The pandemic and Brexit both provide momentum for bigger government – but don’t expect any protestations from the public, writes Dr Brian Keegan.The late US president, Ronald Reagan, never tired of giving out about big government. It’s a crude measure of the influence of government, but the level of national debt gives us some indication of the gap between what it costs to run a nation and what that nation can legitimately collect in taxes from its citizens.National debt suffers from spikes and fluctuations from wars, recessions and – as we are now seeing – pandemics. Such things are outside our control. But even when they are within our control, the national debt can grow unexpectedly. Despite Reagan’s protestations, the US national debt grew almost threefold during his eight years in office.The current pandemic will not grow the national debt of either Ireland or the UK by a comparable amount, but that is a factor of the scale of the existing national debt. Perhaps a better way to assess the impact of government is to look at the number of government agencies we now must deal with. Ireland’s Comptroller and Auditor General has almost 300 departments and organisations to scrutinise during his audit and assurance work. The UK National Audit Office looks over 400 or so UK government entities. As if to catch up, the new Irish Government’s programme makes over 20 references to the creation of new agencies or to increasing the remit of existing ones.The creation of agencies drives public sector jobs. The Institute of Public Administration recently noted that public sector employment in the Republic of Ireland exceeded 300,000 back in 2018, thus restoring staffing to pre-great recession levels. Before the pandemic struck, public sector employment in Northern Ireland exceeded 200,000. While most of our fellow citizens in the public sector are involved in service delivery, a lot of them are involved in regulation.We are already seeing how the pandemic is driving government size. Over the past few months, much of the Institute’s advocacy work has been about brokering arrangements with government – both north and south – to make things like the Temporary Wage Subsidy Scheme and the Job Retention Scheme work better on the ground. Ensuring that these schemes work well is vital, but they take up time, eating into the capacity of both our members in business and our members in practice to deliver other added-value services. Other business supports like state-backed loan guarantee schemes are also going to bring an additional burden of compliance, assurance and red tape.Brexit too is providing momentum for bigger government. The UK Government is duplicating many control and regulatory functions that were previously unnecessary because of EU treaty arrangements or because they were within the purlieu of European institutions. This pattern is being replicated across Europe. For instance, the Revenue Commissioners were to hire 500 additional customs officers to do the additional cross-border trade checks along with apparently 750 in the Netherlands, 700 in France, and close to 400 in Belgium.By and large, business on the island of Ireland benefits from the degree of State regulation. Yet, its role in attracting and securing foreign direct investment by creating a safer investment environment can get overlooked. On the other hand, businesses do not exist to carry out paperwork. This tension was always there. What the pandemic has changed is the political appetite to increase regulation.I think any Reaganesque political campaign promising smaller government would be unlikely to succeed these days. Even if politicians were minded to rein in the regulatory horses, the pandemic has created a greater willingness among the general public on this island to be governed, as evidenced by the almost blanket acceptance of the strictures of lockdown.Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

This is my first Accountancy Ireland comment piece as President. First off, I would like to say that it is a tremendous honour to be elected President of our Institute.I would like to thank my predecessor, Conall O’Halloran, for his exceptional leadership throughout a tremendously successful year. Conall can look back with great pride on his term in office.Bouncing backThe current priority remains one of public health but soon, the huge economic challenge of preserving jobs and rebalancing public and private finances will emerge. This has been made even more difficult by the constraints on both consumption and production.As we move to the next phase in continuing to suppress COVID-19, we as Chartered Accountants will have a pivotal role to play in helping to drive the economy forward and in generating growth.Working in collaboration with business, political leaders and the public sector, Chartered Accountants Ireland will be a strong supporter and advocate for the business community and the positive impact that a renewed economy can have for all in our society.I believe that our 28,500 members working in leadership, finance or advisory roles throughout Irish business will play a key role in kick-starting the recovery and ensuring that businesses bounce back strongly.Priorities for the year aheadAs President, I want to harness the ability, experience, and expertise of our membership network to support economic recovery in the aftermath of the pandemic.The strengthening of our role with the public sector will be the first of my key themes for the year. I see our profession having a much stronger role to play here.The second priority will be maintaining and enhancing the relevance of the Institute to our members from the start of their career through to retirement. We must stay connected. It is good to feel part of something, to feel a belonging to the family that is Chartered Accountants Ireland. I am proud to belong.Members will see that this sense of belonging and active participation is at the heart of the Institute’s new Strategy24, the document that will direct our work over the next four years.As Strategy24 is rolled out, members will see their Institute become more digitally driven. We believe that members will find a greater sense of connection and will see the Institute focus on being a financially sustainable, digitally-enabled organisation with an agile culture that supports innovation and collaboration.My final priority is access to our profession for potential students. We will continue to work to highlight the opportunities available to a new generation of potential trainees within an innovative, forward-looking profession.Looking forwardFollowing May’s annual general meeting, the gender balance of the Institute’s Council now stands at 50:50. I will seek to promote balance more widely across the Institute. It is worth noting that the overall membership is currently 42% female and 58% male.I am looking forward to the year ahead. Of course, there are challenges – but we have a great team at the Institute, and we will drive ahead. I am counting on your support as we work for members across the island of Ireland and beyond.Paul HenryPresident

To look forward and create a better business environment to restore employment and the economies on the island of Ireland, Chartered Accountants Ireland have published a landmark position paper called “The Next Financial Year: Making Irish Business More Competitive”. It draws on problems encountered by members and member firms in handling the Covid-19 crisis to propose how this can be achieved. From members working at the coalface of both economies, we know that businesses, particularly SMEs, are fighting hard to survive.  For the next financial year, we propose how government can help by simplifying processes and removing red tape, and by going fully digital.  We also call for a range of targeted tax measures and supports for businesses in Ireland and Northern Ireland, as well as emphasising the importance of excellent corporate governance and professional ethics. “The Next Financial Year: Making Irish Business More Competitive”, a position paper with alternative approaches and proposals informed by extensive engagement with members, for a better business environment post-pandemic be read or downloaded from our website.

  On June 23 IFAC responded to the European Commission’s review of the Non-Financial Reporting Directive (NFRD). In this review IFAC urged the Commission to adopt a global mindset by engaging input from a broad range of international stakeholders in determining the best way forward.  Steps taken must “fit within” a global system and avoid regional regulatory fragmentation.  Non-financial reporting answers the call from investors and other providers of capital for better, broader information about company performance and prospects for value creation, while also helping identify opportunities to support sustainable—and less carbon-reliant—business models. In the post-COVID world, corporate reporting that reflects the needs of a broad range of stakeholders will be particularly important to communicate on an organization’s performance and priorities.     As a Network Partner of the B20, IFAC calls on global bodies—including the G20—to encourage policy-makers, standard-setters, and regulators to facilitate harmonization towards a globally-acceptable approach to reporting ESG metrics and disclosures. 

