Russia’s War in Ukraine changed many assumptions held by European governments, but Judy Dempsey asks is Europe prepared to embrace significant strategic issues that will change the status quo? Russia’s full-scale invasion of Ukraine in February could radically re-shape the European Union.  And it’s about time.  For too long, the EU and most member states were content in the comfort zone that did not have to deal with issues that would fundamentally change their way of doing things. These included energy, security, the future of enlargement and Russia. Until Russia’s second invasion of Ukraine, there was a tactic consensus that Europe could continue along the path of perceiving Eastern Europe through the prism of Russia and depending on Russian energy. The EU accepted the independence of Ukraine, Moldova and Georgia, not to mention Belarus. However, among many big member states, their sovereignty and independence were ambiguous.  While it was never publicly stated, this part of Europe, whose history and culture are unknown to many EU member states, was considered in Russia’s sphere of influence. In several ways, Russia’s all-out attack on Ukraine has changed that perception. First is the energy issue. It is only a matter of time before Europe will wean itself off Russian gas and oil. This dependence had given President Vladimir Putin immense leverage and blackmail over several EU countries, particularly Germany.  The EU, and German Chancellor Scholz’s Green coalition partners, say they now want to become independent from Russian energy as soon as possible. Despite the considerable pressure from German industry and its business lobbies tied to Russia, who wish to retain the status quo with Moscow, don’t underestimate this goal.  The reality is that Russia’s war in Ukraine has become the catalyst for speeding up Europe’s transition to renewable energy and alternative sources of supplies. As dependence on Russian gas decreases, so will the Kremlin’s geopolitical influence. Another impact of Russia’s aggression is security. Neutral Finland and Sweden are poised to join NATO. These two countries that have long cherished their neutrality now recognise that their security needs to be boosted. Joining NATO would fill a big security vacuum in Northern Europe, where Denmark and Norway are members of the US-led military alliance. The Baltic (NATO member) States will be more than reassured with Finland and Sweden on board. In short, Putin’s aggression in Ukraine has given NATO and the transatlantic alliance a new lease of life. It is changing the geo-security architecture of Europe. It will be interesting to see how Ireland deals with its long-standing neutrality stance.  Another big issue is enlargement that is tied to the future direction of Europe. President Emmanuel Macron’s speech at the conclusion of the Future of Europe conference set out how to make the EU more efficient by having a qualified majority voting system for certain policy issues and having a much closer, structural relationship with Eastern Europe.  But what about making the EU more politically integrated? This would require a treaty change that several member states oppose. However, this is where the war in Ukraine comes into play. European governments cannot retain the status quo when its own security and that of its eastern neighbours are at stake.  For a union with ambitions to be a global player, muddling through is no longer an option. It’s going to require a major shift in the mindset of EU countries to end Europe’s comfort zone that, until now, didn’t take its – nor Eastern Europe’s – security vulnerability seriously.  If it doesn’t make that shift, Europe will fail to use the war in Ukraine to develop a strong, integrated and secure Europe – with Eastern Europe as part of that house.  Judy Dempsey is a Non-Resident Senior Fellow at Carnegie Europe and Editor-in-Chief of Strategic Europe.

The Russian invasion of Ukraine has given rise to potentially complex financial reporting considerations for Irish companies with a presence in one or both territories. David Drought delves into the details of two areas of concern. The ongoing conflict in Ukraine, and resulting sanctions and counter sanctions imposed globally on and by Russia, have impacted certain companies.  Although the conflict is first and foremost an immense human tragedy for those involved, companies whose operations have been affected will need to consider the financial reporting implications.  Here, we consider two potential issues—the first being whether control of subsidiaries located in Russia has been lost, and the second being whether impairment tests of non-financial assets in the affected territories should be carried out. Do you continue to control your subsidiary?  Under IFRS 10 Consolidated Financial Statements, a company (investor) controls a subsidiary (investee) when it has power over the subsidiary, is exposed to variable returns from its involvement with the subsidiary, and can also affect those returns by exercising its power. Control requires power, exposure to the variability of returns, and a linkage between the two. Continuous control assessment  Suppose the facts and circumstances indicate that there are changes to one or more of the elements of the control model. In this scenario, an investor must reassess whether it continues to have control over the investee.  Here, companies will need to consider whether the consequences of the ongoing conflict lead to changes in investors’ relationships with investees in Russia. As a result of the effects of the ongoing conflict, for example, foreign investors may: face difficulties in repatriating funds from investees; exit or cease operations in these markets, either by choice or by being forced to do so because of sanctions imposed; or be impacted by potential new restrictions imposed on foreign owners – e.g. nationalisation of local operations. The hurdle for losing control of an existing subsidiary is generally high, but the loss of control of subsidiaries in the conflict-affected countries or regions should not be immediately presumed.  There is, for example, no exclusion from consolidation due to difficulties alone in repatriating funds from the subsidiary to the parent or the lack of exchangeability of currencies.  In considering the impact of these ongoing conflicts, management must consider these two critical elements of control: power and returns. Power When assessing power over the investee, an investor considers only substantive rights relating to an investee – i.e. rights that it has the practical ability to exercise.  Determining whether rights are substantive requires judgement. Whether there are any barriers due to the consequences of the ongoing conflict preventing the holder from exercising these rights should be considered (e.g. due to current sanctions a company may no longer be able to exercise rights previously available to it.) Returns When assessing returns, an investor evaluates if they are exposed to variable returns from involvement with an investee. The sources of these returns may be very broad and may include both positive and negative returns.  Sources might include dividend or other economic benefits, for example, remuneration for services provided to the investee, tax benefits or certain residual interests.  Management should consider whether the company’s exposure to the variability of returns has been impacted and needs to be reassessed. IFRS 10 does not establish a minimum level of exposure to returns to have control.  Where there has not been a loss of control, there may be other impacts to consider. These might include: possible impairment of the investment in the subsidiary; presentation of the subsidiary as held-for-sale or as a discontinued operation; or  possible impairment of the assets held by the subsidiary. Do I need to test my non-financial assets for impairment? Control in relation to other assets  Before considering impairment for companies with assets on the ground in Russia or Ukraine, it is necessary to assess whether they have, in substance, lost control of those assets.  Control in the context of assets generally means the practical ability to control the use of the underlying asset. If control has been lost, the asset is derecognised in its entirety, and no impairment is carried out. IAS 36 Impairment of assets  The standard requires management to assess whether there is any indication of impairment at the end of each reporting period.  Irrespective of any indicator of impairment, the standard requires goodwill, and intangible assets with indefinite useful lives (and those not yet available for use) to be tested for impairment at least annually. An annual test is required alongside any impairment tests performed as a result of a triggering event. Triggering events  The likelihood that a triggering event has occurred for non-current assets has increased significantly for companies that: have significant assets or operations in Russia or Ukraine; are significantly affected by the sanctions imposed and/or Russia’s counter-measures; are adversely affected by increases in the price of commodities; and/or are significantly affected by supply chain disruption. Impairment indicators  Indicators of impairment may come from internal or external sources, but the likelihood of some impairment indicators existing has increased for companies impacted by the Russia-Ukraine war. Some indicators that may arise include: the obsolescence or physical damage of an asset. For example, plants and operations in Ukraine may be subject to physical damage; significant changes in the extent or manner in which an asset is (or is expected to be) used which has (or will have) an adverse effect on the entity.  a significant and unexpected decline in market value; significant adverse effects in the technological, market, economic or legal environment, including the impact of sanctions on the entity’s ability to operate in a market; a rise in market interest rates, which will increase the discount rate used to determine an asset’s value in use; and the carrying amount of the net assets of an entity exceeding its market capitalisation. Falling stock prices may result in an entity’s net assets being greater than its market capitalisation. Abandonment or idle assets  Companies may have abandoned—or have considered a plan to abandon—certain operations or properties in Russia or Ukraine.  Some companies may have been forced to abandon owned or leased facilities in Ukraine as a result of the war, for example. In such cases, the company needs to accelerate or impair the depreciation of the property based on the revised anticipated usage or residual value. Assets lefts temporarily idle are not regarded as abandoned—for example, when a company temporarily shuts a manufacturing facility but intends to resume operations after military activities in the area abate.  Although temporarily idling a facility may trigger an impairment of that item (or the CGU to which it belongs), a company does not stop depreciating the item while it is idle—unless it is fully depreciated or is classified as held-for-sale. Companies should, however, consider the most appropriate depreciation method in this situation.  Disclosures When reporting in uncertain times, it is essential to provide the users of financial statements with appropriate insight into the key assumptions and judgements made by the company when preparing financial information. Depending on an entity’s specific circumstances, each area above may be a source of material judgement and uncertainty requiring disclosure. David Drought is a director in the Accounting Advisory team at KPMG in Ireland

