February 2015
THE VOICE OF ALL NQs Contact us
email: graham@pqaccountant.com twitter: @pqmagazine facebook: pqmag.com call: 020 7216 6444
P8 MANAGING RISK CIPFA publishes new code of practice to counter the wrong-doers
ALL THE NEWS YOU NEED and a whole lot more Pages 4 and 7
P10
TIME FOR REFLECTION
HAYS SALARY SURVEY Are you getting paid what you should be? Page 12
ETHICAL DILEMMA THE TECHNIQUES THAT CAN HELP A case of nonYOU MAKE THE TRANSITION TO disclosure to external LEADERSHIP ROLES auditors – what P14 should you do?
ETHICAL STANDARDS
SUSTAINABILITY Making the world a better place for business Page 22
Too many companies ‘are paying lip service to the ideals of ethical corporate behaviour’
P16
YOUR JOURNEY AHEAD MAKING THE RIGHT CHOICE Congratulations on qualifying. Now that your professional accountancy exams are behind you, the chances are you’ll be looking to capitalise on your newly qualified status and think about the next steps in your career path. As a leading recruiter in accountancy and finance, right now we have over 200 live job vacancies for newly qualified accountants. We can do the hard work to put you in touch with some of the UK’s leading companies from a wide range of sectors. In fact, many organisations choose to recruit their finance staff purely through Hays, so the opportunities are endless.
To find out more about jobs on offer visit us online, or for help with planning your career contact Jane Knight on 020 3465 0012 or email jane.knight@hays.com
hays.co.uk/nq
COMMENT NUMBER CRUNCHING
20% EDITOR’S COMMENTS Moving on from PQ to NQ Welcome to your first issue of NQ magazine for 2015. NQ is a different animal from PQ magazine, our sister publication. It looks more directly at the challenges you face now you are qualified and looking to become a future FD. The ACCA, CIMA and CIPFA have all contributed articles to this issue. These cover the risk of corruption, sustainability and corporate culture. Ethics is also a big strand in this issue. We discover there is real concern that too many companies are paying lip service to the ideals of ethical issues. And we provide another in our series of ethical dilemmas, courtesy of the CCAB. Finally, becoming an NQ is big stuff, and with it comes some real grown-up choices, particularly about your career. Walker Dendle’s Ismael Chand offers really sound and balanced advice on contracting and interim work. On top of that we ‘show you the money’. The Hays Salary Survey reveals that as an NQ you can typically earn £48,000 working for a big corporate in London and maybe £40,000 at an SME. In Scotland, the typical NQ will be paid between £35,000 and £40,000. What you will be pleased to read is that NQ salaries are beginning to ‘inflate’. Some candidates are even being offered up to £10,000 on their salary just to stay put. We wouldn’t, however, suggest you try that out on your employer, unless you really are looking to change jobs! Finally, there’s a great piece on leadership and reflection. BPP’s MSc in Financial Leadership could be something you want to look at. Your qualification will probably give you credit for 50% of the MSc. Hope you enjoy this mag and please help us spread the word. Please do send the link on to anyone you think would find it useful. Graham Hambly, Editor (graham@pqaccountant.com)
Percentage of women who believe it is impossible for them to reach the top in business P4
61.2%
Percentage of FTSE350 firms fully compliant with the FRC’s UK Corporate Governance Code P7
5
Number of principles in CIPFA’s new voluntary code for ‘managing’ fraud P8
£48,000
Typical salary for an NQ working in London P12
18%
FTSE100 firms who provide evidence that their ethical standards are being upheld P16
3
Number of fundamental questions boards should ask themselves to help create good corporate governance P20
NEWS
Beware Google, says KPMG Big data will be key to accountancy success, says KPMG. The firm recently revealed that future threats from companies like Google were a key reason for its £40m investment into accounting services for small and start-up businesses. When asked about its reasons for creating the cloud-based service, Iain Moffatt, Head of Enterprise at KPMG, said it was partly a response to the prospect of large tech companies entering the accountancy market and using ‘big data’ to steal market share from incumbent firms, including the Big 4. “When we talked about [our mid-market business] we considered our competition. Obviously, we thought about firms like PwC and EY. But then we paused and asked ourselves, is that really our competition? In the next five years, are big accountancy firms going to be our competition, or is it actually going to be Google, or Amazon, or somebody else? “Today, our profession is all about data. The more data you have, the more powerful you are. With big data you can create more-effective KPIs, better benchmarking and more accurate insights. That’s the secret. That’s what the future holds.” Moffatt explained that KPMG’s deal with McLaren last November further emphasised the firm’s focus on data acquisition and analysis. “Our recent deal with McLaren wasn’t about racing cars, it was about harnessing their fantastic data analytical capability.” He also argued that the market in which KPMG operates is changing fundamentally as start-ups become less interested in established brands and more focused on the quality of data supplied by their services organisations. “Fundamentally [Google is] a data organisation. That’s what
it sells. And what’s stopping Google becoming a provider of advice based on data analysis in the future? The only thing stopping it is that it doesn’t currently have a recognised or trusted brand in that field. But in five years’ time that might be different. If you’re a new company are you bothered about whether you deal with KPMG, Google, ABC, or XYZ? No, you care about what that company can do for you.”
