Cima Sept 2013 PDF

www.fm-magazine.
com September 2013
Why a paywall is n0ton the menu atthe guardian s online newspaper
AFRICA CALLING
How the mobile phone revolution has opened the continent for business HM treasurys Kirstin baker on keeping Britains banks afloat during the financial crisis
Financial Management | September 2013
D
Illustration: Jrn Kaspuhl/Dutch Uncle
Our generation Y survey is one of the most comprehensive of its kind
A word from the president
CIMA LinkedIn group: tinyurl.com/ ahxyoda
uring my recent travels as CIMA president I have noticed that one of the hot topics in many regions of the world concerns how generation Y todays group of 20- and 30-somethings might shape business in the future.
Pinning down the characteristics of generation Y is a little more difficult. Anumber of people claim to be experts in capturing the motivations of this group, but I wonder what generation Y-ers think about all this themselves. As I outlined in my previous column, leaders in government, business and academia urgently need to address the high level of youth unemployment worldwide and the ongoing skills gaps inmany professions accounting included. CIMA is committed to helping solve these problems by providing a global pathway for a better-skilled workforce. And we are working on how we can accelerate this process. As I write, I have just read the preliminary results of CIMAs global generation Y survey. This is one of the most comprehensive studies of its kind and will draw together enough in-depth data to give a clear picture of generation Ys career aspirations. We will then compare these findings with the results of a second global poll that asks companies what qualities they are seeking in their generation Y employees. We sent our first survey to 130,000 people, aiming at those aged between How has the institute helped your career? Wed like to hear from members and students about how the CIMA qualification has accelerated their progress. Email your story to: responses@cimaglobal.com 15and 33. Over the next few months theinstitute will analyse their responses in depth to build a profile of generation Y in different parts of the world. From my own interpretation of the results, one of the most interesting findings relates to what generation Y-erslook for in a prospective employer. Given the choice, two-thirds of the respondents said that they would prefer to work for an organisation that shared their values and fitted in with their lifestyles, as opposed to a company thatoffered them big financial rewards. As the dustsettles from the global economic downturn, I think this is atelling sign of the times. We also asked our sample what they thought employers were looking for in terms of skills. More than three-quarters said they thought softer skills were mostimportant at entry level. When it came to both middle-management and senior levels, they rated professional management skills as most important, followed by soft skills and advanced technical skills. I will be interested to seehow employers respond to this same question in the second survey. When it came to career development, most of our generation Y respondents told us they thought that the responsibility should be shared equally between themselves and their employer.Fewer than 10 per cent said that their employer should provide for all their training requirements. This is
another interesting nugget of information to put into the pot. Reassuringly, when our financebased respondents were asked which accounting qualification they would choose, most opted for CIMA, saying they viewed it favourably because it would enable them to achieve a globally recognised standard. This could be another sign that the new CGMA designation is striking a chord with the business leaders of the future. The final results of the generation Y survey may have a slightly different toneonce they have been reviewed and weighted, but it is fascinating to get an idea of whats going on inside the heads of the next set of business leaders. Thereal value of this study will emerge once we combine it with the results of the employers survey. In the meantime Ilookforward to meeting many more generation Y-ers and discovering at first hand how CIMA can help to fast-forward their career development.
Malcolm Furber, FCMA, CGMA CIMA president
at a glance
3-21
Inform
A word from the president MalcolmFurber p3 I worked on Implementing global accounting standards at the International Organization for Migration p6 Inform p915 A digest of the latest developments in management accountancy and beyond: Hot potato Ethical dilemmas resolved Gen Y The cloud versus online fraud Must read When the Money Runs Out Thinking and opinion A study of soft skills in accounting; plus Sarah Thompson of the Australian Financial Review on Australias botched attempts to tax its mining industry Led by finance How Ceylon Cold Stores strengthened its position in Sri Lankas ice cream market p17
36
32
22
The insider view South Africa p18 The data A new name from China tops the list of the worlds biggest banks p21
Features
22-43
The smart continent Africas mobile boom and its commercial benefits p22 Hold the home page The Guardians plan for profiting from its website p28 Information overdrive The next stage of the integrated reporting journey p32
Cover photograph: Sam Hofman and Kyle Bean
Q&A: Kirstin Baker, finance and commercial director, HM Treasury p36 8 ways to Use business intelligence better p42
CIMA is the Chartered Institute of Management Accountants 26 Chapter Street, London SW1P 4NP 020 7663 5441 www.cimaglobal.com President Malcolm Furber, FCMA, CGMA Deputy president Keith Luck, FCMA, CGMA Vice-president Myriam Madden, FCMA, CGMA Chief executive Charles Tilley, FCMA, CGMA Head of media and communications Katie Scott-Kurti FM is published for CIMA by Seven, 3-7 Herbal Hill, London EC1R 5EJ Group editor Jon Watkins Editor Lawrie Holmes Managing editor Darren Barrett Technical editor Neil Cole Group art director Simon Campbell Junior designer Josh Farley Creative director Michael Booth Chief sub editor Steve McCubbin Deputy chief sub editor Chris Ryder Deputy picture editor Louise Fenerci
Resource 45-64
Editors note
How do you run a firm whose governance process is quite unlike that of most others? Andrew Miller, CEO of the Guardian Media Group (GMG), has just such a task. Although the Guardian website is a world-leading online news source, hes working out how best to profit from its status while observing a strict code of editorial integrity and, crucially, without installing a paywall. Its about setting a clear strategy and understanding what you want to achieve, Miller says. In our other feature interview Kirstin Baker, finance and commercial director at HM Treasury, discusses why the issues she faces make her key government role as challenging as any corporate equivalent. We worry about the economy and the social impact and we deal with some pretty complex problems, she says. All of those elements came to the fore when Baker found herself in a small policymaking team struggling day and night to save a number of British banks at the height of the financial crisis in 2008. We were battling on all fronts, she recalls. And we did feel that, if we got it wrong and the markets didnt like what we were announcing, we could be in a position where there was no more money in the banks cash machines.
Study notes T4 part B case study, paper P2 and paper P1 p45 Technical notes Two ways to tackle disclosure overload; plusthe benefits of automating balance sheet reconciliation p55 What you learn on CIMAs Mastercourse on transforming the finance function p60 The institute How the benevolent fund is helping one member in need; plus a report from the investigation committee p63 CIMA events Dates for your diary, plus a summary ofrecent institute events p64
Back
65-66
Lawrie Holmes
Please send your comments and ideas to editor@fm-magazine.com or join the FM feedback group on CIMAsphere at www.cimasphere.com/groups
Project director Stefanie Hinten-Reed Global sales director Hilton Young Advertising manager Philippa Mathers
philippa.mathers@seven.co.uk Tel: 020 7775 5717
CIMA CEO column Charles Tilley p65 Watercooler p66

Picture researcher Alex Ridley Production manager Michael Doukanaris Account director Sin Dudley Group publishing director Rachael Stilwell
Editorial director Peter Dean Managing director Jessica Gibson Chief executive Sean King Chairman Tim Trotter
The contents of this publication are subject to worldwide copyright protection and reproduction in whole or in part, whether mechanical or electronic, is expressly forbidden without the prior written consent of CIMA/Seven. Seven All rights reserved. Origination by Altaimage London. Printed in the UK by Wyndeham Press Group.
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Name Ovais Sarmad, ACMA, CGMA Organisation International Organization for Migration Role Chief of staff CIMA qualified 1988
I worked on Implementing global accounting standards in an intergovernmental organisation

Start date 2009 End date 2012 Location Geneva, Switzerland
I joined the International Organization for Migration (IOM) in 1990. The IOM represents the interests of refugees, economic migrants and residents of countries denied sovereign status. In the 1980s I had held jobs in finance atmarketing company William Levene and race relations body the Runnymede Trust in London, as well as working at accountancy firm G&GB Young. Having qualified with CIMA in 1988Imoved to the IOM and began contributing to the growth of the organisation by implementing management accounting principles. Streamlining administrative processes and strengthening internal controls has cut waste, duplication and bureaucracy, optimising resources for the maximum benefit of our ultimate beneficiaries. As migration has developed into one of the worlds most significant trends,
the IOM has expanded significantly. Founded in 1951 by a group of 16 countries, the organisation sits alongside, and has bilateral agreements with, the United Nations, where it also has a seat on the general assembly as an observer. In my time at the IOM, where Ihave held a number of roles including head of the Philippines mission and director of the global administrative centre I have seen its budget increase sixfold from $200m in 2012. Chief of staff, the job I was promoted to last year, is the highest position in the organisation after the politically elected posts of director-general and deputy director-general. In my previous job as director of the department of resources management Ibegan the IOMs implementation of international public-sector accounting standards (IPSAS). We started the plan
[The IOM by numbers] Represents
member states Employs
151
9,000
locations worldwide Has an annual budget of
450
people in
$1.3bn
four years ago and completed it last year. Our audit was conducted by the comptroller and auditor-general of the government of India, which issued a report certifying that our accounts for year ended 2012 were IPSAS compliant. In order to comply, we needed to implement an enterprise resource planning (ERP) system. This took three years and the total cost, including that ofrolling out the new software to our offices around the world, was about $25m. The project was implemented on time and within budget, and was a key element in moving the IOM towards accrual accounting. Operating to internationally accepted accounting standards is vital if you are an organisation that relies on hundreds of donors worldwide all of which are working to their own key performance indicators. It has also enabled the IOM
tomanage its administrative costs and overheads more effectively. We have created a flatter organisation and maintained a lean HQ structure of about 250 employees in Geneva. We achieved
I have seen our budget increase sixfold from $200min 2012

this by establishing administrative centres in the Philippines and Panama, from where a range of back-office functions such as accounting, HR administration, procurement support
and IT services to offices worldwide areperformed. The decentralisation of support functions has enabled us to implement operational activities to benefit migrants and mobile populations at minimum administrative cost and with maximum efficiency. The IOMs overhead rate of 5per cent is one of the lowest among its peers. This has been made possible by the cost-conscious and proactive management of scarce resources. The skills to drive and manage growth in the IOM by complying with IPSAS, implementing ERP, decentralising back-office tasks and maintaining a leanorganisation with low overheads are based on the principles of value addition and management innovation, which is what the CIMA qualification provides to all students andmembers oftheinstitute.
IOM 2013
INFORM
CFOs value reputation over short-term profits
s corporate activities face growing scrutiny, organisations are becoming increasingly prepared to forego short-term profits if this would protect their reputations in the long term, aCGMA survey has found. According to the global poll, conducted by CIMA and theAICPA, 76 per cent of CFOs and other senior finance professionals believe that their organisations are prepared to make such a sacrifice. The respondents cited three main reasons for this increasing preoccupation with reputational risk: l Growing market demand for greater transparency. l Incidents at leading organisations or competitors leading to a loss of reputation. l The rise of social media. Of the CGMA designation holders surveyed, 65 per cent said that their organisations often or always considered the financial implications of reputational risks when making investment decisions. Almost half (44 per cent) said that their organisations had rejected a project that made financial sense because its reputational risks were too great. Organisations are increasingly recognising the need to take reputational risks very seriously if potential crises are not to turn into catastrophes. After all, nearly a quarter of the businesses surveyed admitted to experiencing a reputational failure andthe widespread use of the internet and social media casts a harsher spotlight than before, said Tanya Barman, head of ethics at CIMA. But what is very worrying is the revelation that businesses still seem to be struggling to manage their non-financial reporting in this area. For more details, visit www.tinyurl.com/p5jolrf
news/opinion/comment/insight/analysis
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HOT potato
This months dilemma