Chartered Accountants play a critical role in operations around the world, and many are now guiding their organisations through the uncertainty and economic turmoil wreaked by COVID-19. Accountancy Ireland spoke to several members at the fore of this difficult task. Liam Woods  Director of Acute Operations at the HSE As a member of NPHET (the National Public Health Emergency Team) and with responsibility for the public hospital system in the Republic of Ireland, Liam Woods has played a central role in the country’s response to the COVID-19 crisis. In normal circumstances, Liam oversees acute services and the deployment of a €6 billion budget for the acute hospital system, which covers 48 hospitals across the country. Today, however, he is at the forefront of the public health system’s response to the global pandemic. Liam and his colleagues have worked relentlessly since December 2019, when the first case of coronavirus became known. “At that time, we were aware that there was an emerging set of concerning circumstances in China,” he said. “We are linked in with the World Health Organisation and the European Centre for Disease Control through the Department of Health, so we began receiving information on the situation almost immediately.” According to Liam, the threat to Ireland was confirmed by the Italian experience, with Ireland’s first case confirmed in late February 2020. This in turn led to an escalation of the pre-existing national crisis management structures. “Once we saw Italy’s crisis unfold, we implemented the HSE emergency management structures and assessed emerging scenarios and the subsequent requirements for intensive care capacity, acute capacity, and community capacity,” he added. “As March approached, we expected a major surge in cases of COVID-19. That surge did occur, but we didn’t see the levels experienced by Italy and that was primarily down to the public health measures taken in February and March.” As the pandemic progressed, areas under Liam’s remit such as the National Ambulance Service became increasingly critical elements of the response strategy. But as the pressure increased, so too did staff absence. “Today (30 April), 2,800 colleagues are absent in the acute system with a further 2,000 absent in the community system related to COVID-19,” he said. “That is a big challenge for the frontline, as is the procurement of personal protective equipment (PPE). Our procurement teams are working night and day to secure the necessary equipment to protect our workers.” That effort has been supplemented by the overwhelming generosity of individuals and businesses according to Liam. “We had a massive response from the business community and society as a whole, from distillery companies manufacturing antibacterial hand gel to people making face shields using 3D printers,” he added. “Beating this virus has become a truly collective effort and those working in the HSE really felt and appreciated that.” Although restrictions are now being cautiously eased, Liam expects the workload to remain relentless. “At a personal level, it is demanding but if you work in the health system and understand how it needs to operate, you at least feel that you can make a direct contribution and a lot of positivity comes from that. The response of frontline staff in hospital and community services has been amazing and the commitment to delivering care has been key to the success to date in responding to what is a global crisis.” Tia Crowley  CEO at Western Care Tia Crowley had an “unusual” induction to the role of CEO at Western Care, as her appointment coincided with Leo Varadkar’s statement in Washington on the first wave of measures to tackle COVID-19 in Ireland. Given that her organisation provides services and supports to adults and children with intellectual disabilities and/or autism in Co. Mayo, Tia was very conscious of the need for – and challenges to – the provision of her organisation’s services. “When the COVID-19 restrictions were imposed initially, we risk-assessed all areas of service provision and made the difficult decision to close day/respite services and limit community support services to essential supports that could be provided safely,” she said. Many of the organisation’s 950 staff were reassigned to support Western Care’s residential services, which now operate on a 24-hour basis. According to Tia, maintaining an optimum level of service while securing adequate PPE for frontline workers is a constant concern – but there are longer-term challenges in the horizon. “I, and the new management team, had hoped to bring in a balanced budget for 2020 after prolonged periods of cutbacks, deficits and containment cycles. However, a shock 1% cut to funding allocations across the sector coupled with the impact of COVID-19 will impact our ability to meet the demand for our services within our existing allocation,” she said. “The cost of the crisis, and the associated long-term implication for funding, is a challenge that is constantly on our minds. But at the moment, our focus has to remain on keeping our service users and staff safe.” Aside from financing, one thing preventing organisations like Western Care operating to their full potential is an overly burdensome compliance regime, Tia added. “I hope the Government recognises how organisations like Western Care responded to this crisis and the support they provided to the HSE when it was most needed,” she continued. “After the worst of this crisis passes, I would like to see a streamlined regulatory environment where, once an organisation is deemed to comply with a basic set of standards, that is accepted by all regulators. We, like others, struggle to comply with multiple regulators and compliance regimes and at last count, more than 35 different regimes applied to Western Care.” Despite the many challenges, Tia has noticed certain positives amid the bleak backdrop. “The atmosphere of cooperation throughout the organisation has reinforced my belief in human nature and I hear stories of resilience among service users, families and staff who have gone over and above to support families in crisis and keep service users happy and content,” she said. “We are also building supportive relationships with the HSE locally as we turn to them for support and guidance. But equally, we provide them with reassurance and support too because we are all in this together.” Ultimately, Tia’s hope for the future is a simple one. “I hope that we can emerge from this pandemic with a sense of pride and renewed purpose, knowing that we have come through one of the most significant events in our lifetime and that everyone in Western Care did their best.” Dermot Crowley  Dalata Hotel Group Dalata Hotel Group was quick to respond to the threat of coronavirus to its business. From cancelling its shareholder dividend to renegotiating with lenders, the company has cut its cloth and according to Dermot Crowley, Deputy Chief Executive, Dalata is well-positioned to weather a long storm. “We have always been very careful with our gearing and as things stand, we have access to €145 million in funding,” he said. “We immediately created a worst-case scenario of zero revenue for the remainder of the year. We examined every cost item and calculated our cash burn. The major fixed costs are elements of payroll, rent and interest. Having done that exercise, we were in a position to reassure our shareholders that we could survive at least until the end of the year on a zero-revenue model.” As it happens, the company is still generating revenue. Dalata raised a further €65 million in April when it sold its Clayton Charlemont Hotel in a sale and leaseback transaction and although most of the company’s hotels are formally closed, Dalata responded to requests from governments and health agencies to accommodate frontline workers, asylum seekers and the homeless – often at much-reduced costs. Meanwhile, all other hotels have management and maintenance teams in place to ensure that all properties are ready to re-open at short notice. While some workers remain, the company was forced to lay-off 3,500 staff at the outset of the crisis, but Dermot is determined to re-employ as many people as possible as restrictions ease and trading conditions improve. “One of the most frustrating things about this crisis is letting our people go. We invest a huge amount in our staff and last year alone, we had 350 colleagues in development programmes. We also take on 35 people each year through graduate programmes and we have several trainee Chartered Accountants in our employ,” he said. “We absolutely want to take everyone back on.” Despite the company’s preparations for the ‘new normal’, whatever (and whenever) that might be, Dermot remains cautious in his outlook for the sector. “Dalata is a very ambitious company and we have a lot of new hotels in the pipeline, but the reality is that we are likely to be facing lower occupancies once the restrictions are lifted,” he said. “When we re-open, the domestic market will be the first part of the business to recover but the international market could take quite some time depending on travel restrictions.” At its AGM at the end of April, the company confirmed that earnings fell almost 25% in the first three months of the year to €17.7 million. With even worse results certain for the period after 31 March and normality a distant prospect, Dermot expects the sector to experience both tragedy and opportunity in the months ahead. “Some companies will not make it through this crisis and that’s just reality,” he said. “That will create some opportunities. We built a strong company after the last crisis, but I do not see the same fallout in Ireland as in the UK this time around. The UK has many old properties and companies with high gearing ratios, so that may be where the most changes will occur.” Naomi Holland International Treasurer at Intel As International Treasurer and Senior Director of Tax at Intel, Naomi Holland had a demanding role before COVID-19 became a threat, but her role has since expanded as she – and her colleagues – seek to protect the chipmaker and its people from the threat posed by coronavirus. As leader of Intel’s Global Tax & Treasury Virus Task Force, Naomi also sits on the Global Finance Virus Task Force, which develops and implements Intel’s crisis response for the corporation’s worldwide finance function. This is not just a strategic project for Naomi, however. Her global role means that she has direct responsibility for employees in some of the worst affected areas of the world. “I have teams based in China where we were dealing with the outbreak from early 2020,” she said. While it was largely restricted at that stage, the China situation effectively became a test-run for the global pandemic that was to come.” Some employee considerations included colleagues who had returned home for the Chinese New Year and became confined to their province, others were on secondment outside their home country and Intel needed to assess the return home versus the remain in situ options, and some countries’ lockdown notice was so short that staff ended up not returning home to their families and were confined alone. In the early days of the crisis, Naomi and her colleagues engaged in extensive scenario planning. They considered single sites closing down, multiple sites closing down, and the impact of COVID-19 outbreaks on the organisation’s operability. That led to a rationalisation of activity to ensure that critical functions remained up and running. “In addition to ensuring that we had the necessary contingencies in place should a