Accountancy was well on its way to digital transformation long before COVID-19, but it can’t be denied that post-pandemic, the digitalisation of the profession has come a long way. Five members discuss their firm’s digital transformation and their role within it. David O’Connor Director Sheil Kinnear Our organisation operated, as many practices, did with an on-premises server and that worked well to a point but as demand for more flexibility grew as a response to the pandemic, it became an obvious option for us to take. In partnership with Datapac, moving to the cloud has futureproofed the business. We have learned to be more flexible and conscious of the risks around us. It has become more and more apparent that cyber security is a concern as we move toward a more paperless, digital environment. As a firm that does statutory audits, the ability to securely access our various software tools from anywhere was a huge incentive for us. I think there is an improvement in terms of what can get done no matter where you are. We are also benefitting from superior processing speeds both in the office and remotely. A challenge in our sector now is the transfer of knowledge. It’s huge in our business and people who work remotely still have to pass on that knowledge to trainees and other team members. This takes a lot more structure and scheduling.  I think there is a change towards more flexible working, but we do like to get together as a team and share knowledge and, because of that, it’s going to be hybrid going forward. Emer McCarthy  Group Strategy and Ecommerce Director Kilkenny Group We set up a “Go Digital” initiative a few years ago to transform as a company and become a true omnichannel retailer.  We defined a range of important steps and investments around channels, technology, and organisational restructuring to realise the omnichannel strategy.  We are one of the first to market with our VR store experience, giving potential shoppers worldwide an immersive, in-store experience from the comfort of their own homes. It allows our customers to engage with the Kilkenny Design brand in a completely new and unique way when the way we shop has undergone such a dramatic shift. COVID-19 has driven dramatic change in the digital space, and consumers have adapted accordingly. We have seen a decade of change over the last two years, and businesses need to continuously invest in experiences or processes via digital to meet and exceed the needs of the evolving omnichannel consumer.  Thankfully, we had commenced this journey before the pandemic, which allowed us to navigate an otherwise tricky trading period for bricks and mortar during the pandemic.   Our culture is very open to technology and the benefits that it brings. Embedding technology and new processes bring a level of change management but collectively, our culture has embraced the same by bringing our teams on the journey with us. Our environment has changed the need to adapt quickly to trends. COVID-19 has driven dramatic change in customers’ digital knowledge and use, which expedites the need to roll out pipeline projects sooner and plan to meet consumer needs three years in advance, at least. Louise Heffernan  Audit and Practice Manager Hugh McCarthy & Associates The pandemic exposed a weakness many firms weren’t prepared for and are now forced to adapt to, highlighting how behind some of us were in the digital age, primarily facilitating working remotely and having a strong online and digital presence.  We took this opportunity to begin a rebrand of the firm, working towards moving all systems online and providing additional training where needed.  We understand Rome wasn’t built in a day, but we are in the final stage of an online rebrand, transitioning to a paperless office and entirely cloud-based within four years.  My role in this has been writing and redesigning the website, developing a strategy with the marketing team, working with the IT team to develop a future cloud-based infrastructure, securing software that is online while ensuring GDPR compliance and setting out a four-year plan to go paperless while upskilling the team to ease with the gradual transition. The company has changed in so many ways. While our team chose to come back into the office, there is an option to work from home, providing a higher level of trust amongst the team and strengthening team communication. Giving the option to work from home also shows we value our employees and understand and appreciate the importance of life outside the office. Because of our digital focus, I have changed how I train the team, making sure all resources are available online while developing the team’s IT literacy. And my role has evolved – I now work with marketing and focus on long-term strategic planning while heavily analysing future costs. Bill O’Leary  Director  Goldbay Consulting Four years ago, I introduced accounting software to offshore wind energy consultants, delivering user-friendly automated features. Its reporting capability significantly enhanced the quality, relevance, and timeliness of our management information, which supported profitable business growth.  In March 2020, the pandemic forced us to change how we worked and the so-called “paperless office” had finally arrived.  My organisation implemented video conferencing software. Weekly and operational review meetings, and bi-monthly revenue assurance meetings with directors and senior fee earners were critical in managing revenue and cash flow during the pandemic.  More recently, our focus is on improving operating margin by using data management tools to extract, process and present project margin information in a graphical format to the leadership team. Collaboratively, we review project information, seek to understand the past better and work to agree on actions to modify future behaviour and increase performance.  Leveraging modern software and related digital processes have enabled me to provide the tools, coupled with knowledge, to empower our project leaders to make better informed financial decisions.  The benefits of digitisation and automation of processes are not always linear. As more simple and repetitive tasks are automated, the remaining work becomes more complex – which creates several challenges, such as increasing demands being placed on senior fee earners and the training and development staff becoming more complex.  The answer, which is nothing new, lies in how we use the wealth of digital information available today. How we extract, analyse, synthesise, present, communicate, discuss, understand, and act on the fruits of digital transformation is critical to unlocking the benefits of the digital revolution.  David Heath  CEO Circit At Circit, we have tried to create a culture of digital transformation from the company’s very beginning. With the assumption that technology will continue to evolve at pace, our team is encouraged to be tuned in to what is available in the market and trial services that they believe our organisation and people can benefit from.  This does not mean we implement every new tool we are aware of, but we do become better at monitoring the market, assessing the potential positive benefits of a new cloud service, and getting the timing right for making a change. By having a mentality of being adaptive, we can more easily advise and be an example for our customers who are also on their own digital transformation journey. Lockdowns and viruses have accelerated business trends already underway for companies, like moving to the cloud and modernising their IT departments, but it has also made them think about how their employees can work more efficiently. We’re moving from it being about ‘work from home’ to it being about entirely new ways of doing work.  For example, in the past few weeks, I’ve held investor meetings over video conference instead of in person, with the same – if not better – results.  Instead of thinking about who’s in an office, I’ve also been broadening the scope of who I chat with and when. On an average day, I’m probably talking to five times the number of people from different time zones than when I worked at the office. After all, anyone I want to communicate with is only a chat bubble and video call away. I think we will be forever changed, but now the challenge is to get the balance and team culture correct – one that is digital-first, security risk averse, being personable and willing to travel to in-person meetings to maintain a deeper connection with customers. 

