International Sustainability Standards Board launched
It’s fair to say there are differing opinions on whether the 2021 United Nations Climate Change Conference (COP26) adequately addressed the pressing issues facing our planet. But there was at least one significant announcement that will have a far-reaching impact on how companies do business for years to come.
The Glasgow showpiece saw world leaders stand shoulder-to-shoulder with some of the biggest names in industry. The International Financial Reporting Standards Foundation (IFRS) used this stage to launch its International Sustainability Standards Board (ISSB). IFRS oversees accounting standards in more than 140 nations, and the ISSB initiative will develop high-quality standards for sustainability disclosure in accountancy.
Having already appointed former Danone CEO Emmanuel Faber as Chair, the board’s remit will be to deliver a comprehensive global baseline for sustainability-related standards which will enable investors to make informed decisions.
The ISSB will work closely with the International Accounting Standards Board (IASB) to ensure both sets of standards work seamlessly alongside each other.
The IFRS said the decision to create the ISSB was prompted by consultation feedback. This feedback, which included two public consultations, found international investors with global portfolios were increasingly calling for transparent and reliable reporting by companies on a range of matters relating to the climate, society, the environment, and governance.
Announcing the creation of this new international sustainability standards board at COP26, Erkki Liikanen, Chair of the IFRS Foundation Trustees, said: “Sustainability, and particularly climate change, is the defining issue of our time. To properly assess related opportunities and risks, investors require high-quality, transparent, and globally comparable sustainability disclosures that are compatible with the financial . Establishing the ISSB and building on the innovation and expertise of the CDSB, the Value Reporting Foundation and others will provide the foundations to achieve this goal.”
IFRS Sustainability Disclosure Standards
So what are the IFRS requirements?
While we do not yet know exactly what the finalised standards look like, we do have enough information to make an early assessment of what they are likely to resemble.
The IFRS has said it aims to release a draft set of standards by the first quarter of 2022 and have a climate-related disclosures standard as well as a standard on general requirements for sustainability-related financial disclosures ready by the second half of the year.
The IFRS sustainability disclosure standards themselves will be based on the groundwork put in place by the Technical Readiness Working Group (TRWG) which was set up in March of 2021.
The establishment of the TRWG was partly a response to calls by the Organisation of Securities Commissions (IOSCO) for greater consistency in how sustainability factored into the decisions made by companies, information which could then inform decisions of investors for whom sustainability was a concern.
On 3 November 2021, to coincide with the announcement about the formation of the ISSB at COP26, the TRWG also published two prototypes.
- The Climate Prototype. This sets out the requirements for the identification, measurement, and disclosure of specific climate-related financial information. This will vary depending on industry but includes information such as sourcing of materials used in manufacturing processes.
- The General Requirements Prototype. This requires an entity to disclose a complete, neutral, and accurate depiction of its significant sustainability risks and opportunities. It includes things such as the targets set by management to mitigate or adapt to sustainability-related risks as well as those that enhance stainability-related opportunities to achieve strategic goals.
The prototypes were developed following six months of joint work by representatives of the CDSB, the International Accounting Standards Board (IASB), the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the VRF, and the World Economic Forum (Forum). It was also supported by the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators.
With this additional backing, the TRWG consolidated key aspects into a combined set of recommendations for consideration by the ISSB.
Now up and running, the ISSB said it will consider the prototypes in its work program, with the climate-related disclosure looking likely to be the first one issued, with others then set to follow. This could include standards on broader sustainability.
Over the course of early 2022, exposure drafts will be issued and comments received, re-deliberation will then be followed by the issuing of final standards.
In terms of adoption, it will be down to individual jurisdictions to decide whether they adopt the new standards, with some likely to do so early on.
The United Kingdom, for example, has already said it expects to put ISSB at the centre of its own sustainability reporting requirements. It remains unclear however, how they may be adopted in other jurisdictions such as the United States and European Union.
That being said, many jurisdictions and companies are already undertaking similar work. Firms which have, for example, adopted TCFD recommendations on climate-related financial disclosures will themselves be well placed to adopt the new standards once they are finalised and released in 2022.
To help further the adoption of the new standards, the Trustees have formed a working group to enable further formal engagement between the ISSB and jurisdictional representatives. This will also include those in emerging markets.
The intention is for the ISSB to be a truly global presence, and it said that engagement with developing and emerging economies will be ‘an important priority’.
The board and chair will be based in Frankfurt, while Montreal will be responsible for supporting the new board and for deeper co-operation with regional stakeholders. Work at both offices is due to begin in early 2022.
Offices in San Francisco and London will also provide technical support, help with market engagement and assist in creating further cooperation with regional stakeholders.
Further discussions will continue with proposals for offices from Beijing and Tokyo to finalise the board’s footprint in Asia and Oceania.
Working with other regulatory bodies
As highlighted earlier, the ISSB will work in close cooperation with the IASB, which will see the International Financial Reporting Standards and the ISSB’s sustainability standards almost as two sides of the same coin. Both boards will be independent and overseen by the IFRS Foundation trustees.
The TRWG already represents several organisations which have experience in standard setting. The VRF and the CDSB will be consolidated into the ISSB and it will work closely alongside the IASB.
The IFRS Trustees announced the ISSB at COP26 and also revealed a commitment by leading investor-focused sustainability disclosure organisations to consolidate into the new board. By June 2022, the IFRS Foundation will also carry out the consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VR), which houses the Integrated Reporting Framework and the SASB Standards.
The ISSB will also have access to expertise from advisory groups. Technical advice on sustainability will be provided by a new Sustainability Consultative Committee. Its members have been drawn from a range of organisations including the United Nations, International Monetary Fund, the Organisation for Economic Co-operation and Development, and the World Bank. There will also be other experts drawn from private, public, and non-governmental organisations.
The bigger picture
It is important to not simply take the new standards in isolation but to consider them in the broader context of society and business.
COP26 was just the latest example of how the public is demanding more not just of governments, but of business when it comes to the climate agenda. With this in mind, it is clear that sustainability reporting standards have a number of crucial benefits.
The most obvious one is the benefit to the environment. Standards provide clarity of guidance to firms who want to do their part in the fight against climate change. Until now, they have not had a baseline to compare their efforts to, and had fewer ways to clearly understand the impact that their actions were having.
Another benefit is to the business itself, the efficiency of how it operates, perception, and the bottom line.
In terms of perception. A company’s green credentials are a major factor in how it is viewed by the public and in turn by prospective clients who wish to be associated with it – or not, as the case may be.
For example, a global report from The Economist Intelligence Unit, commissioned by WWF, revealed a 71% rise in online searches for sustainable goods globally over the past five years.
So it is becoming increasingly important for a company to be able to demonstrate – not just state – its green credentials. By being transparent, it becomes possible to quantify the commitment a company is making towards the sustainability agenda helping to build trust and loyalty.
Reporting standards can also help streamline business operations, provide risk-management benefits and lead to the necessary collation of more data which can then in turn be fed into the decision-making process.
By any measure, things are moving very quickly. Having only formed TRWG in March last year and with the announcement of the ISSB in November, work is already well underway to turn prototypes into standards which will then go out over the course of early 2022.
Following his recent appointment at the helm, Emmanuel Faber, said: “The ISSB represents a once-in-a-generation opportunity to fulfill that need in a fast-changing world, where the climate in particular will drive major shifts in the coming years. We should move diligently and build on the great momentum resulting from the formation of the ISSB at COP26.”
With the Chair now in place, nominations will be received for the remaining board members, with the ISSB planning to launch its first public consultation on its proposed reporting standards by the end of March 2022.
How important is sustainability to your organisation and are you prepared for the new reporting standards? Get in touch with HLB for more information.
Grasp the innovation imperative
Blog by HLB Global CEO, Marco Donzelli
5 January 2022
For many businesses 2021 provided some respite from the ongoing impacts of the coronavirus pandemic, albeit less relief than some had hoped.
In last year’s annual Survey of Business Leaders, we explored how the crisis has prompted many enterprises to take a fresh look at their business models and pivot towards broader, longer-term and more enlightened priorities.
For the agile, the disruption of the pandemic has actually created the right conditions for businesses and whole sectors to benefit from rapid market shifts. The health and biotech sectors provide a great example of just how quickly enterprises can innovate in response to a crisis.
An early finding from this year’s HLB Survey of Business Leaders supports a modest increase in business agility, with 89% of leaders agree that they are able to innovate with greater speed than in the past.
Given this, I have to ask myself if this increased speed of innovation is possible in the health sector, what else might businesses be capable of to prepare for the next great transformation?
Further early insights confirm that, in addition to strengthening their resolve, challenging trading conditions provide forward momentum for more successful innovation:
- In terms of confidence, 86% of business leaders agree that they are more confident in their ability to innovate today as compared to pre-pandemic
- 91% also agree that market disruption motivates them to innovate
- Most encouragingly, 93% of business leaders feel confident to challenge the way things get done in their own organisations
“What surprised a lot of business leaders during the pandemic was their organisation’s ability to innovate, under pressure and under duress, when there was an existential threat,” according to David Sales, Head of Training, St Johns Innovation Centre in Cambridge, one of the experts in innovation we have spoken with to inform our research. “The big question now is, how do we sustain that capability to innovate? As the world settles down after the pandemic, let’s not revert to the age-old acceptance that innovation takes a long time and it needs to be expensive’’.
One thing is for sure, as societies and economies adapt to living with the coronavirus, attention is now firmly on creating new market opportunities to drive sustainable long-term growth. Over 80% of those we’ve polled agree or strongly agree that more rapid and effective innovation will be critical to driving this future growth.
I look forward to sharing further insights on the innovation imperative, from the barriers business leaders encounter to the key enablers to successful innovation, including the benefits of a diverse workforce. Reserve your space at the live launch of HLB’s annual global Survey of Business Leaders on 27 January 2022:
The sustainability challenges for agriculture from COP26
At the 26th United Nations Conference of the Parties (COP) summit held in Glasgow, 45 governments agreed to move towards sustainable farming methods while protecting nature. In addition, 95 businesses pledged to be “Nature Positive.”
Potential solutions include biotechnology, soil and manure management and climate-smart agriculture. However, organisations and farmers in 26 nations face challenges with fulfilling their commitment to changing agricultural policies. In this article we review the key sustainability considerations and actions for agriculture from COP26.
Addressing supply chain issues
According to Gartner, “in the last nine months, the percentage of the 2,000 global largest companies with net-zero targets rose from 20% to 33%.” Reducing value chain emissions of greenhouse gases is vital. Companies are tasked with decreasing emissions in their operations, as these account for most output.