person, team or site fall victim to COVID-19, it was also essential that we prioritised our activity,” she said. “This required significant coordination as we needed to ensure that our partner organisations around the world were satisfied with what remained on our priority list and, importantly, what didn’t.” This required extensive communication, which was central to Intel’s response according to Naomi. “We were acutely aware that people needed information,” she said. “So, we focused on our internal communications and developed a ‘people’ track to complement that.” This was particularly important for Naomi, whose team spans several countries including Ireland, the Netherlands, Israel, India, and China. Her leaderhip remit meant the US teams were also on her agenda. Despite the complexity, Intel’s quick response meant that the company “didn’t miss a beat”, according to Naomi. “COVID-19 has forced all companies to assess items including their liquidity, their work-from-home capability, and their technological infrastructure,” she added. “We took all the necessary decisions, amended procedures as required and augmented our hardware in places. The greater complexity, of course, resided within our factory and logistics networks but I am proud to say that their delivery can only be described as incredible.” As the shock factor subsides and people increasingly become resigned to the prospect of living and working alongside COVID-19 for the foreseeable future, Naomi is determined to maintain her focus on her people and their mental health. “I’ve always said that people are a company’s best asset and if this crisis has taught me anything, it’s in our augmented ability to deliver when we operate as one team despite the circumstances,” she said. “The first six months of 2020 have been a traumatic time for many. However, with senior executives leading from the front and maintaining communication with their people, this crisis is in fact humanising us and helping us connect with our colleagues on a more personal level.” Shauna Burns Managing Director at Beyond Business Travel Beyond Business Travel is ten years old this year and like the rest of the travel sector, it faces severe challenges due to COVID-19. According to Shauna Burns, the company’s Managing Director, 2020 was the year the firm planned to reach £20 million in turnover and build on its investment in Ireland following last year’s opening of offices in Dublin and Cork. The impact of the pandemic was felt by the company in February, according to Shauna, when FlyBe entered administration. March then saw the domino effect of countries closing their borders, which presented a unique set of challenges. “We had clients and staff located all over the world, and we had to work 24/7 to ensure they got home quickly,” she said. The company was also involved in the Ireland’s Call initiative to bring home medical professionals to work in the HSE and NHS. After this initial flurry of activity, Shauna and her team had to take both a strategic and forensic view of the business amid a fast-changing business landscape. “Difficult but essential decisions had to be made on operational continuity and cash flow while engaging with our key stakeholders and looking into the potential for financial assistance from Government,” she added. “From the off, we were determined that our company’s core values around excellent customer service would not change. We retained some key staff to provide ongoing information and to ensure that clients who urgently need to travel can do so. This comes at a financial cost in terms of maintaining our premises and fixed overheads, but it is a decision we believe will benefit the business in the long run.” With one eye on the easing of travel restrictions, Shauna’s firm is also compiling information and advice for companies whose people must resume travel, so that they make informed decisions and manage the impact of COVID-19 on their business. The travel industry will re-open and travellers will take to the air again, she said, but they will travel less often and with an increased focus on traveller health and safety. “We expect to operate below capacity for the immediate future, so part-time furlough allows us to raise activity in line with demand,” she said. “Consequently, we are looking at our offering and service lines, and right-sizing our business for the ‘new normal’. There are opportunities to become leaner, faster, and more efficient, and digitalisation is a core element of that process. “We now have an opportunity to ask ourselves if the business were starting from scratch, what would we do differently and reimagine what this looks like ,” she added. “But for our business, restoring confidence in the safety of air travel is a vital pre-requisite to enabling recovery and with more than one third of global trade by value moving by air, it will also be vital for the recovery of the global economy.” The entrepreneurs Growing businesses with finite resources are very vulnerable to economic shocks, but one Chartered Accountant is using technology to weather the storm. Fiona Smiddy, Founder of Green Outlook, had three active revenue streams before the onset of COVID-19 – e-commerce, markets/event retail, and corporate services including speaking engagements. She is now down to one viable revenue stream, but the growth in online retail has allowed her company to grow during the pandemic. Fiona runs a tight ship from a cost perspective. She outsourced her order fulfilment activity in 2019 and engaged the services of a ‘virtual CFO’ who keeps her focused on her KPIs. “Green Outlook turned one year old at the end of March and the key challenge remains brand awareness and cash flow management,” she said. “The company is self-funded with no outside investment or loans, so I am restricted to organic growth.” Green Outlook continues to support Irish suppliers, with 22 Irish brands represented among the more than 170 sustainable, plastic-free products available online, and Fiona cites this as a contributory factor in her success. “I have noticed a huge uplift in supporting local and Irish businesses and I hope this continues post-COVID-19,” she said. Brendan Halpin, Founder of WeSwitchU.ie, also hopes to support Irish businesses and households in the months ahead. He launched his new company in March 2020, just as the lockdown came into effect, but having spent 2019 in the development phase, he is certain that now is the right time to launch a cost-saving business. WeSwicthU.ie is a digital platform that finds the best electricity and gas energy plan for individual households each year and even as COVID-19 reached Ireland, Brendan did not consider it a threat to his business. “It was pandemic-proof in a sense because our entire proposition is online. From the comfort of your home, the platform takes the stress and hassle out of switching and saving money on customers’ home electricity and gas bills,” he added. “The only change in the business plan was on the marketing side; I had intended to be out and about meeting people, but that activity simply moved online.” While the market reaction has been positive so far, Brendan is conscious that any planned expansion would require funding – and that may be a challenge as the economic malaise becomes more entrenched. “I have funded the business myself so far but if I really want to grow, the next step will involve external financing,” he said. “I do hope that the Government and State agencies will help start-ups like mine grow through their relevant phases despite the uncertainty that lies ahead.”

Ronan Dunne draws on his experience at the highest echelons of business to share his six leadership lessons. When I first worked in London as a banker, I was promoted three times in a period of about 15 months. I was an eager and highly qualified Chartered Accountant but in the first 12 months I worked late every evening. Then, I started working on Saturday and Sunday. I worked my socks off and for the first year, it was a remarkably successful strategy – but then, I hit a wall. I had no more capacity. It was a completely unsustainable model and it did not take me long to realise that unless I could invent an eighth day in the week, I would need to change my management style. The lessons that follow are based on my experience as a Chartered Accountant in business, and one who often had to learn lessons the hard way. Some may be more relevant to you than others, but I nevertheless hope that you find them useful. Lesson 1: It is not what you do, it is what you make happen When Chartered Accountants start out in their careers, they are largely personal contributors. They have a very specific role and success is defined by the outcome or the output of their particular job. Increasingly, however, we realise that this approach is based on an old-fashioned, hierarchical business model. In modern society, and for millennials in particular, painting inside the lines is not an attractive proposition – even in your first job. So, discover as early as possible in your career that your success does not just depend exclusively on what you do; it also hinges on what you make happen. Your capacity to impact and influence is infinite but your output is simply defined by hours in the day, no matter how hard and fast you work. At every point in your career, you have the opportunity to impact and influence those around you. Key takeaway: Take the opportunity to make a difference when it comes your way. Lesson 2: To be an effective leader, build an effective team The capacity to exceed expectations lies in how you blend the skills and capabilities of those around you. Effective teams do not simply do what any other team would; effective teams harness the unique talent, perspectives, and experience of their individual members in a way that enables the collective to achieve outcomes that would not otherwise be possible. When considering team formation, we sometimes think “I need someone for finance, someone for marketing, someone for legal” and so on. But actually, if you build a team correctly, you create space for each person to bring their own personality and their own unique perspective to the team. That is the secret ingredient to superior outcomes. Key takeaway: Every person within the team has a unique contribution to make. Lesson 3: Exercise judgement as to when to exercise judgement This might sound like a play on words but in my experience, people early in their career often have a desire to impress their superiors. They sometimes seek out opportunities to act decisively, to jump in and make a decision in order to demonstrate that they have what it takes to be a manager or a leader. In fact, they often demonstrate their inexperience by attempting to find a moment to showcase their decisiveness and by consequence, unwittingly illustrate their impatience. Very often, the wisest thing to do is to explain why a decision cannot be made due to a lack of information or context, for example. By all means, look for opportunities to exercise judgement but remember that judgement can sometimes be best exercised by not deciding and explaining why. Key takeaway: When meeting with senior executives, remember that rushing to make an impact may make you look like an idiot. Lesson 4: Leadership should happen at every level In business, decisions are best made closest to the point of impact. An effective organisation therefore ensures that those who make decisions have the right context and the discretion to decide, because hierarchy on its own does not always work. In a team, the most senior member is not always the natural leader