The dilemma In the food factory where I work as finance business partner, a new production manager has arrived. Less is being spent on quality control now and a batch ofbiscuits has just failed selective testing. There are no health risks assuch, but control is no longer of thequality that we claim publicly. He insists that we should go to market as its only a minor defect. CIMAs RESPONSE This is an issue of integrity (handbook section 110). Does distribution undermine any commitments to quality by being materially false or misleading, or by omitting or obscuring information? Consider the consequences both financial and reputational and whether there are any regulatory breaches. Also consider whether the manager is trying to intimidate you to comply (section 310). If so, take the matter to your director. For the code and other online ethics resources, visit www.cimaglobal.com/ethics Disclaimer CIMA does not provide legal, investment, professional or career advice. Noresponsibility or liability whatsoever is accepted for any error or omission (whether or not arising out of negligence), or for any loss or damage sustained, as aresultof reliance on information supplied or comments made.
Finance and HR can have more impact by working together

IMA has started a collaboration withtheChartered Institute of Personnel and Development (CIPD) aimed at fostering a closer working relationship between the finance and HR management professions. The ultimate goal of this initiative is toincrease the two functions combined contribution to business, with an early focuson transforming how organisations understand, measure and report data on theirpeople to drive success. The work will include a programme of jointresearch on subjects including big data, integrated business reporting and shared services for HR and finance, with the first shared project researching human capital measurement. This study will explore a sharedconcern that organisations arent consistently good at valuing the contribution of people to their performance and value, oratassessing the risks to business success that poor people management can pose.
The institutes will also make their relevant continuous professional development and training programmes available to each othersmembers in order to help boost knowledge, development and understanding through learning. In a joint statement, they said: While financial information is a critical and recognised measure of a companys value, theimportance of people data is not fully understood by many businesses and is therefore overlooked, often to the detriment of longer-term thinking something that CIMA and the CIPD are striving to rectify. CIMAs chief executive, Charles Tilley, added: When talking about property value, the adage often used is location, location, location. When thinking about the driver of any business, we should be saying it is people, people, people. Visit www.tinyurl.com/o89r5q5 to read more about the collaboration. See also the CIMA CEO column on page 65
poll of the month

We asked Is global corporate governance in crisis?
Source: www.fm-magazine.com
Yes: 34%
No, but a significant improvement is needed: 54%
No, its in good shape: 10%
Dont know/undecided: 2%
What the poll says The results of FMs latest online survey show that, following a seriesof high-profile scandals andinvestigations, confidence in corporate governance has been damaged considerably. Most respondents feel that corporate governance is either failing or in need of significant improvement. Perhaps more telling is that only 10 per cent feel its in good shape.
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Disengaged staff hitting profits

arge organisations could be damaging their profitability by failing to motivate workers, withonly a quarter of their employees agreeing that they are highly engaged with their jobs, new research suggests. A survey of 200 companies employing more than 1,000 people each by US consulting firm Temkin Group has found that fewer than half of businesses place a high priority on taking action as a result of feedback from employees. The lack of a clear engagement strategy and the narrow reach of engagement activities contribute to fewer than 25 per cent of organisations earning strong or very strong scores on our employee engagement competency assessment, Temkin Group said. A report based on the survey suggests that companies with such poor employee engagement could suffer a negative impact on their bottom lines.
When we compared companies with strong employee experience scores withthe others, we found leading firms to have better financial and customer experience results, the report stated. Temkin Groups figures indicate that three-quarters of the companies that reported stronger employee engagement efforts provided an above-average customer experience. This correlates with better financial performance. Eight out of ten companies that made stronger efforts to motivate their employees had above-average financial results, compared with only half of firms that made weaker engagement efforts, according to the research.
he finance directors of some of the UKs biggest companies are shifting towards expansionary strategies and are becoming more willing to take on risk, according to Deloittes latest CFO survey. The research, which gauges the viewsof 135 CFOs including 37 from theFTSE100 and 45 from the FTSE 250 shows that their expectations for recruitment, investment and discretionary spending have returned tolevels previously seen in early 2011. Forty-five per cent of respondents said that the time was right to take risk on to the balance sheet the highest
Expansion back on CFOs agendas
percentage in six years and double the number surveyed a year ago. CFOs are also placing more emphasis on expansion through acquisition andthe introduction of new products orservices. They also seem to be softeningtheir stance on cost reduction: only 34 per cent said that cutting costswas a priorityfor their business down from 42 per cent in Q1 2013. Business optimism has been improving for some time, but our latest survey shows that CFOs are translating this confidence into action. A rising risk appetite and a shift towards expansion show that large corporations are increasingly planning for growth. Therecession-era focus on cost-cutting and debt reduction is easing, said IanStewart, chief economist at Deloitte. Its particularly encouraging to see the move towards growth among UK-facing companies, he added. Thesehave been consistently more defensive than their international-facing peers in the past two years. Their shift towards more pro-growth strategies is asign of an improving UK outlook.
For CGMAs, the following content is now available online
on cgma. org
Why youre never safe from more work even after hours. Just because its midnight doesnt meanyour boss expects you to stopworking. More than a third of employees have reported receivingwork-related emails outside working hours. Mobile technology isexpanding the boundaries of the workplace in many ways not all of them good. www.tinyurl.com/ojck3tt New duties on horizon for internal auditors. Strategic responsibilities will become an increased focus for internal auditors over the next two years,
according to a global EY survey. Fewer than one-third of respondents said strategy was theprimary mandate or focus of internal audit, but that they expected the emphasis to shift. www.tinyurl.com/qx8uucu Corruption and business risk on the rise worldwide. Transparency Internationals 2013 Global corruption barometer survey hasfound that 5 per cent of its respondents in the UK and the US had paid a bribe in the previous 12months when interacting with key public bodies and services. www.tinyurl.com/l77j6ln
Three steps to safeguard against corruption. Regulators worldwide have stepped up their enforcement of anti-corruption laws, especially as more and more companies of all sizes have invested in doing business abroad. www.tinyurl.com/pdfvroy Three lessons in managing supplychain data. Aidan Goddard, FCMA, CGMA, the CFO and COO of LOccitane en Provences AsiaPacific operations, explains how bigdata, when harnessed, can help a company to cut costs and refine its sales and marketing strategies. www.tinyurl.com/kqjvc3p
Getty Images
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A big fraud or a fraud killer?

Chris Kennedy on cloud computings opportunity to enhance its image by helping organisations to combat online payment scams
One of the most hyped, yet misunderstood, strategies of recent years is the new world of business evangelised by the proponents of cloud computing. Few new commercial IT solutions emerge today without reference to the cloud andthe wonders held within it. Although many financial professionals remain reluctant to take advantage of cloud computing deterred by security concerns and the fear of losing control overtheir data the cloud is actually beginning toplay its own role in improving information security and preventing fraud.
Behind the technical complexities and the jargon, thecloud comes back to one simple premise. Itmeans thatbusinesses no longer need to make massive investments inhardware such as file servers, yetitoffers them the abilityto create virtual computers thatsit on theinternetand perform the functions they need,as and whenthey need them. If youre busier than normal, you can simplyadda few virtualmachines. When things are quieter, you can turnafew off. The cloud enables you to adjust yourorganisations technologyprocesses as it changes size andits technology needs develop. Online fraud is the next great hurdle for the internet. Lastyear, more than $1.4trn-worth of transactions were completed on the web. Although this represents only
5percent of total retail commerce, the proportion of moneylost as a result of internet fraud is increasing rapidly. Atpresent, almost 1.6per cent of all online transactions turnoutto be fraudulent. At the current level of anti-fraud technology, nearly 27 per cent of online transactions need tobe manually reviewed by a human. Clearly, with the rateat which e-commerce is growing, this approach to verificationisnt sustainable.
The cloud can play an invaluable role here. We at Trustev are working to eliminate fraud for online merchants by ensuring that they can properly identify whom they are doing business with. We are adopting a new approach to thetypes of data we analyse: in addition to using traditional data sets, such as postal addresses, were also looking for patterns in data dynamically generated by online services about particular individuals.
Illustration: Mitch Blunt/Dutch Uncle
Chris Kennedy, chief technology officer and co-founder ofTrustev
This automated system analyses patterns behind the data, not a users private information itself. The sheer amount of data processing and security that is required forthis form of anti-fraud solution depends on cloud-based technology. Not having a cloud solution would necessitatean investment in the region of hundreds of thousands of pounds in physical hardware before a companycould even get started in this area a huge barrier to entry. Heres an opportunity for the cloud to be on the right side ofthe fraud discussion.
must read
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Policy myopia: a ticket to dystopia