The agriculture supply chain faces numerous challenges as the industry continues to navigate the pandemic. It’s easier for enterprises to visualise their own emissions than to understand those from complex supply chain tiers. Collecting data for accurate calculations is, therefore, the first barrier that organisations face. Technologies and strategic partnerships can help to enable transparency on scope 3 emissions and indirect supply chains. Other solutions include forest conservation policies, increasing materials traceability and transport infrastructure improvements.
Leaders need to develop more robust reporting and governance policies — especially since lenders and investors increasingly evaluate corporations’ performance on sustainability. Organisations must also develop insights about risks and identify revenue-driving opportunities. Having said this, companies can’t get overly caught-up in planning as swift execution is essential for the .5 degrees Celsius pathway.
The global impact of animal feed production
Imported soya for livestock and poultry feeds contribute to the destruction of rainforests, and the UK government says “around 80% of global deforestation is driven by agriculture.” According to the Agricultural Industries Confederation (AIC), over half of imported soya to the UK comes from the US or Canada or is certified as responsibility sourced. Yet, the Soil Association reports that the UK imports more than 2.2m tonnes of soya.
The use of imported soya will be restricted in the future, thanks to a deal to end and reverse deforestation by 2030. However, higher feed prices could lead to additional challenges for small food producers already facing very tight margins in difficult market conditions. The Food and Agriculture Organisation of the United Nations (FAO) reports that “farms smaller than 2 hectares produce roughly 35% of the world’s food.”
Agriculture leaders and policymakers can deploy remote sensors, drones, mobile applications and satellite imaging to support smallholder farms. Doing so could improve market access and productivity to balance the higher cost of livestock feed. Likewise, livestock management improvements through agropastoral production systems could reduce risks faced by livestock keepers while helping the climate.
Reducing methane production from animal farming
Methane causes a third of human-generated warming. At COP26, more than 100 countries agreed to cut 30% of methane emissions by 2030. But methods like adding fat to cows’ diets or developing more digestible feed haven’t been cost-effective.
Some countries, like the US, have made it clear that they aren’t looking to decrease cow populations. However, the US Department of Agriculture (USDA) has joined the Dairy Net Zero declaration. Again, the measure doesn’t focus on cutting dairy production. Instead, it aims to improve productivity and resource consumption.
Resilient agricultural systems that prioritise manure management and improve nutrient use can help farmers reduce methane production globally. Governments could also consider give incentives to farmers and ranchers to reduce their cattle’s emissions.
The European Food Safety Authority (EFSA) recently gave a positive assessment about 3-nitrooxypropanol or Bovaer, made by the Dutch company DSM. According to Reuters, DSM “says emissions are reduced by between 20% and 35% without affecting production.” The EFSA agreed that it does cut emissions in dairy cattle. Other positive signs come from research showing that “red seaweed supplementation reduces enteric methane by over 80% in beef steers.” But this requires major regulatory agencies like the US Food and Drug Administration to approve seaweed as a feed supplement for commercial cattle.
Considering water and drought solutions
Inexplicably, water plays a role in climate change and food hunger objectives. Rising water scarcity, declining water quality and less reliable water availability impact consumers and food producers. Given that 69% of global water use stems from agriculture, the farming industry needs to adopt climate-smart agricultural water management (AWM) technologies and practices.
Other solutions include:
- Climate-resilient crop varieties
- Improved soil health
- Protection for carbon sinks such as forests and wetlands
There has already been resistance to some strategies – like using recycled water for irrigation. Overcoming water challenges will require cooperation between governments, policymakers and corporations. This will mean reducing the demand for freshwater, while developing fair and equitable ways to distribute existing resources.
Overcoming agriculture sustainability challenges
The outcomes from COP26 are a step in the right direction. Food producers are already feeling the effects of climate change on international agriculture, but the solutions aren’t simple or inexpensive. Additional challenges stem from ensuring every farmer has the support and resources needed to achieve outcomes that directly or indirectly impact the environment.
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SPACs: The possible benefits and potential pitfalls
Going public is a highly regulated process that can take years to complete. Instead of doing it in a traditional way, private companies are increasingly turning to SPACs (Special Purpose Acquisition Company) to march around the SEC’s administrative strain and access the public market in a fast-laned process.
As a shell company—but a publicly-traded one—a SPAC’s sole purpose is to raise capital that must be used to invest in an operating business at a later date. As they have no commercial operations, SPACs are able to list faster than a traditional IPO due to the lesser scrutiny required by SEC. Another consideration is the SPAC price is also fixed at $10.00 from the offering, vs market conditions driving the capital raise/IPO price. Later they merge with private companies to acquire their business operations. As a result, the private company becomes publicly traded.
As SPACs appears poised to become an alternative listing route, here we take a deep dive into the benefits and potential pitfalls of this structure through the lens of three different key stakeholders in the process.
Benefits of SPACs for key stakeholders
For sponsors—usually formal hedge fund managers, private equity managers, tankers, or chief executives of fortune 500 companies— the SPAC structure offers easier access to capital and considerable upside potential with 20% founders’ equity at nominal cost.
and also have the redemption protection, whereby they can redeem their share and get the original $10.00 back if they don’t like the merger deal. The public investor can vote yes for the transaction to go through, redeem their share for the money back, and keep the warrant in case the deal is really successful. Previously, they couldn’t fully benefit from the IPO market as they didn’t have the opportunity to invest before the IPO. Since the IPO prices are already pretty rich, private equity and VC firms were reaping most benefits. But with SPACs, public market investors— including retail— can invest in early-stage companies that offer good growth potential.
For the acquired company, SPACs can bring many benefits, including a faster listing process, valuation certainty, strategic partnership and lower marketing costs. Through SPACs, companies can negotiate the deal directly with sponsors, getting more valuation certainty. They can also have more autonomy to select the sponsors, choosing ones that can act as strategic partners able to support the growth of the business post-merger. In contrast, traditional IPOs require time-consuming and expensive roadshows. Also, companies are not allowed to give projections and forecasts, while operating companies merging with SPACs can make projections for the next two to three years.
What are the potential pitfalls?
Certain risks inherent to the SPAC structure are common for all stakeholders, for sponsors, investors and acquired companies alike.
For example, there is a certain degree of criticism around SPACs because of the lacking transparency and the considerable potential for fraud or allegations. Conflicts of interest are the main red flags between the sponsor and potentially the target companies, especially with private equity involved. They can, essentially, exit one of their portfolio companies through a SPAC. This risk very much depends on how forward projections are being made. Because of this, management has to be very careful in getting the valuation justified with the projections they have in mind.
For sponsors, there is the challenge of time constraint. In the SPAC structure, cash capital is held in a trust account which will retain the proceeds for two years. The SPAC has to clinch the deal and merge with an operating business within the time limit. If it fails to deliver within two years, the money from the trust account will have to be returned to all investors. Also, there is the issue of quality and supply of target companies. With fierce competition for targets, this means an increased risk of overpaying for acquisitions.
For public investors, risks to be aware of include the quality of sponsors and their alignment of interests, as well as potential equity dilution. Sponsors are critical as success often depends on the sponsor’s reputation. Also, investors should be aware that those who buy post-IPO and hold shares through the SPAC merger have no downside protection once SPACs have completed a merger and become an operating company. Performance of SPACs post-merger can be disappointing.
Finally, there are some potential pitfalls for acquired companies too. For example, SPACs provide a listing. There is usually cash that rolls over from the trust account into the operating company. Sometimes, it is used to pay the founders of the target company their exit price, but most of the time, cash stays in the company to provide for the growth plan of the new company. This is why there is usually a minimum cash requirement in the merger deal.
Next, there is the question of the public company readiness for all the regulatory and public scrutiny post-merger. Also, even if the merger has been approved by the majority of the shareholders, those who vote against can still redeem from the trust account. Finally, it often happens that the target company has to restate its projections because certain assumptions have failed to materialise, such as information affecting the timeline for launching new products.
Although SPACs have been around for decades, their popularity has surged in the US over the recent years, and lately, they have been spreading into other markets such as South East Asia. Another milestone for this deal structure was reached on 6th December 2021 when it became possible for SPACs to be listed and traded in Switzerland on the SIX Swiss Exchange.
For SPACs to succeed, certain elements appear critical. First, sponsor quality and expertise are often pivotal, but so is the leadership team of the target company. Also, the ability of the company to scale and offer more products in the future, as well as its current and future revenue growth and profitability, are essential for success. Finally, good governance is critical for building investors’ trust to avoid becoming seen as the equivalent of claw machines in an arcade.
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The rise and applications of NFTs
In early 2021, the artist Beeple sold a non-fungible token (NFT) collection at Christie’s for a record-setting $69 million. The rise of NFTs is changing how collectibles are bought and sold. But what exactly is an NFT, and how is it used beyond art collections? What are the implications for creators, owners, sellers, and investors? How are NFTs used in a business context?
What is a Non-Fungible Token (NFT)?
The term “fungible goods” is used by economists to describe interchangeable goods (e.g., a bushel of wheat.) A non-fungible asset, like a piece of artwork, can’t be traded or exchanged at equivalency like you could with currencies or cryptocurrencies, which are a medium for commercial transactions.
A non-fungible asset can be either digital or physical. An NFT is a cryptographic record of ownership for an item encoded into a blockchain with unique identification codes and metadata. The token enables the transfer and tracking of ownership of these assets among holders.
How are NFTs used?
Currently, most NFTs are based on the Ethereum blockchain. The tokenised assets can be bought, sold, and traded globally without the risk of fraud and forgery. NFTs can also be used to present individual identities, property rights, and more.
Although NFTs can be applied to any assets (eg, real estate,) their current market focuses on collectibles, such as digital artwork and sports cards. People are also trading highlights of sports or other events (e.g., NBA) as digital cards and video clips on NFTs. Meanwhile, Twitter founder and former CEO Jack Dorsey tokenised the first tweet ever written and sold it for $2.9 million.
The application of NFTs will become much wider as more people and organisations realise its many advantages. For example, it can remove intermediaries in a transaction and facilitate identity management. It can also connect buyers and sellers to create new markets that don’t yet exist.
What do NFTs mean to buyers, sellers, owners, investors, and businesses?
By enabling digital representation of physical assets and combining it with a tamper-resistant blockchain of smart contracts, NFTs are introducing significant changes in how assets are traded.