Improving the auditor’s report Time for quotas? Leading women in the City of London are calling on quotas for the promotion of female executives. The call comes as evidence appears to show that the appointment of women to the top jobs has stagnated at 20%. Former Lord Mayor Fiona Woolf (pictured) suggested it was all taking too long. “Why not have a quotas for a bit?” she said. This news comes as an O2 survey discovered one in five women believe that it is impossible for them to reach the top in business. There is now less than a year to go before Lord Davies’ Women on Boards’ 25% target deadline. There has also been an attack on the ‘golden skirts’, those women lucky enough to reach board level. It is felt that these women are having no impact on wider society or the pay and promotion prospects of the rest of the female workforce. 4
The IAASB’s new revisions to International Auditing Standards (ISAs) have been warmly welcomed by the ACCA. The changes to the ISAs aim to ensure fundamental and relevant audit matters are explained and communicated to the end user much better. The ACCA’s Robert Stenhouse said that the new standards are more challenging for the auditor, but that with this came great opportunity. He felt they amount to quite radical changes to audit reporting. For example, the new standards allow scope for auditor judgment to tailor reports to individual client circumstances so that best practice can emerge. The IAASB said it hoped the changes will reinvigorate the audit. The most notable enhancement is the new requirement for auditors of listed entities’ financial statements to communicate ‘key audit matters’ – those matters that the auditor views as most significant, with an explanation of how they were addressed in the audit. The IAASB has also taken steps to increase the auditor’s focus on going concern matters, including disclosures in the financial statements, and add more transparency in the auditor’s report about auditor’s work. The revised auditor reporting standards will be effective for audits of financial statement for periods ending on or after 15 December 2016. NQ Magazine February 2015
SUITABILITY AT WAlkeR DenDle We hAve mAny DiFFeRenT AbiliTieS. The SUiTAbiliTy OF OUR JObS SeTS US APART. Walker Dendle Financial Recruitment has become established as a leading recruiter of professional permanent and temporary finance staff in Surrey and the surrounding area for over 12 years, filling a diverse range of part qualified finance and accounting roles across financial and management accountants to commercial accounting and analysis to finance business partnering. We continually focus on adapting and refining our service to suit you, offering sound and knowledge based careers advice to part qualifieds seeking their next, all-important job move. For more information about the range of career openings available though Walker Dendle Financial Recruitment, please contact: Permanent Division perms@walkerdendle.co.uk Temporary & Contract Division temps@walkerdendle.co.uk Walker Dendle Financial Recruitment Swan House, 51 High Street, Kingston Surrey KT1 1LQ
020 8408 9999 www.walkerdendle.co.uk
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NEWS
Final recommendations Look them straight to the partnership rules between the eyes!
Further detailed proposals for simplifying tax rules for partnerships have been set out by the Office of Tax Simplification. The OTS report sets out a series of recommendations for improving the tax system for partnerships, building on the OTS’s two previous reports on this subject. This third and final report on partnerships also details the progress made on taking forward the recommendations in the OTS’s interim report. John Whiting, tax director of the Office of Tax Simplification, said: “We have recommended a series of changes to help these businesses and we look forward to further progress being made. As always, these are based on the evidence gathered by the OTS during extensive fieldwork and we are grateful to the many contributors to our work.” Recommendations in the final report include: ● The introduction of clear and comprehensive guidance for partnerships when they register with HMRC. ● Allow partners to claim their allowable expenses incurred against their share of the profits. ● A range of improvements to help partnerships with international operations, including a requirement for future Double Tax Agreement renegotiations to always consider partnerships issues. ● Clear guidance to be included in the Partnership Manual to address Group Relief on structures involving limited liability partnerships, which we understand HMRC has agreed to. ● Develop a revised and updated HMRC Statement of Practice D12 to govern partnership capital gains and address issues around entrepreneurs relief. ● Introduce two new alternative routes to gift aid for partnerships. However, the OTS repeats its call for HMRC to create a Head of Partnerships role to ensure a proper focus on partnerships in tax policy. The OTS also reiterates that a liaison group to discuss specialist partnerships issues is needed.