The author of When the Money Runs Out HSBCs chief economist warns thatthe West must face up to its new economic realities
When the Money Runs Out: the End ofWestern Affluence Stephen D King, 20, Yale University Press
he stimulus versus austerity debate has diverted attention away from the key long-term economic challenge facing policymakers inthe West. In the face of persistent stagnation, is it still possible for the financial and political claims made over many decades to be honoured? What happens to pensions, healthcare, education and the value of assets if policymakers are simply unable to return GDP growth to its rates of old? Western economies have already plodded through one lost decade. In the UK, for instance, per capita incomes roseby only four per cent in 2003-13 the lowest increase by far in any postwar decade. Yet many people behaved as if the good times were still rolling: fiscal spending as a share of national income surged; taxes were cut; business leaders gave themselves huge pay rises; and investors hunted ever
more aggressively for yield, seemingly unaware of the associated risks. All the while, policymakers allowed their forecasts to be infected with optimism bias, persistently assuming that strong growth was just around the corner. In truth, the Wests golden age of growth which ran from the 1950s to theend of the 20th century has ended. Thisera was dominated by one-off advances: trade opened up after the protectionism of the interwar years; millions of women joined the workforce; consumer credit surged, enabling households to spend today and pay tomorrow; and higher education became an achievable ambition for the many, not only the privileged few. Although technology remains an important economic driver, of course, itwill not be enough onits own to replicate the growth seen in the postwar period. Yet we continue to believe that, with a few adjustments to monetary policy and some fiscal stimuli here
Sir Richard Branson, chairman of VirginGroup: @richardbranson Find the right people to work with and you cant go wrong. Umair Haque, economist: @umairh Its stupid to bet on the future. But its stupider not to.
andthere, we can quickly return to business as usual. Evidence collected from hundreds ofyears shows that economies do sometimes hit a brick wall. From the Black Death to the French revolution toArgentinas 20th-century financial demise, economic distress can then leadto sociopolitical upheaval. As AdamSmith once argued, the risk is that societies then shift from progressive toeither dull or melancholy states where trust breaks down, loss aversion sets in and entrepreneurialism dies. The West doesnt have to succumb tothese pressures, but the risks will onlyincrease in the absence of lasting reform. We have to learn to live within our means, not pretend that future growth will automatically bail us out. That entails tough choices on among other things public spending, banking regulation and the inter-generational divide. Otherwise, it really will be the end of western affluence.
Jeff Immelt, CEO of General Electric: @JeffImmelt Thomas Edison looked at what the world needed and proceeded to inventit. Rupert Soames, CEO of Aggreko: @rsoames I am really getting into this Twitter thingamajig.
Twitterati
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What business leaders have been tweeting recently about strategy, risk and innovation
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Thinking
How effective is the process of developing interpersonal skills for financial managers?
By John Joyce, professor of management accounting education, and Trevor Hassall, professor of accounting education, at SheffieldHallam University.
Illustration: Karolin Schnoor /Dutch Uncle
anagement accounting is changing. The main factors behind this are globalisation and advances in technology, which are making the business environment increasingly dynamic and complex. Tomeet the challenges that await them, therefore, management accountants need to become market-orientated financial analysts and strategic advisers. Software developments have led management accountants to focus less on inputs and more on interpreting financial data and getting involved in strategic planning. The demand is for them to add value through activities such as customer profitability analysis and process improvement. There has been a long-standing debate about the changing personal development needs of management accountants. Central to it is the breadth of skills required and the balance needed between technical knowledge and personal qualities. Theemerging view is that management accountants will not only be required to know that; they will also be required toknow how. Akey factor will be to develop the interpersonal skills required to put knowledge into practice. Skills such as communication, teamwork, time management and problem-solving will be needed to enable technical accounting to be exercised in the relevant context. Ourresearch, which involved management accounting professionals and their employers, sought to establish not only the importance of a range of interpersonal skills, but also the priorities for developing them. Communication skills have emerged as a key factor. Our study has highlighted an important relationship between these and the development of skills such as teamwork and leadership.
Management accountants need to be excellent communicators, but employers are concerned about a skills gap in this key area We have also found that employers are worried that key skills are not being exhibited, despite all the efforts to develop them. Of particular concern is alack of communication skills. We need to improve our understanding of the barriers to the development of these crucial skills. Traditional approaches tohoning such skills have been shown notto work because of these barriers. They must therefore be dismantled. When individuals choose to pursue a career in management accounting they must be made aware of the range of interpersonal skills required of the modern financial management professional. Theseshould become a key part of all recruitment literature and job specifications. Relevant performance metrics should also be developed to measure the required skills during the selection process.
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Opinion
Two botched efforts to extract tax revenue from the mining industry will not have helped the Australian Labor Partys chances in this months election, writes Sarah Thompson
ustralias attempts to tax its miners huge gains resulting from Asian demand in recent years have become a curse for its politicians. The ill-conceived resource super-profit tax (RSPT) broke Kevin Rudds prime ministership in 2010, while the minerals resource rent tax (MRRT) was similarly damaging for his successor as Labor PM, Julia Gillard. The MRRT created considerable global uncertainty as the share prices of Australias resources companies some of the biggest in world were marked down after its implementation in July 2012. Only a meagre amount has been raised so far, suggesting that the cost of administering the tax could even exceed the revenue raised. In fact, the most significant impact of the MRRT, a tax on profits made from the extraction of
non-renewable resources in Australia, isthat it has created more jobs for accountants, who are needed to tackle its mind-numbing complexity. A replacement for the RSPT, which was withdrawn just before its planned implementation, the MRRT is levied at 30 per cent of super profits gained from the mining of iron ore and coal. Acompany becomes liable when its annualprofit reaches A$75m a measure designed so as not to burden smaller players. Potentially, more than 300 firms could be affected. There is no time limit; the tax is there in perpetuity unless a future government decides to end it. Rudd and his finance minister at the time, Wayne Swan, had announced the RSPT as part of their response to a wide-ranging review of the tax system chaired by Ken Henry, then secretary to the Treasury. The RSPT was to be levied at 40 per cent and to apply to all mining,
Illustration: Lyndon Hayes/Dutch Uncle
Sarah Thompson is editor of the Street talk section of theAustralian Financial Review
including for gold, nickel and uranium. The planned measure was a key factor behind Rudds downfall in June 2010. Gillard replaced it immediately with the MRRT after she took over as PM. Thetax won support from the Australian Council of Trade Unions and various miners unions, along with conditional backing from the Australian Greens. BHP Billiton and Rio Tinto have not opposed the MRRT publicly in the same way that they resisted the RSPT, but other big industry players and the Liberal/ National opposition have all come out against it. Andrew Forrest, chairman of Fortescue Metals Group, said that the tax would reduce investment in Australia, while Gina Rinehart the nations richest person and owner of Hancock Prospecting argued that it would do so to the tune of billions of dollars. The measure must be seen in the context of Labors pledge to cut the company tax rate from 30 per cent to 29per cent in 2013-14, but with no commitment for another cut until the fiscal position improves. In the May 2012 budget it was claimed that the MRRT would bring in A$3bn for the year. By October the forecast was cut to A$2bn. In May 2013 the government was forced to admit that its annual MRRT receipts were expected to be a mere A$200m. Rudd said that his Labor colleagues Swan and Gillard had to take responsibility for the MRRT and deal with the consequences of its near non-existent revenue. The controversy was another nail in the coffin for Gillards increasingly unpopular leadership. On 27 June she resigned after losing a party ballot to Rudd, who was reinstated as PM. The campaign to tap some of the vast new wealth of Australias extractive industry has not only undermined the value of its leading companies. It has also come at a cost to Labors credibility as the general election approaches.
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Led by finance
In 2009 a Sri Lankan food and drink manufacturer called Ceylon Cold Stores was struggling to preserve its share of a toughening market. The firms sector financial controller at thetime, Daminda Gamlath, explains how it turned the situation around
The context Ceylon Cold Stores (CCS), a 146-year-old listed firm that can trace its origins to the Colombo Ice Company, has constantly reinvented itself to remain competitive. As well as producing carbonated soft drinks, CCS has been manufacturing ice cream products under the Elephant House name for 75 years in two key categories: bulk(take-home) products and impulse products that are consumed away from home. It also hasother sub-brands. The challenge CCSs dominant position in the market wascoming under pressure. It needed to respond successfully to four external factors fast-changing consumer tastes, a decrease in its customers purchasing power, dated perceptions of the brand and the emergence of low-priced competitors while remaining profitable.
The plan Innovation formed the basis of CCSs multipronged strategy, which included freshening up the companys image and adopting a weighted brand structure, with bulk ice cream products taking advantage of the Elephant House master-brand identity and impulse products developing their own sub-brands. The brand revitalisation was given the go-ahead in 2009 after it secured approval from the executive committee of CCSs largest shareholder, John Keells Holdings. The team Reporting directly to the board, the consumer foods sector president led a cross-functional project team in which each member was responsible for communicating the plan and its objectives to their respective departments. For example, the finance function produced parameters andcriteria designed to enhance the efficiency and effectiveness of all functions, from product development tosales. Outside agencies and consultants did the research and worked on the creative concepts.
The process CCS knew that it wouldnt win the battle without investing in product innovations and developing new channel and pricing strategies that would keep it ahead of the competition. Having established a stronghold, we went on to consolidate it, making long-term plans for monitoring the businesss progress more closely and realigning it when needed; tightening internal controls; and implementing variance analysis, management by exception, credit analysis, risk mitigation and continuous work-study improvements. Detailed operational plans were also made for streamlining production, sales and transport processes in order to ensure more timely and efficient deliveries while keeping costs down. Many sustainability initiatives were implemented to reduce our operations carbon footprint, conserve energy, improve labour practices and ensure product quality.
Illustration: Mike McQuade
The outcome After the initiatives were completed in July 2010, CCS made an annual profit after tax of Rs1.1bn (5.5m) the highest in its history. It was also ranked seventh in the top 100 list of Sri Lankas mostrespected entities by business magazine Lanka Monthly Digest. Theturnaround was recognised at the Sri Lanka Institute of Marketings brand excellence awards as the best turnaround brand of the year.
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The insider view: South Africa