The crypto slump has highlighted the risks posed by cryptocurrency as a speculative asset, but for professionals in finance, the immediate challenge is working out how best to account for it. Gavin Fitzpatrick and Mike O’Halloran dig into the details. Money, currencies and the methods by which people and businesses earn, store and exchange value have taken numerous forms throughout history.  The evolution of currency dates back many millennia, from the early days of bartering to modern methods, such as coins, notes, loans, bonds and promissory notes. Introduced in 2009 with the launch of Bitcoin, cryptocurrency is the latest evolution in this process. Despite a slow initial uptake, its popularity has risen dramatically in the past decade and, today, there are thousands of different cryptocurrencies in existence.  Views on their usefulness and longevity are somewhat fragmented, however. Investors who have been fortunate enough to acquire cryptocurrency at low prices sing its praises, whereas critics argue against its fundamentals and highlight the volatility of the cryptocurrency market. For companies and the accounting profession, however, the immediate challenge is working out how these assets should be accounted for. Here are some common questions worth bearing in mind. Is there a specific standard that accountants can apply to cryptocurrencies? In short, the answer here is no—nor do cryptocurrencies fit neatly into any existing standard. Accounting for cryptocurrencies at fair value through profit and loss may seem intuitive. However, such an approach is not compatible with IFRS requirements in most circumstances, as cryptocurrencies may not meet the definition of a financial instrument as per IAS 32.  Should cryptocurrencies be treated as another form of cash? IAS 7 Statement of Cash Flows states that cash comprises cash on hand and demand deposits. IAS 32 Financial Instruments Presentation notes that currency (cash) is a financial asset because it represents the medium of exchange. While cryptocurrencies are becoming more prevalent, they cannot be readily exchanged for all goods or services.  IAS 7 also considers cash equivalents—short-term, highly liquid investments that are readily convertible to known cash amounts and subject to an insignificant risk of changes in value. Given the considerable price volatility in cryptocurrencies, entities have not sought to apply policies where they define holdings in crypto assets as cash or cash equivalents. In the absence of a specific standard, what guidance and methodologies can accountants follow when deciding how to account for these assets? In practice, accounting policies defined to deal with cryptocurrencies follow the principles of accounting for intangible assets or, in some cases, accounting for inventory.  Intangible assets IAS 38 Intangible Assets defines an intangible asset as “an identifiable non-monetary asset without physical substance”.  Identifiable – under IAS 38, an asset is identifiable if it “is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged.” Cryptocurrency holdings can be traded and are, therefore, identifiable. Non-monetary – IAS 38 defines monetary assets as “money held and assets to be received in fixed or determinable amounts of money.” The value of a cryptocurrency is subject to major variations arising from supply and demand. As a result, its value is not fixed or determinable. Without physical substance – as a digital currency, cryptocurrencies do not have physical substance. As a result of applying the above logic, many companies classify holdings in cryptocurrencies as intangible assets. In line with IAS 38, companies can use one of two approaches to account for intangible assets: Cost – cryptocurrency asset is carried at cost less accumulated amortisation and impairment. In applying this approach, companies must determine if the asset has a finite or indefinite useful life. Given that cryptocurrencies can act as a store of value over time, they have an indefinite useful life, meaning the asset would not be subject to an annual amortisation charge. Instead, an annual impairment review would be necessary. Revaluation – under IAS 38, intangible assets can be carried at their revalued amount as determined at the end of each reporting period. To adopt this approach, the asset must be capable of reliable measurement. While active markets are often uncommon for intangible assets, where cryptocurrencies are traded on an exchange, it may be possible to apply the revaluation model. In order to present increases and decreases correctly (i.e. determining how much is presented in other comprehensive income versus profit and loss), entities must be able to track movements in sufficient detail across their holdings. Establishing the cost of the crypto asset denominated in a foreign currency According to IAS 21 The Effects of Changes in Foreign Exchange Rates, entities will record holdings in cryptocurrencies using the spot exchange rate between functional currency and the cryptocurrency at the date of acquisition.  As noted earlier, cryptocurrencies are not considered to meet the definition of monetary items. Therefore, holdings in cryptocurrencies measured at historical cost in a foreign currency will be translated using the exchange rate at the initial transaction date. Holdings measured using the revaluation approach shall be translated using the exchange rate applied when the valuation was determined.  Inventory As demonstrated, holdings in cryptocurrencies can meet the definition of intangible assets under IAS 38. However, within the scoping section of IAS 38, it is noted that intangible assets held by an entity for sale in the ordinary course of business are outside the scope of the standard. This conclusion is drawn from the fact that such holdings should be accounted for under IAS 2 Inventories. While the default treatment, under IAS 2, is to account for inventories at the lower cost and net realisable value, the standard also states this treatment does not apply to commodity broker-traders.  Such traders are required, under IAS 2, to account for their inventory at fair value less cost to sell, with changes in value being recognised in profit and loss.  Intuitively, it may seem appropriate for entities holding cryptocurrencies to follow the same accounting applied by broker-traders under a business model that involves active buying and selling.  However, since cryptocurrencies do not have a physical form aligning their accounting to a scope exception for commodity traders, it is a judgment call.  In practice, where there is a business model under which crypto assets are acquired to sell in the short term and generate a profit from changes in price or broker margin, the treatment described here from IAS 2 for broker-dealers has been applied.  Other considerations  So far, we have explored accounting for holdings of cryptocurrencies (IAS 38) and trading in cryptocurrencies (IAS 2). The standards referenced are not new.  To date, the IASB has focused on aligning accounting for cryptocurrencies to existing guidance, and practice has developed accordingly. While there is clear logic to the policies developed from this approach, there are still challenges.  For example, while applying the cost model of IAS 38 is straightforward, the balance stated in the financials may be significantly different to the market value. On the other hand, applying the revaluation model of IAS 38 can be difficult from the point of view of tracking movements in value to determine how much is presented in profit and loss versus other comprehensive income.  What about custodians? As recently as March 2022, the US Securities and Exchange Commission (SEC) released their Staff Accounting Bulletin No. 121.  The bulletin provides guidance for reporting entities operating platforms allowing users to transact in cryptocurrencies, while also engaging in activities for which they have an obligation to safeguard customers’ crypto assets.  Until now, custodians may have concluded that they do not control the asset they safeguard. However, the SEC believes that stakeholders would benefit from the inclusion of a safeguarding liability and a related asset (similar to an indemnification asset), both measured at fair value. This guidance is applicable to reporting entities that apply US GAAP or IFRS in their SEC filings. These entities are expected to comply in their first interim or annual financial statements ending after 15 June 2022. While this requirement applies to SEC filings, it is an essential development to be aware of. Challenges ahead Accounting policies designed to deal with cryptocurrencies have developed, in practice, from existing standards. While these policies are grounded in fundamental accounting principles, there are challenges.  As cryptocurrencies continue to become more prevalent, some of the key assumptions in these policies will be challenged.  For example, if the price of cryptocurrencies becomes less volatile, this would challenge the conclusion that they meet the definition of non-monetary assets under IAS 38. Instead, with less price volatility, it could be argued that they meet the definition of cash equivalents.  Given the current challenges and ongoing development of cryptocurrencies, many are calling for standard-setters to engage in a dedicated project to address these issues.  Gavin Fitzpatrick is a Partner in Financial Accounting and Advisory Services at Grant Thornton.  Mike O’Halloran is Technical Manager in the Advocacy and Voice Department of Chartered Accountants Ireland.

Where can small businesses find the advice they need to keep growing? Trusted advisers, says Emma Jones.  My company solves problems for small businesses based on data sets and evidence that guides businesses from different localities and sectors to support that is proven to work for their peers. We shortcut a founder’s route to success through pointing them to the right intervention for their business, at the right time, boosting productivity by saving valuable hours searching for relevant advice.    One factor that has aided the move towards standardised and personalised advice is the number of businesses now operating on common platforms.  Take the e-commerce sector as an example: most online sellers use the same ‘stack’ of technologies, whether that is Big Commerce for sales, Facebook to drive advertising, or Google Analytics to measure results.  This means smart data companies can show a founder if they are selling more or less – or paying more or less for those sales – than competitors.  With insight in hand, a founder then wants advice on how to improve and get into the top tier of performers. Business owners want to simply be told ‘how’ and ‘where’ to spend their time and money. They are willing to share data on key company metrics in return for advice on how they can perform better.  This is where the role of trusted advisers comes in.  With a foundation of data, advisers can guide a business owner through a personalised support journey, with in-built accountability as the adviser takes on the role of a coach in setting out milestones for the business to deliver.  There is a key role for accountants in this as managing or raising money is integral to business progression. While we want to connect small business owners with the right support, we also want to connect them to the trusted experts who can help them to do the jobs that need to be done to spur growth.  Guiding business owners to make the right moves, based on data and insight, and connecting them to the right advisers can help to boost their efficiency, potentially delivering a similar benefit to the wider economy.  Emma Jones is Founder of Enterprise Nation.