Improving compliance with governance code Levels of compliance with the UK Corporate Governance Code have continued to increase, according to the Financial Reporting Council (FRC). Reporting has, it said, become more transparent and informative, with audit committee reports and diversity reporting in particular improving. However, more needs to be done to ensure asset owners and managers follow through on their commitment to the principles set out in the Code. FRC chairman Sir Win Bischoff explained that changing culture is not an easy task. He said: “Our recent guidance on risk management highlighted the need for boards to think hard about how they can better assess whether the culture practices within the company is the same as that which they espouse, particularly under pressure.” The FRC found that overall levels of compliance with the UK Corporate Governance Code continues to improve, with full compliance by FTSE350 firms now at 61.2%, and 93.5% complying with all but one or two provisions. NQ Magazine February 2015
Richard King, former managing partner of EY, revealed recently that he used Martin Johnson’s ‘eye test’ to decide if his fellow partners were up for it and fully on board with his approach and ideas. Like former England rugby captain Johnson, King would look into the eyes of each partner and ask them a series of short questions to determine their level of commitment to what he was proposing. At 6 foot 7 inches tall, Martin Johnson, widely regarded as one of the best Rugby Union players of all time, captained the England Ruby Union team from 1999 to November 2011. According to King: “Martin… had a thing called the ‘eye test’. He’d go round a dressing room before a game and look each of his players in the eye and he could tell who was up for it – forget all the psychometric profiling (although we did all of that too). He’d look them in the eye and say we’re playing the All Blacks today, are you up for it? And he knew the ones who were up for it and who weren’t up for it from their demeanour.” Although it’s surprising to think that this approach would be as effective in the boardroom as it was in the dressing room, King attributes this as one of the key factors in his success during his time as managing partner of EY. King started his career at EY as an articled clerk in 1976, and was made partner in 1981, aged just 29 (the youngest ever partner at EY at the time). In 1989, he went on to become partner of EY’s Luton office, and within five years had turned the struggling office into one of the most profitable in the country. He retired in 2010 after serving as EY’s Managing Partner of UK & Ireland (Excluding London) since 2006. Other factors King attributed to his success included being “dynamic and pretty uncompromising”, having “clarity for you and your team in terms of what you’re doing” and “open, direct, robust conversation with your partners”, which included transparency on how much all partners were paid, so that they knew: “This is how much I value you.” In an industry where the focus is on figures rather than emotion, is there room for a more direct, instinctive approach for leaders of accountancy firms? King certainly seems to think so, and his long and highly successful career at EY speaks for itself. 7
FRAUD
Managing the risk of corruption CIPFA’s new code of practice will help support organisations seeking to ensure they have the right governance and operational arrangements in place to counter fraud
C
IPFA has published a new voluntary code for ‘managing’ wrong doing that can be applied in any public service organisation. Leaders of public sector organisations have a responsibility to embed effective standards for countering fraud and corruption in their organisations. The code has five principles: 1 Acknowledge responsibility: The governing body should acknowledge its responsibility for ensuring that the risks associated with fraud and corruption are managed effectively across all parts of the organisation. 2 Identify risks: Fraud risk identification is essential to understand specific exposures to risk, changing patterns in fraud and corruption. threats and the potential consequences to the organisation and its service users. 3 Develop a strategy: An organisation needs a counter fraud strategy setting out its approach to managing its risks and defining responsibilities for action. 4 Provide resources: The organisation should make arrangements for appropriate resources to support the counter fraud strategy. 5 Take action: The organisation should put in place policies and procedures to support the counter fraud and corruption strategy and take action to prevent, detect and investigate fraud. Let’s take a look at that last principle 8
in more detail. Specific steps needed to ‘take action’ would be: The organisation has put in place a policy framework which supports the implementation of the counter fraud strategy. As a minimum the framework should include a counter fraud policy, whistle-blowing policy, anti-money laundering policy, antibribery policy, anti-corruption policy, gifts and hospitality policy and register, pecuniary interest and conflicts of interest policies and register, codes of conduct and ethics, information security policy, and cyber security policy. Plans and operations are aligned to the strategy and contribute to the achievement of the organisation’s overall goal of maintaining resilience to fraud and corruption. Making effective use of national or sectoral initiatives to detect fraud, such as data matching or intelligence sharing.
