How vulnerable is the food supply chain to a cyber-attack?

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Cyber-attacks on businesses are increasing, and it’s not just digital or finance businesses which are at risk. The UK government recently advised that food supply organisations are in the sights of malicious actors in cyberspace. A major ransomware attack on the world’s largest meat processor, JBS, in June 2021 extorted a payment of eleven million dollars. Shortly after this, in September, the FBI also issued a warning document for the food industry which included several examples of hacking and outlined how cyber-criminal actors are targeting the food and agriculture sector with ransomware attacks:

  • In July 2021, a US bakery company lost access to their server, files, and applications, halting their production, shipping, and receiving as a result of Sodinokibi/REvil ransomware which was deployed through software used by an IT support managed service provider (MSP). The bakery company was shut down for approximately one week, delaying customer orders and damaging the company’s reputation.    
  • In May 2021, cyber actors using a variant of the Sodinokibi/REvil ransomware compromised computer networks in the US and overseas locations of a global meat processing company, which resulted in the possible exfiltration of company data and the shutdown of some US-based plants for several days. The temporary shutdown reduced the number of cattle and hogs slaughtered, causing a shortage in the US meat supply and driving wholesale meat prices up as much as 25 per cent, according to open source reports.

The FBI paper details several other cases, entailing losses and damage to companies’ reputations in this critical sector of the economy. The JBS attack shut down 13 meat producing plants in the USA and Australia. “The hackers recognise that they have the ability to impact individuals through very straightforward, simple attacks that can impact critical infrastructure, that impact food supply and ultimately come down to the lives of everyday citizens,” said Kiersten Todt, the managing director of the Cyber Readiness Institute.

The challenges that food businesses face

The pandemic has shaken up a lot of industries. Apart from the health issue, it has brought to the fore home-working and sped-up the uptake of mobile working in many sectors. People are using laptops and mobile platforms like smartphones and tablets, and they often connect via the public internet, sometimes to conduct what should be secured transactions.  

It looks like hybrid working is here to stay, and businesses need to address this as part of their cybersecurity strategy.  Unfortunately, employees are often the weakest link in the cybersecurity chain. “88% of UK data breaches caused by human error, not cyber-attacks,” according to data obtained from the UK’s Information Commissioner’s Office (ICO).  This is a concern for any industry, but the food industry in particular lags behind other sectors in terms of security awareness.   

What are the biggest threats?

Phishing is well-known, where a user clicks on a link that takes them to a fake site or downloads malware onto the user’s computer. However, a newer and more insidious version is a spoof email, apparently coming from inside your own company or an external client company. If the accounts department of some company in your supply chain sends a query or a document, employees are more likely to click on it and enable a cyber-attack.

Many companies in the food industry use outdated software, or legacy applications and services, which hackers more easily compromise. Supervisory control and data acquisition (SCADA) systems throughout industry are operating on elderly software applications. Some managers take the view that if the system is working adequately, there is no need to upgrade to newer software. This is taking a chance – as JBS found out, once a hacker gets in, the company can be in big trouble.

Automated systems are particularly vulnerable. If a computer system controlling valves, monitoring temperatures and regulating mixes of additives to food gets tampered with, that is a serious food safety issue. If news of a hack gets into the media, the public will rightfully be alarmed. The company involved will inevitably suffer severe reputational damage and an event like this will need professional reputation management to restore.

How can companies protect themselves from a cyber-attack?

Firstly, equip all devices with up-to-date technology tools to operate securely, such as password managers, two-factor authenticators and virtual private networks (VPNs). Beyond that, everyone in the company needs to be educated on the best practices to keep the danger contained. This is not a one-time course or video viewing, but a continuing process as new threats emerge.

Like all cybersecurity measures, good cyber hygiene relies on a three-pronged approach: people, technology and environment. People require mandatory educational training to spot threats like phishing, including the newer types detailed above. Company leadership must be security-aware and set a valuable example to others.

For a hybrid problem, there needs to be a hybrid solution. Improving employee education can include intensive company-wide workshops, online instruction and third-party training services. Some staff respond better to one method than another, so flexibility is essential. However, enforcement is also important, as HLB’s recent cybersecurity survey found that although 90% of businesses said they educate their staff, 33% constantly deal with non-compliance. 

Conclusion – be active, not passive

Cybercrime is a serious threat. Hackers can attack from anywhere in a networked world, and ransomware usually demands hard-to-track cryptocurrency payments. Legacy systems are particularly vulnerable, as they do not have the latest safeguards, and their software may have gaping holes in its defences.

Employees can be caught out by wily hackers and can also make simple mistakes. It’s really important to create a security conscious culture within the business and implement an ongoing programme of training for everyone from interns to C-Level.  HLB’s Chief Innovation Officer Abu Bakkar says, “Cybersecurity needs to be done at a higher level. It needs to be run at the senior level. Otherwise, it doesn’t get the traction it needs.”

Finally, food is a critical sector of the economy. Although many food supply chain companies are not household names, supermarkets are, this means reputational damage will be widespread. It should not be underestimated.  At a time when food supply chains are feeling particularly vulnerable, a cybersecurity attack could cause lasting damage.

For a more in-depth view of current cybersecurity issues and how you can protect your business read HLB’s latest cybersecurity report: Threat or opportunity: Addressing the cyber-risk landscape in the age of hybrid work.

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Why its important to prioritise mental health in the workplace, especially post-pandemic

Marina Kooijmans, Chief People Officer

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Every 10 October, World Mental Health Day reminds people around the globe that mental health issues matter and should be supported. Mental health considerations are particularly important in the workplace, where many people spend a third or more of their waking hours.

The last 18 months, due to the COVID-19 pandemic, took a toll on many professionals’ mental health, whether we realise it or not. The effects from the pandemic on mental health are not likely to change soon.

A recent global study by Motivosity found well-being has plummeted during the pandemic. Consider:

  • Anxiety symptoms increased from 6.33% to 50.9%.
  • Depression symptoms increased from 14.6% to 48.3%.
  • Stress symptoms increased from 8.1% to 81.9%.
  • PTSD increased from 7% to 53.8%.

The mental health issues encountered due to the pandemic put employee engagement – a factor that’s highly related to productivity, retention and profit – in jeopardy as companies navigate a continued remote work situation.

What’s at Risk?

Changing work environments and always-on work technology are contributing to employee stress. The following aspects of work have suffered since the start of the pandemic.

  • Mental health and well-being: According to the Kaiser Family Foundation, in January 2021, 41.4% of adults reported symptoms of depressive disorder and/or anxiety disorder, compared to 11% in January 2019.
  • Ability to disconnect: More than two-thirds (69%) of employees have experienced burnout symptoms while working from home since the pandemic, CNBC reports. Despite burnout, 59% are taking less time off than they normally would, while 42% aren’t planning to take any time off to decompress.
  • Work-life balance: Since the pandemic, remote workers in the U.K., Canada, the U.S. and Austria have seen a sustained 2.5 hour increase to the average work day, according to Bloomberg.
  • Workload: For people in diverse industries, from healthcare positions to on-demand workers, workload has increased in demand. Furloughs and job cuts have also increased the workload for many workers still in pre-pandemic positions. According to Harvard Business Review, since the pandemic, out of workers whose workplace well-being has been negatively impacted, 56% have seen increased job demands.