As demand for professionals in accountancy and finance continues to heat up, salaries are on the rise and flexibility is top of the agenda for candidates, writes Arlene Harris. Despite rising inflation and predictions of impending recession, “good accountants will always be in demand” and, as companies shrug off pandemic restraints and begin to plan ahead once again, the need for professionals in all areas of finance is on the rise. So says Trayc Keevans, Global FDI Director at Morgan McKinley Ireland. “We are in a market like no other, rich with opportunity. It is one of the best times I can remember for accountancy professionals living and working in Ireland,” said Keevans.  Businesses emerging from under the cloud of COVID-19 are being “more intentional” in their hiring for accountancy and finance positions, according to Keevans. “I think this is why we are seeing so much demand in the market. In some instances, companies have been focusing their efforts mainly on surviving the pandemic by ensuring that the accounts were prepared and controls in place. They were really paying attention to very little beyond that,” she said. “Now, they are hiring again—some with a preference for finance professionals with data skills, because financial planning and analysis (FP&A) is seen as providing business intelligence that can help shape the way forward for companies.” The pandemic has also brought about a shift in the perspectives and preferences of candidates in the profession. “The pandemic really made for a much more competitive market, because employees had more time to evaluate their current positions, to think carefully about the level of flexibility they wanted in their working lives, and the direction they wanted their careers to take,” said Keevans. As recruitment moved online, the virtual hiring process also became faster and more agile. “All of these factors have combined to contribute to the record movement of professionals—particularly in the past 18 months,” Keevans said.  In response, she said companies had been adopting “all manner” of retention stratagems to keep talent on board. “Some of this focus has been on compensation and benefits. The culture of counter-offers is at an all-time high, and this has brought about the need for companies to be more agile in all things pay- and perk-related.” As a result, demand for payroll professionals is particularly high at the moment. “We have seen a number of companies that had previously outsourced to payroll bureaus opting to bring this function back in-house,” said Keevans. “This has created significant demand for payroll specialists, not just with EMEA and MNC experience, but also with experience in indigenous organisations.” In addition to compensation and benefits, employers are also responding to changing attitudes to work-life balance and remote working among candidates post-pandemic. “As long as the demand for accountancy talent outweighs supply, we will see professionals continuing to vote with their feet,” said Keevans. “Any company that isn’t offering any form of hybrid working can expect to see their talent pipeline reduced by up to 80 percent based on current market demands. “The preference in the market is for two to three days in the office and the remainder remote.” Some professionals are taking the demand for greater flexibility even further, challenging employers to adopt a more innovative approach to remote working policies. “We’re starting to see talent challenging the flexibility offered by their employer to include working from locations overseas for a number of weeks of the year,” said Keevans. “This trend is still in its infancy and employers are being understandably cautious in assessing the risks and fairness of such an approach before agreeing to any request.  “They are aware that doing so would need to be referenced within the company’s policy documents on the scope of the hybrid/remote working offering.” Employers are showing greater flexibility in other ways too – recruiting more candidates with experience in sectors other than those they operate in. “Until there is a levelling in demand and supply, we expect to see continued flexibility on the part of employers regarding the sectoral experience they are likely to be flexible on when hiring new recruits,” said Keevans. “As it stands, we have seen employers in all sectors showing flexibility in this regard, with the exception of manufacturing, construction and to some extent, pharmaceutical.” Starting salaries Starting salaries for newly qualified accountants are currently averaging €60,000, up from €55,000 this time last year, while part-qualified accountants can expect to earn about €45,000 annually. “The single biggest area of demand we’re seeing right now is for Big Four newly qualified accountants, as well as those with two to three years’ post-qualified experience in multinationals,” said Keevans. Demand for newly qualified accountants is high in both industry and financial services, as is demand for internal auditors and risk professionals, financial analysts, and accounts payable and receivable. Among tax professionals, the highest demand among employers is for candidates at managerial and senior managerial level. “Here, professionals with five years’ qualified experience are securing salaries of between €80,000 and €90,000 plus benefits. That’s up from a range of €70,000 to €75,000 up to 12 months ago,” said Keevans. “The growth in the number of FDI multinationals setting up here, and wishing to have an in-house tax function, is a driving factor—as are the retention incentives the bigger firms are putting in place to retain their tax talent.”   Keevans said there had been a significant shift from contract to permanent recruitment in the market, a trend she expects will continue in the 12 months ahead.   “As the market starts to open back up, we hope to see more mobility in terms of talent coming into the country,” she said. “This would be welcome as a means to alleviate some of the pressure on the supply of accountancy professionals, particularly in the transactional space. “It is important here for companies to consider the potential to sponsor talent to get employment permits and visas, where required, before going to market to hire. This will help to ensure as broad a talent pool as possible, accessible in the most efficient timelines.”

Chartered Star Fiona Smiddy was inspired to set up her sustainable business by a life-changing trip that gave her a new perspective on the world.  It was during a five-month career break in 2018, spent traveling from Colombia and Panama on to Australia and New Zealand, that Fiona Smiddy hit upon the idea for her own business—an eco-friendly venture that would help people shop more sustainably. “I remember I was on this hilltop in Medellín in Colombia, and I looked down and saw this little kid who was flying what looked like a kite. I realised as I was looking at him that it wasn’t a kite. It was a plastic shopping bag attached to a string,” said Smiddy. “I thought how lucky we are in Ireland with the economy we have, the opportunities and the climate. A lot of us can buy what we need. When you visit countries where people have so much less in so many ways, you realise just how much it matters to try to make a difference.” A Chartered Accountant, Cork-born Smiddy is the founder of Green Outlook, an ethical retailer selling eco-friendly skin, hair, and personal care products online at greenoutlook.ie. Smiddy runs the business from Rathangan, Co. Kildare, stocking products from close to 40 sustainable brands, including Daughters of Flowers, Janni Bars, Moo & Yoo, Oganicules and Sophie’s Soaps.  Each has been selected to help visitors to the site shop consciously. Many of the products are plastic-free, and all are made with natural ingredients and sustainably sourced, the majority in Ireland. “I set up the business after I came home after traveling. I took over a website that was already up-and-running. The founders were leaving Ireland and I wanted to get started as quickly as possible,” said Smiddy. “I did a whole rebrand, started my own social media channels and really worked on promotion and publicity, building awareness and bringing more brands on board.” Her work with Green Outlook has earned Smiddy the title of 2022 Chartered Star. Awarded in April by Chartered Accountants Ireland, the designation recognises outstanding work in support of the UN Sustainable Development Goals (SDGs).    As this year’s Chartered Star, Smiddy will now represent Ireland’s Chartered Accountancy profession at the One Young World summit in Manchester in September.  “My background in accountancy has been a huge help to me in getting my company off the ground. Once I knew that my future was going to be in sustainable business, I had this knowledge to hand right from the get-go, even down to simple things like filing VAT returns.  “I have been able to self-fund Green Outlook. I didn’t take anything out of the business for the first 18 months. I kept reinvesting and I think the financial knowledge I had really helped me to understand how important that was and get off to the right start.”  Recognising the important role Chartered Accountants can play in helping to combat the climate crisis, Chartered Star entrants must demonstrate how they are working towards, supporting, or living the values of any of the 17 UN SDGs.   Commenting on Smiddy’s win this year, Barry Dempsey, Chief Executive of Chartered Accountants Ireland, commended her “passion and commitment.” “As a profession and an Institute, we are fortunate and proud to be represented on the international stage by Fiona,” Dempsey said. “She follows in the footsteps of other Chartered Stars who have demonstrated passion and commitment in applying the skills and knowledge of the Chartered Accountancy profession to trying to address just some of the issues that the climate crisis presents.”  