NFTs essentially convert a physical asset into a digital one, which helps remove intermediaries in transactions. For example, artists can connect directly with collectors instead of working through an agent. NFTs can also improve business processes, for instance, by allowing different parties in a supply chain to verify the provenance, production, and sale of a product to ensure its authenticity.
By converting physical identification documents (e.g., passports) into NFTs, entities can verify their identities without physically presenting a piece of documentation. This can help facilitate cross-border transactions and streamline business processes while reducing the risks of identity theft and fraud that can cost companies reputational and monetary losses.
The digitalisation of physical assets makes fractional ownership and the democratisation of investment feasible. The ability to verify and track ownership can open up more investment opportunities in many asset types while the ease of investing and trading can increase the worth and revenue of an asset.
By simplifying business processes and transactions, NFTs can facilitate the creation of new markets or investment vehicles. For example, a seller can tokenise a piece of land. Each parcel will have its unique characteristics and be priced differently using relevant metadata. This bypasses traditional complex and bureaucratic trading processes and enables more investors to participate in the market.
Understanding the taxation implication of NFTs
As NFTs become more widely used, we need to consider how taxation and financial reporting work for these assets. Governments are still grappling with this new form of investment, and investors must understand their local tax laws when buying and selling NFTs.
In the US NFTs are classified as capital assets unless the seller is in the trade or business of buying and selling NFTs. While artists and creators may not be taxed for creating an NFT, the sale can be taxed as ordinary income subject to self-employment tax.
In Canada, NFT ownership is treated as an asset. The disposal of an NFT is calculated and taxed as a gain or loss. In the UK, an NFT is often considered as a capital asset held for investment purposes. The sales, which generate a capital gain or loss, are subject to Capital Gains Tax (CGT).
Navigating the new world of NFTs
NFTs offer many benefits to creators, buyers, investors, and businesses as an investment vehicle or a method to facilitate transactions. As a fast-evolving field, there are still many questions about how NFTs fit into the current financial infrastructure and how individuals and businesses should account for an NFT’s value. Therefore, it’s important to work with qualified financial and accounting professionals who understand the global implication of NFT transactions as the rules and regulations evolve.
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How technology is shaping the future of travel
The travel industry continues to face difficulties nearly two years into the pandemic. Unfortunately, travel-related disruptions will stretch into 2022 and possibly beyond. However, companies that really embrace technology transformations can balance challenges with operational and customer experience (CX) improvements.
As we move into the fourth industrial revolution, digital technologies will empower consumers and bolster the travel and tourism sectors. In this article we’ll discuss how technology is shaping the future of travel and what these innovations mean for your organisation.
Using technology to build resilience
Disruptions have unravelled the travel supply strain. Cancelled flights and local closures can reduce consumer confidence, whilst longer waiting times at security checkpoints combined with supply shortages are eroding the customer experience. The tourism sector must continue to adjust to ongoing disruption and take steps to build resilience.
Earlier in 2021, at the World Trade Organisation’s (WTO) Aid for Trade Stocktaking event, a panel on tourism resilience identified three key actions:
- Improve traveller confidence
- Understand and monitor new market trends and demand drivers
- Focus on building a resilient and inclusive travel sector
In each case, technology plays a role. It can ease waiting times and prioritise safety while providing travellers with extra assistance when adjusting to new protocols. Digital tools also give tourism businesses access to real-time data affecting customer safety and experiences. Organisations can then use this information to identify friction points and track consumer sentiment and behaviour trends.
Lastly, technologies like artificial intelligence (AI) can reduce unconscious bias and the need for high-touch security measures. Travellers can pass through sensors that detect anomalies more effectively and less obtrusively than pat-downs and other methods.
Building security into every project
TransUnion’s quarterly analysis to 30 June 2021 shows the digital fraud attempt rate rose 155.9% in the travel and leisure sector over the previous year. But, organisations aren’t backing down from technology initiatives. Instead, leaders realise the importance of considering security before, during and after product development.
According to IBM, the number of CIOs reporting higher maturity levels in their security and privacy transformation has increased 218% since 2019. By addressing cybersecurity early, travel and hospitality companies can roll out new customer-facing tools and features while lowering vulnerabilities.
Reimagining the traveller journey
Even as lockdowns occurred, people went online to discover new destinations and dream about future travel. Although companies cut back on marketing and advertising initiatives, they pushed ahead on customer engagement tools, especially those that drive direct traffic.
Going forward, organisations will use technology to capture and keep travellers’ attention. The travel and tourism industry can use technology to learn how traveller behaviour changes, while interacting with customers using their preferred methods to continue building relationships.
Key customer-facing technologies include:
- Cross-channel approach to messaging. Travel and leisure businesses pair conventional platforms like texting, email and push notifications with in-product tools such as in-browser or in-app messages.
- Virtual reality (VR) for decision-making. Online VR tours help travellers scope potential destinations and feel comfortable choosing tourist activities. People can explore outdoor environments, attractions and landmarks from the comfort of their homes.
- Augmented reality (AR) for real-life experiences. More and more consumers are looking for AR-based apps for wayfinding at a destination or as a real-life guide to local tourist attractions.
- Virtual assistants for better experiences. Travellers interact with AI-powered chatbots to learn about safety or hygiene measures, COVID-19 policies and inventory or room availability. Companies can collect data about usage and use it to develop personalised experiences.
- Secure interactions using recognition technology. Consumers use biometric features on their cellphones to approve transactions. Travel companies can use key tools to support biometric logins, including contactless check-ins, payments and more.
Focusing on workforce optimisation and agility
According to Deloitte’s 2020 Global Human Capital Trends survey, “53% of respondents said that between half and all of their workforce will need to change their skills and capabilities in the next three years.” Unfortunately, “38% said that identifying workforce development needs and priorities is their greatest barrier to workforce development.”
Technology can help travel and tourism leaders identify skill gaps, develop workforces and retain staff. Skills graphs map current skills and capabilities to roles, performance, demographics and external trends. Interactive tools can also let employees take self-assessments and tailor their learning goals to personal interests and self-development objectives.
Leveraging data for operational and CX enhancements
Nearly every device and system supplies data which industry leaders can use to identify challenges and opportunities. For instance, IoT technology can automate maintenance tasks and alerts, helping to solve problems before it affects the customer experience. Likewise, in-room devices let guests personalise settings in conferencing or private spaces. In return, organisations can collect this data to track usage and monitor resources.
Other data touchpoints supply information to predict demand or uncover new consumer behaviour patterns. Leaders can use data to optimise pricing, promotional strategies and operational performance. Purposeful technology objectives can increase profitability across the board.
Technology drives business value in the travel industry
Today, every airport or hotel is a technology company. Digital tools create seamless, secure experiences. Indeed, when backed by customer-centric support teams empowered by consumer intent and sentiment data, travel and tourism companies can shape the customer journey.
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Live webcast launch event
HLB Survey of Business Leaders 2022
17 December 2021
How are CEOs rising to the challenge of powering their innovation engines amidst ongoing fluctuation in market conditions, shifts in consumer sentiments, and disruptions to the supply chain? Through a comprehensive survey of 586 business leaders from 46 countries, and in–depth interviews with innovation experts, we explore how businesses are planning to propel themselves forward in a future where innovation must be executed at warp speed and across multiple vectors.
Join our team of international business experts on Thursday 27 January at 4pm GMT as they discuss the findings of our research during a Q&A panel session. Register today:
Are you accounting for your SaaS arrangements correctly?
By Michelle Warren, HLB Australia
Software-as-a-Service (SaaS) – or cloud-based software – is fast becoming mainstream. However, as businesses move away from on-premise software to SaaS arrangements, they should be mindful of the accounting implications. In this article we consider the two agenda decisions issued by the IFRS Interpretations Committee (IFRIC) relating to SaaS arrangements.
SaaS is a way to deliver software services to customers through the internet, meaning customers can access data from any device as long as it has an internet connection. In this web-based model, software suppliers host and maintain (i.e. control) the servers, databases and the code that makes up the application. SaaS arrangements differ from traditional on-premises software in the following ways:
- The software is not installed or stored on the customer’s computer systems
- The SaaS services and infrastructure are managed by the SaaS supplier and shared by many customers
- Customisation of the SaaS services is limited
- SaaS services are typically paid for on a subscription basis
With this is mind, let’s consider the accounting treatment of SaaS arrangements by reference to the two agenda decisions issued by the IFRIC.
Software asset or service?
The March 2019 agenda decision considers how to account for a SaaS cloud computing arrangement in which the customer contracts to pay a fee in exchange for a right to receive access to the supplier’s application software for a specified term. The question that arises here is whether the customer receives a software asset at the commencement of the contract or a service over the period of the contract. A customer receives a software asset at the contract commencement date if either:
- the contract contains a software lease; or
- the customer otherwise obtains control of the software on the date the contract starts.
For a lease to exist, a contract must convey the right to control the use of an identified asset. For such a right to exist, a customer must have both:
- the right to obtain substantially all the economic benefits from use of the identified asset; and
- the right to direct the use of the asset (i. the customer can direct how and for what purpose the asset is used).
A cloud-based software arrangement generally does not give rise to a lease under IFRS 16 Leases. This is because a right to receive future access to the supplier’s software running on the supplier’s cloud infrastructure does not in itself give the customer any decision-making rights about how and for what purpose the software is used.
In assessing whether the customer obtains control of a software asset at contract commencement date, the requirements of IAS 38 Intangible Assets need to be considered. For an intangible asset to be recognised, the ‘identifiability’ and ‘control’ criteria must be met.
A right to receive future access to the supplier’s software does not give the customer the power to obtain the future economic benefits flowing from the software itself and to restrict others’ access to those benefits. SaaS arrangements, therefore, do not usually give rise to an intangible asset. In conclusion, where a SaaS arrangement does not give rise to a software lease nor does it give rise to an intangible asset that the entity controls, then the right to access the supplier’s application software in the future is a service contract. The customer recognises the expenditure for the service (being access to the software) as the services are received. If the customer pays the supplier before it receives the service, an asset is recognised for the prepayment representing the customer’s right to future services.
Configuration and customisation costs
Building on the earlier agenda decision discussed above, the April 2021 agenda decision considers how to account for costs incurred to configure or customise a supplier’s application software in a SaaS arrangement. In the scenario presented to the IFRIC, the supplier (and not the customer) controls the cloud application software to which the customer has access (so the same kind of service arrangement present in the March 2019 agenda decision). Configuration and customisation are specifically described in the fact pattern: Configuration involves the setting of various flags or switches within the application software, or defining values or parameters, to set up the software’s existing code to function in a specified way. Customisation involves modifying the software code in the application, or writing additional code.