Mental health greatly affects your employees’ ability to do their jobs effectively and efficiently. Mental health issues in work environments can also lead to physical health issues, from heart disease to chronic pain.

To combat these risks and reduce the effect of a pandemic on employees, Deloitte research shows professionals primarily need these three basic human needs met at work:

  • Trust
  • Safety
  • Connection

At your organisation, you can take steps like the following to protect the mental health of your workers and its effects on your business.

1. Increase access to mental health resources

Provide mental health coverage as part of company insurance plans. Offer free counselling sessions from licensed professionals. Expand your definition of “sick days” to include time off for mental health. Promote mental health tips and resources in company newsletters.

2. Consider a drastic change to overall company flexibility

If you have remote employees and are able to, consider having deadline-based work, rather than set office hours. Some employees work better at night compared to early morning, for example. A flexible schedule encourages work-life balance for employees.

Also, consider enabling work-from-home capabilities at least some of the time. A 2021 study reported by Harvard Business Review found 88% of knowledge workers say they’ll look for flexibility in hours and location next time they look for a new position. Hybrid office solutions are highly appreciated by a lot of people. The hybrid office combines the best of both worlds: the comfort of working from home and the necessary social connection in the office.

3. Destigmatize mental health struggles from the top

Show workers you support them by promoting mental health care from the top down. Most people experience mental health issues at some point in their lives. When managers, executives and other leaders at your company share their struggles, that destigmatises the need for mental health support, which might benefit some of your workforce.

4. Express appreciation for your team members

Employee recognition is associated with talent retention, organic growth and employee productivity. Spotlight a job well done in team and company-wide meetings, in online communications and via rewards. Celebrate, even small, successes as a team regularly. It is the little things that matter.

5. Communicate frequently and consistently

Poor workplace communication can lead to stress, unmet expectations and needs, arguments, high turnover, low morale and dissatisfied clients. Keep employees abreast of company developments so they trust in and feel connected to your company.

6. Budget for home equipment

Not everyone enjoys working from home. Gen Z, in particular, is more likely to feel negatively about remote work. 

One challenge of remote work is a lack of equipment. Set employees up for success by providing secure, easy-to-use devices that enable them to complete all necessary tasks. Support them with technology solutions comparable to what you would do for the office environment.

7. Train management in how they can talk about mental health and well-being with employees

Gallup research shows managers account for 70% of variance in employee engagement. Managers should be at the forefront of protecting employees’ mental health, by providing their team members with the right resources and support. Offer mental health training to employees and teach managers symptoms to look for regarding emotional distress or substance abuse. Regular check-ins are a great way to support employees. Listening can be very beneficial, to give employees the feeling that they are not alone in a difficult situation. And overall, managers should give employees the feeling they are valued.

8. Look for signs of anxiety and stress

Mental health issues like stress and anxiety can lead to poor productivity, absenteeism and a higher incidence of safety issues in the workplace. Identifying mental health signs earlier can help your business prevent these issues. 

Encourage a proactive and supportive approach. Have managers promote help from qualified mental health professionals to their team members.

Mental health affects everyone

Mental health is an invisible but important part of workplace success. Most people have experienced some type of mental health challenge during the pandemic, whether it was stress from adjusting to remote work, or difficulty finding a work-life balance.

As an employer, you can take a proactive approach to supporting your employees’ mental health. Provide mental health resources, encourage an open dialogue, offer training for managers and company leaders, and acknowledge the challenges your employees are facing. Create a mental health strategy to improve productivity and results for your business, while at the same time improving the engagement and belonging of your people.

Marina Kooijmans

Chief People Officer

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HLB Cybersecurity Report 2021

IT PROFESSIONALS SURVEYED 136 ARE STILL NOT PREPARED FOR A HYBRID-WORKING MODEL 12% MADE CHANGES TO CYBERSECURITY PROTOCOLS 82% EDUCATE THEIR STAFF, BUT ARE ALWAYS DAELING WITH NON-COMPLIANCE 33%

Threat or opportunity: Addressing the cyber-risk landscape in the age of hybrid work

As we emerge from lockdowns and government restrictions caused by COVID-19, more companies across the globe are adopting hybrid working models. In doing so, CTO’s and IT management face increased risks and vulnerabilities from cyber-attacks and data breaches. Is your organisation ready to face the dangers of employees working remotely on a permanent basis?

In light of Cybersecurity Awareness Month 2021, we surveyed 136 IT professionals  about today’s cyber-risk landscape, the lessons learned from lockdown and the road ahead for CTOs to protect against cyber-crime in the age of hybrid working.

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Key findings

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How technology can help us to build more sustainable real estate

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Pressure is mounting on the real estate industry to increase its focus on building sustainably.  According to the World Economic Forum’s report “Environmental Sustainability Principles for the Real Estate Industry,” the real estate sector is responsible for consuming over 40% of global energy each year. In addition, buildings use approximately 40% of the world’s raw materials and generate 20% of global greenhouse gas emissions.

Statistics like this have led industry leaders to seek innovative ways to use technology to reduce the real estate sector’s environmental impact. Traditionally, these efforts have been primarily focused on short-term cost savings. However, it’s now becoming clear that integrating sustainability and climate considerations into the building process can result in significant medium and long-term economic and financial payoffs. Here’s a closer look at some of the ways technology is helping the construction industry build safer and more sustainable real estate:

Robotics and Drones

By offering a birds-eye-view of construction sites, drones allow surveyors to map out areas they otherwise wouldn’t have access to. This can be used to detect deviations from the blueprints, allowing crews to correct issues that could lead to major problems down the line. They also improve safety by allowing construction managers to monitor sites via camera without having to physically be on-site.

In addition, drones can deliver construction materials, reducing the amount of vehicle traffic at the construction site. This can lower carbon emissions, reduce fuel use, and improve efficiency.

Robots are also improving construction sustainability. In the past, the variability of tasks and lack of full environmental control made it difficult to use robots in construction. However, today’s construction sites are much more technologically advanced. Some sites are currently using robots for repetitive tasks like masonry and bricklaying. This can improve both the speed and quality of the work, creating a safer environment while also conserving energy.

Innovative Building Materials

Global innovation has led to the creation of building materials that are safer and have a longer lifespan. For example, heat-reflective paints are used to reduce a building’s heating and cooling needs while smart glass windows can adjust their transparency, significantly optimising a building’s heating and cooling capacity.