on a particular topic or project so to be continually effective, teams should encourage those closer to the issue to take the helm. That means cultivating the flexibility to have junior members lead the way. Indeed, the biggest challenge facing larger organisations is their established hierarchical models. Such companies recruit bright, young, and digitally literate people but in too many cases they leave after a year or two because they get completely disillusioned. Despite understanding more about behavioural trends or other issues that may be affecting the business, their opinion is never sought out because they are three or four levels down in the organisation. Leaders need to empower those people and accept a certain amount of risk. There must be permission to fail but even in organisations with a mild risk tolerance, this concept creates a space in which an organisation’s collective potential can be nurtured. Key takeaway: Acknowledging context is critical to effective decision-making. Couple that with delegated authority and permission to fail, and you have a solid foundation for a highly effective organisation. Lesson 5: Authenticity is the gateway to true leadership My view of authenticity is built on two ideas – one is a personal insight and the other builds on the elements discussed above. I became a CEO for the first time with O2 in the UK when we were on the cusp of a major recession. I had a successful career up to that point but when I took over as CEO, I struggled for the first six months because I spent a lot of time wondering what other people would have done in my situation. In many jobs, you are the subject matter expert but as CEO, you are a jack of all trades and often master of none. Then, I had an almost spiritual moment when I realised that I had 27 years of rich experience. It became clear that the only way I could do my job was to be myself. So, as a leader, you need to ask yourself: who are you? People rarely challenge themselves with this question. I describe myself as chief cheerleader and chief storyteller. I am an extrovert, a joiner-upper, an enthusiast – and I use that to be a front-row leader because that just happens to be my natural style. So ultimately, the best way to be successful in any role is to be yourself. The second thing is that when you are the boss, nobody asks you a question that they know the answer to. This leaves you with a strange obligation to know the answer to everything, but CEOs manage uncertainty amid many shades of grey and it can be quite liberating to realise that the CEO can and should say: “You know what, I am concerned about that as well.” If you do that, you help your people work things out, find solutions, and build answers to organisational challenges with a sense of togetherness. Key takeaway: Know your strengths and acknowledge that you do not – and should not – have the answer to every question. Lesson 6: Know the question before you try to answer it There is massive structural impatience in organisations and as a result, I see much more ‘ready, fire, aim’ than ‘ready, aim, fire’. Too often organisations run towards an assumption of what the question (and answer) is; they are in action mode immediately. But a little time working out the precise nature of the question will invariably bring you closer to the answer. Organisations consistently do two things wrong: they press ahead to answer a part-formed question, and they do not allow talent to flourish because hierarchy gets in the way. Key takeaway: Define the question clearly before embarking on the search for an answer. Ronan Dunne FCA is CEO at Verizon Consumer Group.

John Kennedy explains why knowing too much can harm your practice, and where you should apply your focus instead. When I ask Chartered Accountants to make a list of the problems that hold them back from getting new clients, I am sometimes surprised at the issues they include. One point never makes the list, yet it is often a challenge – they just know too much. How can that be a problem? Surely every client wants a highly knowledgeable accountant, someone who is on top of all of the details and knows all of the angles?This is partly true, but it hides how you can inadvertently damage your practice. Unless you take time to step back, think clearly from the perspective of the client and shape your words to meet their needs, you can quickly lose their attention. This problem is compounded by the assumption that your clients pay you for your knowledge of accountancy, but that is not why clients pay you. Why do clients pay you? This is a deceptively simple question. Is it because of the things you know or because of the things you do for them? Or is it because your qualifications mean you are empowered to authorise documents? Each answer constitutes some part of the reason, but each also obscures a vitally important point. There are two crucial distinctions. First, clients do not pay you for the things you do; they pay you for the value you deliver. Second, the value you provide is only partially expressed in monetary terms. The fundamental truth is that, in many cases, clients most value the way you make them feel. Where your real value lies When you were studying as an undergraduate, the emphasis was on increasing your knowledge. You bought textbooks, you attended lectures, you completed assignments and the focus was always on what you knew – more facts, more information, more knowledge. Your exams tested and confirmed your knowledge; the more you could prove all you knew, the higher the grades. And the more you knew, the better you felt and the better you were regarded by the training firms for whom you hoped to work. With this relentless emphasis on knowing more and more, it is unsurprising that you came to assume that knowledge was where your value as an accountant lay. Then you became a trainee Chartered Accountant in a firm. In your application, your interview and all of the tasks you were given, it was assumed that you had the knowledge required. At this point, the emphasis began to shift to the things you did. You were given specific tasks; what you did and the time it took was captured in timesheets. The emphasis of virtually every aspect of your work, your day and your value revolved around recording your activity in your timesheets. And then you set up your own practice. By now, the emphasis had become so engrained – entrenched even – that you assumed that the key to building a successful practice revolved around turning what you knew into what you do, and recording that in timesheets to bill your client. This focus transferred to your client, but the truth is that this is not where your greatest value – nor your greatest opportunity – lies. Your client wants your value, not your time To build a successful practice, you need to move your thinking – and the focus for your client – beyond what you do and towards the value you provide. This involves two steps. The first step is to consciously move the emphasis from the things you do to the value you deliver. This first step is widely accepted but poorly implemented in practice. The second step is perhaps even more critical if much less understood. To build a practice with strong bonds with long-term clients, you need to move the emphasis from facts to feelings. Human beings like to believe that our species is more rational than it really is. We believe that we see or hear something, we analyse it rationally, and we decide. But do you suppress your feelings at work and give dispassionate advice? Are you always logical and provide clients with clearly thought-out analysis? This is what we like to believe, but it is often untrue. The reality looks much more like this: we see or hear something; we filter it through our emotions; we interpret it and tell ourselves a story; and on that basis, we decide if it is right or wrong. This filtering process happens all the time and while every client wants the facts dealt with, they assume that this is the minimum level of service they will receive from their accountant. The bonds that make clients work with you and generate referrals are forged beneath the level of conscious thoughts. Even in business, the way we feel is of enormous importance so you can create a genuine edge by understanding and applying this. The positive feelings generated by your work include peace of mind, increased confidence in decision-making, or the anticipation of a comfortable retirement. These are important sources of value, yet few realise just how vital these submerged feelings are – even in the most dispassionate business transaction. Every interaction has a submerged, and usually unstated, emotional aspect. As a practice owner, you must understand this and use it to your advantage. When making the shift in focus from the things you do to the value you deliver, you must take account of the genuine feelings at play. Value is about more than money Feelings are always there and are an important part of the value provided by a Chartered Accountant – no matter how much we try to convince ourselves that it is “just business”. Everyone has clients they like and clients they do not like; phone calls they look forward to making and phone calls they hate making; tasks they like doing and tasks they hate. We are very skilled at telling ourselves stories that turn these feelings into apparently rational explanations supported by facts to support our conclusions – but there is no avoiding the reality that feelings are very powerful, and this is the same for your client. Let us take an example that shows just how powerful this concept is. Complete this sentence: “More than anything, I want my children to be…” I have used this example for decades and the answer is almost always “happy”. Occasionally, the respondent will say “content” or “fulfilled”, but in each case the answer is an emotion. It is never a financial or factual answer. This is a simple example of just how important feelings are. How to gain an advantage Gaining a client does not begin and end with you making clear all of the things you will do for them. For an individual to act, they must first feel confident that you understand what they want. And more importantly, they must also be convinced and motivated to the point that they are committed to working with you. Being convinced and motivated depends on your ability to address the feelings that so often remain submerged, unexamined, and unaddressed. I have heard about all the effort accountants put into planning and preparing for meetings with potential clients, often spending hours crafting a well-designed and high-quality document and accompanying presentation. But they then go on to tell me that, even as they are discussing the document or giving the presentation, they know it is just not working. Almost everyone has experienced this in some way, but many simply continue as if the submerged feelings are not there or are insignificant. The habitual pattern is to press on with more information, more facts, more details. The result is that you completely overlook the reality that the submerged feelings are the decisive factor in the ultimate success of any relationship. It is much more useful to bring these feelings to the surface. You do this by using questions to draw out how the work you are discussing with your client will make them feel. The truth is that few clients care about exemplary management accounts or pristine submissions. Some do want to use their cash more effectively or to have a clear tax plan in place, but everyone wants to feel the peace of mind or sense of security that these actions bring. Yet, many