The assessment of whether configuration or customisation of cloud-based software results in an intangible asset depends on the nature and output of the configuration or customisation performed.
Intangible asset not recognised
Where a customer does not control the software being configured or customised, the customer would not recognise an intangible asset for the costs it incurs. This is because such costs do not create a resource controlled by the customer that is separate from the supplier’s software hosted in the cloud.
In this scenario, the costs would be expensed when the customer receives the configuration or customisation services. Under IAS 38, services are received when they are performed by a supplier in accordance with a contract to deliver them to the entity, and not when the entity uses them to deliver another service. This means the costs are expensed as the service is received and not when the customer accesses the SaaS arrangement to which the configuration and customisation services relate.
The IFRIC agenda decision goes on to explain that IAS 38 provides no guidance on how to identify the services that the customer receives and when the supplier performs those services. It is, therefore, appropriate to draw guidance from IFRS 15 Revenue from Contracts with Customers that deals with similar and related issues.
Applying IFRS 15
In situations where the supplier of the cloud software (or a third party contracted by the supplier) also provides the configuration or customisation services, the customer determines when it receives those services as follows:
- if the configuration or customisation services are distinct, then the customer recognises the costs as an expense when the supplier configures or customises the application
- if the configuration or customisation services are not distinct (because those services are not separately identifiable from the customer’s right to receive access to the supplier’s application software), then the customer recognises the costs as an expense when the supplier provides access to the application software over the contract
For those situations where the customer engages a third party to supply the configuration or customisation services, the costs are recognised as an expense when the third-party supplier configures or customises the application software.
Entities may encounter difficulties assessing whether the configuration or customisation services performed by the supplier are distinct from the right to access the supplier’s cloud software over the term of the contract. The guidance in IFRS 15 states that a good or service promised in a contract is distinct if both the following criteria are met:
- the customer can benefit from the good or service either on its own, or together with other resources that are readily available to the customer; and
- the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the
Applying the first criterion to the scenario under discussion, indicators that the configuration or customisation services are distinct would be if such services are provided separately by other suppliers, or if the customer could use the SaaS application software without the configuration or customisation services. On the other hand, if these services require the supplier to significantly modify (customise) its own cloud-based software so that it functions together with the customer’s existing infrastructure, it may be appropriate to conclude that the customisation service is not distinct on the basis that what is being promised by the supplier is a fully-integrated system. That is, the promises to provide the customisation service and access to the cloud-based software are not separately identifiable (second criterion above).
Intangible asset recognised
It may be the case that a SaaS arrangement results in the customer modifying its own existing software, or creating new software that it owns and controls – for example, to allow for entity-specific functionality of the supplier’s cloud software, or to enable the customer’s on-premise applications to interface with the supplier’s cloud-based applications. In these situations, it is likely that a separate intangible asset can be recognised for certain costs under the requirements of IAS 38, remembering that costs related to research and training, as well as indirect costs and general overheads cannot be capitalised as part of an intangible asset.
What do agenda decisions mean for entities?
The existence of agenda decisions is not well known outside of the accounting technical community, but they can prove to be quite helpful if you know they are there. The IFRIC deliberates IFRS application issues from IFRS users worldwide. It then decides whether to recommend standard setting to address these issues. Where the IFRIC decides that standard setting is not required to address a specific issue (because IFRS provides adequate guidance), the basis for such a decision needs to be communicated to the public. This is where agenda decisions come in: they explain the basis of not recommending standard setting for the issues rejected by the IFRIC and aim to improve the consistency of IFRS application.
Entities that claim compliance with IFRS need to follow the guidance in agenda decisions (since agenda decisions derive their authority from IFRS itself).
Where an entity’s current accounting practice needs to change because of an agenda decision, this constitutes a change in accounting policy. Such changes are generally accounted for retrospectively, meaning numbers reported in previous periods would need to be restated where the changes are material. Specific disclosures are required for changes in accounting policies. Agenda decisions do not have effective dates. The expectation is that entities adopt the changes stemming from agenda decisions in a timely manner, meaning they should evaluate the impact of relevant agenda decisions and reflect any required changes in their financial statements as soon as possible.
For further guidance or information please get in touch with HLB’s IFRS advisers.
How can hospitality businesses prepare to thrive in 2022?
After a tumultuous couple of years, hospitality businesses want relief and stability. However, staff shortages and supply chain problems combined with ongoing concerns about infectious disease outbreaks, from COVID-19 to the flu, are impacting the industry. Will the uncertainty continue into 2022? If so, how can organisations adapt and prioritise future plans?
Disruptions are already occurring again in some countries, and may also be sprinkled across 2022, but business leaders can act now to mitigate the effects. It’s time to move beyond survival mode. In this article we explore the hospitality sector’s key challenges and discuss how building resilience can prepare companies for the upcoming year.
Cashflow challenges and solutions
Many restaurateurs and hoteliers cut back on service hours or amenities, and this trend will persist due to ongoing labour shortages. In addition, experts predict food inventory costs to remain higher through much of 2022. Cash flow during specific dayparts or from various revenue streams may also vary.
The International Monetary Fund forecasts that advanced economies will see their real gross domestic product (GDP) decrease in 2022, except Germany, Spain and Japan. Likewise, emerging market and middle-income economies will decrease, whereas low-income developing countries will increase.
Without detailed cashflows, it is almost impossible to estimate how much cash companies will need during this recovery period. Cashflow forecasts should include:
- Cash outflows for the repayment of debts, including government-backed loans
- Return on investment (ROI) projections for sales and marketing tactics
- Various “what if” scenarios to understand investment and customer experience priorities
- Ongoing expenses for customer and employee COVID-19 safeguards
- Real-time figures showing the financial impact of changing business hours
- Assumptions based on the current state of global tourismand local factors
Customers: expectations and experiences
Increasing footfall will continue to be a key priority for hospitality businesses in 2022. However, guests aren’t ready to let go of convenient experiences. They’re still looking for contactless services, delivery and meal kits. Consequently, hospitality businesses should assess the customer journey, including experiences from the last two years and expectations going forward. To sufficiently plan ahead, consider the following points:
- Consumers want transparency about safety and sanitation protocols, including frequent updates on your website and communication with loyal customers.
- Ongoing remote work may alter lunchtime hours and demand type (delivery versus on-premises meals). Hours and menus may need adjusting.
- Are pandemic-related income streams, such as meal kits or individual alcoholic drinks sold at the front desk sustainable?
- Guests still want contactless payments, check-in kiosks and quick response (QR) codes for wayfinding and ordering. Hospitality leaders should appraise the ROI of technology investments.
Hospitality and leisure supply chain considerations
Steep cost increases, long lead times and product availability concerns could decrease in 2022. However, it’ll be a bumpy road until then. Unexpected hurdles in 2022 stemming from geopolitical unrest, virus outbreaks or new variants, and consumer demand could reduce available quantities of key products. Hospitality leaders should remain optimistic while prioritising supply chain resilience.
Along with broadening their food and beverage supply chain, hospitality businesses can evaluate existing vendor relationships and alternative product costs versus function and aesthetics. On the one hand, companies may want to continue new practices, such as offering condiments for to-go orders by request only. Yet, it’s equally important to determine if inventory changes affect the customer experience. If so, organisations can focus on their messaging to keep guests abreast of ongoing challenges.
Barriers to staffing
Businesses that have been reliant on government support may need to reassess their staffing arrangements and carefully consider whether redundancies will need to be made. Will businesses need to close during quieter times? If so, how can you reduce the impact on guests and current employees?
Again, consistent communication is critical. Regular updates on your social channels, websites and third-party listings should reflect your current situation. Supervisors can use scheduling platforms and data-driven insights to adequately staff shifts and forecast shortages. Additionally, flexible schedules and outsourcing non-core tasks could help reduce some labour challenges.
Leaders may also need to take a closer look at automation tools to streamline workflows and fill service gaps. Sensor technologies can reduce daily maintenance requirements without risking unforeseen disruptions. Cross-training and upskilling will also remain crucial in the upcoming year. Hospitality and leisure businesses should review skillsets and prepare staff for future changes. For instance, customer service talent remains a priority, but those employees increasingly require technical skills.
Technology: understand the benefits and drawbacks
Technology adoption skyrocketed during the pandemic, and there’s no turning back. Yet, in an industry where high-touch means an upgraded experience, hoteliers and restaurateurs need to consider the impact of technology on the customer experience and also on the workplace. The best tools reduce costs and increase efficiency, but they should also provide secure, user-friendly customer and employee-facing apps.
Keep in mind that incorporating new technologies without proper support could negatively affect your customer and employee retention. Hospitality and leisure companies can train human resources, customer service agents and technology staff to identify friction points and assist individuals. Plans for 2022 should assess:
- Current technology usage and adoption rates
- Risks and benefits of new technologies or tools
- Rollout strategies for upcoming investments
- Cybersecurity issues such as privacy vulnerabilities for software and endpoints
Looking ahead: a new definition of stability
Uncertainty can breed innovation and deliver valuable lessons – but it doesn’t always come easily. Completing a full assessment followed by strategic actions could reduce future disruption while helping hospitality leaders weather new storms. Despite all the challenges over the past year, hospitality and leisure have remained robust. Whilst the end of 2021 may continue to create challenges, there are opportunities in 2022, and the sector needs to be ready to flourish.
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HLB Cross-Border Business Talks Podcast Series
Welcome to our podcast series, where we’ll be exploring the latest cross-border business topics with HLB thought leaders and special guests. Our podcast episodes provide bite-size analysis on today’s issues in 10 to 15 minute long episodes.
New episodes will appear regularly, as we share insights and ideas on a range of international business topics, from FDI and global economic trends, to the latest technology advancements in business and sector specific analyses. Sign up to listen to our podcast series via Spotify or Apple Podcasts.
Eps 25: The integration of accounting and cyber forensics
In follow-up to our cybersecurity report 2021 we discuss the integration of accounting and cyber forensics, and ask – what should business leaders be aware of? With guests Tom Reck and Matt Ferrante, both Partners at HLB USA.Hide
Helen Smith, HLB’s Marketing and PR Manager
Tom Reck, partner at Withum, HLB USA
Matt Ferrante, partner at Withum, HLB USA
Helen Smith: [00:00:00] Welcome to HLB cross-border business talks, HLB ‘s global podcast series on international business topics.