FM examines how business is conducted in countries around the world, with local experts acting as business guides
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COMMERCIAL environment
South Africas economic prospects look relatively good, with GDP growth of between 2 and 3 per cent a year forecast for the medium term, according to Marius Ungerer, resident chair in strategic management at University of Stellenbosch Business School, who says that this must be viewed in the context of how the countrys economy is planned. The national development plan sets out South Africas wider long-term investment targets and its development focal points. It aims to eliminate poverty and reduce inequality by 2030 by (among other things) developing an inclusive economy, building capacity and promoting leadership and partnerships throughout society. South Africa is one of the primary gateways to the continent, Ungerer says. This offers very good growth prospects for businesses using South Africa as a springboard. Our economy reflects a dual nature: it has both developed and developing components. We have a growing middle class, as well as a large base at the bottom of the pyramid. This dual-economy reality holds many opportunities. Maryvonne Palanduz, FCMA, CGMA,head of retail finance and risk atMetropolitan Holdings, agrees. SouthAfrica remains attractive for most mid-sized and large organisations, she says. Consumerism has continued to be buoyant over the past few years, despite tough global conditions. This has largely been attributable to growth in earnings from the lower-income market, fuelled by unsecured credit thats not sustainable. GDP growth hasslowed over the past few months. Therehave been several instances of labour unrest, particularly affecting themining sector. Nevertheless, SouthAfricans have a high degree of entrepreneurial spirit that comes from operating in a competitive market. The nations banking industry has been having a tough time too. Alfred Ramosedi, FCMA, CGMA, managing director of Nedbank Private Bank, says: Its been a very difficult trading period. A lot of customers are indebted and there are threats of downsizing and retrenchments. But he adds that management accountants are well placed to take the opportunities that stillabound for them in South Africa. Werelucky because we are at the gateway to Africa, which is a melting potof development opportunities for firms that are willing to take a risk. For local guidance onSouth Africas management culture, visit FMs website at www.fm-magazine.com/feature/ depth/insider-view-sa
[South Africa by numbers]
$384.3bn
South Africa is the worlds
GDP in 2012
Doing business
Make sure that you understand the culture in South Africa, advises Alfred Ramosedi. There are many quirky aspects of South African culture in general, as well as in business, to get used to. Forexample, if someone says Ill do something just now, it does not mean Ill do it immediately. Although South Africas infrastructure is sound, including fantastic financial systems, some services eg, telecoms arent extremely good. Be prepared, then, to find islands of excellence in an ocean of inefficiency, Ramosedi warns. This forces business people to plan properly around these aspects. Internet connectivity is widely available, but its slow and costly by international standards. While labour is sometimes not as productive as it could be, South Africans can work hard and be resourceful, Ramosedi says. Employment legislation is also very strict and is somewhat biased towards employees, rather than employers. So you need to know your labour law. Most important, he adds, is to be flexible, creative and customer-centred. Ungerer suggests partnering local firms to create mutual benefits. You need to support the principles of the Broad-Based Black Economic Empowerment Act 2003 (BBBEE). This is essential for doing work with the government and big business, he says, adding that BBBEE compliance promotes the constitutional right to equality; increases the effective participation of black people in theeconomy; supports faster economic growth; and promotes increased employment and more equitable income distribution in order to encourage the economic unity of the nation, protect the common market and promote equal opportunity and equal access to government services. Ungerer urges foreign firms to understand regional legal requirements, as well as local needs and domestic economics at all levels. This is essential to take advantage of the different sub-segments of the consumer market, he says.
largest economy GDP growth in2012
28th
2.5% 5.4%
CPI inflation in 2012
Unemployment in 2012
25.2%
Population
Source: Statistics South Africa
51.1 million
Source: World Bank
Gallery Stock
Contact
Lorraine van Schalkwyk, CIMA South Africa Email: lorraine.vanschalkwyk@ cimaglobal.com
21
The data
The worlds biggest banks
or the first time, a Chinese bank has taken the top spot in the global rankings. Industrial and Commercial Bank of China (ICBC) is now the worlds biggest by tier-1 capital, according to The Banker magazine, compared with a rank of 32nd only eightyears ago. The country now has four out of the worlds 10 biggest banks and 96 of the top 1,000. The US also has four top-10 banks, but Europe has only one: HSBC,which benefits greatly from its operations in Asia.
At its peak price in late 2006, one Citigroup share wasworth $55.70, giving theUS company a market value of
$277.2bn
In 2012 HSBC agreed to pay a recordfine to the US authorities (for,among otherlapses, allowingitselfto be used to launderdrug money) of
$1.92bn
Illustration by Leandro Castelao
Assets ($trn)
Source: The Banker, Bloomberg, Thomson Reuters
Agricultural Bank of China
Bank of China
BNP Paribas (France)
Wells Fargo (US)
Mitsubishi UFG* (Japan)
China Construction Bank
Bank of America
RBS (UK)
Citigroup (US)
HSBC (UK)
JP Morgan Chase (US)
*As at 31 March 2013
ICBC (China)
By tier-1 capital as at 31 December 2012 ($bn)
22
23
the smart continent
The rate at which Africa has adopted mobile phones in the past decade speaks volumes about the regions economic potential. Now that well over half of the population have access to a handset, mobile connectivity has not only transformed how people communicate it also signals a leap forward for business
By Beth Holmes
he commercial opportunities presented by Africas mobile revolution have encouraged western IT giants such as Microsoft, Hewlett-Packard, Intel and Google to establish footholds in the region from which to expand. With demand for both hardware and software services plateauing in mature economies such as the EU and the US, the vast growth market that Africa represents is also of particular interest to investors from China, India and Russia. But no two countries in this complex and diverse continent present the same challenges particularly infrastructure constraints for a new entrant of any size. Its fair to say that South Africas mobile industry differs from that of Angola, for example. Yet Angola, with nocable network providing fixed broadband whatsoever, canstilloffer 4G connectivity. In this case, skipping a technological generation doesnt seem much of a hindrance. Africa is the worlds fastest-growing mobile telephony market and is driving the mobile-only approach, says AndreHugo, director of Deloitte Digital. This is evident in thefact that the number of mobile connections has grown by44 per cent here in the past 12 years, with 700 million activeconnections predicted to be in use in sub-Saharan Africa by 2016. We see mobility as a driving force that
willfundamentally change the face of business and the economy in Africa. Gustavo Fuchs, who runs Microsofts Windows Phone business for the Middle East and Africa, concurs. He believes that theres a real desire for new products at the right price. The market has taken an opportunistic view of Africa. Paul Roberts, co-founder and director of ForgetMeNot Africa, which has developed technology enabling any mobile to send and receive email and messages on any carriers network, confirms that there is a large pent-up demand. Theres a very large emerging middle class that is aware of technology services and products, but until recently has not had access to these because of political, financial and/or infrastructure constraints.
Mightier than the sword

So what will be the impact of the mobile boom and the access to the web its enabling? The most dramatic example has been the use of smartphones by the democracy movement in north Africa to co-ordinate its revolutionary campaigns during the Arab spring of 2011, filming and broadcasting footage of protests and government crackdowns to the watching world. The widespread adoption of mobile technology certainly has contributed to reforming political processes and institutions in various countries, Roberts says. A seemingly mundane incident can catalyse the reformation process and mobile and internet channels can help to spread awareness of the issue. They are enablers. Hugo agrees that the arrival of new communications technology will always be a catalyst for change. The financial, retail, medical and education sectors will be the largest beneficiaries from the adoption of mobility in Africa.
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5.98bn 85% 644m

