Focus on Finance : A Conversation with Women in Senior Roles
Competition, compliance and corporate governance are now more than ever the everyday concerns of chartered accountants operating at the top of their profession in the business world. In an environment that has changed considerably in recent years, chief financial officers face the daily challenges of ensuring that the businesses are in compliance with new regulatory and international financial reporting rules as well as ensuring that their operations remain focused and profitable.
Just how do they ensure they stay on top of their game in a high-pressure environment and what are the main issues of concern in today’s challenging markets? We asked some top accountants for their views:
Asked about the impact, positive and negative, of the new IFRS reporting structure on their businesses, Australia-based Siobhan Geraghty, director and chief financial officer of the East Asia Property Group, commented: “IFRS has had a negative impact on the business purely from the perspective that the time and cost investment more than outweighs any benefit”.
She has found that the reporting structure has become more onerous.
“In fact, now I effectively need to have 2 sets of books one with actual numbers that are based on historical data and one based on IFRS which is a concoction of “Deemed” interests” and “hypothetical market values”, she said.
But for Heather Nesbitt, Chief Financial Officer, Hypo Public Finance Bank in the IFSC, the new structure has` meant little change in practice because her firm has been reporting under IFRS for some time.
“We have been little affected, as we have reported under IFRS since 2001. In fact we have seen a positive impact this year as we now report only one set of figures, IFRS, where previously we had to produce Irish GAAP for regulatory and legal filings.”
On the main changes in the audit process in recent years, Ms Geraghty has seen significant increases in audit costs as well as issues around the extent of knowledge required to interpret and apply the new rules.
“Our audit costs as a result of IFRIS effectively doubled this year, not only that, but the audit team right from manager down did not have an adequate in-depth knowledge of IFRIS and in many cases I found myself educating them on the application & interpretation of IFRIS which was very disconcerting given these guys are supposed to be the experts!’, she explained.
And she has found that the time required for the audit has increased significantly:
“Much more audit time is spent on planning, particularly around fraud. But I sincerely doubt the value it adds to the audit process given that the audit is still not effectively tailored to the risks. Again I put this down to inexperience”, she said.
And she has a suggestion aimed at making the process work more effectively.
“Having been an auditor myself and having also worked at the highest levels in commerce – I would deem it imperative for everyone in audit to have some exposure to how businesses really run in order to be in a position to effectively judge corporate risk”, she said.
On the increase in costs she added: “While there an increased cost burden on the business, there is very little additional value add”.
Because her business was an early implementer of IFRS, Ms Nesbitt finds it difficult to separate the impact of changes in the audit process and those being driven by the growth and developments in the business itself.
“Since our business has changed a lot over the last number of years, it is difficult for us to quantify exactly how much changes in the audit process have affected things and how much the business itself is driving the changes. As we were early implementers of IFRS we experienced more costs associated with this as the audit process caught up. I also see the demands it places on audit staff - the level of knowledge they require to be effective is very high. A lot of that knowledge has to come from us which means we have to spend a lot more time with the auditors”, she revealed.
She, too, has seen an increase in costs as a result of changed audit requirements:
“More audit requirements will always mean more costs. These are not just the direct auditor costs but also the costs internally with providing more information, enhancing systems to provide the information and supporting the transfer of knowledge to the auditor”, she explained.
Discussing whether corporate governance requirements will be effective in raising standards and in combating corporate wrongdoing, Ms Nesbitt commented: “As a public unlimited company they do not directly apply to us but as a licensed bank the Financial Regulator will probably require we comply anyway. Therefore we have to be prepared, and we expect that there will be considerable costs associated with it. On the positive side such corporate governance improvements promote Irish enterprise making Ireland a more attractive location for investors”.
Rejecting any suggestion that corporate governance standards were in danger of becoming too onerous, Ms Geraghty felt strongly that: “Corporate governance is an imperative aspect of directing a business to, as far as possible, eliminate corporate disasters like Enron recurring. In my view the full board of directors should have a pro-active role in signing off on corporate governance issues rather than having such matters delegated on a committee basis. In my view the corporate governance standards can never be too onerous”.
Asked what she thought were the difficulties in ensuring that good corporate governance principles are complied with, Ms Geraghty replied: “Board complacency that this is just another administrative tool that needs to be signed off rather than pro-active management and leadership in this field”
Noelle Brett, Finance Director, Georgia Pacific Ireland Limited is confident that strong new standards will help to combat corporate wrongdoing:
“While the new requirements have put a substantial burden on businesses, in terms of resource and cost I feel that overall business processes and procedures have been strengthened as a result. Standards have risen and while the new requirements will go a long way to combating corporate wrongdoing, they cannot totally eliminate individual instances of wrongdoing. However, rigorous review and testing will be provide a major deterrent and also help with early detection”, she said.
And she added “The difficulties of ensuring compliance with good corporate governance procedures are those of time and resource. In a fast moving environment, keeping all your documentation updated, reviewing the controls and making sure they are robust and testing to ensure they comply is a huge task.”
The main challenges facing their businesses, their sectors and the economy in the coming year included the implementation of new directives, rising costs and infrastructural issues and staffing issues.
Banker Heather Nesbitt picked out the implementation of Basle 2 as the big issue for her sector.
“For us it is without a doubt the implementation of Basle 2, a lot of planning has gone into the rollout over the last two years.”
For Ms Brett, the risks associated with becoming a high cost economy were a major concern: “The biggest challenge facing the economy and manufacturing businesses in particular is that we are becoming a high cost economy. We have lost numerous manufacturing businesses and jobs to economies where the costs of labour, energy, transportation, etc. are just a fraction of what they are in Ireland. The government needs to address issues like our infrastructure, our road network needs urgent remedial work (the M50 chaos is costing the economy millions in lost time and energy annually), we need to reduce energy costs and we need faster rollout of new technology/broadband”, she warned.