Hello everyone. And in our podcast today, we’ll be discussing the integration of accounting and cyber forensics. My guests are both partners at Withum, HLB USA Tom Reck specializes in forensic and valuation services. And Matt Ferrante is an expert in cyber and information security services. So welcome to you both. Thank you for joining me.
So firstly, can each of you explain how you define forensics in each of your fields, please, Tom, perhaps you can start. Sure, thanks for having me. Yeah. So typically, or generally I should say forensics is the use of our accounting skills to investigate fraud, an asset misappropriation, [00:01:00] some sort of embezzlement things of that nature that basically require us to dissect and analyse the financial information.
Tom Reck: And that for use in a legal matter typically. So, it’s either something that’s already in a lawsuit or is going to be heading for a lawsuit at some point in time.
Helen Smith: Thanks. Thank you for that. And Matt?
Matt Ferrante: Yes. Thank you. Cyber forensics is applied science and technology for use in criminal civil regulatory and fact planning regulatory matters.
It provides a repeatable process and often follows a designed set of process and procedures that are accepted in the scientific community.
Helen Smith: So, Tom, as a forensic accountant what, what would be the kinds of engagements that you would generally get involved in? And what kind of records would you review?
Tom Reck: So typically, we get involved in any number of matters. So, it could be something ranging [00:02:00] from someone inappropriately using company funds for their own personal use, rather than properly for the benefit of the company or you know, we get involved in matters where corporate clients may have been diverted to another entity.
In other words, the clients themselves were stolen if you will. And you know, that negatively impacted the company, which we would be looking at. I’ve been involved in matters where there were payments being made to vendors who were in turn kicking, a portion of the monies that were being paid to them back to an individual at the company that was making the payment.
So those are the sorts of things that we would typically get involved in. And in terms of the record what I like to do is I like to start either with the financial statements or tax returns. To get a sense as to what the trends in the business have been and whether there [00:03:00] is anything that looks unusual.
So was there an increase in a particular expense category and in a certain year, did receivables go up at a time when overall revenue was declining, certain things that might give one pause. So that would be something we would look at. And then from there we would try to peel back the onion, I guess you’d say so we’d look to obtain the general ledger, which would allow us to see in greater detail the underlying transactions that have occurred. Sometimes we are able to access the systems directly. So, we can’t manipulate or change data in any way, but we can see what transpired and depending on the system that’s being used, we can see who approved transactions, et cetera, things of that nature.
And frankly, I mean, oftentimes we’re involved in matters where there’s a suspicion as to what has transpired. So with that in mind, we tried and focus on [00:04:00] proving, you know, whether our theory as to what’s what we believe has happened has in fact happened. So we might focus on a specific batch of things, whether it’s payments to an individual, whether it’s certain banking transactions or credit transactions in a particular month, or to a particular person, things of that nature.
So it, it really, you know, you start at a high level and then as I said, you peel back the onion, you work backwards from.
Helen Smith: Thanks. And so, so your ability to function on, on, on what you’re looking at as a forensic accountant is dependent on the integrity of the underlying books and records. And is that always the case?
Tom Reck: No, not at all. I mean, you know, I’d say most of our cases, you know, we do get the underlying records oftentimes after a, after a protracted fight, but we, but we will get it. But we have been involved in situations where and I can think of one specifically where [00:05:00] we were to be provided. And this was by a court order. We were to be provided with a mirror image of, of data underlying records. So if you went to think and simplistically think in terms of like QuickBooks, right? Although sometimes the system might be specific to a particular industry, but you know, we were ordered to be provided with a mirror image of the underlying records and. We were able to discern that that was not what happened, which is when we turned to the cyber team, which is, which has Matt Ferrante’s group.
Helen Smith: So, so Matt, can you tell us a bit more about what your role in all of this would be there? And then what state do you usually called in?
Matt Ferrante: It depends in terms of what stage we’re particularly brought in. As I mentioned before, cyber forensics gills with five finding matters, but often we’re brought in when there’s active litigation that is going on. Pretty much every issue that report on, on there’s a, a cyber role to that. And as most people are aware having data, just for example, in a QuickBooks file, that’s usually one piece of [00:06:00] the digital data because there’s a lot of other data that surrounds. You may have invoices. You’re going to have communications. You may have a chatlogs, SMS messages or text messages. Data is dispersed, especially with the work from home environment cloud environments. We’re brought in to help one, build the strategy, then work on identifying, collecting, preserving, processing, and setting up view for different stakeholders. So they can get a clear picture of what is going on. The good news is that with the amount of data that’s being produced, to get a very accurate picture of what has transpired. But QuickBooks will tell you, for example, I’m, I’m using QuickBooks as an example. It will tell you part of the picture. Usually not all of it.
Helen Smith: Thanks. And how technology changed and all of those and how does it affect what you’re working on?
Matt Ferrante: Technology has changed [00:07:00] significantly because as I mentioned, you have A lot of distributed systems. We deal with data that’s in motion, meaning active data that is going down with active communications emails, one form of communication. But we’ve seen stuff that we’re a lot of the financial data or communication is active. It’s being going on to the instant messaging within, within the company or some of it’s in a cloud environment. So, it’s changed significantly. There’s a lot of often cross border issues. For example, we get a court order to collect a company data. Where does that company data actually exists? Does it exist within Europe? Does it exist within the United States? So you have to make sure, as cyber forensic experts that you’re not overstepping your bounds on where you’re collecting the information. So, making sure that different court orders are drafted appropriately involves a cyber forensics team to assist with counsel, to assist with the forensic accountants to ensure that stuff is being drafted correctly. We’re not [00:08:00] overstepping our bounds and we’re getting an accurate picture. So our clients can make well informed decisions.
Helen Smith: Great. Thank you. And what should businesses and people be aware of, of generally? What controls should they have in place?
Matt Ferrante: Sure. Interestingly you asked that because what we notice is when we were talking about the integrity of the integrity of systems from a cyber forensic or cyber security perspective, we look at it as protecting the bits and bytes. So, a financial system we can help protect that from the cyber security perspective to make sure that there’s no manipulation there’s appropriate, what it trails that are in place. But we also need the forensic accountants and the auditors to ensure that what is being put into those books is going to be accurate. And the integrity of those books are accurate as well. So, the collaboration between the different groups is imperative. A good example where there’s usually underlining [00:09:00] issues. taking it into a cyber security perspective is a business email compromise or BEC fraud. The FBI reports within the US to cost businesses $1.8 billion on an annual basis. And what we find out when we go into these is that it’s not just that there’s a lack of cybersecurity controls. There’s a lack of financial controls and accounting controls that are put into place. So working with Thomas Reck’s team and other auditors is critical to make sure that those financial controls are in place. So, when people do not send wires in appropriately or that people aren’t manipulating the books. So, the integration of the two, the cybersecurity, as well as the cyber the accounting teams and the auditors is important to have good integrity of the books and to reduce impacts on an organisation.
Tom Reck: Yeah. And if I could add to that, I mean, when you look at the underlying, underlying operations of a [00:10:00] company, there’s really a lot that goes on. So, you’ve got the sales, you know, at the top, if you will, you’ve got the whole sales transaction. How do sales get recorded? Who is keeping track of any accounts receivable? Who’s able to write off any accounts receivable that may not be collected to the extent that payment is received, what controls are in place to make sure that, money that should be being received by a company is properly received and being properly recorded. You have all sorts of fixed assets on the books and books of, of companies that need to be maintained. You’ve got accounts payable, you’ve got a payroll department and an, each of these different parts of a, of a, of an overall entity, there needs to be controls in place so that the data can’t be manipulated or to try and at least mitigate the chances of the manipulation of that [00:11:00] data, allowing someone to improperly have access to a company funds that they shouldn’t shouldn’t have access to.
Matt Ferrante: Just one of the things that further elaborate on that, the controls one of the things that we get asked are, are they different from a SMB or SME, small to medium enterprise, to a global enterprise class environment? Case in point we’ve seen impacts on a on a large global financial institution, one of which I was in, and after the fact, after two out of the big fours blessed off on the acquisition of a Russian bank, I went in to a Moscow and I was just there to kick the tires to see what was going on because some antennas were raised back in, in England. And it turned out that by we recovered and identified a, a shadow network or an additional network where they’re running a kind of parallel [00:12:00] financials or a, another network where they were basically running parallel books, long story short, it was a, a billion-dollar acquisition, and it was over a half a billion dollar loss. So, we’ve seen this happen for large enterprises, as well as smaller to medium sized businesses. You need the same fundamental type of controls in place. And a lot of these, if you’re proactive, you can mitigate a lot of the impacts to a business.
Helen: Thank you for that. I was, I was just going to ask actually, whether, if you’re working for small business or of a global company as a problem is the same, is it, is it, is it, is it different?
Matt Ferrante: Obviously a larger, larger the organisation. They can usually absorb you know, much bigger, critical impacts. You see, the impacts on the smaller to medium sized enterprise be very costly. And sometimes they can’t recover on some of the the major impacts that they’ve had. So fundamentally from what I’ve seen for a cyber security perspective, I’m not speaking you know, [00:13:00] financial controls, they’re very similar and they’re scalable to the organisation they’re affordable and they’re scalable. But what we see is that where companies are proactive on putting these controls and having an appropriate audit done, that includes a cyber side to it, has been very, very beneficial to mitigate these issues and, or uncovering issues that that ever occurred. I was bought in, but you mentioned before when am I bought in, I can give you an example of when I’ve been bought in just on a cyber security audit, had nothing to do with financial controls. Where we’re analysing data that was coming in and out of the networking environment for a large construction company within the data that we’re analysing, we noticed that they were running QuickBooks and it was odd because their accounting system was not based on QuickBooks. And I said, that’s strange. Are you running QuickBooks within your environment? The CEO said, no, we’re not. We shouldn’t be running that at all. I was able to trace that data back to the CFO’s desk [00:14:00] and we identified that he was running his own quote elicit accounting, operations, and billing the company fraudulently for internet services and other stuff that the company didn’t need. And it was basically based on a shell company. Then obviously the forensic accountants came in and cleaned up the rest of the environment and the financing perspective.
Tom Reck: Yeah, my perspective to, to the, to answer that question, Helen, when you have smaller companies oftentimes it’s, it’s difficult for them to have the proper controls in place, the proper segregations of duty of duty that being said I think you can also have larger companies where things can go awry and oftentimes that, as a result of the tone from the top. Right? So, if you have someone that’s really, you know, all about just increasing the top line and doesn’t care, whether there, whether things are being done properly, for lack of a better [00:15:00] way of putting it, then anything can happen. Whereas if you have someone who maybe is very interested in, obviously in increasing the top line, but also wants to make sure that things are being done properly, then the chances of there being an issue is, is mitigated to a certain degree.