Providing for independence assurance over fraud risk management, strategy and activities. There is a report to the governing body at least annually on performance against the counter fraud strategy and the effectiveness of the strategy from the lead person(s) designated in the strategy. Conclusions are featured in the annual governance report. NQ
● The code is freely available
to download from the CIPFA website. It builds on CIPFA’s previous guidance the ‘Red Book’ (Managing the Risk of Fraud, Actions to Counter Fraud and Corruption). It is shorter and clearly set out the importance of top-level support from the governing body NQ and leadership team. NQ Magazine February 2015
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ETHICAL DILEMMA
Cultu clash You are concerned about non-disclosure to external auditors and the culture in your department generally. So what should you do? Outline of the case You are employed as an accounting systems manager in a company that manufactures heavy plant. You and the financial controller both report to the finance director. During your work, you overhear the financial controller saying that he has not been disclosing certain things to the external auditors. These include the fact that a recent acquisition has resulted in a large piece of machinery becoming redundant and of very little value. You are unsure whether to believe this, but you are concerned that the culture within the finance department appears to be one of antagonism towards the external auditors, who are (unreasonably in your 10
opinion) seen as adversaries of the company. In addition, you have heard that a bribe was paid to an overseas company to secure a sales contract. You feel uneasy about the situation, and you are concerned that the close relationship between the financial controller and the finance director may prevent you from exploring the accuracy of the information that you have received.
Key fundamental principles Integrity: Can you overlook the financial controller’s comments, the culture within the department, and the alleged bribe, and still demonstrate your own integrity? Confidentiality: Is there any basis
on which you may or must make disclosures to the external auditors or anyone else? Professional behaviour: How should you proceed in order to comply with relevant laws and regulations, and so as not to discredit yourself or the profession?
Considerations Identify relevant facts: Consider the company’s policies, procedures and guidelines, accounting standards, and applicable laws and regulations. Can you corroborate the facts further through documentation and discussion with relevant parties? Does the company have an internal process for whistleblowing? What channels NQ Magazine February 2015
ETHICAL DILEMMA
ure h of communication exist within the organisation, for example with the external auditors, the company’s audit committee or an ethics officer? Identify affected parties: Key affected parties are you, the financial controller, the employee making the allegation of the bribe, the finance director and the external auditors. Other possible affected parties are the internal audit department, the audit committee, the board of directors, and users of the financial statements. Who should be involved in the resolution: You should consider involving the finance director, the board of directors (via the company secretary), the internal audit department, and the audit committee. NQ Magazine February 2015
Possible course of action You must check the relevant facts and perform the necessary research into accounting standards, applicable laws and regulations, and any policies and procedures within the company that may support you in alleviating your concerns. In particular, you should consider whether any antibribery policies and procedures of the company can help you. If no internal procedure exists, you should discuss the matter with the finance director, regardless of the close relationship he has with the financial controller. If, for any reason, you feel it is inappropriate to discuss the issues with the finance director, or if his response is unsatisfactory, the next step may be
for you to take the matter to the board. You should always exercise discretion and tact, and so it is preferable to involve the finance director in your representations to the board. If you have suspicions or evidence of criminal activity (which, in this case, could include the alleged bribe), you might be obliged to report it to one or more authorities. In this respect, you should seek advice from your professional body, and also consider taking independent legal advice. You should document, in detail, the steps that you take in resolving your dilemma, in case your ethical judgement is challenged in the future.
• For more ethical dilemmas see the CCAB website NQ 11
HAYS SALARY SURVEY
AN APPETITE FO
L
£36,000
Recently Qualified
£37,000-£42,000
£40,000
SME
Typical
Newly Qualified
£30,000-£35,000
£32,000
Recently Qualified
£32,000-£36,000
£33,000
Corporate
Typical
Newly Qualified
£36,000-£44,000
£40,000
Recently Qualified
£40,000-£48,000
£42,000
SME
Typical
Newly Qualified
£33,000-£37,000
£35,000
Recently Qualified
£35,000-£45,000
£40,000
Corporate
Typical
£36,000-£42,000
£40,000
Recently Qualified
£38,000-£48,000
£43,000
SME
Typical
Newly Qualified
£28,000-£34,000
£32,000
Recently Qualified
£30,000-£40,000
£35,000
Typical
£30,000-£36,000
£35,000
Recently Qualified
£36,000-£42,000
£38,000
SME
Typical
Newly Qualified
£28,000-£34,000
£32,000
Recently Qualified
£30,000-£38,000
£35,000
Newly Qualified
£35,000-£40,000
£37,000
Recently Qualified
£36,000-£45,000
£39,000
SME
Typical
Newly Qualified
£28,000-£37,000
£36,000
Recently Qualified
£30,000-£43,000
£38,000
SOUTH WEST
Typical
WALES
Newly Qualified
Corporate
MIDLANDS
Newly Qualified
Corporate
12
Typical
£35,000-£40,000
NORTH WEST