Number of mobile phone subscriptions globally of the worlds population use mobile phones Number of mobile subscribers in Africa out of a population of 1.1 billion
[The mobile phone market by numbers]
Newbusiness models and products are constantly beingdefined in countries such as Kenya, Nigeria and South Africa as market demand drives innovation formobile-only solutions. Oneonly has to look at great mobile-based solutions such asthe eLimu educational application, the agricultural insurance packageKilimo Salama, the Hello Doctor health service and Way-C Africas answer to the iPad to see examples in practice. To what extent, then, is the mobile revolution changing howbusiness is done in Africa? The biggest game changer will be that traditional bricksand-mortar operations will have to adapt to the needs of the consumer, Hugo says. We dont believe they will disappear, but their business models and footprints will change just as the consumer is changing to be more aware of the products and services they can purchase and at what price. Roberts adds: It all comes down to awareness in my view awareness that products and services exist and awareness ofhow much these cost in other regions and online. No longer can the veil of obscurity and opaqueness be used to pricegouge consumers or to provide a bad service. Awareness leadsto options, which lead to changes in provider and supplier information. This will open up new competition andindustries inmany emerging markets. Mobile financial services, insurance products and information-based services are likely to be very interesting for a number of companies.
No longer can the veil ofobscurity and opaquenessbe used to price-gouge consumers or to provide a bad service
of completely replacing it. Thismeans that, even as smartphones and higher-end feature phones continue to roll out, the market still requires services that can work with the limitations of the mass of feature phones in use. He continues: Remember also that, while it may be relatively easy to set up channels for distributing consumer devices such as smartphones, the network infrastructure that would maximise the potential of these devices is not always as widespread. Low-cost 3G smartphones may also be piling into Africa now, but these are often limited by the relative lack of network coverage. We can expect such shipments to increase over the next five years, but I believe that feature phones will retain a relatively large share of the market owing to their high reliability, low cost and the continuing reuse of embedded devices. According to IT News Africa, mobile transactions are also revolutionising banking practices. For example, Safaricoms M-Pesa system has taken hold of the east African mobile money industry with its text me money technology. This enables users to store funds, pay utility bills and complete commercial transactions on their mobiles something that most consumers in the developed world are not yet doing.
Halfway handset
While smartphones have taken hold in developed nations, agrowing trend across Africa has been the emergence of so-called feature phones. These are souped-up basic mobiles that offer some of the functions found on a smartphone. Thesemay offer web access and have a camera, an MP3 playerand satellite navigation capability, as well as the ability to run simple apps. Nigeria and Kenya have the highest proportion of inhabitants using feature phones in the world, with 89 per cent and 88 per cent respectively, according to mobile advertising network BuzzCity. The popularity of these models provides afantastic opportunity for developers to get on board something they have been slow to do. There is a relative dearth of apps aimed at this market. Feature phones are well and truly widespread throughout Africa, Roberts says. They number hundreds of millions andthey continue to be embedded ie, reused within communities. So, although more sophisticated devices are being sold, they are adding to the mobile device base instead
26
18%
Estimated percentage of Africas population that are smartphone users
65% 5
of Africas GDP is accounted for by self-employed small business owners micro-entrepreneurs
[The mobile phone market by numbers]
Number of main international cables in place providing bandwidth to Africa
One word of warning from Hugo concerns generalising trends across such a large continent when analysing how far Africa may represent a microcosm of wider emergingmarket development enabled by technology. The biggest misconception is to view Africa as a whole and assume that what works in Kenya will work in Zimbabwe or South Africa, he says. To a large extent, this is one of the reasons that M-Pesa has not been as successful outside Kenya and Tanzania. To benchmark Africa against other emerging markets could therefore lead to the same misconception. Eachemerging market will have its own particular cultural, economic and political nuances, resulting in a dramatic impact on what technology or platform will be successful locally. Roberts agrees, saying that, while there are similarities to be found across developing markets, each country in the continent has its own nuances, restrictions and opportunities. Having said that, the impact of communications technology in particular, coupled with a growing awareness by citizens of emerging markets of what is possible, does appear to be accelerating the adoption of technology across Africa. This has a powerful effect in boosting technology uptake, again based on awareness of what is possible and what exists elsewhere.
The biggest misconception is to view Africa as a whole and assume that what works in Kenya will work in Zimbabwe or South Africa
Many African countries have little or no fixed-line internet infrastructure. The use of wireless 4G networks here becomes an attractive proposition compared with the costly option of installing and maintaining new fixed lines. Mobile networks allow for wider coverage, especially in sparsely populated rural areas. Fixed-line infrastructure does have its place, but the total cost of ownership and availability becomes a key consideration for providers. Roberts adds: Countries that have bypassed fixed-line infrastructure can certainly benefit in several ways. The sheer cost of maintenance and line upgrades can be a drain on the resources of state-owned and private companies. By leaping a generation, that investment can go into newer infrastructure thats more relevant to the countrys needs and this is usuallymobile. Lessons learnt in other countries that have rolled out newer tech can also be applied without having to learn the hard and expensive way. As James Mwangi, CEO of Kenyas Equity Bank the first bank in the world to offer a completely mobile account saidat a recent IBM conference in Nairobi: Africa is better positioned to adopt the next generation of technology than anywhere else, because its not tied by a legacy system.
Mixed signals
There have been several studies on the growth of mobile phone usage in Africa, but their findings appear to vary wildly contrast Microsofts estimate of 10 per cent penetration rates for smartphone usage with the 18 per cent cited by the African Mobile Factbook 2012. Fuchs thinks that the significant difference between the figures can be explained by the large number of products imported through distribution channels that are unauthorised by the manufacturer. We have data showing that these grey imports are huge and that hurts the economy. Dealing with this issue means understanding how you drive policy with governments on taxes, fees and import regulations, he says, but adds that the development of different countries should not affect how piracy problems are tackled. The maturity ofnational governments here varies greatly, but our conversations tend to be the same. Microsoft will invest in countries that have the right policy, licensing and stability. Given the vastly differing levels of market maturity across the continent, what impact might jumping a whole generation of telecommunications technology as has happened in Angola have had? I wouldnt consider it a technology jump, Hugo says. That would imply that there was already some technology in place.
Alamy, Panos. Source: African Mobile Factbook 2012.
28
29
Hold the home page
As publishers continue to suffer at the hands of theinternet, Andrew Miller, chief executive of the Guardian Media Group, tells FM why putting newspaper articles behind a website paywall is noton his online menu for now, at least
By Lawrie Holmes Photographs by Ivan Jones consumed primarily in digital formats. The great opportunity this gives us is that we can become global very quickly. A story like Snowdens is taking the Guardian from being known by a few people in the US to being a well-known brand there in a matter of weeks. Our aim, therefore, is to find an audience and ensure that as many people outside the UK as possible trial the product. And through trial we will build business models. GMGs relatively early investment in establishing a web presence has put the group in a strong position to profit from a growing online readership, according to Miller. His experience at Auto Trader, a car-selling magazine that launched a website back in 1996 and stopped publishing print editions this year, highlights the importance of being quick off the mark. In the world of classified ads, where I spent nine years, thedigital space is where the first mover has a core advantage. Thefirst mover cements its brand name, he says. This is also true in news: there will be a battle among providers to be the main news brands worldwide. Sitting back and waiting for it to happen for you is not an option. You dont necessarily have to be first, but you have to be one of the first and have the right model. We were one of the first to build a proper standalone website and a mobile app. If youre not known as digital and dont invest in trying new things, youll get left behind. One of the complexities affecting his search for profit concerns the Guardians stance on offering free web content. Some observers have suggested that the strategy pursued by its senior management, including editor Alan Rusbridger, has been inflexible to the point of a willingness to lose revenue. The perception is that were rigid; the reality is very different, says Miller, who previously worked at Procter & Gamble and drinks firms Bass and PepsiCo. What were being rigid on is having open journalism thats trying to engage people and bring them into the debate. That is not the same as opposing a paywall. We believe this is a moment when we want to grow the Guardian and when we want people to engage with it across different platforms. A paywall in my view and this comes back to my time in consumer goods stops them
he Guardian has broken some of the worlds biggest news stories in recent years. An exclusive interview in June revealing the identity of former CIA operative Edward Snowden, whod leaked details of the National Security Agencys spying activities, drew seven million readers to its website from the US alone, for example. The brand of investigative journalism that exposed the extent of phonehacking at the News of the World has helped to lift the Guardian from the UKs ninth-biggest paper by circulation to the worlds third-largest online news source, with 84 million unique users. Developing a digital platform that has delivered such impressive figures is only the start for Andrew Miller, chief executive of the Guardian Media Group (GMG). The Scot, whoran the finances of GMGs Auto Trader subsidiary before becoming group CFO and then CEO three years ago, must nowfind ways to capitalise on the brands global recognition. Thatsno mean feat, given that the industry is still reeling from the digital revolution. Some publishers have clung to thetraditional paper format in the hope of hauling in some advertising revenue, while many others have set up websites and placed some articles behind paywalls to encourage users to subscribe for exclusive material. GMG sees profiting from the Guardian site as a long game that first requires it to gain mass appeal, which is why a paywall has not been installed. The sector is going through a fundamental transition thats happening very, very quickly, Miller says. News is being
30
84 million 196m
Number of unique users of the Guardian website worldwide Group turnover in the year to March 2013
trialling your products. You cant say that you have a multimedia product if you cant get people to access it. Miller points to a chart on his office wall showing how many stories are being read onthe website at any time. Themost popular one as we speak is an article on the Tour de France, which is being read by more than 3,000 people. Most readers have accessed the story via links on Twitter. If we were behind a paywall, we wouldnt be getting people reading that story through something like Twitter. Its too early to say theres a right answer and its also too early to close off access to your content, although it doesnt mean that paywalls are wrong, he says. If wed closed ourselves off, we wouldnt be where we are right now, with 84 million unique users and a digital revenue of 56m up 28 per cent on the previous year. Its absolutely right to be getting people to try us. Things mightbe different in a few years time once consumption settles, butright now it doesnt seem right to put up a paywall.
[Guardian Media Group by numbers]
What were being rigid on ishaving open journalism thats trying to engage people. That is not the same as opposing a paywall
Paper money
The Guardian newspaper and its Sunday stablemate the Observer saw their annual operating losses fall to 31m in the year to March 2013 from 44m the previous year, while the group returned to the black with a pre-tax profit of 23m. We have closed the gap significantly regarding losses and we will draw on our assets to fund these losses while we find this new business model, says Miller, who points out that all big investment decisions are informed by the groups ownership by the Scott Trust, which has a mission to deliver high-quality journalism in perpetuity. The unique structure of the organisation ensures plenty of flexibility in handling its assets, delegating management to a board of heavy hitters including former Virgin Media CEO Neil Berkett and lastminute.com co-founder Brent Hoberman. Rusbridger, on the other hand, reports directly to the Scott Trust. This gives him complete editorial independence its a great model, says Miller, who points out that questions of how the trust structure works should it need extra capital remain hypothetical, since GMG has cash reserves of 250m plus assets not marked to market in Auto Trader (known as Trader Media Group)
and business-to-business publisher Top Right Group, which are both jointly owned with private equity firm Apax. Given Millers confidence in the robustness of its finances, why has GMG made four rounds of redundancies that have affected its editorial department key to the groups offering in particular? The new world we are operating in is in continual transformation and that entails continual restructuring, he says. Sadly, in a business where the largest cost is people, pressures on people and cost reductions are inevitable. Thats tough, but the workforce when I started at Auto Trader was over 4,000. It now stands at about 1,500, so it has meant a strong reduction. That doesnt mean its inevitable; it means you have to manage your way through it at a pace thats right. If the revenues in digital grow in a way that we expect at speed there will be less pressure on the cost base. Some critics of the job cuts have suggested that in place of journalists GMG has come to rely increasingly on readers and other amateur contributors in the form of citizen journalism. To me thats an inevitability of digital people want to be involved in the discussion, Miller says. A lot of the skill remains with the journalist who specialises in this space. Justas important is the core skill of a good editor: managing journalists while also bringing in bloggers who have a real interest in a topic and people who just want to join the debate. The group is pursuing a number of innovative projects aimed at delivering digital profitability without a paywall. TheGuardian Soulmates dating site, forexample, is making a significant contribution. Weve taken its revenues from 37m two years ago to 56m, but there are other things we think well add in due course to grow the revenue. Its not only about chasing the revenues that we are earning successfully. Its also about putting digital first and taking the global opportunity we have two-thirds of our readership is outside the UK, yet weve barely monetised that, Miller says. Among the new ideas is Guardian Labs, a creative initiative working directly with clients to shape content in the right kind of way for advertisers. What advertisers want is something that can offer them a multi-brand opportunity. We can do that
31
187,000
Operating loss of the two newspapers in the year to March 2013:
Average circulation of the Guardian (founded in 1821), measured by the Audit Bureau of Circulation (ABC) in June 2013
22.7m
Pre-tax group profit:
31m
212,376
Average circulation of the Observer (the worlds oldest Sunday paper, founded in 1791), measured by the ABC in June 2013
while not many others can. This is about designing campaigns and meeting campaign requirements with them using our content. Where the process of innovation takes an interesting and, for some observers, potentially alarming turn is the use of the Guardian name for such purposes. They point to the appearance of a range of sponsors including one or two bugbears of campaigning NGOs that have helped to double its digital display advertising revenue to 27m in the past year. But Miller insists that their presence does not damage the brands integrity. We will do sponsorship around content in conjunction withthe editorial team. To me thats a core innovation. In fact its one of the main drivers of our digital revenue in the past 12months, he says. But I can be absolutely categorical that the independence of our journalism is preserved. I have no ability to influence what is written and thats an appeal for advertisers. The brands integrity remains the same, whichis agreat asset. It doesnt make some conversations with some sponsors any easier at times. But, once they go through the logic of the Guardian offering, they realise its the kind of thing they want to be with. Miller says there has never been a call to drop a sponsor because of a backlash from readers. It would be an editorial decision only. So, if the editor wanted me to pull something from publication, we would probably pull it. But its something weve never had to face because the process that we have works really well.
I have no ability to influence what is written and thats an appeal for advertisers. The brands integrity remains the same
Bean counting
The live concept, where readers can interact with the groups journalists at events such as masterclasses, has also earned GMG several million pounds. Another intriguing approach has been the launch of a Guardian-branded pop-up coffee shop in trendy Shoreditch, east London. Its something well try for five or six months to see where it goes and what we learn from it, Miller explains. We can hold events there that cement the brand and well also find a sponsor, so its something that doesnt lose us money. He is adamant that the integrity of the Guardian brand is in no way undermined by any of these projects. The great thing about our organisational framework is
that the editor can act without any need to work directly with me, he says. It means that our brand is very pure. We are very careful commercially to work with the brand and ensure that we never stray into the wrong territory. Miller stresses that, despite cash-burn required by him and his predecessor, Carolyn McCall (now CEO of easyJet), to deliver the digital model, the number of mistakes made along the way has been minimal. Everything has been done in the right way at the right time. Errors may have been made in individual decisions, but in the round were in a fantastic position as the consumption of news is accelerating in the digital space. Commenting on the distressed state of many leading American publications, he says: The US experience shows that, if you dont act to get ahead of a structural not cyclical change, you have a real challenge on your hands in news journalism. Some US news organisations cut the journalism back too quickly and theyre suffering as a consequence. Miller counters the idea that the Guardians largely liberal-minded readership is reluctant to spend money: Farfrom it theyre reasonably affluent. We have to build aproposition and ensure that its going to be robust for advertisers, from direct revenue and indirect revenue. Healsoconfirms that the future of the groups newspapers, including the Observer, is secure: Theyrethe bedrock of what we do three-quarters of our revenues are based on newspapers. In the meantime, GMG has been addressing concerns that the value of TopRight Group, which, while ringfenced along with Trader Media Group, fell sharply after acquisition, although Trader Media Group delivered a profit of 143m. GMG wrote down 70m on the radio station assets it sold recently, including Jazz FM acquired for 45m and sold back to its founder for 1. From my perspective these things happened in the past, says Miller, who stresses that his main focus is on working with the unique features of his creatively driven company. What one cant do is mandate change. Its about setting a clearstrategy, understanding what you want to achieve and working with people. And thats the fun of it. I wouldnt have it any other way.
32
Information overdrive
By Lawrie Holmes Illustration by Tadaomi Shibuya
33
The integrated reporting movement is gaining momentum as the investment community puts itsconsiderable weight behind the concept. Aleadinglight in the campaign, Steve Waygood ofAvivaInvestors, traces its progress so far
Sustainable Stock Exchanges Initiative was born, modelled on the approach taken by the Johannesburg Stock Exchange and influenced by the work of Mervyn King, professor of corporate citizenship at the University of South Africa, who had writtenapioneering paper on integrated reporting in 2009. Waygoodreports that the Johannesburg Stock Exchanges equivalents in Brazil, India and Hong Kong have since adopted roughly similar approaches, while others are looking at how to incorporate ideas about wider corporate disclosure. The exchanges in Singapore and Malaysia have changed their guidance and I know that Istanbul and Nasdaq are talking about it. Nasdaq hasnt done anything yet, but it has asked all investors to come together on this issue. It would prefer that every exchange does the same thing, says Waygood, who believes that the US stock market is anxious to ensure that any new rules dont drive companies away from it which is what happened in 2002 when the Sarbanes-Oxley Act tightened up the corporate governance standards expected of US-listed firms after the Enron and WorldCom scandals. The engagement with exchanges is still very much a work in progress London and New York, for example, are not yet committed, but talks are ongoing, he says. Deutsche Brse and Toronto Stock Exchange have been very engaged, although they havent taken the obvious step in changing their listing rules.
lthough integrated reporting is a relatively new idea, Steve Waygood, chief responsible investment officer at Aviva Investors, has been interested in encouraging firms to make more complete disclosures for the past 15 years. This stemmed from a frustration in his company about the lack of detailed information on which to base its investment decisions. Markets work on the basis of data. If the information we rely on from companies is short term and thin, then a shorttermist view will prevail in the capital markets, he says. With this in mind, Aviva Investors has been among a growing group of big asset management firms pushing for companies to report non-financial aspects of their business inorder to paint a more detailed picture of their current and likely future performance. Non-financial doesnt mean that these issues are irrelevant to evaluation, Waygood stresses. We need some idea about areas such as customer retention, employee retention and government relations in order to have some satisfaction about a companys cash flows. A watershed moment for Aviva Investors came in 2008 when Alan Dromer, its chief executive at the time, called for adebate with stock exchange listing authorities on the issue. Hewas pushing for a requirement on the boards of all firms with market caps of $2bn or more either to issue sustainability reports or to explain why not. Dromers declaration quickly caught the attention of Gavin Power, deputy director of the United Nations Global Compact, a joint initiative between theUN and big business topromote sustainable commercial development. Power and Aviva Investors organised a conference the following year at the UNs headquarters in NewYork, where Paul Abberley, the companys current interim CEO, spoke. The event drew a number of key regulators, standard-setters and big investors, including the International Organization of Securities Commissions, theWorld Federation of Exchanges and Goldman Sachs. All of them, Waygood recalls, were saying that this was the way forward. The movement snowballed to such an extent by 2011 that a similar event attracted representatives of asset management firms controlling a total of $5trn in investment funds. The
Road from Rio