Helen Smith: Okay, thanks. Thank you very much for, for your time today Matt and Tom, that was all very interesting. Thank you.
Thanks for listening for more information about this topic and other cross border business insights. Visit www.hlb.global/insights
Eps 24: Emerging growth companies and M&A activity during the pandemic
For many emerging growth companies, the pandemic has presented unique opportunities. We sit down with Chris DeMayo, HLB’s Global Emerging Technology Leader, Patrizio Prospero from HLB Malta and HLB USA’s David Sacarelos to discuss how these companies have navigated M&A activity during 2020 and the expectations for 2021.Hide
Andrea Moseley, HLB’s Marketing and PR Manager
Chris DeMayo, HLB’s Global Emerging Technology Leader
Patrizio Prospero, HLB Malta
David Sacarelos, HLB USA
[00:00:00] Welcome to HLB Cross-border Business Talks, HLB’s global podcast series on international business topics.
Andrea Moseley: Hello everyone. Welcome to the podcast I’m joined today by Chris DeMayo HLB’s global emerging technology leader, Patricio Prospero from HLB Malta and David Sacarelos from HLB USA. We’re going to be discussing emerging growth companies and M&A activity during the pandemic. In terms of MNA activity. What are you seeing in the marketplace? Chris, I’ll start with you.
Chris DeMayo: I think when we look at 2020, we’ve seen a pretty significant increase in M&A but it’s been for a lot of different reasons. There’s been acquisitions happening because companies are sort of looking at the pandemic and it was, it was a painful, you know, event for them.
And they were sort of waving the white flag and saying, we don’t [00:01:00] have the gumption to go another two, three years and rebuild from this pandemic. We’d rather just merge up and that was combined with big companies with big balance sheets, like the Facebooks of the world who had capital to deploy and wanted to acquire good technology and good client, a good employee basis.
So, you saw a lot of deals happening there. But then you also saw a lot of companies that had been really positively impacted by the pandemic based on where they were in the marketplace, online retailers, especially on wrong retailers of food and going out to the market and raising money and high valuations off of really aggressive revenue growth became another area where companies were benefiting from the pandemic in terms of M&A.
Andrea Moseley: Patricio, what are your thoughts?
Patricio Prospero: I think that as [00:02:00] every disruptive event brings even COVID has provided with a certain level of opportunities. So, I think for what concerns M&A what we have seen is that there were a lot of companies, especially in the new emerging technology that they had found the opportunity of acquiring companies, which they didn’t manage to sustain their business through the pandemic. Having said that, I think that there were also companies which they have held to their original. We have seen a number of merger and acquisitions. They were delayed and they eventually will be closing in 2021.
We know that there are also a lot of companies, which they have requested a reassessment of the venue education of the value of the merger [00:03:00] because of the pandemic. So, I don’t think that it affected everybody in the same way. I think that there is a way that there are companies, which they have actually benefited from the situation and from good opportunities.
But some other companies, they had to hold their horses and this fell through as well. So, I think that 2020 was a bit of a year where companies, they also had to put everything on stand by to eventually see how this situation is going to get after the COVID situation.
So, I’m quite curious to see what’s going to happen in 2021, because from the analysis that we have, through surveys and through the study, we’ll see that we are seeing that eventually some merger and acquisition are going to be closed by the end of [00:04:00] 2021.
So, 2021 could be also a good year for this kind of deals to be actually achieved and close. Finally, what it was held in 2020 it could be finalised in 2021 so we will see what’s going to happen this year.
Andrea Moseley: David, how, how have you seen the market?
David Sacarelos: Well, I think after the lockdown has happened in the last year and going into 2021, maybe my comments really about 2021, I think there’s a renewed optimism. I think there is you know, quite a bit of government response. We get vaccines going out and I think there’s a view that there’s quite a bit of funding available and demand available.
The 2021 is going to be really a good year. Most people were talking with believe that 2021 will have valuations about the same or found higher than, than the in the past. And the [00:05:00] deals will be if anything, the same if not more. So, I think, yeah, obviously we had a big influx toward the end of 2020.
Most people are, are really looking toward 2021 to be a good year. I think, especially in technology, healthcare, consumer goods. Clearly retail and real estate probably are at the downside of that, of that trend. But I think overall, I think it’s going to be an optimistic year for 2021.
Andrea Moseley: We’re now, obviously in the era of remote working. Is real estate changing in this new time. And what are the role of emerging growth companies? David, I’ll start with you.
David Sacarelos: Well, I think I think that the real estate and it kind of in a handful of different ways and it does impact how you think about emerging growth companies and, and their involvement in there. I think a real estate’s going to have [00:06:00] to assess and continue to figure out their needs
and worked from home models and really whether or not, or how the market has changed from a supply and demand area clearly emerging work, emerging companies found new ways to attract capital, attract both financial capital and human capital and technology and other aspects of, of, of development and innovation. Globally because of the pandemic and you don’t have to be in a building but that assessment’s going have to continue. What we’re seeing and hearing also is that young people are frankly, a little tired of not going into the office and being with other people they believe it does, in some cases, hamper innovation.
And they want to be able to do both. They want to be at home, and they want to go in. So, I think right now, you know, the market’s going to have to assess really what is the supply and demand. In addition to that, at least in the United States, I think we’re all looking at the [00:07:00] new Biden administration, secondly, to see where regulatory rules are going to change our tax laws, going to change.
Whether or not the broaden or limit opportunities zones those all impact the real estate market and they do impact, especially in Silicon Valley. A lot of folks have been thinking about putting start-up companies in opportunity zones because not paying tax on that gain is kind of a nice thing if you think about it.
So, there is questions about just regulatory rules and tax policy. Moving ahead. And I, and I think at least in the larger markets, probably in California, New York, and some of the others, we are looking at the disputes among landlords and tenants here in California. We just, yesterday came down and they are going to stop any kind of evictions from commercial, commercial property.
At least for now. So we’re at least through June. So, we’ll see where that leads. That’s going to impact [00:08:00] technology companies, emerging companies that have long-term leases that theirs right now have on their balance sheets. So, we’ll see where that goes as well.
Andrea Moseley: Patricio can we have your opinion as well?
Patricio Prospero: Yes. I’m in agreement with what David said.
Meaning that, of course working from home has brought a number of companies effectively cut costs and eventually having also the possibility of relocating their space or, changing the use of their space at the office. Although when we’re looking at the human capital, I think that this has negatively affected on the long term.
On the long term, it will be negatively affecting also the way how especially in the tech industry people before used to perceive the work, I mean, I remember a few years ago before this pandemic [00:09:00] happened you know, working in a tech company was fun. It was fun job. You used to work with a tech company.
You used to go, for example, working in Google offices. And it was like enjoying the time with your, with your friends, having time to meet each other, to brainstorm, to create new ideas to discuss. Possibly new things to do. And that was one, most, probably one of the key success factor of a tech company, because they used to approach the human capital in a different way.
So, I think that before we use people working in tech company used to identify themselves with the culture of the company and they used to feel more belonging to the company. I mean, they, they, they felt this, this kind of sense of belonging because it was you know, the whole culture was actually sort of transmitted to the, to the person working in those offices. Today, working [00:10:00] from home, it standardized a bit, the experience, the experience.
So Although it could have brought a number of positive financial repercussions definitely it has also an impact on the way how people are living the work experience. I mean, we read statistics and we see that there are people who feel more depressed. People that they feel more the need of sharing. You know and, and maybe meeting other people and exchanging and sharing ideas. And this is something which on the long term it could affect, or obviously, especially for innovative company the innovation, the innovative elements. So, you know, even the fact that sharing experience, it makes, you know, a whole experience for people, you know, to come up with new ideas and innovative ideas.
So, I think that could be on long term something which we should be looking at in terms of human resources. [00:11:00]
Andrea Moseley: Chris, any thoughts?
Chris DeMayo: I think the ripple effect of remote work and the remote work environment is so deep. You could spend hours talking about how this is going to change the way that we work and live.
When you’re in the middle of it, you always think of it as, as probably more of a change than it will be. So, I agree, it’s not binary. We’re not going to go to a full remote environment because there was, there was absolutely very real benefit to being around people. But I haven’t talked with single client that has said we’re going back to a five-day work week in the office.
Those days are over. And that’s an interesting thing to think about because it opens up. So many different possibilities. First of all, you now can have people, you can now seek talent in places that were, are far, far away from your office. You can now accommodate [00:12:00] talent that, maybe you have somebody that didn’t want to live in New York city or California, and wants to live in Topeka, Kansas. And they can’t. So it’s going to open up possibilities. It’s going to change the offices are laid out. It may or may not change the square footage, but it may change the way that they’re designed more collaboration, space, less offices and cubes, because not as many people were going to be needing offices because we’ll be sharing spaces more than we will you know, having permanent spaces or perhaps we won’t share spaces, but the spaces will be substantially smaller.
So, there’s a lot of potential change that’s going to come. And we just don’t know yet what that looks like. You know, some of this is going to be great. For industries, certain industries, and some of it’s going to be very damaging. I’ll give you an example. When you think about where we have gone with online conferences and with video conferencing, you know, everyone [00:13:00] says we’ve advanced 10 years in, in a matter of 10 months that is going to have a very negative impact, a decimating impact in some cases on travel and hospitality, right?
Because business travel. It does not have to happen anymore in the way that it once did. Big important meeting to now happen on video conferences. That changes the dynamic of the marketplace. And real estate is, is, is, is certainly not going to be spared by that you know, to, to David’s point, I think, you know, could people be looking for less space for no space?
Could people be changing their space? Absolutely. And, and I don’t think anyone’s going to be able to fully predict the long-term impact. But it will be a winners and losers impact. I think some, some industries will be very positively impacted. Some will be very negatively impacted. But I think the cultural norms have yet to be set as to what we’re going to be expecting from our, our, our employee bases going forward.
Andrea Moseley: And you’ve [00:14:00] mentioned already how companies are still going public, but that has obviously changed. So, what do SPACs mean to tech companies in the marketplace? Chris, I’ll start with you.