As the recently appointed Vice-Chair of the International Sustainability Standards Board (ISSB), Sue Lloyd will play a key role in paving the way for a “global baseline” for reliable ESG investment criteria. Elaine O’Regan talks to the New Zealand-born former IASB Vice-Chair about what lies ahead in her new role.  Prior to taking up your role with the ISSB, you were Vice-Chair of the International Accounting Standards Board for six years. Looking back on it, what do you see as your most significant achievements in that role? Completing the international IFRS Standard for insurance contracts was definitely a high point, and also chairing the IFRS Interpretations Committee from 2017 to 2022, and making it more responsive. What does your appointment as Vice-Chair of the International Sustainability Standards Board mean to you professionally? How important do you think the work of the ISSB will be, and your role in it? I see this appointment as a really exciting opportunity for me professionally. Corporate reporting is at a real turning point where we are embracing the need for the broadest set of information about sustainability, risks and opportunities to help investors make informed decisions. I am really excited and honoured to be part of that process. The ISSB has a pivotal role to play in bringing more comparability and quality to reporting on sustainability risks around the world and building a more efficient system, both for the preparers, providing the information, and also for the investors consuming them. One of my key roles as Vice-Chair of the Board is to bring to bear the standard-setting approach of the IASB. My technical skills from that world, and my knowledge of financial reporting, will help me to bring that rigor to sustainability reporting for investors. How will the ISSB’s approach to standard-setting emulate or differ from that of the IASB? How will the two bodies coalesce and work together in the future? There will be a lot of similarity with the IASB, particularly in relation to due process and the thoroughness in which we approach our work. The ISSB wants to be really inclusive and build on the viewpoints of our stakeholders. We have that in common with the IASB. Obviously, the subject matter is different. Sustainability is a more nascent area of reporting, so we will have to work more closely with our ecosystem and really work with assurers and specialists in sustainability to build this new infrastructure for reporting. The ISSB is a sister board to the IASB, and that is great because it means we are part of the same foundation. It gives us the unique ability to sit together and work out the package of information we are asking for to meet investor needs, and to make sure that the reporting and the financial statements fit well together. When the IFRS talks about the ISSB establishing a “global baseline of sustainability standards” what does this mean, and why is it important for the ESG agenda globally? When we talk about a global baseline, what we really want to do is establish a set of disclosures that are sufficient to meet the needs of investors—to enable them to understand how sustainability, risks and opportunities affect the value of a company’s shares and its debt.  We want to provide a ‘set of information’ on companies around the world so that investors can make decisions based on consistent and comparable data. That is really what a global baseline means. It will happen in practice through a combination of two different mechanisms. One will be adoption or incorporation into the regulation in different countries, so that it becomes part of the mandatory reporting system for jurisdictions, in the same way that the IASB’s accounting standards have been mandated by jurisdictions around the world.  Complementing this, we expect there to be a lot of voluntary application of the standards, separate to the regulatory element, because this is a good way for preparers to understand what information is relevant to meet investor needs.   Tell us about the ISSB’s four core pillars – governance, strategy, risk management and metrics. How relevant is each one in the context of your overall mission? Our overall objective is to make sure that investors have the information they need to understand the effects of sustainability risks and opportunities on enterprise values, share price and the value of a company’s debt.  Our pillars are the prism we use to gather sustainability information from four different perspectives. One is how a company governs its risks, and how it is managing those risks and building them into its business strategy. We also look at the metrics they use to assess where they are now, to set their targets for the future and measure their progress in meeting their targets. This ‘package of information’ is designed to meet the investor’s needs, and, importantly, it is designed to encourage companies to think about how they govern and manage risks. How will the work of the ISSB support and help investors in respect of good environmental, social and governance (ESG) practice? What other ‘ESG stakeholders’ will benefit from your work? We know that there are different parties who are interested in information about sustainability, not just investors. We want to facilitate the provision of information to all of them. We want to make this an efficient reporting system for public policy purposes and for broader stakeholder groups beyond investors, for example. One of the aspects that we are focusing on here is what we call the “building block” approach.   This means that, when we are building our requirements, we have investors’ needs in mind, but we also want to make sure that others can add specific investor requirements onto our disclosures to meet broader needs. If we can avoid the need to have one set of disclosures for investors and a completely separate set for broader stakeholders, it is more efficient for those preparing the information. Tell us about the first draft ISSB standards, published in April. What do these draft standards provide for, how is the consultation process progressing and what will the next steps be? There are two documents. The first is the General Requirements Exposure Draft, which sets out the overarching requirements for what should be provided for in sustainability reporting.  It asks companies to provide information about all of their significant sustainability risks and opportunities relevant to enterprise value assessment.  It also sets out some other general ideas—for example, the fact that you should be able to understand how this information relates to the financial statements and the proposal that this information be provided at the same time as the financial statements. The second document is the Climate Exposure Draft, which sets out what specific disclosures should be provided by a company about climate risks and opportunity. This means that, if a company using the General Requirements Exposure Draft identifies climate risks and opportunities as a “significant” sustainability-related risk and opportunity, they can turn to the Climate Exposure Draft to find out what disclosures to provide.  That document is asking for information about the physical risks of climate change the company is exposed to—flood risk, for example—but also opportunities arising from climate change. If a company has developed a product, which may become more popular because of climate change, investors may want to hear about that as much as they would climate-related risk.  These drafts are out for comment until 29 July, 2022. Once we get the feedback, we will decide what we need to adjust, what we can keep as is, and then we will move on to the final requirements. How do you foresee the “roadmap” of additional draft standards rolling out beyond these first two? What standards are next on the agenda for consultation and what is the anticipated timeline for their introduction? Our next step will be to ask our stakeholders what they think we should prioritise after the General Requirements Exposure Draft and Climate Exposure Draft documents are approved.  We only have so much time, and the same is true for our stakeholders, so it is important to us to ascertain where the greatest needs lie. In other words, it is really up to the stakeholders to decide what we work on next. How will the International Sustainability Standards Board (ISSB) build on work already carried out by the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB)? Our four core pillars (governance, strategy, risk management and metrics) are taken straight from TCFD recommendations, and they form the backbone of the proposals we have out for comment.  We have incorporated their structure and the climate disclosures included in the TCFD have been incorporated into our Climate Exposure Draft. We have built on SASB materials in two ways. Industry-based requirements in the appendix to the Climate Exposure Draft are taken from SASB’s industry-based standards.  We took the climate-related metrics and included those in the Climate Exposure Draft as part of the mandatory climate disclosures.  We are asking stakeholders to use SASB guidance to help them meet their disclosure requirements in the General Requirements Exposure Draft up until the time we draft more specific disclosure requirements of our own. How do you foresee the ISSB working alongside, and collaborating with, other standard-setting and regulatory bodies and initiatives like the Securities and Exchange Commission (SEC) the Global Reporting Initiative (GRI) and European Financial Reporting Advisory Group (EFRAG)? Having our proposals out for comment at the same time as the SEC and EFRAG proposals means that we have a unique opportunity to compare and contrast these different proposals and bring as much commonality as we can to our requirements. In an ideal world, we want to work together to build this global baseline and ensure as much consistency as possible with the SEC, EFRAG, the Global Reporting Initiative (GRI) and others.  We have a Working Group tasked with doing so with the US, Europe and also China, Japan and the UK. We are encouraging our stakeholders to write to the SEC and to let the commission know if they think that the global baseline is important.  The GRI is also very important and is a really good example of the ‘building block’ process that I described earlier.  We have a Memorandum of Understanding with GRI. One of our aims is to work together to form a global baseline we both agree on to meet investor needs and to encourage GRI to add the additional pieces of information to meet the broader information needs.

The FRC has issued FRED 80 Draft amendments to FRS 100 Application of Financial Reporting Requirements Application Guidance The Interpretation of Equivalence. This Financial Reporting Exposure Draft proposes to update the Application Guidance to FRS 100 to reflect changes to company law and decisions on equivalence further to the UK’s exit from the European Union. The objective of FRS 100 is to set out the applicable financial reporting framework for entities preparing financial statements in accordance with legislation, regulations or accounting standards applicable in the United Kingdom and Republic of Ireland.   Comments on FRED 80 are requested by 26 August 2022.