ast year saw a considerable amount of movement in the accountancy and finance jobs market in the UK, according to the latest Hays salary survey. We are talking both permanent and temporary recruitment here. Much of the uptake took place from spring 2014 onwards, with a much busier job market over the summer months than in preceding years. As private sector organisations continue to grow those skilled finance professionals who can interpret business and financial data, manage cash flow, enhance process efficiency and communicate with a business effectively will be in demand. Hays reveals that there has been a significant rise in the demand for newly qualified accountants with 0-3 years’ post-qualification experience in all sectors. This is starting to inflate the salary requirements for candidates, and in turn we are seeing some significant counter-offers. Some candidates are apparently being offered up to £10,000 on their salary to remain where they are. If you want to access Hays’ UK Salary & Recruiting Trends 2015 visit www.hays.co.uk/salary-guide
Corporate Newly Qualified
SCOTLAND
NQ magazine drills down into the nitty-gritty of the Hays UK Salary & Recruitment Trends 2015 guide
NQ Magazine February 2015
HAYS SALARY SURVEY
OR CHALLENGE? Corporate NORTH EAST
£35,000
Newly Qualified
£38,000-£45,000
£43,000
Recently Qualified
SME
Typical
£32,000-£38,000
£35,000
Newly Qualified
£34,000-£42,000
£37,500
Recently Qualified
YORKSHIRE & THE HUMBER
Corporate
Typical
£32,000-£38,000
£35,000
Newly Qualified
£35,000-£40,000
£38,000
Recently Qualified
SME
Typical
£30,000-£35,000
£33,000
Newly Qualified
£35,000-£40,000
£35,000
Recently Qualified
EAST OF ENGLAND
Corporate
Typical
£40,000-£48,000
£45,000
Newly Qualified
£40,000-£52,000
£46,000
Recently Qualified
SME
Typical
£35,000-£45,000
£40,000
Newly Qualified
£38,000-£48,000
£45,000
Recently Qualified
Corporate
Typical
LONDON
£45,000-£55,000
£48,000
Newly Qualified
£50,000-£60,000
£55,000
Recently Qualified
SME
Typical
£43,0000-£50,000
£45,000
Newly Qualified
£45,000-£55,000
£50,000
Recently Qualified
Corporate SOUTH EAST
NQ Magazine February 2015
Typical
£30,000-£40,000
Typical
£40,000-£50,000
£42,000
Newly Qualified
£45,000-£55,000
£52,000
Recently Qualified
SME
Typical
£35,000-£42,000
£40,000
Newly Qualified
£40,000-£52,000
£48,000
Recently Qualified 13
LEADERSHIP
Time for reflection Daniel Clark outlines a technique that can help you make the transition into leadership roles
A
s a newly qualified accountant, the hard work is now behind you and you can reap all the rewards. Right? Well, not quite. The truth is that the next few years will be critical in terms of career choices and development. Numerous paths are open and you need to make decisions about career directions. You need to develop an understanding of your competencies and skills, broaden your experience and find sources of guidance and support as quickly as possible. Many accountants find that this is the point where they are expected to transition to supervisory or management and leadership positions. Their qualification has equipped them to do the job from a technical point of view, and probably included some theory around management, but there is nothing in accounting qualifications that specifically develops skills in areas such as influencing, leading, sales and motivation. However, these are critical skills for a successful career involving management and leadership. Anyone looking to reach a senior position later in their career will need to start developing them quickly. There is a further transition, which some people find difficult to make. The accounting qualifications teach a body of knowledge around accounting standards, management accounting techniques, approaches to strategy, and so on. When studying, it is easy to see this knowledge as a set of rules that must be mastered and then applied to situations in the workplace. However, the body of knowledge around accounting is not in any sense ‘truth’, but a series of informed perspectives representing the consensus of the profession. This consensus has developed over time, in particular historical contexts, and to serve certain purposes. This consensus has changed in the past and will continue to change going forward.
14
NQ Magazine February 2015
LEADERSHIP DEVELOP YOUR SKILLS The new online MSc in Financial Leadership from BPP University builds on your accounting qualification with the key skills, knowledge and experiences to help you become a business leader. Your qualification will already give you credit for 50% of the MSc. Find out more at www.bpp.com
This is a critical shift you need to make in your thinking if you are going to be a successful leader. You now understand the accounting standards, but do you understand why they have developed the way they have, and how they might change to be more relevant in the modern world? Or how management accounting techniques such as absorption costing, budgeting and return on investment, were developed decades ago to serve the needs of the economy at that time. The economy has changed beyond recognition so what do we use now? Do you understand the limitations of strategic tools such as Porter’s Five Forces and the Value Chain, and how to judge between when certain tools are useful and when they are downright dangerous? Do you know how to look for other tools that may be more useful in your own context? Learning this will not happen quickly – in fact, it should take the rest of your career. But there is one powerful tool that can help. Reflective practice – sometimes called “reflection” or “critical review” – can be your main route to ongoing learning and development, and the research clearly links it to successful careers. As the great educational philosopher John Dewey put it: “We do not learn from our experience but from reflection on experience.” Reflection can take many forms, but it involves reviewing your actions and drawing lessons for the future. Reflection following a meeting or project may run like this: ● Analysis of differences between what was intended and what was actually achieved. This analysis should be informed by feedback from multiple stakeholders. ● Awareness of how your knowledge helped in terms of process (how you used it) and content (why you used the knowledge you did). ● How you have applied skills and identified ‘gaps’ where new skill development is required. ● What could be done differently, and better, next time. By taking steps to actively manage skill development, understand different perspectives on accounting and reflect effectively, you will be well on the way to becoming not just a professional accountant but a successful leader too. NQ ● Daniel Clark MA MPhil FCA is Head of
Online Programmes at BPP Business School. You can find him on Twitter at @danielclarkfca and on LinkedIn at https://www.linkedin.com/in/ danielclarkfca.