accountants spend too much time talking about the surface facts, the facts that – even when they are dealt with well – are, at best, efficient and uninspiring. The often-unacknowledged truth is that the feelings you create in your clients are just as valuable in building long-term relationships as the work you do. When you deal with the surface facts well, but the submerged feelings are left unattended, there is the illusion of progress, but the relationship is merely routine with little enthusiasm. New clients in particular will sometimes engage you as part of their initial wave of enthusiasm, irrespective of the work you have done, but that will undoubtedly be a passing phase. The worst-case scenario is where the factual, practical aspects of the relationship are not adequately clarified and addressed, and the submerged feelings are also poorly dealt with. If this is the case, the client may accept you as a necessary evil, and you both bump along for a short time until your client moves to another practice. Even if they stay, these are the clients that are difficult to deal with, slow to pay, and frustrating to have. Only when you take control of, and actively deal with, both the surface level factual tasks and the submerged feelings do relationships take off. When this happens, it is of real value to both you and your client. These are the client relationships you want – you are both in step, you both work well together, and you both feel positive about the work. Too often, however, this kind of relationship is left to chance because the influential role of submerged feelings is seldom acknowledged, discussed, and actively addressed. But you can make these positive and rewarding client relationships a matter of choice. Just get into the habit of raising your clients’ understanding of the importance of the positive feelings generated by working constructively with you as their accountant. Ask about the areas they want to be confident in; probe how putting their affairs in order will reduce stress; and test and draw out the peace of mind they will get. As you become skilled at eliciting and addressing these submerged feelings, you will set yourself apart from your competitors. Move your emphasis from what you do to the value it brings, and then take the critical step of drawing out and addressing the submerged feelings that are most important to your client.   John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

Dr Annette Clancy explains why employees’ mental health should be the organising principle for businesses in the 21st century. 20-30% of us will experience mental health issues during our lifetime. Could the quantity and quality of work have something to do with this?  A recent study conducted in the UK shows that one-third of us are not happy about the amount of time we spend at work. More than 40% of employees are neglecting other aspects of their life because of work, which may increase their vulnerability to mental health problems. As a person’s weekly hours increase, so do their feelings of unhappiness, worry and anxiety. Employees’ mental health is affected by their roles. For example, we might expect to see mental health issues in workers who deal with trauma and violence every day, but studies also show that workplace culture, bullying, disciplinary processes, and toxic workplace relationships all contribute to deteriorating mental health. Many businesses have policies for mental health and workplace wellness, but for those who are trying to cope with challenging workloads and suffering at the same time, policies may not be enough. Very often, people hide what they are feeling for fear they will be stigmatised or punished. Policies need to be backed up with empathetic intervention by managers who have the right combination of ‘hard’ and ‘soft’ skills. Yet, managers are rarely trained to either recognise or manage conversations with team members who may be experiencing mental health difficulties. So, what can managers do to de-stigmatise mental health issues? 1. Create an organisational culture where there is respect for people. This sounds simple, but in practice, it rarely is. Most mental health issues arise from toxic relationships, bullying, harassment or power dynamics. Changing the culture around this would go a long way in helping to eliminate some mental health issues. 2. Train all managers and team leaders in ‘soft’ skills. Help people develop the ability to listen to what is not being said and read body language so that they can pay attention to those they manage. Stress and anxiety are felt, not spoken, so managers must be attuned to how it is expressed. 3. Encourage a culture of openness about time constraints and workload. Employees must feel able to speak up if the demands placed on them are too high. Also, ensure that employees’ jobs are manageable within the time for which they are contracted. Expanding job creep is one starting place for stress in organisations. Monitoring this aspect of an organisation’s behaviour alone could impact significantly on mental health. 4. Allow staff to attend counselling and support services during working hours, as they would for other medical appointments. This proactive initiative sends an important signal that mental health is a priority in your organisation. The World Health Organisation (WHO) defines mental health as “the state of wellbeing in which every individual realises his or her own potential, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to her or his community”. The WHO definition provides a policy template for organisations wishing to create a culture in which the mental health of all workers is prioritised, not only those with mental health issues. It offers an interesting insight into how an organisation might be structured if mental wellbeing was the organising principle. As mental health issues continue to increase both within and beyond the workplace, perhaps the WHO definition isn’t so far-fetched. Putting people at the centre of organisations used to be the way we did things; putting the mental health of employees at the centre of organisations may be the way we need to do things in the 21st century. Dr Annette Clancy is Assistant Professor of Management at UCD School of Art, History and Cultural Policy.

As the saying goes, rough seas make great sailors and the new President of Chartered Accountants Ireland, Paul Henry, has abundant experience of leading in times of crisis. Perhaps in a sign of the times, Paul Henry sat down at his desk at home in Belfast to conduct this interview. With the lockdown in full effect, he was working from home as he sought to run his commercial property business and prepare for the year ahead as President of Chartered Accountants Ireland. And it will be a busy year indeed. In July, Paul will also become Chair of CCAB – a forum of five professional accountancy bodies that collaborate on matters affecting the profession and the broader economy. There will undoubtedly be much to discuss. From recovery to regulation, Paul will lead the charge for both Chartered Accountants Ireland and CCAB at a turbulent and fragile time in the island’s history. The global COVID-19 pandemic has spawned an economic malaise that may well be compounded by the effects of Brexit but leading through such crises was far from his mind when he decided to become a Chartered Accountant in the 1980s. The path to industry From an early age, Paul was determined to become both a Chartered Accountant and businessman – influenced in part by the apparent success of his friends’ parents. Upon leaving his science-focused secondary school in North Belfast, Paul attended Queen’s University Belfast where he studied accounting at undergraduate level before completing what was then known as the Postgraduate Diploma in Accounting. He readily admits that his first year studying accounting was “a wee bit of a mystery” but with some perseverance, both the art and the science of the subject began to make sense. Paul went on to qualify as a Chartered Accountant with PwC Northern Ireland in 1989, where he met his wife, Siân. He subsequently held positions with the Industrial Development Board, Enterprise Equity, PwC (for a second spell), and ASM Chartered Accountants before joining his current firm, Osborne King, where he is now a Director and equity partner. The move from practice to real estate advisory came about when Paul was working with ASM Chartered Accountants, primarily on corporate finance projects. “I had been speaking with the team at Osborne King about developing the business and the commercial skills they would need to do that, so I helped to shape a role and job specification for them,” he said. “They went to market with the role and close to the closing date for applications, one of the team said: ‘We’ve received some good applications, but we didn’t receive one from you’. For me, that was the light bulb moment because it was precisely the career I wanted. So, I went through the application process and thankfully landed the job.” Becoming a businessman Paul’s evolution did not end there, however. Having joined Osborne King in 2000, he led transactions involving sophisticated financial structures including private finance initiative and public/private partnership deals. Business was booming but unbeknownst to most, the financial crash of 2008/09 was not far away. The global downturn that followed decimated many sectors and industries – not least commercial property. Osborne King, like many others, felt the pinch but out of crisis comes opportunity and Paul went on to achieve his second childhood dream: becoming a fully-fledged businessman. “Through a series of developments and the downturn in particular, I ended up completing a management buyout of Osborne King with one other colleague. We restructured the business and the shareholders haven’t looked back since,” he said. With the benefit of hindsight, Paul can identify several lessons that are pertinent today as employers attempt to stay solvent and keep their businesses afloat. “The critical thing is to be open and honest with your people. In a downturn such as this, businesses must reduce their cost base and conserve cash, and that means having difficult conversations – particularly with staff and suppliers,” he said. “But if you communicate clearly and often, people will trust you and that is a precious asset to have. So be straight with them about the challenges facing your business, but don’t forget to repay that trust when the business landscape improves.” Indeed, one of Paul’s proudest achievements is keeping the full Osborne King team intact throughout the 2008/09 crisis and its aftermath. “We were probably the only commercial real estate firm that didn’t make any redundancies during the last recession,” he added. “We did that because, in my mind, we have great people and it is our people that will help us thrive once the economy recovers.” The current crisis Nobody expected to be in an even worse economic predicament just 12 years later, but the onset of the COVID-19 pandemic has led to plunging world economic growth. Businesses are operating in a near-absolute environment of uncertainty as governments scramble to provide the necessary lifelines for corporations, entrepreneurs, and their staff. In that context, Paul has been impressed by the agility and ingenuity of the governments in the Republic of Ireland and Northern Ireland in responding to the needs of both businesses and citizens. “People are often very critical of the public service but in recent months, we have seen its very best elements – not least in the health sector and