While some headway has been made in increasing the number of firms committed to making any form of wider disclosure, aphenomenal gap remains in the range and quality of databeing reported, according to Waygood. Determined to hastenprogress, he was influential in convening 40 likeminded organisations to form the Sustainability Reporting Coalition, which last year lobbied the UN at its Rio conference on sustainable development to produce a comply-or-explain framework for sustainability reporting. We asked for a treaty and were effective in getting a few paragraphs in the conferences outcome text, he says. Paragraph 47 of this document, entitled The future we want, states that the UN encourages industry, interested governments and relevant stakeholders to develop models forbest practice and facilitate action for the integration of sustainability reporting. To Waygood, this means that, while the UN acknowledges the importance of the issue, it is a weak paragraph that is quite a political indication of the direction oftravel, as it doesnt really do anything. We need to ensure that regulators are aware of how investors feel about this, so our coalition has been continuing to push the UN. The panel on post-2015 development goals chaired by the British prime minister endorses our recommendation, while the Sustainable Development Solutions Network chaired by economist
35
Jeffrey Sachs [special adviser to UN secretary-general BanKi-moon] backs them too. Waygood is confident that faster progress can be made in the next phase of development. Were pleased that it looks like one of the replacements to the UNs millennium development goals could refer to integrated reports and sustainability reporting, which would be an amazing outcome, he says. Another more likely immediate outcome could come from the European Commission, which has tabled the narrative reporting proposal for which I was on the expert group partly because of the work were doing advising those writing the commissions proposal. Weve beentalking to the Lithuanian presidency of the Council of the EUto ensure that it tables time in the next debate its chairing. And atthe G8 meeting we called on the leaders to push the commissions proposal, so a real head of steam is building. What happens next in the development of integrated reporting could depend on how far global bodies will push for non-financial matters to be included in the full report and accounts of a company, rather than in a separate document.
Integrated reporting encourages integrated governance, which itself drives integrated thinking
At the moment not one international organisation hascreated definitions that aregenerally endorsed and in common use, so we all have different perceptions of what these terms mean, Waygood admits. But Im pleased that the commission is proposing that non-financial disclosures need to be in the report and accounts. It means that this information should be synchronised with the main data. At present, most firms issue information on corporate social responsibility (CSR) and sustainability more than six months after they publish their main report (see graph). That makes itnext to useless, although you can look at trends over time, he says. So the commission is talking about narrative reporting, but it has declined to talk about integrated reporting in the main articles of the proposal. Its concerned that the meaning of the term is not clear enough. Im frustrated by that, because I think the concept is perfectly clear.
Integrated capitalism
While integrated reporting is considered the goal in the disclosure debate, Waygoods ultimate aim is what he calls integrated capitalism. He explains that integrated reporting encourages integrated governance, which itself drives integrated thinking by boards. Thats not enough, though, because we need the integrated cost of capital of the company to be lower if the board is running it well and in an integrated and sustainable way. That cost of capital is a function of investors integrating these issues call them non-financial, CSR, sustainability, whatever into our evaluation work. Without that, our buy, sell and hold decisions wont reflect narrative reporting figures, so a company that is well run on these aspects wont be rewarded with a lower cost of capital. And, of course, the lower your cost of capital, the easier it is to raise money and give your business a competitive advantage. Waygood argues that the process should start with fund managers clients, who need to take an integrated approach when mandating fund managers to make long-term investments on their behalf. It is a good idea for pension funds and other clients to ensure that long-term issues are being considered. That also requires them to integrate into their disclosures to their beneficiaries whats being done in their name with their money, he says, noting that at each stage of the capitalmarket supply chain there is a similar obligation to achieve integrated capitalism. How do we go beyond integrated reporting and ensure that capital markets integrate these issues throughout? I think thats not going to happen in the next few years. Were talking about a decade or more before wecan get to that point.
THE timeliness of firmssustainability reporting by nation