NQ Magazine February 2015
15
ETHICAL STANDARDS BP was faced with a $40 billion bill, including fines, cleanup costs and settlements, as a result of the Deepwater Horizon oil spill in 2010
Too many companies are paying lip service to the ideals of ethical corporate behaviour, according to the IIA
F
TSE100 companies are still not providing shareholders and other stakeholders with a measure of the ethical standards they claim in their annual reports, according to research by the Chartered Institute of Internal Auditors (IIA). Some 90% of FTSE 100 companies make reference to their high ethical standards or integrity as part of their annual report. However, only 18% provided a metric to demonstrate to shareholders that these ethical standards are actually being upheld in practice, and to allow shareholders to track whether the company’s performance is getting better in this area, or worse. The IIA says that although more than twice as many FTSE100 companies are now providing specific metrics on ethical standards compared with three years ago, the number doing so is still very low. This may suggest that many FTSE100 companies do not have a complete picture of the health of the corporate culture and standards of behaviour across the company. The IIA recently called for boards to take action to audit their corporate culture and behaviour. The report said that boards must clearly define the standards of behaviour that the company aims to uphold, and back this up with policies and systems that enable it to monitor these standards throughout the organisation, not just at the top. The IIA advises that these systems should address areas such as recruitment policies, performance management and reward. Recent controversies including the GlaxoSmithKline bribery case, the Libor rigging scandal involving several major banks and the Leveson inquiry all illustrate the risks to businesses of failing to ensure that appropriate standards of ethics are maintained across the organisation. Policymakers are also taking an increased interest in business ethics – the new Banking Standards Review Council is expected to have a strong focus on the improvement of culture and behaviour within banks. In the IIA’s study, the most common measures used by FTSE100 companies to demonstrate their ethical behaviour were indicators showing how well the company’s ethical policies are understood by staff and suppliers. Seven FTSE100 companies included in their annual report the percentage of their staff who had formally acknowledged that they understood and accepted the company’s ethical policies. A further 11 gave figures on the amount of training on ethical issues that had been provided to their staff. 16
Additionally, 26% of FTSE100 companies provided a specific reference to their anti-bribery standards or compliance with the Bribery Act. Dr Ian Peters, Chief Executive of the IIA, said: “It is becoming increasingly accepted that boards and senior management need to set the right ethical tone across the whole business. If they don’t, they run the risk of getting into difficulties with the law and regulators and this can NQ Magazine February 2015
ETHICAL STANDARDS
Prove it! damage the company’s reputation and brand. The fact that so many FTSE100 companies are now making specific reference to the ethics of their business in their annual report demonstrates a growing awareness that behaviour and practices are on the radar of shareholders as well as of consumers and regulators.” He added: “However, although 90% of the companies in the FTSE100 say they have high standards of ethics and NQ Magazine February 2015
integrity, fewer than one in five provides shareholders with evidence that these standards are truly being enforced. This suggests that companies need to do more to ensure effective controls and metrics are in place to protect themselves from the risks that can crystallise when ethics and culture are weak. Not only do they need to do more, but it needs to be appropriately reported, with the information in those reports adequately quality assured.” NQ 17
INTERIM CAREER OPPORTUNITIES
A bright idea? 18
NQ Magazine February 2015
INTERIM CAREER OPPORTUNITIES
A spell working as a contractor could do wonders for your CV, says Ismael Chand
T
he first thing many accountants do after qualifying is to look for the security of a permanent role to reflect their qualified status. However, in light of current market conditions we thought it would be worth bringing you up to speed on what contracting could do for your career.