Globally, there’s a massive amount of research going into the development of more sustainable building materials. Japan recently saw the development of a new material called CABKOMA Strand Rod. Made from thermoplastic carbon fibre composite, the material is the lightest seismic reinforcement currently available on the market. Researchers are also testing a self-healing concrete that is designed to make buildings and infrastructure safer, stronger, and better able to stand up to natural disasters.

Big Data

Big data, or the ability to evaluate huge amounts of data and uncover behaviour patterns, unknown correlations, and hidden trends, has proven to be invaluable in the real estate industry. Using sensor input from the machines used on construction sites can help with everything from improving fuel efficiency to lowering overall construction costs and reducing ecological impact.

Big data can track weather patterns, business activity, traffic, and more. Construction managers often use this data to determine optimal timing for construction activities. This can help minimise downtimes, reduce waste, and improve construction efficiency.

Construction managers can also use geolocation to improve their logistics, further reducing downtime and ensuring spare parts for vehicles and equipment are available as needed. In addition, big data can be used to track energy conservation in office buildings, shopping centres, and other commercial buildings to confirm they meet the initial design goals, improving both current and future building sustainability.

The Internet of Things (IoT)

Sensors and smart devices that share information with each other, also known as the Internet of Things (IoT), are becoming more integral in the construction industry. Seemingly small upgrades can have a major impact on reducing the industry’s carbon footprint. For example, equipping vehicles and machinery with sensors that will shut them off when they’re idle can significantly reduce fuel waste.

Within buildings themselves, smart technology improves sustainability in a wide variety of ways. This may include anything from improving the energy efficiency of elevators to offering electric vehicle charging for tenants. Smart lighting and smart HVAC systems are also some of the most in-demand IoT upgrades in new construction.

Maintaining and optimizing IoT will also have a major impact on long-term sustainability. One Berlin-based start-up, Sensorberg, is “digitising buildings” equipped with IoT devices. By mapping both their Co2 emissions and energy consumption, the company is using technology to find additional ways to improve these metrics.

Another green tech company, Recoginzer, uses self-learning technology to optimise buildings’ CO2 optimisation and energy efficiency. By giving both landlords and tenants a better understanding of their energy usage and waste, these programs enable all parties to enjoy lower costs and a smaller carbon footprint.

3D Printing

The use of computer-aided design to create three-dimensional objects – also known as 3D printing – is quickly becoming indispensable in the construction industry. By allowing for the production of samples or even complete objects, 3D printing technology creates an opportunity to ensure all details are properly designed. This can significantly reduce material waste while also saving time. 3D printing also creates the opportunity to pre-fabricate materials either offsite or directly on-site, making them immediately available for use.

By integrating 3D printing into the pre-construction process, builders can decrease labour costs, increase energy savings, and support overall sustainability.

Building Sustainably is the Way of the Future

As both technology and the construction industry continue to evolve, we can expect even more opportunities to create a safer, smarter, and more sustainable outlook for the real estate industry. From construction industry leaders to commercial real estate landlords, it’s critical for all those involved to embrace technology’s ability to make their buildings more sustainable. Making these investments will future proof your buildings, yield higher returns, and allow you to be a more responsible steward of our planet.

Are you currently making changes to reduce your building’s environmental impact?

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The current state of global tourism and factors shaping the industry in 2022 and beyond

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The pandemic decimated the global travel industry virtually overnight. Travel restrictions due to the virus outbreak resulted in a staggering 98% drop in international tourist arrivals in May 2020 compared to the same month the previous year. And things only slightly improved since then— the first quarter of 2021 saw a drop of 83%.

Before the pandemic, the USD 8 trillion industry accounted for 10.4% of global GDP and 10.6% of total global employment, while tourist spending totalled USD 1.7 trillion. A nosedive in international travel resulted in a loss of approximately USD 1.3 trillion in export revenues—more than 11 times bigger loss than the one experienced in the last economic crisis in 2009.

As a result of such a profound shock, experts are not expecting things to return to the pre-pandemic level in the short term or even medium term.

With travel restrictions still present in most parts of the world, the question remains how will the future of travel look in 2022 and beyond?

Here are four key trends in terms of consumer behaviour, operating procedures, and service offerings shaping the global tourism industry.

Key factors shaping global tourism

1. Responsible travel

The great pause that pandemic forced upon the travel gave us a glimpse of the world with a more sustainable way of living. As consumers take the opportunity to rethink how their activities—including travel—interact with societies, natural resources, and ecosystems, they increasingly double down on sustainability.

This watershed moment made travellers grow more aware of their visitor footprint and the negative impact of over-tourism on the ecology as well as challenges related to food, water, and energy waste.

As a result, consumers increasingly seek destinations and travel options that are aligned with their green values and the commitment to minimise their impact on the planet. This growing market trend forces travel businesses to rethink every aspect of how they run their operations to create a more resource-efficient and carbon-neutral tourism sector of the future.

2. Demand evolution: Focus on domestic trips and outdoor destinations

Travellers, largely confined to their homes for the best part of the past 18 months, are longing for a change of scenery.

The desire to travel is very strong—after all, the need to explore is inherent to human nature. However, how that desire translates into demand might look different in the post-pandemic world.

Due to heightened uncertainty about the virus spread and potential travel restrictions, travellers’ behaviour has shifted toward the known, predictable, and reliable.
They now prefer to travel within smaller groups such as friends and family. In addition, they value flexibility and are booking on much shorter lead times. A recent study demonstrates that 80% of bookings are now made within a fortnight of departure, as opposed to 36 days in pre-COVID-19 times. Travellers of today also tend to travel shorter distances—The World Travel & Tourism Council estimates that in 2020 domestic visitor spending was less negatively impacted as it decreased by 45%, compared to international visitor spending, which took a much bigger hit declining by 69.4%.

3. Leisure travel will lead the recovery; Business travel could see a permanent shift

Leisure travel will lead the recovery in the tourism and travel sector, while business travel—a key revenue generator for hotels and airlines—could see a permanent shift or may come back only in phases based on proximity, reason for travel, and sector. Regional and domestic business travel is expected to return first, but a full recovery to pre-pandemic levels is not expected to happen before 2025.

As remote work takes hold, people realise it does not necessarily mean work from home but work from anywhere. In an environment where the workforce becomes distributed across the country and the world, the industry needs to reimagine business travel. For example, company retreats intended to gather employees coming from their individual locations may become a new form of business travel.

4. Technology and innovation

An unexpected catalyst for innovation, the pandemic has prompted the sector to re-evaluate its digitisation efforts. Travel businesses are exploring how technology can be used to drive demand and facilitate safe travel.

Novel technologies such as virtual reality (VR) deployed at the decision-making stage of the customer journey can help customers experience destinations before the travel—and from the comfort (and safety) of their homes. Through online VR tours, they are able to experience hotel and restaurant interiors, outdoor environments, famous landmarks, and other tourist attractions, which gives them extra encouragement to make a booking in this new world of increased uncertainty.