Ms Geraghty identified staff issues and rising costs: “Staff Retention, business growth in an economy suffering inflationary pressure and interest rate rises as a result”, she commented.
The Institute of Chartered Accountants in Ireland was one of the first accountancy bodies to recognise the importance of Continuing Professional Development (CPD). Since January 2006 all ICAI members are required to achieve a minimum average of 20 hours ‘structured’ and 20 hours ‘unstructured’ CPD per annum. The requirement may be averaged over a three year period.
Asked for their views on mandatory CPD, Ms. Brett and Ms Geraghty considered it useful while Ms Nesbitt felt it was irrelevant after accountants had reached a certain point in their careers.
“I think mandatory CPD is good. It encourages finance people to keep their skills and knowledge updated. However, I think individuals might have a difficult enough time in proving that they had completed the necessary number of hours, if they needed to”, Ms Brett said.
And Ms Geraghty was of the view that “CPD is imperative to ensure that the standards of the CA brand etc are maintained at the highest level. In my view CPD should be on a rolling 2 year basis so that if large projects or business demands result in CPD falling short then it can be made up in the subsequent year. However, any longer than 2 years puts the CA too far out of date.
But Ms Nesbitt commented: “I do not believe mandatory CPD has relevance after a certain point. As professionals we will need to keep updated anyway to do our job. Personally, I pick courses or conferences from an interest or relevance perspective rather than focusing on maintaining CPD therefore sometimes have to fit in a few intensive updates near year end to bring up the hours!
On how the role of the accountant in business has changed, there was agreement that accountants need to be much more than number crunchers and must be communicators and strategy drivers.
“The accountant in business now must be able to understand and communicate with all areas of the business, particularly in the banking world under IFRS as traders need to understand the impact of their dealings on financial returns. Instead of being the last link in the chain, we are now part of the process at all levels, placing a high demand on accounting staff to broaden their skills base”, according to Ms Nesbitt.
Ms Geraghty commented: “The CFO is no longer the number cruncher and overall controller, they now are a key strategy driver for the entire business. The scope has grown dramatically with the introduction of issues relating to corporate governance and IFRS. However so have the on-going demands of business generally. The CFO is a fundamental link in senior management without whom business could simply not survive in the current compliance driven environment”
And Ms. Brett explained: “In addition to the basic job spec, normal deadlines, there have been a lot of new initiatives that finance personnel have had to face - Corporate Governance, Sarbanes Oxley, IFRS. Also a lot of companies have issues regarding pension scheme deficits. Finance plays a key role in driving business performance and in strategic planning. All these requirements mean that accountants in business today are extremely busy with a lot of conflicting pressures to contend with”.
PRESSURE AT WORK
With high-pressure careers their strategies for dealing with the demands of their jobs range from hiring good staff to time management and physical exercise.
Ms. Brett believes in building a strong support team.
“I deal with the pressures by hiring the best staff that I can. Good people make a huge difference and I have a great team. I also think it is very important to have a balance in life, I exercise a lot – I play squash and horse ride and most weekends I retire to country living and I try to eat well.”
For Ms Geraghty: “Keeping up to date with changes in the reporting framework, whilst juggling the demands of an ever increasing scope of work, added to by the challenges of business growth, reporting requirements and good corporate governance is a challenge. Couple all this in with juggling the demands of the infamous work/ life balance. As a mother of 2 pre-school children one of the biggest challenges is leaving the pressure of work behind when you come home and being able to effectively switch from high flying corporate businesswoman, to the loving wife and mother the family deserve to have”.
And Ms Nesbitt commented: “Being an accountant was always a pressurized job, there is always another reporting date looming! I’m not sure that the pressures have changed greatly, as you mature in a job you learn the skills that help you cope. Effective delegation, good time management and being able to “switch off” are essential. The graveyard is full of indispensable people!”
Finally, would they recommend accountancy as a career?
Ms Nesbitt is happy with her choice: “Few of us dreamed of being an accountant when we grew up, it was something we decided later on along the way. I came in late, after a science degree, at which stage I did not even know the difference between auditing and accounting, but I never regretted the decision. It is a good entry into business, and a core skill that is never wasted even if you move on into other fields in the business. And let’s face it – a well paid job!”
Ms Brett sees it as a training that offers a wide range of career opportunities: “I would definitely recommend accountancy as a career. The training one gets is a fantastic foundation for life. Accountancy can lead you in many different directions and can be a stepping-stone to great things”
And Ms Geraghty is enthusiastic: “Most definitely accountancy lets the world literally be your oyster. I have travelled far and wide with my accountancy qualification and my 12 years in Sydney have seen me grow from audit supervisor at Coopers and Lybrand to Chief Financial Officer at a global property development company. Accountancy is much less the man’s world that it was when I qualified back in 1992. The profession as a whole is now far more evenly balanced in the big six firms between the sexes. However in upper echelons of Big Business the Board rooms are still pre-dominantly male. It is not uncommon for me in an average week to attend 3-5 meetings with a broad representation of professionals across the legal, Banking, real estate and finance professions and yet be the only female in attendance. I guess that tells us the male dominance at higher levels is not an accountancy only issue but one common across many professions.”
“As for Board meetings both here in Australia and on the international stage, we females are a very rare breed! But when you really want to prove you have the capability to be the very best at Board level, self belief and an attitude of excellence ensures an outcome I wish more of us could persist with.”
Note: IFRIS are the Australian equivalent of IFRS.