Why consider contracting? Current market conditions (lack of good candidates, particularly NQs) means that candidates like you are hot property right now. Throughout the recession there has been a distinct lack of training contracts, which has led to the current problems. Contractors have the flexibility to work in a variety of different roles, sectors and workplace environments. For a newly qualified candidate this opportunity to work across a range of industries could really help you to develop an informed opinion on what type of company and sector you enjoy working in the most. It could also help you to build an effective network of contacts and mentors who could support your development throughout your career. Things to consider There are some crucial elements that you should always consider before accepting a temporary offer of employment. How flexible you are on each of these elements will dictate the type of contracts you will land, and also how much of the experience will be relevant throughout your career. Purpose: What is the role that you are going for? How will it help to serve your ultimate aim of progressing as a finance professional? Will it make use of, or develop, your existing skill set? Length of contract: Our experience tells us that most finance contracts run between three and six months. The length of your contract will obviously determine your availability for new opportunities that may come to market. While most contractors have a one-week notice period it is worth noting that one in five contractors get their contracts extended; and the longer you stay in a role, the stronger your bargaining power grows over becoming a permanent member of staff. Daily rate or hourly rate? Across the board you are likely to see that junior roles pay an hourly wage, whereas more senior roles will attract a daily rate.
NQ Magazine February 2015
Payment method: There are three different ways for a client to pay a contractor. All three have different implications on tax and NI contributions. PAYE employees are on staff payroll, and their tax and NI contributions are deducted at source by the employer or agency. The other end of the spectrum is when a contractor sets up a limited company. Using this method means you will invoice the client or agency for ‘services provided’ and file your own statutory accounts. One other method you could choose is to use an umbrella company. These companies help you to become more tax efficient with your money; they invoice the agency and then pay your wages, usually on a weekly basis. Be aware that umbrella companies do charge a margin for their services; either in the form of a flat fee or as a percentage of your wages.
Impact on your career Some candidates choose to contract permanently and others elect to for certain periods of time. The flexibility contracting provides is what people generally enjoy along with, of course, the premium on your wages. However, it is important to point out that there is a certain level of uncertainty because you have no guarantee of employment beyond the period of your contract. It is really important that you weigh up each of the elements we have mentioned before you accept any temporary contracts. While we have noticed the upturn in contracts coming to market recently; during recessions and lean times for a business you will find that contractors are often the first people to go. However, current market conditions mean that things are looking up as more and more businesses are ramping up their talent acquisition. The perceived political risk to business with the General Election on the horizon may stop clients from really stepping up their permanent recruitment right now, but there is still lots of work to do and that’s why we all love the flexibility of contractors! If you would like to explore the benefits of contracting or enquire about the types of contracts that may currently be available, please visit our website www.Walkerdendle.co.uk or get in touch with me: Ismael.Chand@walkerdendle.co.uk
NQ ● Ismael Chand, Talent Management Executive, Walker Dendle Financial Recruitment
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CORPORATE CULTURE
Does ethics start in the boardroom? Ewan Willars examines a new ACCA report ‘Culture and Channelling Corporate Behaviour’
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he boardroom of the 21st century plays a critical role in setting the moral compass of its organisation. This was the simple and assertive statement made in a new report from ACCA and the Economic and Social Research Council (ESRC), called Culture and Channelling Corporate Behaviour. The report stressed that boards are also critical in helping companies to avoid the sort of dysfunctional behaviour that can cause accidents, undermine an organisation’s values or create financial and reputational loss. Based on a series of roundtable discussions and a survey of ACCA members, the report advises that when assessing their organisation’s culture, boards should ask themselves three fundamental questions, which are seen as basic good corporate governance. They are: ● What are the goals and purposes of the organisation? ● What sort of behaviours does it wish to encourage and discourage? ● How is the tone at the top set out and conveyed through the organisation?
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We know that an organisation can have the most sophisticated code of governance and rules, but as recent high-profile scandals have shown, poor organisational culture has been a significant cause of corporate wrongdoing. To design a system that works, we believe it is important to ask the right questions, especially: what kind of culture do you want in your
organisation? The report lists a number of trade-offs that need to be balanced by the boardroom and by staff; is there openness about mistakes or zero tolerance? Is the organisation innovative or controlled? Does profit rule, or does public value matter more? Assessing culture can be difficult because it calls upon a brand new set of skills and requires a multidisciplinary approach. But what we hope with this report is that it will help boards and staff avoid some of the potential dangers and help them on their journey towards evaluating and improving the culture within their organisation. For ACCA, this is where the skills and abilities of the professional accountant can make a real difference. Trained to evaluate and measure, the accountant needs to be attuned to ensuring that values can be measured and reported internally and externally – after all, what can be measured can be managed, and the accountant is of course adept at
NQ Magazine February 2015
CORPORATE CULTURE
✒ 3. Track how decisions are being made. How aware are decision-making groups, from board level downwards, of the risks of cognitive bias and groupthink? How is diversity of thinking and challenge encouraged?