Augmented reality can be used to offer travellers real-world experiences combined with virtual elements as the best of both worlds. For example, travellers can use an AR-based app as a real-life guide around tourist attractions, or it can help them navigate around a destination.

Reimagining travel for the new era

The pandemic has been a game-changer for the global travel and hospitality industry. It has caused consumer habits, expectations, and priorities to transform so profoundly that many of the preferences will have been irreversibly changed for years to come. What will be the ultimate shape of the tourism industry once the COVID-19 pandemic becomes history remains to be seen.

Still, this unprecedented crisis can serve as an opportunity to improve how the industry operates, especially through greater digitisation and environmental sustainability.

As countries start looking for a balance, gradually lifting travel restrictions, and travellers’ confidence slowly returns, the travel will gradually recover due to unleashed pent-up demand. However, bringing back travellers and restoring confidence in travel will require creativity and new approaches to tourism to reflect the changes that have happened over the past 18 months. Travel businesses need to try to understand these changes and adjust.

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Auditors: Be proud!

Blog by Bettina Cassegrain, HLB's Global Assurance Leader

24 September 2021

This year, #AuditorProud celebrates ‘the pivotal roles auditors have played in maintaining the integrity of our economies and our businesses’ and the fact that ‘the work they do is more important than ever…’.

Like every year, I decided to do a quick search on the internet to see if anybody is talking about the central role we have undoubtedly played during the pandemic and if #AuditorProud is being discussed.

Interestingly enough, and like in previous years, I found very little. The only auditors who are proud and willing to say so appear to be the ones in Australia and New Zealand. The website of Chartered Accountants Australia and New Zealand (CA ANZ) came up right at the top of my search, acknowledging the many challenges auditors have had to face over the past 12 months and actively encouraging their members to join in the weeklong celebrations.

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And yet, our colleagues from Australia and New Zealand are not the only ones who made noteworthy contributions during a truly unprecedented period. Many of us have not only transformed our relationships with clients during these very challenging months but also those within our teams, giving relationships a different focus and making them more meaningful. As a result, an environment where audit quality can improve and stakeholder confidence thrive is steadily emerging. Still, rather than taking a brief moment to focus on the positives and gather some strength to embrace the future, we continue to hide our light under the bushel, as if we were scared of showing our profession in a positive light.

Understating the positive aspects of our profession may simply have become what we are used to, and I am not certain when it happened nor why. All I remember is applying for trainee positions in London during 1999 and not being the only one. We were thousands at the time, and when we had finally landed our dream job, we were extremely proud of our profession and our firm. I get the impression that in many parts of the world audit is no longer the dream career it once was and figures show that demand for staff in the audit market far outweighs supply.

Is it at all conceivable that we as auditors are at least partly responsible for the current situation?  How can we expect others to see us in a positive light when we do not do so ourselves? How can we complain about stagnating recruitment numbers and the negative reputation of our profession when all we talk about is the expectation gap, declining fee levels, never ending audit scandals, difficult to navigate auditing standards and long hours?

Our stakeholders and the wider public will see us the way we see ourselves. If we cannot find anything positive to say about being an auditor, how can we expect anybody else to do it for us?

So, we may not all be used to feeling #Auditorproud, but there really is no better time to try.  Thanks to the many efforts auditors worldwide have made during the past year to assist our clients, our wider stakeholder community, and the economy as a whole, we truly have something to celebrate:  our resilience, our collaborative spirit, our never faltering optimism and our capacity to devise new best practice when it was most required. These are all great attributes, and yet they largely go unnoticed.

At HLB, we often talk about adding value and becoming future proof auditors. It seems to me that we have made a significant step in the right direction during the past year. Let’s therefore all join in the 2021 #AuditorProud celebrations, share and enjoy our successes, strengthen our teams and get ready to continue playing the pivotal role we have been playing recently.

Join the conversation on social media using #AuditorProud.

Bettina Cassegrain

Technical Director & Global Assurance Leader

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Industrial manufacturing for the digital age

23 August 2021

Industrial manufacturing is undergoing a rapid transformation and the pandemic accelerated the pace of change. Digital technologies and changing customer demands are revolutionising the manufacturing landscape and how value is created, dramatically increasing the overall level of uncertainty.

Still, there are many opportunities to drive growth. Industrial manufacturing 4.0 — or the manufacturing for the digital age — is based on digital technology and novel methods such as big data and analytics, smart interconnected devices and cloud computing, advanced robotics and automated machines as well as additive manufacturing (3D printing) and advanced materials.

Big data analytics

Modern manufacturing is a data-rich environment that supports the collection, transmission, sharing, and information analysis across the organisation to produce invaluable intelligence.

The global big data analytics in the manufacturing industry was valued at USD 904.65 million in 2019 and is expected to reach USD 4.55 billion by 2025, growing at a CAGR of 30.9% from 2020 to 2025.

Like most organisations, industrial manufacturers are creating a growing digital footprint and have access to operational and business data from their processes, assets and workflows. They can leverage this vast amount of data about their inventories, products, people, and finances to gain a competitive advantage, control costs, optimise the use of resources and manage sustainability efforts amid evolving regulations. Big data analytics enable manufacturers to optimise manufacturing and field operations and respond to key business needs by integrating the data from and into the products themselves. Big data fuels other novel technologies such as the Internet of Things, robotics and automation and AI. Intel cites automation and the effective use of data as core elements of its competitive strategy.

Industrial Internet of Things

Internet of Things refers to the network of interconnected devices that communicate via embedded sensors and wireless networks. It is revolutionising the businesses across the board.

Data-gathering and analytics capabilities enabled by the interconnected devices offer a new source of value across the whole of the supply chain and manufacturing processes, opening new possibilities never seen before.

IoT allows operational technology and information technology to join forces to transform manufacturing and empower organisations to create new ways to optimise operations and engage with customers.

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IIoT or a network of interconnected devices, products and people applied in industrial settings leverage the massive amount of data produced in organisations every day to extract deep insights they can use to optimise business and manufacturing processes by streamlining operations, making better, data-driven business decisions, and using predictive analytics to see the changes in customer behaviours as they emerge.

The impact on the bottom line is palpable. It is estimated that IIoT will increase manufacturing productivity by 10-25%, unlocking up to $1.8 trillion in global economic value by 2025. At the same time, IoT applications in manufacturing are expected to generate $1.2 to $3.7 trillion of total economic value annually by 2025.

IoT devices and Big Data-powered predictive analytics applied in all areas across the board, including supply chain management, operating efficiency and predictive maintenance, enable manufacturers to reduce overhead, save resources, increase profits, and optimise operational efficiencies. According to the American Society for Quality, 82% of manufacturers which digitised their businesses increased operational efficiency and improved product quality with 49% fewer product defects.

Connected products enable manufacturers to provide continuous monitoring and offer data-driven predictive maintenance services to their customers, detecting issues before they escalate into problems. IoT is a powerful novel technology that enables manufacturers to scale easily, go to market faster and expand their offering from a holistic platform.