Chris DeMayo: Sure. Yeah. You know, SPACs have been around for, for a long time. But you know, over the last decade or so you really, haven’t seen a lot of activity in this back marketplace in the United States the process of going public is normally a fairly long drawn-out expensive process. It could take years for a company to start the process of going public and actually come to that fruition. What’s SPACs have done is it has created a fast track to going public. You know, the, the simple concept of this SPAC is a, an entity, which is a shell was formed that goes public. It has no activity other than literally having a bank account with money in it. It then goes out and acquires a private company. Which therefore makes that company now a public company [00:15:00] and it can be done in a matter of months rather than taking years to do. So, it fast-tracks the process of going public and getting companies into the public market.
And, and that has created a really frothy market in the United States in terms of potential companies, potential targets of SPACs and having liquidity events.
Andrea Moseley: How are you seeing things in Silicon Valley?
David Sacarelos: Well clearly whether you’re a traditional SAS company, FinTech electric vehicle company, whoever you are the SPACs are offering a really enticing financing option.
Th this is another way to raise capital and it’s it. It’s somebody. Easier, I guess. And then it’s going going through IPO. I, I noted Chris that on Monday, I just in preparation for our call, five companies announced plans to go public through SPAC mergers at valuations over a billion dollars a piece.[00:16:00]
Yep. And, and all the, one of the deals in the last number of last four months, it only one didn’t include SPAC that was a, so there’s quite a bit involved, quite a bit out there. And I think it’s just another, the way I look at us, it’s another financing option, whether it be faster or cheaper, or what have you is another way to go. If you are a tech company to, to raise capital. And so it’s also attractive to private equity companies in California, and then in Silicon valley they’ve already been interested for years in SPACs and you’re going to see many more funded, I think, in the coming years. Yes, there’s reduced disclosure on the front end.
I think the companies have, have a chance to really speak more directly to their investors. Have a little more transparency in what they’re doing. But Chris, I agree I have the question of the day is whether or not these valuations are realistic in the end. So, there is conversation in Congress and [00:17:00] in the federal reserve and some other folks and just making sure that, Whether or not, there should be some more regulation. We don’t know nothing’s happened at this point in time, but as we look at 2021, it’s just another very good way to raise capital. I think that’s a good way to look at it. Yeah.
Chris DeMayo: The risks that I see out there is so many of these companies that are going to be targets of SPACs.
Yeah, they’re not really ready to be public companies, right? So they’re going to snap a finger and all of a sudden they’re going to be a public company. And these companies, the rules for their reporting is no different than a traditional public company. So, you know, are they going to have the internal accounting functions to be able to provide accurate financial statements on a quarterly basis?
Are they going to be able to speak accurately to the street about revenue, projections, and growth. These are things that they were never trained to do as a private company. And usually that’s part of that kind of two-year process of going public is putting that infrastructure in place. And, you know, [00:18:00] how is that going to affect the market in the future when you have companies that just, they haven’t, they’re sort of building the plane as they’re flying it and going into a big IPO.
And now you’ve got the public markets investing into these companies. You know, they’re going to have. You know, step up and it’s going to be, it’s going to be a challenge for the next couple of years, to the extent that these you know, these private companies with thin internal accounting departments are going public.
Andrea Moseley: So, I’m conscious that the situation obviously is rapidly changing. And it continues to change it like an accelerated speed. What are your expectations for 2021? Who do you think the winners and losers will be in the kind of the tech space in regards to the pandemic? Patricio I’ll start with you.
Patricio Prospero: We have seen a number of winners and losers during this pandemic. Whereas before discussing about working from home people, they stay more at home they travel less, they spend more time at their houses. So, all those, tech companies that somehow [00:19:00] provide services to people which stays at home, definitely they are the winner of the spirit of the pandemic. We mentioned before the videoconferencing and how this effectively has impacted the way how we do business and how we actually interact today. When you look at zoom, for example, an application that before pandemic had about 10 million subscribers, And in few months went up to 200 million that makes you understand how these kinds of companies they have actually achieved a big success during the pandemic.
Another winner is for example, the gaming company, as we said, people are spending more time at. And they have to entertain themselves. So, when you’re at home, what you’re doing is either watching a movie. So, there we see that the streaming company like Netflix or Amazon Prime and all these [00:20:00] kinds of, of, of companies, they have actually had a huge success, but also gaming company like Nintendo has more than doubled his sales during pandemic online gaming so those, I think that definitely. Two of the winners. I mean, if we want to identify winners, then there are companies which they didn’t. I mean, in my opinion, they didn’t benefit.
I mean, they, they won in some stages, but they also have lost in some other situations. Just to give you an example. If you take up Amazon, which is perceived to be one of the big winner of of this pandemic, if you look deeply to the situation, they have raised a lot of concerns with people working at Amazon about the work conditions of employees at Amazon which is creating a lot of pressure on on the company.
And on the other side, don’t forget that Amazon, for example, has decided having the online sales business has [00:21:00] also owns one of the biggest cloud systems. So people are so, and a lot of companies, which they actually are in difficulty of payment are finding very difficult to pay Amazon’s fees for what concerns so involve in formation, the cloud.
So that could detailing in a, in a high-risk. So it doesn’t mean that everything, that signal it’s looking good, it’s actually. You know, something which is definitely a win. And there are those that we identify as major loser. Thinking about companies like Uber, for example, the transportation company that they have lost a lot of of business during the pandemic
They had to change their business model. Most of these companies, now they have moved to the business of delivering food rather than delivering person or driving people from, from, from one site to another. And definitely then the company. That we have seen in the past booming like [00:22:00] Airbnb or, or all the internet based tech middleman, what we call middleman.
They have seen a big loss during the pandemic because people are not traveling. So especially tourists to these importance, as we said, Airbnb booking.com. And all the other is they have seen a big loss in revenue during this period because there is no actually you know there are no actually people traveling, so business automatically has reduced.
I think that’s a, in a nutshell, these could be those that, which we could identify as winners and losers. I maybe, I don’t know if Chris or, or, or, or they, they have more, more to add to this, maybe they have a. Or opinions or other examples to provide.
Chris DeMayo: To your point. And if you’re an online business that is able to deliver, you know, a good conveniently you saw a huge increase in revenue in [00:23:00] 2020. And the thing is, that’s a permanent shift because you forced people to adopt a new technology. And now that they have they’re going to stay with it. So, you know, retailers will, will have to, you know, deal with the fact that you’re going to have a lot of people that were once going to walk into a storefront to buy something.
And now they’re comfortable buying online. And, and, and when you think about different demographics, you know, younger people have always been doing that, but if you’re, if you’re in the, you know, the 50 to 70 year old demographic, maybe you weren’t, and now you are, you may not be going back. And that’s a huge, huge buying demographic I think that’s probably one of the bigger shifts that you’re going to see.
I think you know, they’re definitely going to be a winner. And as I mentioned before, I think hospitality is, is going to, it’s going to struggle for a long time travel and hospitality is going to struggle. I think you’ll see a surge when the pandemic is over and people wanting to get their vacations in, but over the longterm, I think you’re going to see business travel is going to, is going to be so different.
And that’s where a lot of [00:24:00] money is made. Quite frankly, not necessarily on vacationers. You know I think that the, the technology community will net benefit from the pandemic and, you know, getting away from the economics. I think one area where I think is, is, is important is, you know, leadership in crisis. You know, when, when revenue’s always going north and money’s always flowing in from investors it becomes easy to lead.
I don’t want to say it’s easy to lead, but you know, you don’t have some of the pressures that maybe are out there. You, you see companies emerge and leadership emerge when there’s crisis, you know, how do you deal with cutting costs? How do you deal with people? Where, what are the decisions that you make?
And I think that having gone through this, the companies that come out the other side will be better, more solid companies that will be better businesses. Because they’ll, they’ll know that it’s not just going to be about burning cash. And how fast can you spend money on, you know on employee [00:25:00] perks it’s going to be about how do you build a business that can survive things that happen, that you don’t see coming.
And I think that that may be one of the most important by-products of this pandemic that, that maybe we’re not seeing right now, but that, that will grow out over time.
Andrea Moseley: David, any final thoughts?
David Sacarelos: Well, okay, so predictions for 2021. I always like when people ask me that question I have clearly, I think what most people feel is technology healthcare, consumer goods are still going to be at the forefront.
I think we have a number of clients who are doing some amazing things in ag tech. The, the field robotics and in farming is certainly something. People are keeping an eye on artificial intelligence, machine learning. We mentioned earlier, just the whole issue of remote work technology. The cloud tech companies are going to be, I think we’re going to do fine.
The FinTech companies are going to do very well. Anything related to enterprise health [00:26:00] and wellness, I think we’ll continue to do very well food tech, if you haven’t already, you’re probably won’t buy a plant-based , is it called the hamburger? I don’t know, but you’ll be buying something that’s plant based in the near future because that’s something that people are interested, at least in the United States technology around the insurance industry will be, will be key in 2021.
We know in the bay area here in the Silicon Valley and mobility companies, your electronic electric vehicles. A lot of demand there. And I think there’s going to be a lot of money put into that, into that technology space retail, health wellness and anything connected with supply chain technology can make it easier to move things from here to there and not have to be so the hold into a, a physical infrastructure that’s some thoughts that I have at least maybe I’ll leave it there.