In developments this week, Accountancy Europe has written a letter to the European Commission's Commissioner Mairead McGuinness on the development of purposeful and effective European sustainability reporting standards and IAASA has published its annual Profile of the Profession for 2021 which presents an overview of the Prescribed Accountancy Bodies’ members and students and includes statistics about regulatory and monitoring activities. Read more on these and other developments that may be of interest to members below. Financial Reporting EFRAG has published a Draft Letter on the IFRS Interpretation Committee's Tentative Agenda Decisions in the final phase of implementing IFRS 17 Insurance Contracts and seeks constituents' views on the letter. The IFRS Interpretations Committee have issued its April 2022 update which includes the details of its recent meeting on 20th April. The Financial Reporting Council (FRC) has published new research, in conjunction with the UK Anti-Slavery Commissioner and Lancaster University, which has identified significant shortcomings in the quality of companies’ modern slavery reporting. Auditing IFAC has published “Audit Fees Survey 2022: Understanding Audit and Non-Audit Service Fees, 2013-2020”. As part of its ongoing consultation in relation to the proposed amendments to ISA (UK) 600, the FRC has invited stakeholders to its upcoming webinar on 4th May and virtual roundtables on 11th and 12th May The FRC has made changes to its Publication Policies for the Audit Enforcement Procedure (AEP) and the Accountancy and Actuarial Schemes (the Schemes). Sustainability Accountancy Europe has written a letter to the European Commission's Commissioner Mairead McGuinness on the development of purposeful and effective European sustainability reporting standards. Anti-Money Laundering and Sanctions FATF has recently published its first report on the state of effectiveness and compliance with the FATF standards. It gives a comprehensive overview of the state of global efforts to tackle money laundering, terrorist and proliferation financing. It states that the non-financial sector, including accountants generally have a poor understanding of risks from money laundering and terrorist financing and struggle to mitigate them. There are also some harsh conclusions on systems to monitor and enforce transparency in beneficial ownership. Fscom, a UK compliance firm, has recently published a handbook entitled “AML in Crypto Handbook“ which is a short introduction to Anti-Money Laundering in the context of cryptoassets. Their aim is to provide a beginner’s insight to cryptoassets from the point of view of an AML professional. The handbook is free to download from their website. The UK Financial Conduct Authority (FCA) recently conducted a review of financial crime controls in “challenger“  banks. Broadly speaking such banks are a sub-sector of retail banks which aim to reduce the market concentration of traditional high street banks through the use of technology and more up-to-date IT systems and some of them are online-only banks. The review found there is a need to improve how such banks  assess financial crime risk. Some are failing to adequately check their customers’ income and occupation, and, in some instances, challenger banks did not have financial crime risk assessments in place for their customers. You can read the press release here and the finding of the multi firm review here. The House of Commons library has recently published a research briefing entitled “Sanctions against Russia”. In it the briefing deals with the UK Sanctions regime prior to 2022, what prompted fresh sanctions, what sanctions the UK is imposing, co -ordinating with allies and the imposition of secondary sanctions. Readers should go to the website of the Workplace Relations Commission to read about information for Ukrainian Nationals on employment rights in Ireland. There is information on the website on employment law rights in Ireland in the Ukrainian language and the Russian language. The European Banking Authority (EBA) recently published a statement addressed to both financial institutions and supervisors to ensure they make every effort to provide access for Ukrainian refugees to at least basic financial products and services. They also set out how AML/CFT guidelines should apply .You can read details of the statement here. Members are reminded that you can locate further detailed information on sanctions generally on the Institute’s dedicated sanctions page which is being regularly updated at the moment. Other Areas of Interest Minister Robert Troy announced on 28 April 2022 that the “interim period” introduced under the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (“2020 Act”) has been further extended to 31 December 2022. It had been due to expire on 30 April 2022. The 2020 Act among other provisions made it possible for company meetings, for example AGMs and EGMs, class meetings and scheme meetings to be held virtually. It also increased the period of company examinership to 150 days and increased the threshold at which a company is deemed unable to pay its debts to €50,000. The Minister said this is likely to be the final extension but also noted that work is ongoing to put virtual AGMs and general meetings on a permanent statutory footing. The European Data Protection supervisor (EDPS) recently published his Annual Report 2021 - you can read the press release here and the executive summary here. The report covers a huge amount including an overview of the EDPS’ supervisory activities such as the supervision of Europol and the European Public Prosecutor’s Office. In one of its news items on the annual report the EDPS refers to its’ work on international transfers of personal data; on COVID-19; on the Area of Freedom, Security and Justice; as well as the EDPS' legislative consultations and technology monitoring activities. Late last year the Central Bank gave notice of its intention to establish a Climate Risk and Sustainable Finance Forum. In recent days it has published a call for interest to the forum. You can read the press release here. The forum will be consultative and will meet twice a year, with the inaugural meeting taking place on 29 June 2022. It is looking for expressions of interest from the likes of financial sector representative bodies, financial sector participants (firms), experts on climate change. Selection criteria are set out in the call for interest and you can complete the expression of interest form here. The Central Bank Director General of Financial conduct recently addressed an Institute of Banking/Compliance Institute seminar on “The importance of effective governance, culture, and agility in a changing environment". She spoke about topics including the Central Bank’s strategic approach, standards and the enhanced Individual Accountability Framework, Structural changes in the Irish retail banking sector and Sustainable finance and the risks of greenwashing. You can read her remarks here. The Dept of Finance (DOF) this week launched Ireland’s first Women in Finance Charter. The Charter is open to all financial services firms operating in Ireland and signatories commit their organisations to improving the number of women in management and board level positions to achieve better gender balance and a more inclusive working environment. You can read the press release here and see the current list of signatories to the Charter. DOF has also recently published its Economic Insights – Spring 2022 which provides analysis and insights on topical economic issues and developments. You can download here. IAASA has published its annual Profile of the Profession for 2021 which presents an overview of the Prescribed Accountancy Bodies’ (PABs) members and students and includes statistics about regulatory and monitoring activities. The Charity Commission for Northern Ireland has issued some useful information on the Charities Act (Northern Ireland) 2022. Readers may be interested in the recent publication of the Consumer Rights Bill 2022. This new draft legislation will bring about a number of positive changes for consumers and for the first time, consumer protections will be extended to digital goods and services so that consumers are protected when they use cloud services or buy downloadable or streamed goods and services, including games, films, music and software. The Competition and Consumer Protection Commission has welcomed the publication of the bill and you can read more about it on their website here where you will also find a link to the draft legislation. National Standards Authority of Ireland is Ireland’s official standards body under the auspices of DETE. It recently launched its new strategy for 2022-2026 – Innovating to Shape a Safer, Better, and Sustainable Future. The strategy is stated to give priority to Climate Action and Sustainability; to Digital Transformation; to Construction, with a particular focus on housing; and to Medical Technology. You can download the strategic plan here . In other FCA news, the CEO recently delivered a speech on the critical issues in financial regulation: The FCA's perspective. He mentioned issues such as the war in Ukraine, economic, social and governance (ESG) reforms, diversity and inclusion, accountability and performance and innovation and crypto. You can read the speech here. For further technical information and updates please visit the Technical Hub on the Institute website. 

The Financial Reporting Council (FRC) has published a new Audit Firm Governance Code for the Big Four audit firms and firms that audit FTSE-350 companies and significant numbers of public interest entities (PIEs).   The new Code is a result of the findings of a monitoring programme undertaken by the FRC which identified scope to further strengthen its oversight and governance and to align the provisions of the Code with Operational Separation for the Big Four firms.   It separates the roles of the board chair and senior partner/chief executive, clarifies the role played by partnership boards in holding management to account and introduces criteria for board composition, reinforcing the position of independent non-executives within audit firms. For the largest audit firms, it sets out a clearer distinction between the role of Independent Non-Executives (INEs) and Audit Non-Executives (ANEs). The new Code also more closely aligns with the UK Corporate Governance Code, emphasising the importance of long-term sustainability, culture and employee engagement.