Robotics

The use of robotics is increasing across the value chain – from production to warehousing, distribution and customer management –  helping manufacturers optimise productivity, reduce defects, and cost-effectively streamline supply chains. As one of the IoT devices, capable of adjusting to changing production and logistics environments, robots can receive signals from interconnected equipment and send them to digital platforms where they are collected and analysed as a large number of datapoints carrying invaluable insights.

Additive manufacturing (3D printing) and distributed production

Additive manufacturing, also called 3D printing, refers to digital technologies that allow the creation of a three-dimensional physical object from a digital model.

It is called additive as materials are added layer by layer instead of subtracted like in a conventional manufacturing process. Because materials are only consumed (or added) where needed, considerably less material is wasted.

According to 3D Printing Industry research, additive manufacturing revenues have been growing rapidly at the annual rate of 27% over the past three decades and is expected to reach $44.39 Billion by 2025. The explosive growth is driven largely by benefits such as the reduction in manufacturing errors, development cost and time, and the capacity to build customized products.

3D printing enables manufacturers to transform the supply channel by leveraging digital warehouses and the so-called distributed manufacturing on-demand. This novel approach involves a decentralized network of 3D printers located at or near the point of use that replace traditional centralised manufacturing facilities to better meet customers’ needs and deliver goods when and where they are needed.

By being close to the end-user, on-demand distributed production reduces inventory costs, lead time, and dependency on demand forecast as the production is flexible enough to respond to unpredictable customer demand at no additional logistics costs, such as transportation, customs and taxes.

The power of digital technology for the new era of manufacturing

Digital technology is powering a new industrial revolution, impacting all aspects of manufacturing, leading to radical improvements in speed, quality, productivity, and flexibility. At the same time, it is getting more and more affordable as robots and sensors are getting less expensive but also efficient and easier to use.

Advances in information technology bring rapid transformation to traditional manufacturing, changing the landscape and enabling manufacturers to achieve operational excellence and differentiate themselves in an increasingly competitive market. Unleashing the power of digital technology for manufacturing fit new era involves collaboration between people and machines. AI-enabled advanced data analytics results in machines taking increasing responsibility for decision-making in manufacturing and will require upskilling for the workforce to enable people to work alongside machines. For manufacturers that embrace digital transformation, the benefits are vast.

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What does the future of work look like?

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What does the future of work look like? This question has been on the minds of many people since the start of the pandemic. Will we go back to the office, or will we learn from the earlier periods during the pandemic and keep the hybrid office model? What is the role of technology in the new world of work?  How do we create and sustain a sense of connection and belonging in the hybrid workplace?

While the economy reopens step by step, it doesn’t necessarily mean you nor your employees want to return to the pre-pandemic status quo. With plenty of time to adapt to working remotely and discovering the benefits, more and more businesses are embracing a hybrid work style. By adopting new technology, reshaping work culture, and adapting your leadership style, you can settle into a new normal going forward.

Hybrid work

Respondents around the globe have indicated in several surveys that they would prefer hybrid models of remote working to stay. Covid-19 has broken through cultural and technological barriers that prevented remote work in the past, setting in motion a structural shift in where our work takes place. In our industry, with highly skilled and highly educated workers, research shows that more than 20% of the workforce could work remotely three to five days a week as effectively as they could if working from an office. Accounting, tax and advisory services have a high potential, with 50-75% of time spent on activities that can be done remotely without a loss of productivity.

 

Some 41% of employees who responded to a McKinsey survey in May said they were more productive working remotely than in the office. However, one impediment to productivity may be connectivity. A researcher at Stanford University found that only 65 percent of Americans said they had a fast enough internet connection to support video calls, and in many parts of the developing world, the connectivity infrastructure is sparse or non-existent. Developing digital infrastructure will require significant public and private investment.

So, we can safely conclude that after adapting to work-from-home life during the pandemic, not all your staff may return to the physical workplace. Given the win-win scenario of having a virtual workforce, business leaders should allow their teams to continue working from home. This is an important option if you want to be competitive in attracting and retaining the right talent for your organisation.

A survey by LaSalle Network found that 77% of companies are moving to a hybrid model, with a proportion of workers at home and the rest working in the office. For teams that work better in person, leadership can invite them back and monitor productivity as well as the mental health and wellbeing of their employees, to achieve the ideal hybrid workforce balance.

Workplace

The hybrid work solution implies that organisations will be reserving most of their office space for team collaboration, training, and client meetings, though leadership would have to ensure the arrangements suit both clients and staff. Physical space will still be important. People want to get together, bounce ideas off one another, and experience the energy of in-person events. Moving forward, office space needs to bridge the physical and digital worlds to meet the unique needs of every team – and even specific roles.

Technology

Technology that facilitates communication and collaborative work effectively is crucial for hybrid workforces. Maybe you updated your tech suite of business software back when work-from-home orders were mandated. With teams working from different places, you need one centralised place where everyone can meet virtually to work.

Companies deploying cutting-edge technology with smart automation can improve job satisfaction for their employees, according to a 2019 study. Repetitive, tedious tasks are shown to impact mental health by causing symptoms like fatigue, anxiety, and depression. Technology like AI and bots now exists in our industry, and it can take the repetitive and less interesting work out of the equation. Organisations should invest in technology solutions to increase employee productivity, satisfaction, and the bottom line.

Tech issues can quickly frustrate employees who are otherwise engaged with each other. Make sure you have solid conference calling software and provide remote workers with web cams, headsets or other equipment if needed.

 

 

 

The remaking of work culture

Employees working remotely have been relying on technology to stay in touch, and staying connected should be promoted in the hybrid workplace culture. To compensate for not being in a physical office, business leaders and employees alike should make themselves available online as much as possible throughout the workday. Having a chat feature built into your software is the best way to go. Team leaders and managers should check in on a group chat as often as necessary, sometimes daily, to make sure employees are engaging on the live chat feature. The cadence, content, and duration of check-ins varies based on the employee. Some want daily contact with their managers, others prefer to be left alone until an update is needed.

As your new model of post-pandemic work gets put into practice, your culture will have to catch up with it. The culture at your workplace is the common beliefs and mindsets that affect employee behaviour—the individual efforts and the way employees connect and collaborate with each other. While the core values of your company won’t change, the ideas that connect people may have to differ in a hybrid work culture.

Building culture in a hybrid world means both confronting new challenges and encountering new possibilities for creating an environment that’s inclusive and empowering, regardless of whether we’re in-person, remote, or something in between. Managers need to adapt their leadership style to the new way of working. And that isn’t always easy. It is hard work to foster a sense of belonging, connectedness, and trust among your people in a way that can extend beyond the office walls. But with some genuine attention, clear communication, and open feedback you can come a long way.