Denmark 57% Australia 56% Netherlands 48% Sweden 45% Singapore 43% Hong Kong 38% Norway 33% Japan 32% Malaysia 29% Switzerland 28% UK 28% Canada 26% China 24% US 22% Germany 20% Spain 19% Finland 19% Belgium 15% South Africa 15% Austria 10% France 7% Mexico 7% South Korea 6% Brazil 6% Italy 3%
Percentage of companies with year-ends in Q4 2011 that issued 2011 sustainability performance information by 1 May 2012
Sources: CK Capital, Aviva Investors and Bloomberg
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national treasurer
By Lawrie Holmes
Kirstin Baker, ACMA, CGMA, finance and commercial director, HM Treasury
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Kirstin Baker has played a key role in one of the UKs most important institutions. She explains how her work became vital to the countrys interests during the financial crisis andreports on the ongoing changes in her department
What are your main responsibilities? Im finance director for the Treasury Group and Imanage the departments finance team, as well asits commercial, IT and estates functions. Thegroup includes the Debt Management Office, UK Financial Investments and various smaller bodies, as well as the core department. Im on the Treasury board and the board of UK Financial Investments. With an HR director, I jointly manage the corporate centre group, which comprises more than 150 people. In some ways were the back office that provides services to the business, which in the Treasury is policymaking. The finance team also gets involved in some of the more complex transactions that the department undertakes. For example, there is a project team working on the mortgage interest guarantee scheme that the chancellor announced in the budget. We will work with that team on the detailed design of this scheme. I also take a sort of non-executive role in some of these large projects: Iwill sit on the steering board or on the project board for undertakings with significant financial oroperational risks. How closely do you work with politicians? At the moment I play a supporting role to other Treasury officials who work with ministers very closely. The ministers decide which policies they want to pursue, but they rely on officials to advise on how best to achieve the objectives they have set. We do challenge them if we think that a proposal will not work in practice. Part of my role is to ensurethat the advice we are giving on the costs and benefits of different options is robust, so that the permanent secretary, Sir Nicholas Macpherson, is satisfied that any spending we commit to will represent value for money. How much pressure is the Treasury under to achieve cost savings? Like most central government departments, the Treasury has been reducing its budget and staff numbers. We are going from more than 1,200 employees to about 1,000 over three years, makingit a pretty small department by Whitehall standards. This process, which will shrink the corporate centre as well, is the result of 2010s strategic review. While making such savings, we need to ensure that we can still provide the service to ministers wewant. Weve restructured and we have really pushedfor more flexible working. We now have some staff in a central project pool, so that we can move people quickly when priorities change. TheTreasury often has to respond rapidly to new policy priorities or external events, so were getting better at deploying people where theyre most needed. When the Cypriot financial crisis struck inMarch, for instance, we were able to bring some people in very quickly, as we had lists of individuals who had worked on similar events. We were able to get the desk space ready for them and we have an ITsystem that enables them to work quite flexibly. Weve also made savings on some of our backoffice costs. For example, we have moved to desk sharing and let out the office space that this has freed up in our building, reducing the net cost to us. We will also be sharing some of our corporate services with other Whitehall departments to obtain economies of scale. How did you develop your career, given that you started at the Foreign Office? After gaining a first-class degree in history and politics at the University of Cambridge, I joined thecivil service fast-stream development programme as a generalist. I wanted to work in public service and was interested in the political decision-making process. I joined the Foreign & Commonwealth Office in1993, where I specialised in European issues andEUnegotiations. I studied for 15 months at thecolenationale dadministration, where Frenchcivil servants are trained, and later spent time working at the European Commission in Brussels.So I spent a decade in various different EU-related jobs at the Foreign Office, the CabinetOffice and the European Commission. Iworked on the enlargement negotiations when Finland, Sweden and Austria were coming into theEU and when I was in Brussels I worked on competitionpolicy as a regulator, covering big airline alliances and mergers. I was always interested in jobs that had an economic or financial element to them. Over time Ispecialised in microeconomic and financial policy, so it seemed to make sense to come to the Treasury. Initially, I was on a formal secondment from the Foreign Office, but I hadnt been back therefor about five years and felt that the Treasury would be a more natural home for someone with my skills and experience. I felt at home as soon as Iarrived, so it was definitely the right decision.
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How dark were the days of the financial crisis in2008 when your team had key interventions to make in the banking industry? When I joined the Treasury to help prepare for the 2004 spending review, the economy was growing steadily. We were starting to say: Itsbeginning toflatten off in terms of the rate of growth of spending, so Whitehall departments will need to tighten their belts. Withhindsight, those were years of plenty for the sector. At that time we would set future public spending by making an economic forecast of what GDP growth was going tobe in x years and wed then make a fiscal forecast. On the basis of that, we could say how much tax revenue we were expecting to get in and therefore how much money we could expect to spend. It is clear now that in the early 2000s our forecasts werepretty optimistic, although not many
people were saying that at the time. (Since 2010, economic and fiscal forecasting has been done outside the Treasury by the independent Office forBudgetary Responsibility.) The crisis started with the collapse of Northern Rock in September 2007, but the worst of it seemed to be over by the spring of 2008 when I went in to manage the Treasurys Northern Rock shareholder team. As things started getting worse in the summer, we were bringing in more people, but we were still very thinly staffed as more and more institutions started getting into difficulty. The toughest time was the autumn of 2008: afterthe downfall of Lehman Brothers, Bradford &Bingley got into difficulty, the Icelandic banks collapsed and then RBS and Lloyds/HBOS had to bebailed out. All these things happened in quick succession and there were three or four weeks where we were working all hours of the day and night, weekends included. We were dealing with lots of different crises at the same time many of which were completely new to us. We were making policy very rapidly and then having to implement it. The markets are watching your every move, so you have to be in a position first thing on a Monday morning to be able to announce something. It was pretty frightening. We could see the immediate crisis we were trying to sort out, but we knew that doing so was going to lead to a huge hole in the public finances. I can remember going home and saying: Thats the finances completely in a mess for the foreseeable future. We were battling on all fronts and we did feel that, if we got it wrong and the markets didnt likewhat we were announcing, we could be in aposition where there was no more money in thebanks cash machines. So it felt like a huge responsibility a situation where you were very tired, yet trying to put a lot of things in place. Under normal circumstances policymaking isnt necessarily a slow process, but it usually takes a little time. Theres a lot of consultation and its harder for radical solutions to get through because theyre inevitably more risky. But in that situation we simply needed a solution and all kinds of ideas were on the table things you might typically have dismissed before. Some of what we did, such as allowing Lloyds and HBOS to merge, which had implications for competition that are playing out now, we wouldnt have wanted to do in normal times. On the other hand, if the whole financial system almost falls down, youre thinking: At this point were not as worried about competition our first priority is simply to keep the system going.
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Has the financial crisis led to improvements in the governments risk management? If a bank were to get into trouble now, wed be much better at dealing with the situation. The Northern Rock crisis exposed the fact that we didnt have legal mechanisms in place enabling us to nationalise the bank we couldnt simply pay out to depositors in the way we are able to now. Now that the Office for Budget Responsibility hasbeen established to make the economic and fiscal forecasts, I think the system is more robust. Previously, you had a team of economists here doingthat and their work was signed off by ministers. Forecasting always requires judgement and ministers might affect that judgement.
started. Its all taking longer than expected and thats mainly because the economic situation wasmore difficult than anybody had foreseen. Withthe banks, I think that were beginning to seelightat the end of the tunnel, but the fiscal positionremains challenging because the economyhas taken so long to recover. We are just having another spending round, setting budgets for 2015-16 in which we are imposing more cuts. The expectation is that therewill have to be more cuts beyond that. Withinthe Treasury we will have to make furthersavings and were working on how to dothatwithout further reducing our workforce orlosing policymaking capacity. What made you decide to take the CIMA qualification in 2010? A phase of the crisis had come to an end, so Iwanted to leave the Treasury for a bit to get a slightly better work/life balance and challenge myself by doing something different. I moved to Edinburgh to work for the Scottish government, looking after capital spending and issues of private-sector investment. It was really interesting to work in an institution with a different culture and I learnt a lot. Its much easier in Scotland to geteveryone interested in an issue around a table, which makes for a much more collaborative style ofworking than is often possible in Whitehall. I completed the CIMA qualification in two years. Although I was quite familiar with accounting concepts, I thought that it would be useful to have a financial qualification to formalise this knowledge. I had spent a lot of time with both investment banking advisers and finance professionals in government and Id talked with them about all kinds of concepts. I was familiar with that language and understood it reasonably well, buttheres something about doing the exams and someof the calculations from the bottom up that makes your understanding more robust. I think the CIMA qualification gives you credibility. I certainly wouldnt have got my currentjob without it. Id really encourage people working towards it to consider a public-sector career. Some of the problems we have to deal with in government are far more complex than those inthe private sector. In business youre worried aboutprofitability, but in government we also worry about the economic and social impact of what we do. We deal with some pretty complex andimportant problems and we need really goodfinance people to help us with those.
Kirstin Baker
1993 Enters the civil service and spends a decade working on European economic policy at theForeign & CommonwealthOffice, the Cabinet Office and theEuropean Commission in Brussels. 2003 Moves to the Treasury to manage the 2004 spending review. 2005 Becomes head of the general expenditure policy team. 2008 Appointed head of the Northern Rock shareholder team and works on a series of Treasury interventions during the financial crisis. 2010 Joins the Scottish government on secondment, leading its work on capital budgeting and investment policy. 2013 Returns to the Treasury as finance and commercial director.
We did feel that, if we got it wrong and the markets didnt like what we were announcing, wecould be in a position where there was no more money in the banks cash machines
Then theres the question of how we look at risksand prepare for unlikely, but very highimpact, events. We are better at that in the Treasurythan we were before 2008. We do consider, for example, how the eurozone might collapse and what the consequences might be. There has been alot of contingency planning with regard to the eurozone and what the worst-case scenario might be, so there is more thinking about what might happen and what we might do. The crisis in Cyprusshowed the value of doing lots of contingency work beforehand, so we were able torespond rapidly as events unfolded. Is the economy on the mend? I hope so the recent signs are good but it is takinga long time. When we set up UK Financial Investments we thought it would be selling shares within a few years, but five years later its not even
Photographs by The Gasette/ Phil Gammon
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8 WAYS TO Use business intelligence better

By Peter Bartram
Firms have a vast amount of data available to them from a huge range ofsources. Business intelligence tools are designed to help them sift useful information from all this material, but, aswith any tool, they should be used intelligently to achieve optimal results
Develop an analytical culture
Deliver information wherever its needed
Illustration by Borja Bonaque
You need to develop a workforce thats enthusiastic about finding insights from business intelligence (BI), says Eddie Short, partner and head of BI at KPMG Management Consulting. But a typical problem is that most investment goes into developing the tools and far too little into making the best use of them. Short thinks that many firms have access to so much data that its easy to cherry pick material that supports your owntheories. Its therefore important to obtain validation from key members of your organisation. If you dont like what the numbers are telling you, you need tofind new options, responses and scenarios not to find a way of getting the figures to bewhat you want, he says.
In a typical company far more people work flexibly than was the casetwo decades ago. This has given rise to the need for BI tools to be available on employees mobile devices. Theability to process big data on these anywhere and at any time is crucial, according toRachel OBrien, an information management and analytics specialist atHP Enterprise Services. Tom OFarrell, a director of business and technology services company Aiimi,believes that its important for workers to be able to view real-time data on their mobile devices. Any failure to deliver information this way could be bad news when it comes to keeping customers and winning new ones.
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Make more use of unstructured data
In the past, most of the information inBIsystems came from structured datasuch as sales figures. Today, some of themost vital insights are hidden in avast mass of unstructured data, including e-mails, Word documents, PDF files and images. In fact, 80 per centof information inatypical organisationis unstructured, according to Seamus Galvin, head of R&D at Espion, aspecialist ininformation security. Thevolume of unstructured data is growing at 50 per cent a year. Galvin suggests that companies couldanalyse their unstructured data tospottrends indicating fraudulent behaviour, for example, or to gauge attitudes to the organisation among customers and employees.
information need to answer in order tomake effective decisions, he says. Designers of management information should ensure that they include the rightcombination of data dimensions toanswer the key questions that managers will be asking as they probe and challenge the information. Masters recommends making the information interactive, so that it helps individual managers to search for the specific insights they need.
Mine social media for intelligence
Focus on the future
Too much management information concerns what has happened rather than whats likely to happen. Ithas been said that managing with historic data is like driving a car by looking in the rear-view mirror. More firms should be using predictive analytics, argues Steve Farr, product marketing manager at Tibco, aprovider of infrastructure software. Its not necessary to have a mathematics degree to work this kind ofanalysis, he says. These tools remove complexity, allowing users to focus on making decisions, asking questions and exploring data. A particularly useful feature of predictive systems is their ability to monitor events and take action automatically. For example, a system could forecast events that might lead aclient to want to switch to another supplier and then act to discourage them from doing so.
understanding complex information, according to Nathan Yau, the author of Data Points: Visualization That Means Something (Wiley, 2013). Visualisation takes advantage of all kinds of graphs and pictograms. Yau believes that this should enable users tosee trends, patterns and outliers thattell you about yourself and what surrounds you. He adds that good visualisation is a representation of datathat helps you to see what you otherwise would have beenblind to if youd looked only at the naked source. Yau says that visualisation involves answering four key questions: what datado you have? What do you want toknowabout it? Which visualisation techniques should you use? And does whatyou can see make sense?
Online forums, blogs and news sites are packed with information that firms can use, but they need the right systems to do so. Social media sites are especially useful for monitoring rivals activities. The first step is to analyse a range ofrelevant sources to gain a full picture of your industry, advises Richard May, asenior executive at Spotter, which specialises in textual analysis. Whittle down and categorise the datayou do receive to remove the background noise, he says. That should leave you with accurate, useful information that will enable you to outmanoeuvre the competition. A true sign of a firms ability to monitor social media is the accuracy of its data.
Ensure that managers use the information
Keep information uptodate
View information pictorially
Visualisation converting raw data into pictorial form is a powerful way of
In a fast-moving business world, information that was useful a year ago may not now be adequate, warns JohnMasters, solutions director at Metapraxis, a business analysis company. Management information should anticipate key questions about business performance that users of the
Producing great BI is only the first step. Its wasted effort if managers arent using it. Theyre more likely to make use of itif the information is presented in the most user-friendly format possible. Masters says that people process tabular information sequentially and graphs using their visual ability. Graphs are generally the most appropriate device for communicating insights when the message is contained in the shape of its values such as a trend, a pattern of behaviour or evidenceof exceptional performance or when we need to reveal relationships among whole sets of values, he explains. We should always design the simplest chart possible to make the message clearand obvious.
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CIMA My JOBS
www.cimaglobal.com/myjobs
Job-search clinic sponsored by Robert Half
Contract work: myth vs reality