emergency services. We owe a huge debt of gratitude to those who put themselves in harm’s way to keep us safe,” he said. Paul is also keen to highlight the vital role of the Institute in helping its members through the pandemic. “In times of adversity, we become incredibly creative and innovative and the Institute has responded very well to offer members even more services – whether it’s the COVID-19 Hub on the website or our regular webinars on soft skills or the Wage Subsidy Scheme,” he added. “Since March 2020, the level of member engagement with the Institute has increased significantly so we can see clearly that our Digital First programme is the right strategy. If there is a silver lining to all of this, it is that we have been forced to accelerate many of the innovative member services initiatives that were already on our agenda for 2020 and beyond.” All of this, he said, complements the traditional role of the Institute as a source of support for its 28,500 members. “CA Support is there to support all members and students in times of difficulty or crisis, and the service has seen an increase in activity in recent months,” Paul said. “Whether you have lost your job, are struggling to cope with uncertainty, or feeling lonely, all members and students can turn to their member organisation for support and guidance, and that is something that makes me immensely proud.” The role of the Chartered Accountant In addition to helping each other, Chartered Accountants will also be relied upon to help steer businesses through the pandemic and towards a sustainable future in what remains a very uncertain economic and regulatory landscape. Paul is hopeful that the global economy will recover relatively quickly, but there remains much to be done even if the economic signals begin to improve. “As we work through the fallout of the pandemic, businesses will need to be aware of the ‘wall of creditors’ waiting for them on the other side of the crisis,” he said. “Although survival is the name of the game at the moment, rent, commercial rates, and other obligations will need to be settled at some stage and Chartered Accountants – both in business and as advisors to business – will need to turn their focus to that issue.” All the while, Brexit rumbles on in the background and although it has the potential to compound the economic woes bestowed on the island of Ireland, Paul points to the profession’s pragmatism as its most valuable asset in navigating the added uncertainty. “The Institute has made clear that it would be preferable if Brexit did not happen, or if it did, that it happened in a planned and managed way with ample time for businesses to acclimatise to the new reality. But Chartered Accountants will play the hand they are dealt and work to understand what role they must play in making Brexit work without judgement,” he said. The President’s priorities Paul takes the helm at Chartered Accountants Ireland at a distinctly turbulent time but as the saying goes, rough seas make great sailors and Paul’s experience – both in industry and practice – gives him a rounded view of the needs of the membership during times of crisis in particular. In the year ahead, the Institute will launch a new four-year strategy that will hopefully outlive both COVID-19 and Brexit and despite the uncertainties, Paul’s focus will remain very much on people, talent, and potential. “When I joined Enterprise Equity, my chief executive said ‘Paul, it’s going to cost me £1 million to train you’. I was thrilled because I thought I was going to be educated in the best universities in the world, but he really meant that I would make many costly mistakes along the way,” Paul said. “In business, you are often backing the jockey and not the horse. It is the people, team and leaders that will get you around the course and win the race, and this focus on people will be a core element of my Presidency in the year ahead.” Paul will also focus on other strategic imperatives during his tenure: building on the recent evolution of the education syllabus, supporting the Institute’s Digital First initiative, and adapting to the ‘new normal’ for students, members and staff – whatever that ‘new normal’ might be. “My key priorities will revolve around member experience. It is vital that we engage with members, both at home and overseas, and become increasingly relevant to members in all sectors,” he said. “Building engagement with our members will be central to that sense of relevance. And as someone who wasn’t engaged with the Institute for many years, I can say with conviction that once members engage with Chartered Accountants Ireland and come to understand the breadth of services and support available to members and students alike, they will be amazed.” Conclusion Paul’s presidency will be a presidency like no other. Travel will be restricted in the short-term, a global recession is looming, and the world of professional services work has undergone a dramatic upheaval. But Paul remains optimistic for the future. “Through our education system, we are equipping the next generation of Chartered Accountants with the skills and expertise necessary to lead businesses into the future and support economic recovery and growth,” he said. “Meanwhile, our members continue to be relied upon as the people who connect the dots, bring people together and make individual elements more effective and valuable by creating and leading great teams. For me, the future is all about empathy, people, and teams – and if we get that right, we can and will recover.”

Teresa Stapleton explains how senior leaders and managers can create a high-performance culture with loyal, engaged, and motivated employees. An estimated two-thirds of companies still conduct annual performance reviews, despite extensive research and employee feedback which suggests that they are outdated. What most companies hope to get from performance management is engaged, motivated, high-performing employees and business success. But the reality is that annual and bi-annual reviews fall well short in supporting these aspirations. They typically involve time-consuming and detailed write-ups of past performance, which have little impact on future results. More and more companies are questioning the value of analysing past performance based on goals set 12 months ago and rating individual performance on a scale to determine rewards. Most managers and staff dread the whole process. Research by Willis Towers Watson found that only 48% of employees report that performance reviews have helped improve their performance, and just 52% think their performance was accurately evaluated. There is widespread consensus that ongoing performance management and the provision of feedback and coaching is a better approach to creating an engaged, motivated workforce. However, the challenges involved in replacing the annual review process, which has been embedded in organisations for many years, can seem daunting. Over the last ten years, several companies have successfully done just that – transformed their performance management processes to re-energise their organisation and employees. While there’s no one-size-fits-all solution, the following themes are worth considering when re-thinking performance management. Performance management philosophy The starting point for changing any process is deciding what you want to achieve. Defining what specific behaviours, values and results you want to encourage, and whether individual accomplishments or team collaboration – or indeed, a mix of both – will be recognised and rewarded is a good first step. Many companies share their vision, values, culture, performance management philosophy, and employee development approach on their websites as it is where prospective candidates go to get a feel for the company and whether it would be a good fit for them.  The traditional levers for recruiting and motivating employees are attractive pay and benefits, competitive bonus schemes, job security and career development prospects. Also, employee engagement and employee experience are increasingly recognised as being of equal importance to attract talent and drive productivity. Some companies have adjusted their rewards model to empower managers to offer smaller incentives more regularly when goals are achieved. Others offer training, educational support, or development programmes to reward strong performance. Providing a positive working environment where employees feel that their work is meaningful and their contributions are valued is now seen as central to attracting and retaining talent. Senior leaders and managers have a critical role to play in building an environment and culture where their teams enjoy coming to work and are committed to delivering exceptional results. Performance appraisal model Companies often adjust their performance management approach over time to reflect changing economic conditions and the latest thinking on business leadership. The bell curve system of performance appraisal, which was widely used for decades by large companies, has been abandoned by most. This model forces managers to rank employees into a bell-shaped distribution curve, with 20% high performers, 70% middle performers, and 10% low performers. The advantages of the bell curve model are that it helps managers differentiate rewards based on contribution and forces them to tackle low performers. However, the drawbacks of the model are generally believed to outweigh the benefits as it can create unhealthy internal competition to be a top performer and get high rewards and undermine collaboration across teams. It was also viewed as unfair and demotivating to employees pushed into the ‘middle’ or ‘low’ categories to hit the numeric requirements of the curve if this does not reflect their actual performance. Many companies have replaced the bell curve model with less rigid approaches that focus on continuous performance management, providing real-time feedback and coaching to improve performance and support personal development. Some companies have even dropped performance ratings altogether as they focus performance discussions too much on past events, shifting instead to highlight learnings from past experiences and create personal development plans for each employee to increase future impact. Objectives and key results There is a real art in setting meaningful and achievable targets that motivate staff to deliver great results. The biggest challenge is often distilling the broad range of activities each employee is responsible for to highlight the objectives that will contribute most to the overall success of the business. All too often, individual commitments or goals are a long list of activities and deliverables, making it hard for employees to see what is truly important and creates the most impact. Including granular details of job responsibilities or adding broad commitments that apply to all employees, while well-intentioned, often dilute the focus on clear, meaningful, personalised priorities. A growing number of companies like Google, Intel and LinkedIn have adopted the ‘Objectives and Key Results’ (OKR) framework to align company, team and individual goals and set targets. The process involves defining three to five objectives for each individual, with key results that are usually stated as numeric targets or other clear measures to track progress. While setting clear expectations upfront is essential, it is just as important to update them regularly to reflect changing company priorities and business direction. Regular performance check-ins Managers play a crucial role in setting their teams up for success by getting to know the strengths and capabilities of each team member and matching each individual’s skills to meaningful goals. Open communication is essential to set performance expectations, stay aligned on progress, and provide real-time feedback to address issues before things go off course – or to capitalise on opportunities to do things quicker or better. Performance and development discussions should take place on an ongoing basis and not be reserved for a formal review meeting once or twice a year. If regular check-ins are happening, there should be no surprises when it comes to performance assessment and rewards discussions. Most companies have performance management tools to track and monitor performance processes. Automated systems can also help streamline the process of capturing peer-to-peer feedback, highlighting blind spots or behavioural issues that managers should address. Conclusion Modernising performance management requires re-thinking the whole employee/employer value exchange. Employees want to do meaningful work, aligned with their values, where they feel they can grow, flourish and be justly rewarded. Senior leaders and managers have a critical role to play in creating a high-performance culture with loyal, engaged, and motivated employees to sustain business growth and long-term success. Teresa Stapleton is an Executive Coach at Stapleton Coaching.