While many roles in human resources departments are being overtaken by AI-enabled automation, new opportunities are opening up for liaising between employees and companies.  Talent professionals can help remote workers adapt and find solutions separately from their managers or team members and be there to answer questions. In the age of automation, having a real person whose sole job is employee satisfaction and success, can make a huge difference to improving your workplace culture.
When it comes to new hires, particularly those working remotely, it is important to make them feel connected to the company and culture as quickly as possible. Besides the direct manager, connecting the new hire with different people at different levels in different parts of the organisation as soon as possible is important. So, for instance, a peer in another line of business, a senior leader, and a lower-level colleague. The idea is to build a network of supporters and enablers that the new hire can go to for advice and learn about how things work at the organisation.

What does leadership look like in the new world of work?

Modern organisations were built on a foundation that is no longer relevant: the idea that you must be physically present with your people to see and evaluate their work. Now that we’ve proven employees can be productive and companies can be run with remote employees, our beliefs about management are shifting too.

Some organisations are concerned about how their leaders cope with the new circumstances of remote work. Some leaders are out of touch with their employees and need a wake-up call because the need for connection between managers and employees has never been greater.

Over the last year, people have been doing a lot of self-reflection on what’s important to them in their personal and professional lives. As a result, their priorities and goals have likely shifted. Leaders should not be afraid to go deep with people about their feelings. It is important for leaders to know what is important to each individual. An example of a topic to be discussed between a manager and an employee is what it means to work at that specific organisation; what are the purpose and values that are important? This can help foster a deeper connection, provided both sides can listen to each other’s view without judgement.

Another tip for business leaders is to not only listen carefully to what is being said, but to think about the how, what, and why of what you are hearing. Observe how your employees interact with you, colleagues, other teams, and those at levels above and below them. Paying attention to those details can help you anticipate the needs of the people in your team.

Vaccinations

At the new stage of people returning to the workplace new very practical questions pop up for business leaders, they may need to decide whether or not to require jabs for employees. Either move is a gamble. Some organisations have mandated that all workers must get vaccinated, or at least divulge their vaccination status, before returning to the office. Plus, more organisations are making customers show proof of vaccination (or a recent negative COVID-19 test) to get service. It isn’t a decision that leaders are taking lightly. Many have wanted to impose a mandate; one spring survey from Korn Ferry indicated that 72% of current and recent CEOs of major companies were open to mandates. However, vaccinations have become a political hot potato. If a company does decide to mandate vaccines, it needs to complement it with a full education program. Set up town halls for all employees, so they can learn about the efficacy of vaccines along with the risks to themselves and others of not getting vaccinated.

 

Stay or go?

The data around quitting is the starkest indication that change is now the new normal. Being able to work remotely has opened up new possibilities for many workers. If you no longer need to be physically present in an office, your employer could, theoretically, be located anywhere. Some 46% of the people surveyed for a recent Microsoft report said they might relocate their home because of the flexibility of remote working.

With employees feeling they have more flexibility than ever, they increasingly are focused on making their job work for them. Employees are quitting instead of giving up the possibility of working from home. Some 41% of workers globally are thinking about handing in their notice, according to a recent Microsoft survey. The main reason given for considering quitting is if their employers weren’t flexible about remote work. The drive to get people back into offices is clashing with workers who’ve embraced remote work as the new normal. If anything, the past year has proved that lots of work can be done from anywhere, without lengthy commutes on crowded trains or highways. Some people have moved. Others have lingering worries about the virus and vaccine-hesitant colleagues. But as office returns accelerate, some employees may want different options. The lack of commute and spending more time with their family are among the top benefits of working from home.

Talent professionals and team leaders must get involved in understanding each employee’s needs and purpose for being at the company and follow-up to help ensure their job is giving them what they want from work and their employer.  Some CEOs have already said that they will let their people choose where they need to be to do their best work, in balance with their professional and personal responsibilities. The important task for both leadership and talent professionals is to align the employee’s intentions with those of the company.

Conclusion

Many companies have found that working from home cuts costs, while employees have adapted their lives to working remote. The future of work post-pandemic will embrace a hybrid of what existed before the pandemic combined with what worked for the better during lockdown mandates. And we have to keep in mind that the pandemic has only accelerated trends that have been a long time coming: digitisation of workplaces and the platform economy, the expansion of remote and flexible work, and virtual education.

There are no one-size-fits-all answers when it comes to hybrid work. But there are research-based best practices and experience-informed strategies for ensuring that your organisation and employees reap both the benefits of working remotely and the strengths of traditional co-located work.

All this needs to be done based on flexibility, adaptability, and choice for both employers, employees, and customers, supported by clear communication.

Marina Kooijmans

Chief People Officer

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How the Dutch Meat Tax could affect the global food and beverage industry

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In an effort to reduce emissions and encourage healthier, greener lifestyles across Western Europe, many national governments are now taking up the idea of a levy or tax on meat, with an accompanying subsidy of fruits and vegetables. The goal would be to increase the price of meats like beef, pork, and chicken to better reflect environmental costs, which until now have not been reflected in the prices of these products. These environmental costs include CO2 emissions, as well as biodiversity lost to unsustainable farming practices. 

Since Western European countries are some of the biggest consumers of meat in the world, this tax could potentially have a huge impact on exports. Most citizens of Western European countries consume an average of 80-90kg of meat per year, ten times the average of less developed countries like Rwanda and Ethiopia.   

This tax and subsidy combination has the potential to have a hugely positive impact on the area as a whole, starting with the first countries that are discussing possible implementation, like in the Netherlands.  In this article we’ll discuss the Netherlands’ history with this proposal, and the potential outcomes if it’s introduced as promised in the coming months.

Background on the Meat Tax proposal in the Netherlands

The Dutch Ministry of Agriculture, Nature and Food Quality recently announced plans to introduce this proposal to the Dutch Parliament in a session on April 22, 2021.

Although the Netherlands is one of the first individual EU countries to propose introducing the meat tax at a national level, it first came to international attention when it was discussed as part of a European Parliamentary session on February 5th, 2021.

The proposal was based on a report presented to MEPs by the True Animal Protein Price (TAPP) Collective, an organisation that seeks to introduce “effective policy measures aimed to lower consumption of meat and dairy by introducing fair prices for meat and dairy products, including environmental and other costs.” The coalition is made up of farmers, animal welfare and climate activists, as well as food companies.

Effectively, the TAPP Coalition’s proposal would introduce a higher tax on meat (some have proposed up to a 30% increase), which would be used to offset VAT on fresh produce by as much as 10%. It’s estimated that within the next 10 years, this could result in a fund of €32.2 billion per year spread across the EU Member States, which could be used to assist farmers who want to invest in more sustainable agricultural practices.

How it could affect meat exports in the Netherlands

After the meat tax proposal was created, market research company DVJ Insights was brought in to survey the general population in countries like the Netherlands, Germany, and France. They found that this proposal was broadly popular, and was surprisingly even more popular among members of traditionally centrist-right wing parties like Germany CDU/CSU and the Netherlands’ CDA, CU, SGP, and VVD. Overall, estimates put support at a robust 70% of Europeans.