Andrea Moseley: all very much for your time. And thank you all for listening. [00:27:00] Thanks for listening for more information about this topic and other Cross-border business insights visit www.hlb.global/insights
Eps 23: Cyber-risks in the age of remote working
In light of Cybersecurity Awareness Month, HLB’s Chief Innovation Officer Abu Bakkar is joined by Global Advisory Leader Jim Bourke and HLB Digital Partners Almerindo Graziano and Gustavo Solis to discuss the most pressing cyber-risks of today, the lessons learned from lockdown and the road ahead for CTOs to protect against cyber-crime in the age of remote working.Hide
Eps 22: How the European investment climate is adapting to the New Normal
In a follow up to our North America podcast, we sit down with Bart de Volder from HLB Netherlands and David East, Head of FDI at Bureau van Dijk to discuss in what ways the European investment climate looks bright, despite the ongoing pandemic.Hide
Eps 21: COVID-19’s impact on the North American investment climate
The global investment climate has been considerably impacted by the pandemic. We sat down with Anant Patel, HLB’s Global Transaction Advisory Services Leader and David East, Head of FDI at Bureau van Dijk, to discuss the North American investment climate and the impact COVID-19 is having on cross-border activity.Hide
Eps 20: The ongoing impact of COVID-19 on financial reporting
COVID-19 has disrupted most professions across the globe with auditing being no exception. We sat down with HLB’s International Assurance Committee Member Jennifer Chowhan and HLB UK’s Caroline Monk to discuss the broader impact the pandemic is having on financial reporting. This includes some of the key issues global businesses and their auditors need to be aware of in light of operating in the “New Normal”.Hide
Eps 19: Transfer Pricing considerations in light of COVID-19
With the abrupt change in economic conditions and likelihood for ongoing challenges, existing Transfer Pricing policies may no longer reflect economic realities. We sat down with HLB’s Global Transfer Pricing Leader, Carlos Camacho and Marina Gentile from HLB USA to explore some of the issues being encountered and transfer pricing policy considerations when addressing short-term business disruptions as well as considerations for developing long-term strategies.Hide
Eps 18: Emerging technology trends for 2020
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Eps 17: Transforming business through AI
Business leaders across the globe consider Artificial Intelligence (AI) the most important technological innovation for business future success. We sat down with HLB’s Jim Bourke and Claus Frank and guest speaker Heiko Altrichter from AI research laboratory Laxford Capital to understand the benefits and limitations of AI for business.Hide
Eps 16: Investor confidence remains uncertain but opportunities are ahead
David East, Director of Product Strategy at Moody’s Analytics working for Bureau van Dijk and Andrew Mosby from HLB’s Global Accounting and Compliance Services group discuss how increased levels of uncertainty are affecting European FDI trends.Hide
Eps 15: The role of Not-For-Profits in the development of Africa
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Eps 14: M&A Trends in Africa
Africa remains an attractive destination for buyers, with its growing middle class, improving economies and increasingly stable political environment. HLB’s Marco Donzelli sits down with Neermal Shimadry from MCB Capital Markets, William Hunnam from Orbitt and Clensy Appavoo from HLB Mauritius to discuss the latest M&A trends across the continent.Hide
Eps 13: Cities of the Future
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Eps 12: Consumer behaviour changes and the response of global businesses
Consumers no longer buy simply on price or brand name -there are now a variety of factors that influence their choices. For global businesses, keeping on top of the latest trends can be a challenge. Barry Sheldon, President & Chief Operating Officer, Illy Caffe, North America & Jim Bourke, HLB’s Global Technology Advisory & Digital Solutions Service Leader discuss the change in consumer behaviour and how global brands are responding to these challenges.Hide
Eps 11: Challenges and opportunities in today’s global real estate market
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Eps 10: Why does the world need Cyber Security Awareness Month?
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Eps 9: Blockchain intelligence: A compliance framework for crypto-currency transactions
How is blockchain changing society and the way we do business? Together with HLB’s Patrizio Prospero, HLB CEO Marco Donzelli discusses the societal impact of blockchain technology and regulation around crypto-currency transactions with Giancarlo Russo, Founder of Neutrino and Alessandro Perillo, Innovation Manager at Young Platform.Hide
Eps 8: Made in Italy: How Italian companies are successfully conducting cross-border business
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Eps 7: The importance of soft skills in business
Professor Adrian Furnam and HLB’s Bettina Cassegrain discuss how having the ability to influence, persuade and negotiate with others, both inside and outside an organisation, is crucial for leadership success and business growth.Hide
Eps 6: A profession in transformation: Audit practices are becoming more technology driven and culturally diverse
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Eps 5: Investor confidence remains fragile
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Eps 4: Why the revision of ISA 540 is creating a more collaborative dialogue between auditors and clients
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Eps 3: The next generation of start-ups: Going across borders
In the heart of Silicon Valley, HLB’s Industry X.0 Marco Donzelli, Chris DeMayo and David Sacarelos together with guest speaker Lei Wang, Chairman and CEO of Huahai Technology discuss the next generation of start-ups and the challenges and opportunities to grow across borders in today’s global business environment.Hide
Eps 2: US-China trade conflict: In every crisis there are always opportunities
Zhenge Zhao, General Representative of China Council for the Promotion of International Trade in the USA and HLB’s Coco Liu, Chief Regional Officer Asia Pacific discuss the trade war between China and the US, the impact on FDI activity between the two economies and the opportunities the current situation presents.Hide
Eps 1: Challenges and opportunities for foreign companies in the US in times of trade uncertainty
Trade conflict and Brexit are cause for turbulent times for international businesses. Stephen Cheung, President of the World Trade Center Los Angeles and HLB’s Yan Jiang, Senior Tax Manager specialised in US-Asia cross-border activity discuss current challenges and opportunities for foreign companies operating in the US.Hide
International Sustainability Standards Board launched
The International Financial Reporting Standards Foundation (IFRS) launched its International Sustainability Standards Board (ISSB) at the UN Climate Change Conference (COP26). This article discusses the aims and next steps for this new Standards Board.
Grasp the innovation imperative
HLB CEO Marco Donzelli shares early findings from HLB’s third annual survey of business leaders. Register today for a virtual front-row seat to the report launch on 27 Jan 2022.
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The advantages of blockchain across sectors and jurisdictions
Webinar: 16 December 2021, 1pm GMT
The introduction of blockchain and cryptocurrency in business is offering creative and innovative ways to improve performance. In this webinar we explore the competitive advantages of using blockchain and cryptocurrency across jurisdictions, we outline trends from 2021 and emerging trends shaping the future outlook for 2022. Our panelists will offer their unique perspectives using case studies across a range of sectors including financial services, esports and gaming.
Mark Eckerle, HLB USA . Mark is team leader of Withum’s Blockchain, Cryptocurrency and ICO services group and specialises in technology and emerging growth industry.
Kendra Ross, Shelgeyr Ltd. Kendra runs fully crypto gaming platforms, allowing players to bet on sports and in a casino with bitcoin and altcoins.
Chris Kissack, HLB Isle of Man. Chris is business development manager at Affinity Group, based on the Isle of Man, and at the forefront of emerging sectors including fintech, esports and gaming.
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What skills and capabilities are we looking for in our business leaders?
Marina Kooijmans, Chief People Officer
There’s a lot going on in the world at the moment. We’re all trying to cope with change and uncertainty and many leaders are facing challenges they’ve never encountered before.
Our 2021 survey of 583 business leaders from 55 countries found that business leaders are concerned or are very concerned about a number of issues, from the consequences of Covid-19 to climate risks. Their top concerns are:
To navigate the uncertainty, today’s leaders need specific skills to keep their workforces strong. Skills like adaptability, empathy and problem-solving matter.
Alongside this, professionals are also thinking differently about what they want from their careers. We’re in the midst of what is being referred to as the Great Resignation, with workers quitting their jobs in record numbers. In markets around the globe, workers want to feel like they belong and fit in with their organisation and in their careers.
How our leaders behave during this time will affect the stability and growth of their organisations. So, what makes a good leader in the current climate? We see the following skills as crucial during these ever-changing times.
The COVID-19 pandemic brought stress upon many workers. Employees may have lost loved ones or had to become caretakers for sick family members. Virtual school turned parents into classroom supervisors. An upended world changed how we shopped, saw each other and related to others.
The disruption has also emphasised the importance of authenticity in the workplace. According to Microsoft’s 2021 Work Trend Index survey, compared to a year ago, 39% of people say they’re more likely to be their full, authentic selves at work. What’s more, 17% of professionals have cried with a coworker in the past year.
We need leaders who can focus on the “human” side of leadership. A 2021 report by “Forbes” cited several research studies in which empathy was cited as an essential leadership skill that positively contributed to workforces.
Leaders today need to be understanding of what their employees are going through. They need to build relationships with their people and provide support that fosters work-life balance and that prioritises mental health for all.
We also need inclusive leaders, who recognise the value of diversity and equity in the workplace. Inclusive leaders make everyone feel like they’re valued and like they belong. They treat all employees with respect and strive to inspire and instill confidence in their teams.
According to research from Deloitte, teams with inclusive leaders are 17% more likely to report they’re high-performing and are 29% more likely to say they behave collaboratively. Inclusive leadership also leads to teams being 20% more likely to say they make high-quality decisions.
Our own research found 93% of leaders agree it’s even more important in the current environment that employers ensure equal opportunities and support to all their people. Inclusive leaders develop open mindsets where they encourage contributions and innovation from everyone, no matter what their role or rank is.
Inclusive leaders are great listeners. They’re aware of how bias can affect a workplace and work to accept diverse points-of-view.
The past few years have taught us that anything can happen. Leaders must have an agile mindset and be able to adapt to changing industries and events.
Adaptability also requires an action-oriented approach. Technology is rapidly evolving, and leaders must possess “technological intelligence,” which goes beyond a mere understanding of how current technologies work. Technological intelligence requires being open to new technologies that can support business growth, creativity and innovation.
When business challenges emerge, adaptable leaders pivot to recover. A study of 300,000 leaders reported by “Inc.” found out of the 10 characteristics of successful leaders, problem-solving and issue analysis were prominent leadership skills.
Our research found 91% of leaders are confident they can steer their business in a new direction post-pandemic. Leaders look at problems as an opportunity to improve strategy, show resilience and come out better.
Commitment to people
Managers account for at least 70% of variance in employee engagement, Gallup reports, yet most employees aren’t engaged at work. You can greatly improve your business results when you invest in your team. According to the “Harvard Business Review,” employees who feel inspired are 125% more productive compared to workers who are just “satisfied.”
- Meet with employees to talk about their career goals
- Create action plans to help team members grow their careers
- Provide learning and development opportunities to employees
- Encourage employees to take on new responsibilities and work outside their comfort zone
Effective leaders make a commitment to the development of their people and their talent. They know how much their team matters to their business’ success. They know that if they invest in their people, they will in turn give back more to the company.
Great leaders unite a team behind a shared purpose, mission and vision. Leaders strive to continually create positive change. They’re willing to take risks that could result in better outcomes, all while remembering the business mission that drives decision-making.
- The company’s mission, values and goals
- How to measure success
- What a team’s strengths and areas of improvement are
- How to define effective collaboration
Leaders should exemplify the purpose and values behind their company. They motivate others to achieve specific goals and objectives. They’re willing to put in the work themselves and are great examples to those they lead.
Good leaders combine it all to drive business results
Leadership supports the people at your company and influences the quality of your product or service. Good leaders foster collaboration. They approach work from a people-centered viewpoint. They motivate, inspire and include all team members.
Whether you’re in a leadership position or aspire to be in one, rapidly changing times require adaptability, reflectiveness and cultural intelligence. Great leaders share in the same goals as their team. They support employees so that the entire workforce can achieve amazing business results for the organisation as a whole.