✒ 4. Be honest about the value of ensuring the bottom line adds up. The report lists seven points for consideration by the board, serving as a starting point for assessment and possible change:
✒ 1. Align and embed core values at the very top. Do people who do not act in accordance with the company’s stated values get promoted? Do management practices drive people to do things that they regard as unethical?
✒ 2. Watch out for the trickle-down effect and dynamics in groups. What can prevent the tone set at the top from effectively trickling down through the various levels of an organisation?
NQ Magazine February 2015
regulation and codes. What attitude to regulation should an organisation have? Does it want to support and work with the spirit and the letter of codes or does it see regulation as something to be avoided or exploited for its customers’ interests or its own sake?
✒ 5. Beware of unintended
they promote long-term sustainable performance or do they encourage immediate self-gain only?
✒ 7. Anticipate trends. Is the organisation open to new creative ways of thinking or is it constrained by a fear of the uncertain? How aware of global market trends are management and human resources? This may seem like a lot of questions, but they are the right ones to ask. The report can be found at this link: www.accaglobal.com/culture
NQ ● Ewan Willars is director of policy at ACCA
consequences attached to any incentives structure. Is it understood how incentives (deliberately created or not) work in practice? Can the board identify better measures that properly reflect the long-term aims of the organisation and use them in better ways so they do not get ‘gamed’?
✒ 6. Find out what motivates people. Are incentive structures in place actually fit for purpose? Do
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SUSTAINABILITY
Adapt or die The world has finite natural resources, and businesses that ignore this do so at their peril, says Sandra Rapacioli
E
ven as the issue of sustainability rises on the business agenda, natural capital is absent from most corporate accounts and business models. It is also largely ignored by investors as boardrooms continue to focus on shortterm pressures. This is a mistake. Although they may not realise it, businesses face a stark choice – adapt or fail. As natural resources become scarcer, business leaders must develop their strategies and models to take into account the limits of our environment. Organisations that adapt and manage risk with innovation will thrive. Those that fail to make adjustments will suffer from rising input costs, risks to their supply chain and reputational damage. This is where management accountants come in. With their unique blend of skills and mandate to identify future risks, they can help their leaders make decisions that lead to sustainable success. Specifically, management accountants can help in three different ways. Firstly, keep yourself up to speed. Management accountants exist to help decision-making, so it is important that you are well-versed in issues that materially affect business at a macro level. As with everything else in the profession, choosing the right data to learn from is an art in itself – be suspicious of news stories from either extreme of the political spectrum, and of commentators who appear to be picking facts to suit their arguments rather than the other way around. Instead, prioritise anything that seems relatively objective, such as peerreviewed scientific papers, or media with a centrist reputation. Secondly, generate data and analysis that includes environmental and social factors. Techniques such as scenario planning and full or material flow cost accounting and carbon foot22
Organisations that adapt and manage risk with innovation will thrive. Those that fail to make adjustments will suffer from rising input costs, risks to their supply chain and reputational damage. printing will provide insights that allow environmental and societal costs and risks to be assessed and compared to the impact on their business model. This will enable decision makers in their business to create strategies that are sensitive to these issues while either driving value creation or, at the very least, limiting value depletion. Thirdly, and finally, act as an advocate and attempt to influence senior management. Even those new to management accounting can help influence others, and the aim is to encourage senior businesspeople to think of sustainability as a longterm business issue that needs to be factored in to decisions. How you do this will depend on your relationship with senior stakeholders – but don’t feel you need to sacrifice your job and picket your office with a placard; include in your report a well-timed sentence backed up with relevant data, and you will have made a small but significant difference. The aim is not necessarily to single-handedly change
your organisation’s policy – just to ensure that sustainability is considered as part of the debate. You will not be alone. A recent Chartered Global Management Accountant (CGMA) report entitled ‘Redressing the balance’ looked into how management accountants drive sustainable corporate strategies. A total of 1,100 CGMAs were asked how the environmental and social data they produced is used within their company, and 84% of respondents said it is used to help in general strategy development. Some 67% of respondents use it to provide insight into cost management and efficiency; 69% for project and investment appraisals; 76% to help create risk management strategies; and 63% for budgeting decisions. These figures show a strong management accounting function can produce insights that feed into all areas of the business and help companies achieve balance. Natural capital depletion and other sustainability risks will become prominent business concerns in the 21st century, and management accountants have a unique combination of skills to support their organisations. It may seem that newly qualified professionals couldn’t have the impact of much senior members, but that is not the case. You can steer your company’s approach to accounting for sustainability and natural capital by taking initiative and creating a discourse around the issue in your business so it is always on the agenda. In this way you can help guide them to sustainable success.
NQ
● Sandra Rapacioli, Head of Sustainability Research and Policy, CIMA NQ Magazine February 2015
SUSTAINABILITY
NQ Magazine February 2015
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