The Dutch Minister of Agriculture, Nature and Food Quality has been pressed to give some insights on how this proposed tax could affect food and beverage businesses, as well as general consumers. She has said that she expects businesses to pass on these higher food costs to consumers at a rate of 75%. As long as businesses pass on these new taxes equally, the market will remain competitive.

In addition, the proposed tax on meat will hopefully lead to lower prices of fresh produce, which should encourage greater consumption of healthy and sustainable fruits, vegetables, and related products. In the end, most families may notice a small increase or even a reduction in their grocery spend, if they’re able to buy less meat, and take advantage of the lower cost of produce to purchase more of these items.

How this tax could affect Dutch competition on the global market  

Most members of the Dutch Parliament support this tax proposal because they believe that it will have a net positive effect on their country’s ability to compete in a crowded export market.

By making more money available to invest in sustainable farming initiatives, they can support the next generation of farmers to ensure that they have what they need to succeed in a competitive global market.

However, some meat producers have pushed back against the data set used to determine the proposed tax. “The report does not take into account the protein density of meat,” says a spokesperson for the Liaison Centre for the Meat Processing Industry. “If emissions were calculated on the basis of essential amino acids instead of weight, the production of some crops that are used as a source of ‘alternative’ proteins would become more emissive than beef, pork or chicken.”

Determining the outcome of the proposed Meat Tax

Ultimately, this comment from the Liaison Centre for the Meat Processing Industry shows that there is still a lot to be determined before the Netherlands, any other EU country, or the EU itself puts a higher tax on meat in place. Although net positive effects on public health and healthcare costs, sustainability, and animal welfare can be expected, governments still must commit to consultation with meat producers and agribusinesses to ensure that they’re able to weather this change along with consumers.

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Why accounting firms are best placed to offer cybersecurity services

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Cybersecurity is a major concern for businesses of all sizes. In fact, the threat of a successful cyber-attack increases every year. Without a protection plan in place, your business, customers, and data are all vulnerable. Even worse, if a cyber-attack occurs, you may never recover from the damage to your reputation and the cost of dealing with the fallout.

Working with our accounting firms that also provide cybersecurity services is one of the best ways to protect your business. In fact, our teams are uniquely suited to provide these critical services. Here are a few reasons why:

1. We’re trusted business advisors

Many large accounting firms already provide their clients with security and control-related services. This may include auditing, examinations, and advisory services. Since you already trust your accounting firm to help you achieve your business objectives, so it’s not a far leap to extend the services they provide.

Rather than spend valuable time interviewing a new firm that you’re not sure you can trust, adding new services from your accounting firm will save you time and give you additional peace of mind.

2. We take a holistic approach

Involving all levels of an organization’s management and your most trusted advisors allows you to take a holistic approach to your cybersecurity, rather than piecemealing it together. Considering how quickly the business and cyber landscapes change, this is truly the only way to stay ahead of the continually evolving threats and risks facing your business.

Accounting firms that offer cybersecurity services often have multidisciplinary teams that bring a combination of unique strengths to the table. From expertise in performing audits to extensive IT and cybersecurity knowledge, a knowledgeable accounting firm is uniquely positioned to detect potential vulnerabilities and provide actionable advice to help minimize risk.

3. We’re experts in preparation and protection

Properly protecting your firm from cyber-attacks requires organization and attention to detail. Trusting your accounting firm to handle your cybersecurity means you’re choosing an expert who is already familiar with much of the data and information that requires protection.

Since we’re already knowledgeable about the interior workings of your firm, your accountant can easily detect areas of vulnerability and make recommendations to close any potential areas of weakness.

4. You’ll Enjoy Cost Savings

While many cybersecurity firms cater to large businesses and organizations, the threat is very real for businesses of all sizes. Working with accounting firms that offer cybersecurity is often a much more cost-effective solution for small and medium-sized business owners.

Is Your Company Currently at Risk?

Now that you understand the benefits of working with an accounting firm that offers cybersecurity services, you may wonder whether your company is currently at risk. In almost all cases, the answer is yes!

If your business handles any type of sensitive client data, you’re responsible for protecting it. This includes Personally Identifiable Information (PII), Protected Health Information (PHI), and cardholder data. There are a variety of laws in place that dictate your responsibilities.

For example, if you’re located in the United States, you must follow the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Payment Card Industry Data Security Standard (PCI), and other applicable laws. There are also state breach notification laws that clearly explain your cybersecurity compliance obligations. In Europe, you’re required to follow General Data Protection Regulation (GDPR) rules. Failing to meet the rules that apply to your business and location can land you in serious trouble and cause irreparable damage to your business and your brand.

Companies that are considering or are currently undergoing a merger or acquisition or that have insufficient IT resources may experience even more cyber-vulnerability.

If any of these circumstances apply to your business, it’s important to consult with a cybersecurity expert as soon as possible.

Common Types of Cyber Attacks

Understanding how to avoid cyber attacks is one of the most important things you can do to protect your business. Here’s a look at some of the most common types of attacks business owners face:

1. Phishing

Unfortunately, phishing attacks are becoming more common and more sophisticated. They often arrive in the form of an email that looks legitimate but is designed to dupe you into providing valuable information like your passwords or credit card information. These emails will often appear to come from your bank, a large retailer, or other trusted entity.

2. Malware

The term “malware” is short for “malicious software.” It’s unwanted software that is installed on your device or system without your knowledge or permission.

There are many different types of malware. Some, like spyware, are designed to track what you’re doing and gain access to your credentials and other valuable data. Others, like ransomware, are created to extort the victim while still other types are simply designed to create some type of disruption.

3. SQL Injection

If your business uses a database-driven website and the permissions are not set properly, attackers may be able to exploit the system to read, modify, create, or delete the data stored in your database. In some cases, they may also be able to shut down the database, recover deleted content, and even issue commands to your operating system.

Learn More About HLB’s Cybersecurity Services

HLB’s Cyber and Information Security Systems team is dedicated to helping businesses and organizations prepare for and protect themselves against cyber-attacks. If an attack occurs, we’ll provide you with the immediate support you need to quickly respond and recover, so you can minimise potential damage to your business.

To learn more about our cybersecurity services, contact us for a free proposal.

 

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Whistleblowers protected by EU Directive from December 2021!

By Patrick Van Impe, HLB Belgium

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Until the introduction of the EU Directive on this subject, only a few EU countries had comprehensive legislation on the protection of so-called whistleblowers (the Netherlands, Norway, UK). Other countries limited themselves to reporting misconduct only in the public sector (Belgium).

With the introduction of this EU Directive, this is now extended to both the private and public sector and to all EU countries. The EU Directive obliges the member states to enact legislation by 17 December 2021 that will better protect the potential whistleblower in the private or public sector who report infringements of EU legislation.

These include, for example, breaches of financial services, consumer protection, data protection, GDPR, product safety, transport safety, food safety, environmental protection, public health, etc.