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

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

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

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

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

The IAASB’s new quality management standards represent a fundamental shift in focus for auditors and firms must act now to prepare for the fast-approaching compliance deadline, writes Noreen O’Halloran. The suite of quality management standards released by the International Auditing and Assurance Standards Board (IAASB) will have a major impact on all audit firms, regardless of size, and now is the time to start getting your house in order. Effective from December of this year, these standards include a revised International Standard on Auditing – ISA 220 (revised) Quality Control for an Audit of Financial Statements and two new International Standard on Quality Management. These are ISQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements; and ISQM 2 Engagement Quality Reviews.  Practitioners are required by these standards to have necessary systems designed and implemented by 15 December 2022, with the monitoring reviews performed within one year of this date.  Irish standards align The Irish Auditing and Accounting Supervisory Authority (IAASA) has released revised quality management standards aligned with those released by IAASB. By releasing new standards, the IAASB is addressing the need for the audit profession to perform quality engagements consistently.  These standards require audit firms to have in place a strong system of quality management that is robust, proactive, and scalable, enabling the consistent execution of high-quality engagements.  While these standards are welcome, they do impose additional time, effort and ultimately costs on audit firms. ISQM 1: the lowdown ISQM 1, the standard replacing International Standard on Quality Control 1 (ISQC 1), addresses a firm’s requirement to design a system of quality management to manage the calibre of engagements performed by the firm.  This standard applies to all firms performing audits or reviews of financial statements, or other assurance or related services engagements. A firm must now establish quality objectives, identify, and assess quality risks, and design and implement responses to address those risks.  This is a much more forward-looking, proactive approach than that currently required under ISQC 1. The process is expected to be iterative, requiring continuous improvement and revisiting.  ISQM 1 comprises eight components, two of which are process driven. These are the risk assessment process and the monitoring and remediation process.  The remaining six are quality objective components, comprising  governance and leadership, relevant ethical requirements, resources, acceptance and continuance, engagement performance, resources, and information and communication.  Audit firms must apply a risk-based approach in designing, implementing, and operating the components in an interconnected and coordinated manner, tailoring their approach to the specific risks arising for a firm. Risk assessment  Audit firms are required to establish quality objectives for each of the six quality objective components. Certain quality objectives are predetermined in ISQM 1.  Firms must also establish additional quality objectives responsive to the nature and circumstances of the firm or its engagements. Once the quality objectives are established, the firm will then need to identify and assess quality risks, taking into consideration the type of engagements carried out and the extent to which this work may create quality risks in relation to specific quality objectives.  Firms are likely to have some existing policies and procedures in place, which may continue to be relevant in meeting these new requirements.  Existing policies and procedures should not, however, be carried forward without first considering the specific requirements in ISQM 1 and the individual nature and circumstances of a firm and its engagements.  Gap analysis A gap analysis is a must for all firms to help them identify areas where they may need additional or different responses.  Not all risks identified will rise to the level of a quality risk as defined in ISQM 1. Quality risks are those that have a reasonable possibility of occurring and a reasonable possibility of individually, or in combination with other risks, adversely affecting the achievement of one or more quality objectives.  For example, in a small firm, where leadership may be concentrated in a single or a very small number of individuals the firm may identify a quality risk with respect to the Governance and Leadership component as staff may be reluctant to challenge or question the actions or behaviours of leadership, due to fear of reprisal.  After quality risks have been identified, firms must then design and implement a response to those specific risks.  Appropriate response The ISQM 1 identifies several specific responses required by a firm. Responses that are properly designed and implemented will mitigate the possibility that the quality risk will occur, resulting in the firm achieving its quality objective.  Take the previous example of a small firm with a single or very small number of individuals at leadership level, whose behaviours staff may be reluctant to challenge. The quality risk arising here might be addressed by obtaining anonymous periodic feedback from staff at all levels within the firm using focus groups and/or staff surveys.  Firms should keep in mind that the quality objectives for one component may support or overlap with those of another.  When establishing quality objectives, therefore, it can be useful to think of the components as interrelated or interdependent with each other.  Here’s one example. The quality objective in the information and communication component, regarding relevant and reliable information exchange throughout the firm, links with the ethical requirements component, regarding the communication of relevant ethical requirements applying to individuals within the firm.  The nature and circumstances of the quality objectives, the identified risk and the subsequent responses will differ from one firm to the next, depending on their size, network structure (when relevant) and the type of engagements they provide. Monitoring and remediation The monitoring and remediation process can be split into several elements, comprising: the design and performance of monitoring activities; evaluating findings and identifying deficiencies; evaluating identified deficiencies; responding to the identified deficiencies; and  communicating the findings.  Looking back at our earlier quality risk regarding staff reluctant to challenge or question the actions or behaviours of leadership, a potential response was that the firm might facilitate focus groups and/or staff surveys to gather anonymous feedback regarding the actions and behaviours of leadership.  Once sought, such feedback must then be monitored. The firm may collate the feedback and present it to leadership, including details of the actions required to address the feedback and a corresponding timeline for these actions.  The purpose of monitoring the activity here is to determine whether the response to the quality risk is appropriate. If deficiencies are identified as part of this monitoring, firms need to evaluate their severity and determine how pervasive they may be.  This will help firms to focus on the deficiencies giving rise to the most significant risks. They should also evaluate the root cause of these deficiencies. Root cause analysis is not a new concept to practitioners. Many will already be undertaking this process when deficiencies are identified.  However, for those firms not currently doing so, ISQM 1 requires a root cause analysis in respect of identified deficiencies. ISQM 2 and ISA 220 revised While ISQM 2 is a new standard released by the IAASB, many of its elements have been relocated from either ISQC 1 or ISA 220, addressing both the responsibilities of the firm and the engagement quality reviewer.  The engagement quality reviewer is part of the firm’s response, rather than the engagement team’s response to quality management.  The engagement quality reviewer is required to exercise professional scepticism, rather than professional judgement, which is the responsibility of the engagement team when obtaining and evaluating audit evidence.  Revisions have also been made to ISA 220 (revised), which remove the requirement for an engagement quality review (as that is now contained in ISQM 2), and also clarify and strengthen the key elements of quality management at the engagement level, including the responsibility of the engagement partner.  The engagement partner is responsible for managing and achieving quality at the engagement level. These changes include revision to the definition of the engagement team, to include all those who perform audit procedures on the engagement regardless of their location or relationship to the firm. There is also a new stand-back requirement for the engagement partner to determine that they have taken overall responsibility for managing and achieving quality on the audit engagement.  Ensuring compliance The IAASB’s new quality management standards represent a fundamental shift in focus from quality control to quality management, and all firms should act swiftly to prepare for these changes. Here are three steps you can take to help ensure compliance by 15 December 2022: Consider your current position against the new requirements, and identify areas where your firm could start to progress implementation plans, along with the individuals within the firm who need to be involved.  Look at your current resources and – particularly for non-network firms – consider whether additional resources might be needed, and if service providers may be required to fill any gaps.  For network firms, each individual firm is responsible for its own system of quality management, including design, implementation, and operation. Locally you may need to consider how the network requirements might need be adapted or supplemented by the individual firm to be appropriate.  Bear in mind that the new quality management standards provide an excellent opportunity to enhance the quality and consistency of audits.  These standards will drive firms to implement quality management consistently, supporting audits of a higher quality.  A word of warning, though: don’t underestimate the time, resources and investment needed to implement these standards. You will also need appropriate buy-in and a commitment to quality enhancement from those in leadership.  A great deal of change management may be required to effectively implement the new and revised standards. With the implementation date fast approaching, time is of the essence.   Noreen O’Halloran is a Director in the Department of Professional Practice at KPMG Ireland.

The high street is firmly back on the business agenda for UK entrepreneurs keen to boost visibility and engagement with customers, influencers and the media. Customers are buying and UK businesses are using every channel at their disposal to service demand while being in the spaces and places of the target shopper.  Because founders come looking for content and support on topics from raising money to hiring staff, Enterprise Nation is able to track sentiment and trends. Right now, the prevailing topic is how to service customer demand.  Customers, both large and small, are actively shopping both online and off line. Consumers are heading out in search of new experiences and products, and big brands – including corporates and government – are buying from small firms offering the niche services they are after.  Entrepreneurial founders are intent on servicing this demand regardless of the rising cost of doing business. There are three ways in which we are seeing this trend materialise:  E-commerce There are many platforms from which small businesses can sell both within the UK and overseas. Amazon has long had a position of strength in enabling spare room start-ups and growth companies to reach customers across the globe. The e-commerce giant is now being joined in a busy market by new platforms, such as Faire.com, which connect retailers to wholesalers, high street brands like John Lewis and Joules, who are starting their own marketplaces stocked with products from small businesses, and emerging sector-specific niche platforms, such as Glassette.com for homewares. All offer small businesses a rapid route to market, with payment solutions such as Klarna enabling a straightforward sales process for the customer.  Pop-up retail In order to meet customers, buyers, influencers and journalists on the High Street, small businesses are testing physical retail locations and bringing their brand into the real world. Property operators, including Sook, SituLive and Space and People, are making physical retail a viable option for the smallest of companies by allowing them to rent space by the hour, and on a budget. In-person events After a two-year hiatus, physical events are making a comeback, with the number of live business gatherings listed on our platform doubling in the past two months. As a result, we’re also seeing the return of the serendipitous meeting during the workday coffee break, or after-work drink, once again opening up new opportunities for the hustling entrepreneur.  Small businesses are powering on all cylinders and are staying updated on the techniques that will help them reach more customers effectively and efficiently. Doing so will deliver revenue, economic growth, and a vibrant business community successfully servicing market demand in entrepreneurial style.   Emma Jones is the Founder of Enterprise Nation, a business support platform and provider that operates in the UK and Ireland.