Although the cost of examinership may be prohibitive for smaller entities, Companies Act 2014 provides two alternative restructuring mechanisms that are both less complicated and less costly. Declan de Lacy reports. The restrictions imposed to stem the spread of COVID-19 have caused an unprecedented economic shock. The IMF’s Economic Outlook forecasts that the global economy will experience its worst recession since the 1930s, with Ireland experiencing a fall of nearly 7% in GDP and a rise of almost 150% in unemployment. The oncoming recession will inevitably result in companies failing at even higher rates than were seen during the downturn a decade ago. It is equally inevitable that many of the companies which will ultimately fail could be made viable by restructuring their debts and other obligations. It is incumbent on our profession to steer troubled companies through this crisis and give them the best possible chance of survival. The examinership process is the most widely recognised mechanism for restructuring insolvent companies. This mechanism is not suitable for small and medium-sized enterprises (SMEs), for whom the cost of examinership is prohibitive. That is not to say that formal debt restructuring is not accessible for SMEs. Companies Act 2014 provides two alternative restructuring mechanisms that are both less complicated and less costly. These mechanisms are the schemes of arrangement provided for by Sections 449-455 and Section 676 of Companies Act 2014. Neither mechanism is well-known or widely used, even though they have existed in one form or another for more than 50 years. Companies Act 2014 introduced the most recent version of these schemes and made the Section 449 scheme much more accessible. The infrequency with which these mechanisms are used is not a reflection on their effectiveness. They have recently been used by international companies to restructure hundreds of millions of euro worth of debt. They were also used to restructure the obligations of the property funds operated by Custom House Capital and by the company at the centre of the pork dioxin scare of 2008. Both schemes provide mechanisms by which a company may propose an arrangement in which the amounts due to creditors are either written off, deferred or otherwise compromised. If the requisite majority of creditors approve the arrangement, it can then become binding on all creditors. In practice, creditors need to be offered some quid pro quo to induce them to accept the proposals. This might be the introduction of new funds to partially reduce creditor balances or future payments linked to trading results. In each case, the outcome for creditors must be no worse than in a liquidation scenario as otherwise, an aggrieved creditor would have grounds to ask the court to refuse to permit the implementation of the arrangement. It is not necessary to treat all creditors in the same manner. Indeed, it is likely that any arrangement would involve secured creditors, preferential creditors and trade creditors being treated differently. Unlike examinership, neither scheme provides a mechanism by which onerous leases may be disclaimed. Notwithstanding this, landlords are likely to support proposals to reduce excessive rents to market rates if the alternative is the termination of the contract when their tenant goes into liquidation. A significant advantage of a scheme of arrangement over an examinership is that a company’s directors can commence the process without going to the High Court. There is also no requirement for an independent accountant’s report to be prepared. This means that a scheme of arrangement can be implemented for a fraction of the cost of an examinership. A further advantage of a scheme of arrangement is that the company does not automatically go into liquidation if a scheme is proposed, but not approved. The Section 449-455 Scheme There are no criteria that a company must satisfy before proposing a scheme of arrangement under Section 449-455. The first step in preparing to implement an arrangement is to identify the separate classes of proposed affected creditors. These might typically include preferential creditors, secured creditors, trade creditors, and related parties. A meeting of each category of creditor must be convened to consider the proposed arrangement. A ‘scheme circular’ must be prepared, in which the company sets out details of the proposed arrangement and how each class of creditor will be affected. Once notice of the class meetings has been issued, the company may apply to the Court for an order giving it protection from existing and new proceedings. This application is unlikely to be made unless a company is under immediate pressure from creditors. An arrangement becomes binding on all of a company’s creditors if 75%, by number and value, of the creditors represented at each class meeting votes in favour, the arrangement is sanctioned by the Court, and a copy of the order is filed with the Companies Registration Office (CRO). The Court has recently held that it should sanction a scheme unless “it is satisfied that an honest, intelligent and reasonable member of the class could not have voted for the scheme”. By comparison, a proposal by a company in examinership may be approved by the Court if it is agreed to by more than 50% of only one class of affected creditors. The Section 676 Scheme Any company that is either being, or is about to be, wound-up may propose a scheme of arrangement under Section 676 of Companies Act 2014. This means that the company must be in liquidation, or that a winding-up petition has been filed, or that an extraordinary general meeting (EGM) and creditors meeting to pass a winding-up resolution and appoint a liquidator has been summoned. Of course, if the proposed arrangement is approved, the winding-up need not proceed. A scheme pursuant to Section 676 is less complicated to implement than either an examinership or a scheme under Section 449-455. There is no requirement to distinguish separate classes of creditors or to obtain separate approval from each class. Additionally, an arrangement approved by the requisite majority of creditors becomes binding without the need to be sanctioned by the Court. The Court only becomes involved in the arrangement if an aggrieved creditor applies to have it amended or varied. The major disadvantage of the Section 676 arrangement is that it must be approved by 75% of all of the company’s creditors, and not only by 75% of those represented at the meeting where it is considered. This means that a proposed arrangement could fail through creditor apathy and not because of any opposition by creditors. Conclusion Neither scheme offers a perfect solution, either for companies or their creditors. The requirement in a Section 449 scheme to obtain the agreement of a majority of all classes of creditor means that a class comprising a small fraction of a company’s overall indebtedness can frustrate the wishes of the majority. The requirement in a Section 676 scheme to obtain the agreement of 75% of all creditors, and not only those who choose to make their views known, means that a meritorious proposal could fail due to creditor apathy. In many cases, onerous contracts, including leases, may be the reason for insolvency and the absence of a means to repudiate them is a defect in these schemes. It is not controversial to say that the restructuring options available to SMEs require improvement. As long ago as 2011, the programme for government adopted by Fine Gael and Labour included plans to introduce new restructuring mechanisms for SMEs that did not require court involvement. The Company Law Review Group made recommendations on the matter in 2012. More recently, in 2019, the European Union issued a new directive on restructuring and insolvency, which will require changes to our restructuring law and must be implemented by July 2021. In the meantime, directors of SMEs will need expert guidance if they are to avail of the imperfect restructuring options available to them today. Members of the Institute should be mindful that they must hold an insolvency practising certificate to advise companies in connection with arranging schemes of arrangements. The approach of Revenue and public bodies to schemes of arrangement In most companies, the debt due to the Collector General will represent more than 25% of the debts due to the preferential class of creditors. In such circumstances, Revenue’s agreement will be essential to securing the agreement of 75% of each class of a company’s creditors, as required for a Section 449 arrangement to succeed. Companies Act 2014 explicitly states that State authorities may accept proposals made under a scheme of arrangement that would result in their claim being impaired. This means that debts for taxes, local authority rates, and redundancy payments may be compromised as part of an arrangement. Notwithstanding this, the section of the Revenue Commissioners’ collection manual dealing with Section 449-455 proposals indicates that, where a company “wishes to put forward proposals, Revenue would be prepared to consider them but that they are unlikely to be accepted if they do not provide for full payment of the tax debt”. Interestingly, the section of the same document that deals with examinership indicates that “Revenue’s position will depend on the circumstances of the case (e.g. previous tax collection history, whether there will be a change of directors etc.)”. It therefore seems that Revenue approaches proposed write-downs of tax debts in examinership cases with a more open mind than they would for Section 449 proposals. This suggests that SMEs, for which the cost of examinership is prohibitive, may be treated less favourably by Revenue than larger enterprises, for which examinership is an option. Revenue’s response to the COVID-19 pandemic has been extraordinary and has gone so far as to suspend debt collection procedures entirely. In this context, it might be expected that Revenue will now adopt a more open mind to proposed arrangements in the interest of preserving industry and employment.   Declan de Lacy leads the Advisory and Restructuring Department at PKF O’Connor, Leddy & Holmes.