The Directive protects whistleblowers who have obtained information about breaches in a work-related context. This may not only concern employees or civil servants, but also applicants, former employees, self-employed persons, shareholders, directors, trainees and anyone who works under the supervision and direction of (sub) contractors and suppliers.

 

Its most notable features are:

 

  • Effective, confidential and secure reporting channels
    • The Directive imposes an internal hotline for (i) legal entities in the private sector of at least 250 employees by 17 December 2021 (50 employees – 17 December 2023) and for (ii) all legal entities in the public sector (although Member states may provide for an exemption for municipalities with fewer than 10,000 inhabitants or fewer than 50 employees or other entities with fewer than 50 employees).
    • At member state level independent and anonymous external reporting channels
  • Protection against dismissal, witholding promotion, financial sanction, change of working hours, intimidation, harassessment
  • Confidentiality = protection against both identity and content
  • Protection not only for the whistleblower but also for those who assist him/her
  • Financial, legal and psychological support
  • Sanctions

 

Detection of occupational fraud

What is occupational fraud? One commits occupational fraud when individuals or groups of individuals make illegal use of their occupational position for personal advantage and victimise consumers, colleagues or/and the own organisation.

According to the last available Report to the nations for Western-Europe (2020 Global study on occupational fraude and abuse – ACFE), 43% of all occupational fraud is initially detected by a tip coming from employees (50%), customers (22%) or vendors (11%).  We can therefore expect that the number of reports of occupational fraud will increase significantly with the introduction of this legislative framework, and with that the volume of fraude investigations in the future. Furthermore, the study shows that median losses were nearly doubled at organisations without hotlines.

In general those who are closely involved with this subject prefer to refer to the term ‘reporters’ rather than ‘whistleblowers’, considering the courage it takes and the positive effect it brings to society.  Reporters can be crucial to bring to light incorrect behaviour, illegal activities and to save the ethical culture and values of an organisation, the environment, or even lives (product safety, food safety, public health).

Studies also show that staff members prefer to express their concerns regarding irregularities rather informally, choosing to talk to their direct supervisor (28%), the fraud investigation team (14%), internal audit (12%), a co-worker (10%), HR (6%) or other (15%).

 

How to protect your organisation against occupational fraud?

Still, according to the same Report to the nations, the most obvious anti-fraud controls in Western Europe are:

External audit 83%

Code of conduct 81%

Internal audit 74%

Hotline 64%

Anti-fraud policy 56%

Fraud training for managers / executives 55%

 

This illustrates why fraud prevention is often a culture-driven topic. All too often, a significant incident occurs before proper attention is given to fraud prevention. We should all be warned, and not let it come to that.

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The post-pandemic agriculture, food and beverage supply chain

By Arjan Mulders, HLB Netherlands

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The COVID-19 pandemic hit the agriculture, food, and beverage sectors hard. Our 2021 survey found that 81 per cent of business leaders consider the consequences of COVID-19 the biggest business risk. Empty supermarket shelves revealed weaknesses in their supply chains. Consider that the supply chain affects producers, distributors, food-processing plants, and consumers. In many food-processing plants, production ended up either reduced, suspended, or temporarily discontinued due to workers who tested positive for COVID-19. Less production in processing plants meant less food on grocery store shelves. 

The pandemic changed consumer behaviour and increased the demand for food. Closures of restaurants or limited-service at restaurants affected both the eating and buying habits of consumers, which resulted in a shift in demand from food service to retail. The number of trips to supermarkets greatly increased, with consumers focusing on staples with long shelf life such as pasta, canned foods, and frozen foods. Out of necessity, consumers preferred home delivery and takeaway options. Post-pandemic consumers are likely to continue buying groceries through home delivery. Consumers said grocery delivery is something they will continue to do post-pandemic, a survey found.

COVID-19 also disrupted the food supply chain, including crops rotting in the fields due to a lack of farmworkers. For example, European asparagus farmers lack enough workers to harvest the crop because border restrictions make it impossible for migrant workers from Eastern Europe to come to their farms. Even when produce gets harvested, some food processing plants scaled back or shut down to contain COVID-19. In addition, international transport of fresh foods is difficult due to border controls and freight restrictions. 

The effects of international trade disruption

In addition to COVID-19, trade disruptions pose a problem for supply chains, with 58 per cent of those participating in our survey reporting concerns about international trade flow disruption. Trade routes are necessary for a global economy and few food and beverage companies can survive without international trade. A large container ship stuck in the Suez Canal for a week serves as a good example of the importance of trade routes. The blockage of the ship stopped 400 ships from moving through the Suez Canal and cost around twelve per cent of global trade. 

COVID-19 itself disrupted international trade. Global merchandise trade recorded the biggest decline in one period in the second quarter of 2020, decreasing 14.3 per cent compared to the first quarter, according to a paper published in February 2021. The pandemic affected international trade in many ways, as the Organisation for Economic Cooperation and Development lists. When the pandemic began, ships in Chinese ports dealt with restrictions on their movement, which caused a shortage which led to a rise in the price of containers. Lockdowns impacted labour available to unload ships at ports and increased costs due to the added protective measures for workers. Supply chains, in general, remain affected by added health and safety measures for workers, and that affects both time and costs. 

The post-pandemic food and beverage industry

Post-pandemic life will return to normal but for the agriculture, food, and beverage sectors that normal will not look the same as it did before COVID-19. Our 2021 survey of business leaders found that 60 per cent of business leaders surveyed believe that global growth will decrease in 2021, and only twelve per cent are confident their organisation can grow revenue. Twenty-four per cent of agricultural leaders say they are not confident in their company’s ability to grow revenue over the next twelve months. That seems to suggest that business leaders expect a downturn for the agricultural industry, which makes sense given that the pandemic hit industries hard that rely on the agricultural industry. 

As lockdowns lift, restaurants return to in-person service and schools re-open, which increases the demand for bulk food supplies. Post-pandemic, the demand for food and beverage products will increase, and whether the increase occurs as fast as some anticipate or the build-up is slower, operational efficiency is key. Can the agriculture, food, and beverage industries keep up with the demand? As David Dollar, Senior Fellow at the Brookings Institute points out, for all sectors to keep up with the post-pandemic changes, they will need to improve operational efficiency. The good news is that in our survey, 72 per cent of agriculture leaders plan to improve operational efficiency. 

There is more room for optimism. Our survey found that a high percentage of agriculture leaders suggest improving operational efficiency is a key way they will enhance their business in 2021, while 51 per cent of them plan to launch new products and services. Three-quarters of leaders also said they feel confident about their ability to grow in the next twelve months. Time will prove if the confidence business leaders put in their ability to grow in the next twelve months measures up to the ability of supply chains to keep up with post-pandemic demand. If food and beverage companies embrace operational efficiency and realize that a new normal will exist post-pandemic, the confidence expressed in our survey will prove prophetic. 

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