COVID-19 has changed the face of banking globally, but what’s next? Billy O’Connell delves into the top 10 emerging trends shaping banking this year. The COVID-19 pandemic has irrevocably changed the banking industry. Customers have become more demanding on multiple fronts - from service fees to sustainability - banks have doubled down on technology, accelerating their innovation drive, and new entrants to the market have become more ambitious, broadening the scope of services they offer. Here are the ten trends most likely to impact banking globally and locally in the months ahead.  1. Everyone wants to be a ‘super-app’ Just as the smartphone consolidated our hardware needs within a single device, super-apps are consolidating many of our retail, social and other needs.  Most digital banking consists of checking balances, paying bills, and making deposits — functionality more and more big technology players are incorporating into broader platforms alongside other services like commerce and social networks.  How should traditional banks respond when faced with the expansion of Amazon, Meta, and others into financial services?  They can try to add non-banking functionality to their own services and compete head-to-head for customer attention or partner with a super-app to provide white-label services. A third option is to wall themselves off from the fray and defend their traditional franchise.  2. Green gets real Investors and regulators will need to see environmental promises being delivered as they urge financial firms to become better stewards of the planet.  Proposed rules will require independent verification, proving that banks are living up to their claims. They will face immense pressure to redirect credit away from carbon-heavy companies toward sustainable energy.  In Ireland, lending has become increasingly ‘green.’ The main financial institutions are evolving their product offerings, focusing on supporting environmentally-friendly economic activity. These products make a real difference as they actively guide consumers towards a change in their behaviours.  3. Innovation makes a comeback Globally, the decade after the great financial crisis was a period of retrenchment in which many banks pulled back from introducing new products and focused on getting the basics right. Start-ups and digital challengers have emerged, with new offerings leveraging innovative solutions to target specific customer pain points.  The growth of Buy Now Pay Later (BNPL) providers is an example of this. However, banks are fighting back with creativity. Irish retail banks have invested significantly in the last five years in technology and innovation projects to deliver new digital services for customers.  We are seeing this in product innovation across the board – in the introduction of fully digitised customer journeys for personal lending and mortgages, instant account opening, data analytics and new digital capabilities to support SME lending.  During the pandemic, we saw retail banks improvising and innovating at speed as they leveraged their technology investments to respond with creativity and agility to the new challenges. 4. Fees Over the last several decades, banking fees have shifted from regular charges for services like account maintenance to in-built fees for facilities like overdrafts.  Fintech firms arrived, promising an array of services for the magical price of free, only to reveal later that revenue must come from somewhere.  Banks are creating features that put the users in charge of fee decisions. Fortunately, digital, AI and cloud capabilities are converging to provide the perfect platform for personalised advice that will help build consumer trust and involvement. 5. The digital brain gets a caring heart Before and during the pandemic, banks continued to invest heavily in digital technology to make banking more accessible, faster, and efficient. However, it is more difficult than ever to win customer loyalty.  Banks realise they have much to gain by learning to better understand and respond to customers’ needs and individual financial situations. Being well-positioned to meet customer needs through the challenges of the past 24 months has been important for banks and customers who needed their support.  Building on this momentum and focusing on AI and other technologies will be important to help banks predict customers’ intent and respond with more tailored messages and products. 6. Digital currencies grow up Several central banks worldwide are now launching digital currencies, and more are thinking about it. These are accompanied by maturing regulations around cryptocurrencies and a recognition that, while decentralised finance (DeFi) may still be in the experimentation phase, many of the core concepts of decentralised trust will likely have enduring value.  We will likely see more financial institutions and government agencies sharing data and ideas on how to incorporate aspects of this new type of money into the global financial system.  According to the Competition and Consumer Protection Commission (CPCC) research, one in ten Irish investors (11%) held crypto assets or cryptocurrency like Bitcoin in 2021. The number jumps to one in four (25%) for those aged between 25 and 34, indicating the appetite amongst younger generations in Ireland for digital money.  7. Smart operations put zero in their sights In 2022, banks will apply artificial intelligence and machine learning to back-office processes, enabling computers to outperform humans in some tasks. This will, eventually, decouple bank revenue from headcount.  Banks have made incremental efforts to streamline their operations at a global level. These new technologies, along with the use of the cloud and APIs, can accelerate their efforts well beyond small efficiencies and toward the long-held dream of ‘zero operations’ where waste and latency are eliminated.  8. Payments: anywhere, anytime and anyhow Getting paid and sending money are now anytime, anywhere features we’ve come to take for granted. The next step in this payment revolution is for these networks to open up. China has already demanded that internet companies accommodate rival payment services. At the same time, proposed legislation in India would force digital wallets to connect and mandate that merchants accept payments from all of them.  Banks with payment offerings will have to compete and cooperate with rival banks, fintech, and other players as the world of networks opens up. We’ve seen this gathering momentum locally, with AIB, Bank of Ireland, KBC, and Permanent TSB coming together on a joint venture to create a real-time payments app. The continued investment highlights the desire to evolve in response to customer needs and compete with digital challengers, such as Revolut.  Customer trust is an essential factor in driving success in the financial services industry. If the banks can give consumers the digital functionality they crave, alongside reliability and service, they could leapfrog their challengers. 9. Banks get on the road again Just as individuals are relishing getting out from under pandemic travel restrictions, banks too will go wandering in search of growth both at home and abroad. In Ireland, we’re already seeing M&A activity from the core banks, causing a seismic shift in the entire landscape.  This includes Bank of Ireland’s takeover of the capital markets and wealth management divisions of Davy stockbroker and its purchase of KBC’s loan book; AIB’s acquisition of Goodbody Stockbrokers and its JV with Great West LifeCo; and Permanent TSB’s purchase of Ulster Bank’s loan book.  10. The war for talent intensifies Figures released from The Workhuman Fall 2021 International Survey Report indicated that almost half (42 percent) of Irish employees plan to leave their jobs over the next twelve months.  As technology has become a critical enabler for banks, a much-publicised shortage of engineering, data and security talent presents a real challenge. Younger workers, in particular, want flexibility and to be valued in their jobs.  Forward-thinking banks are developing integrated plans that holistically address their work and talent issues. They’re mapping the skills they need now and expect to need in the future and are using a variety of approaches to recruit and retain them. They are also re-assessing their structure, culture, and work practices to improve their appeal as employers.    Time for a different approach Decades from now, the most successful banks will be those that continuously shape their businesses to the needs of customers, employees, and other stakeholders. Their greatest asset will be their ability to identify opportunities and innovate efficiently.  Billy O’Connell is Head of Financial Services business at Accenture Ireland.

Irish CEOs are becoming increasingly concerned about the dangers posed by cyber-risk and many are taking steps to mitigate the potential threat to the bottom line.  Cyber-risk has moved up the corporate agenda, cited as the dominant risk facing business leaders this year in a new global CEO survey. Forty-nine per cent of the respondents in PwC’s 25th Annual Global CEO Survey identified cyber-risk as their top concern, up from 47 percent and second place in the same survey last year. Irish CEOs are even more concerned about cyber-risk than their global counterparts, the report has found, with 58 percent citing it as the top threat they face this year, compared to the global average of 49 percent. For Pat Moran, Partner and Cybersecurity Lead at PwC Ireland, these findings are no surprise.  When Moran joined PwC in 2016, his cybersecurity team had fewer than 10 people. Now, in response to rising demand from clients nationwide, the headcount has risen to more than 50. “Cybersecurity is a major issue now, but that wasn’t always the case. I remember working for a bank back when I started my career. We would carry out technology audits and present our findings to the audit committee, but we were generally at the bottom of the agenda,” said Moran. “Cyber-risk was seen as a very technical area; one that couldn’t really have any major impact on the wider organisation. These days, it’s very much the opposite.  “Everyone wants to know about potential cyber-risks – the audit committee, the management team, the board of directors. Cyber-security is seen as a major business issue, and with good reason.” The high-profile ransomware attack on the Health Services Executive (HSE) in 2021 had the effect of catapulting cybersecurity even further up the corporate agenda in Ireland. “The HSE incident was a major wake-up call for all organisations in Ireland in both the public and private sector,” said Moran. “It caused unprecedented disruption and people realised that, if something like this could happen to a critical public service like healthcare, it could happen to anyone. That was when the penny really dropped and organisations in Ireland started to sit up and think seriously about cyber-risk.” Eight-two percent of CEOs in Ireland have factored cyber-risks – including hacking, surveillance and misinformation – into their strategic risk management, according to PwC’s Annual Global CEO Survey. As Moran sees it, however, many are still unprepared for a potential cyber-breach and have yet to put systems in place to ensure business continuity and recovery. “The HSE attack really showed, not just the financial risk associated with a cyber-breach, but also the potential risk to an organisation’s reputation,” he said. “Dealing with a cyber-attack can be a nerve-racking experience. Just this week, I got a call from a client hit by a ransomware attack and they were really panicked.  “They weren’t sure what their next steps should be; how they should communicate the incident internally; who they should contact outside the organisation. They hadn’t figured out the chain of communication, and that really added to the upheaval they were facing.” Moran advised CEOs and management teams to examine the response from Paul Reid, CEO of the Health Service Executive, to the ransomware attack on the HSE to help formulate their own response strategy in the event of a similar cyber-attack on their organisation. “Paul Reid was out there front-and-centre, supporting the HSE messages going to the public and the media. That really helped to mitigate some of the impact,” said Moran. “The number of organisations reliant on their online presence and ability to do business online increased dramatically during the pandemic, and consumers and clients can be quite unforgiving when it comes to data breaches, in particular. “They get understandably nervous when an organisation with access to their data is compromised. The question is: ‘If security is an issue here, do I really want to be a customer?’”  How organisations communicate in the event of a data breach is, therefore, critically important, according to Moran.  “I think CEOs and boards do now understand that a cyber-incident or attack doesn’t just impact one part of an organisation. It impacts all parts of the organisation,” he said. “It impacts every employee. It impacts customers and suppliers. It impacts the leadership and the board and they need to play a really prominent role in any recovery from a major incident, and in planning for that recovery – not just in prevention.” The HSE attack was traced back to Conti, a ransomware group thought to be based primarily in Russia, which has since signalled its support for Russian President Vladimir Putin’s assault on Ukraine. So, what does this mean for the global cyberthreat landscape in 2022? “There is now an increased risk that there will be more cyberthreats and attacks coming from Russia,” said Moran. “Richard Browne, the Director of the National Cyber Security Centre, has advised that organisations be vigilant and monitor their networks for potential vulnerabilities, phishing or denial-of-service attacks.  “Speaking to our own US colleagues at PwC, there is definitely an expectation that we will see more attacks. Our guidance to clients is to increase monitoring activity and rehearse their incident response, so that – in the event of something happening – they can respond quickly, and people know in advance what their roles and responsibilities will be.”