With fintech innovation transforming the financial services sector, banks must undergo a strategic revolution – as IBM did in the 1990s – to survive and thrive. When your Irish mammy says she’ll “Revolut ye some money” for her grandson’s birthday, you know that fintech has moved mainstream. Leading fintech firms now have market cap valuations to rival the banks, with investors (or speculators) pricing in significant growth expectations at the expense of incumbents.  As banking boardrooms grapple with their response to the fintech onslaught, they could do worse than look through the lens of history to find inspiration from a similarly disruptive period in the IT sector in the 1990s.    Sword to a gun fight Gary Hammel, who is one of the most significant strategic thinkers of the 20th century, once prophesied that “in the new economy, those who live by the sword will be shot by those who don’t”. He observed that, when technological disruption occurs in a mature sector, dominant incumbents often suffer from the “tyranny of success”. They rigidly stick to the business model that delivered decades of success in the misguided belief that it will sustain success into the future. Before they know it, they become irrelevant and decline. Roll forward to 2020 and observe the vast sums of global capital that have been invested in fintech organisations over the past decade, as investors believe they can tap the vast profit pools (and data) that banks have had to themselves for centuries. While global bank CEOs were at first in denial, and even complacent about the fintech threat, many are now concerned by the exponential disruption to their core revenue lines. In considering a response, bankers could do worse than study IBM’s resurrection in the 1990s and how it underwent a strategic revolution to renew its lease on success. But before we go there, let us delve deeper into the disruption that is happening in financial services in 2020 and the banks’ response thus far. Fintech disruption A holy trinity of tailwind forces are driving fintech’s disruption of banking: A technological revolution (e.g. data and artificial intelligence); A paradigm shift in customer expectations (e.g. those who demand low effort and excellent user experience banking); and Favourable regulatory changes (e.g. the second Payment Services Directive (PSD2), which has opened up banks’ transaction data to fintech companies). Fintech companies have developed superior value propositions across nearly every product line. This allows consumers to send and convert money more cheaply, pay for goods and services much more easily, borrow money in an instant (no form-filling), and invest money smartly at a fraction of the cost charged by incumbents. They have perfected these propositions with helpful feedback from digital-savvy early adopters and now have their focus set on acquiring the banks’ core customers. Bank executives attempt to counter the fintech threat by allocating finite investment resources to one product line under massive attack (payments, for example), leaving other product lines open to disruption (business lending or investments, for example). The multi-flank offensive is stretching banks beyond their capacity to respond, but the fintech companies are only getting started. The greatest corporate turnaround of them all Before a mortal blow is delivered, banking CEOs should learn from the greatest corporate turnaround of them all. When Lou Gerstner took over as IBM CEO in 1993, he inherited a sprawling, rigid, loss-making organisation in rapid decline. They could not match the pace of product innovation from a new breed of agile competitors. Each competitor’s specialist focus on a part of the IT value chain enabled them to develop value propositions far superior to the ‘jack of all trades and master of none’ IBM. Within a decade, Gerstner had led IBM through one of the most successful corporate turnarounds and reinventions of all time. Gerstner and his team observed that, while corporate CEOs/CIOs were choosing IT products from competitors, the result was an IT architecture stack encompassing many different suppliers, which brought huge frustrations. These same corporations now needed a ‘technology integrator’ partner with a whole-market knowledge who could help them select, integrate and manage their portfolio of IT suppliers. For Gerstner, this was the eureka moment. This significant emerging customer need showed him that the future of IT would be services-led, not product-led. IBM’s perceived greatest weakness became their most significant asset, as they had the market knowledge needed to win in this lucrative new services market. How could this play out for banking? Let us imagine how this could play out for banking. We are in the year 2030 and the ‘platformification’ of financial services has occurred, with a handful of trusted financial platforms banking all of Europe’s consumers and offering any banking/fintech product these consumers could need. Think Amazon, but for financial services. 90% of incumbent banks will have missed the boat by 2030. They either went bust or are now operating as a utility company, offering commoditised financial products through these platforms. Fintech companies are also resigned to offering their products through these platforms, as the cost and effort involved in customer acquisition became too high. ABC Bank is the exception and has become the dominant consumer financial services platform player in the UK, Ireland, Benelux and the Nordics with 50 million customers. In 2020, ABC Bank saw an emerging market need for a trusted ‘financial integrator’, one that could make sense of – and harness – the multitude of great fintech offerings for the benefit of the consumer. The bank was brave and decisive, investing heavily in the right capabilities to become the Amazon of financial services. In particular, it invested in its digital front-end, third-party management capabilities, and data analytics capabilities. Consumers in these markets know that ABC Bank’s intuitive and secure platform can help them find the leading and best value fintech product offerings on the market. Customers are reassured that ABC Bank has properly scrutinised any fintech offering listed on the platform before giving the green light to offer their services. They have no worries, therefore, about their data or the security of their money. As consumers’ financial affairs (and data) are managed within one platform – cash, investments, pension and expenditure – ABC Bank has a holistic view. Remember, data is more valuable than gold. ABC Bank is, therefore, in a unique position to provide higher value in-house services, such as holistic analysis and advice to help consumers make better-informed financial decisions. If all this seems a bit far-fetched and futuristic, it is worth noting that this change has already occurred in Asia with the meteoric rise of Ant Financial. This financial services platform did not exist five years ago and is now worth $150 billion. Conclusion As banking boardrooms regroup following the pandemic and look once again to the future, perhaps they can dust-down the IBM playbook. They can position themselves at the centre of their customers’ financial lives as the financial integrator, making sense of – and harnessing – the power of fintech innovation for their customers’ benefit. Those who move swiftly and decisively can seize the day. Those who procrastinate and live by the sword will be shot by those who don’t. Vincent Colgan is a financial services strategist with expertise in banking and fintech collaboration.