ew research shows that temporary and contract employment ison the rise. More thanthree in 10 (31%) chieffinancial officers(CFOs)have either significantly orsomewhat increased their use of contractand temporary staff compared to three years ago, showing the continued necessityUK businesses have to engage temporary resource to help augment permanent headcount. Organisations are increasingly reliant on agency workers to carry out business critical processes, with research showing that CFOs have increased their levels of temporary/contract staff from one in five (18%) departmental employees two years ago to one in four (26%) an increase of eight percentage points. The highest use of temporary workers is within small companies, where nearly one third (30%) of departments comprise temporary or contract staff. This pattern can be seen as good news for unemployed workers or accountants who are looking for the work-life balancethat contract employment affords. Someprofessionals fail to consider the option of contract work, however, largely because of persistent myths about what it does or does not entail. Here, we set the record straight about some of the most common misconceptions: Myth: working as an contract professional will hurt my prospects of getting hired on a permanent basis. Reality: Many businesses view contract hiring as a way to evaluate individuals for permanent positions. With organisations still scrutinising costs, employers are understandably cautious about premature hiring but theyre also struggling with
managing workloads. To bridge gaps, theyare bringing in the most accomplishedcontract professionals theycan find, and many firms are evaluating the skills and cultural fit of these individuals to possibly make thempermanent employees later on. Myth: temporary and contract work is short term, sporadic and low paying. Reality: Although project consulting frequently offers the option of working fewer hours than a full-time role might require, professionals with sought-after skills usually find that they can work as much as they want. As to wages, the specialised and niche area of contract engagements will often command a premium. In fact, more than one in four (26%) CFOs plan to increase hourly wages and day rates for temporaryand contract professionals in the next six months. Myth: you cant include temporary or contract work on a CV. Reality: As the temporary industry has grown and expanded, contract assignments have come to be viewed more as high-level consulting projects than so-called temp work. Hiring managers understand that project work provides valuable experience that can enhance a candidates abilities.
Myth: you cant develop new skills working for a recruitment consultancy. Reality: Accounting and finance professionals who work on a temporarybasis are often involved in projects that are as interesting and challenging as those they might encounter in permanent positions. Whats right for you? As the economy gains momentum, skilled accounting and finance professionals would be wise to go wherethe jobs are and, at the moment, manyemerging opportunities are contract roles. By distinguishing betweenthe myths and realities of contract work, youcan make an informeddecision onwhether working as a project professional might be an option that makes sense for you.
Robert Half is the worlds first and largest specialised recruitment consultancy, with a global network of more than 345 offices worldwide. For more information about our professional services or career advice, please visit roberthalf.co.uk.
Find your next role at roberthalf.co.uk
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RESOURCE
study notes
T4 part B Test of Professional Competence in Management Accounting
STudy & tech notes/the institute/events

In this issue: Paper P2 Performance Management, p48 Paper P1 Performance Operations, p50
Its crucial to ensure that your supporting calculations are accurate and complete. Youll earn marks for this, of course, but it will also improve your chances of scoring well when you make your recommendations By the T4 case study writer
bout 10 of the 15 marks obtainable under the application criterion in the T4 assessment matrix are available for the preparation of arange of supporting calculations. Accuracy is vital here. In the real world, operational and senior managers will look to you, as their management accountant, to analyse any given fin ancial situation correctly and explain the results to them. You must therefore develop the ability to prepare accurate figures, understand what they mean andexplain the likely financial effects of various courses of action. T4 tries to emulate such r eal-world situations. The unseen material always provides new problems and proposals on exam day and its your task to write a cohesive, well-structured report containing sound financial analysis. If your calculations are wrong, you could end up recommending the wrong decision or rejecting a viable proposal. Most crucially, your calculations should help you to analyse the opportunities and
problems facing the business in the case study and to form a sound financial basis for your recommendations. Its clear, then, that accurate calculations do more than gain you credit under the application criterion. They should help you to understand the implications of the a lternative actions available, which should in turn enable you to gain higher marks under the important judgement and logic criteria each of which carries 20 marks. Lets consider the types of calculations that have been required in four recent T4 exams. l BVS fleet maintenance case, March 2013: the effect on operating profit of changes in utilisation levels for 10 underperforming workshops; the net present value (NPV) of the proposed extension of the firms coverage for servicing electric vehicles; the NPV of the opportunity cost of the lost margin from the customer called FAST ifthe proposal to extend the coverage for servicing electric vehicles were to be rejected; and the cost of the proposed apprenticeship scheme. l D plc house building case, November 2012: NPVs for two alternative joint
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ventures; the savings and payback from restructuring the company; the residual income from a housing development proposal; and the reduction in operating profit resulting from a decline in the number of new homes built owing to competition from a rival firm. l D plc house building case, September 2012: the effect on profit and cash flow if the new proposals were to be a ccepted; and the effect on profit and cash flow if they were to be rejected. l Jot toy company case, May 2012: the total manufacturing cost and effect on profitability of a potential new order for atop-selling toy using different pricing structures; the forecast cash flow for the rest of the year; the effect on the forecast cash flow of offering early-payment d iscounts to customers; and the effect on the forecast cash flow of introducing debt factoring. As you can see from the above list, the three most common types of calculation required are as follows: l NPV evaluations of new proposals. l Cash flow forecasts. l Other costing exercises relevant to the industry setting. Lets work through the NPV calculations required by March 2013s T4 exam. The question paper and the examiners model answers can be downloaded from CIMAs website at bit.ly/T4March2013 and bit.ly/T4March2013Answers. The scenario concerns BVS, a fleet maintenance company that has a private equity investor, PIE, which owns 60 per cent of its shares. The unseen material gives cost and revenue figures for a proposed geographical extension of the firms servicing capability to increase thenumber of electrically powered v ehicles covered. It also provides information about FAST, a big client that isplanning to replace 1,000 of its conventional vehicles with electric ones and has stated that it will terminate its contract for servicing 4,500 vehicles if BVS decides against expanding its coverage. The NPV calculations for extending BVSs servicing capability for electric vehicles to all 440 of its owned and m anaged workshops show a negative NPV of 796,000 at the end of year three and a positive NPV of 17,000 at the end of year four. Most candidates were able to work out these figures successfully. The unseen material states clearly that the proposal will not be acceptable
to PIE if it cant generate a positive NPV inside three years. Some candidates did not p erform any further NPV calcul ations and they simply recommended rejecting the proposal, because it did not meet PIEs criterion. But in doing sothey were i gnoring the NPV of the o pportunity costof the lost margin on
796,000 from the servicing proposal plus 2,774,000 for the effect of the potential lost gross margin from FAST. Candidates who rejected the proposal because they had calculated only the negative NPV would not have scored many marks because theyd have failed to consider every relevant factor. Part of
FASTs 4,500 vehicles if this client were to terminate its contract with BVS. The T4 exam is all about looking at the bigger picture and taking all relevant factors into account, so what was expec ted here was a calculation of the cost of losing FASTs custom. FAST has 4,500 vehicles: 3,500 conventional ones, generating a margin of 310 apiece, and its planned 1,000 new electric vehicles, each of which will generate a margin of 70. So, if FAST were to terminate its contract, the lost margin would be 1,155,000 a year. Even if a candidate compared only the one-year figure of 1,155,000 with the negative NPV of 796,000, it would give a positive figure and show that the proposal was financially sound. The correct financial analysis should have shown that, in the required threeyear period over which the proposal is being evaluated, the annual saving of 1,155,000 would generate a positive NPV of 2,774,000. This is the opportunity cost of retaining FASTs custom. When the bigger picture is taken into account, therefore, the proposal would be acceptable both to BVSs board and to PIE, providing an overall positive NPV at the end of year three of 1,978,000. This is based on a negative NPV of
the job of the management a ccountant is to look at all material aspects and c onvince stakeholders, such as PIE, of the viability of this proposal when the loss of the FAST contract is taken into account. Candidates who recommended that the proposal should be accepted and that PIE needed to be convinced about the financials would have scored high marks under the logic criterion. In the T4 exam, as in business life, all relevant factors should be evaluated in order to arrive at a commercially sensible recommendation. You should look at a number of past T4 papers on the CIMA website, work through some of the calculations and check your solutions against the model answers. Remember that managers in industry will depend on you to advise them on the financial effects of alternative courses ofaction. The analysis that you prepare needs to be accurate and it must also takeinto account every significant issue. T4 is trying to prepare you for whats required out in the real world.
Further reading CIMA Official Study Text T4 Test of Professional Competence in Management Accounting, CIMA Publishing, 2012.
Getty Images
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Paper P2 Performance Management
Approach two to 6(a)
Your solution to any given question is unlikely to replicate the model answer in the post-exam guide. But using a different method shouldnt stop you from scoring full marks if its clear, comprehensive and correct By Norwood Whittle, FCMA, CGMA
here are several acceptable ways of answering most exam questions. Both questions in section B of May 2013s P2 paper were no exception, allowing multiple approaches. Candidates whose answers differed from the official CIMA solution could still earn the maximum number of marks available. Lets work through questions 6(a), 7(a)and 7(b) which can be obtained by downloading the question paper from CIMAs website at bit.ly/P2May2013 using two approaches to tackle each one. Question 6(a) requires us to calculate a firms optimum production plan for the month and the resulting profit, for a maximum of 11 marks (technically, 11 are available, according to the allocation guides in tables 1 and 2). The firm will either buy the component in question or make it in house. It will not do both.
Approach one to 6(a)
Our first method compares the contributions per skilled labour hour for products D, E and F with that of the bought-in component, C. For C the contribution will equal the difference between the external purchase price and the internal cost of making it. As table 1 shows, manufacturing C produ ces the lowest-ranking contribution per skilled labour hour, so the firm should keep buying it. The resulting product plan is shown in table 2.
1. Ranking contributions per skilled labour hour approach one to Q6(a) D E F CMarks Selling price per unit ($) 112 136 153 80 Total variable cost per unit ($) (58) (64) (118) (37) Unit contribution ($) 54 72 35 43 1 Skilled labour hours per unit 1.0 1.5 0.5 1.0 1 Contribution per skilled labour hour ($) 54 48 70 43 2 Ranking #2 #3 #1 #4 1 2. Optimum production plan for month one approach one to Q6(a) 2 Units Skilled labour hours Unit contribution Total contribution Marks F 3,000 1,500 $35 $105,000 D 2,400 2,400 $54 $129,600 E 1,000 1,500 $72 $72,000 5,400 $306,6002 Fixed costs ($150,000) Profit $156,6001 3. Ranking contributions per limiting factor approach two to Q6(a) D E F[ext] F[int]Marks Selling price per unit ($) 112 136 153 153 Total variable cost per unit ($) (58) (64) (118) (75) Unit contribution ($) 54 72 35 78 1 Skilled labour hours per unit 1 1.5 0.5 1.5 1 Contribution per limiting factor ($) 54 48 70 52 2 Ranking #2 #3 #1 #41
Our second method compares details of the three products, plus the figures for F on the assumption that component C is made in house. Table 3 compares the contribution per limiting factor for F when C is bought in (F [ext]) rather than manufactured (F[int]). The option with the highest contribution per limiting factor will be chosen. Its clear from the table that the contribution per limiting factor for F[ext] is greater than for F[int], so the company should continue to buy in C. The resulting production plan will be the same as that for approach one and is again worth five marks in total. The most common errors committed by candidates in answering question 6(a) included the following: l Presenting the figures poorly. l Failing to calculate the correct number of skilled hours per unit of C. l Choosing the right product mix but using the wrong contribution per unit. l Assuming that its better to buy in C and failing to compare this option with manufacturing it in house. l Failing to calculate a contribution per limiting factor and ranking purely on contribution or profit. l Failing to subtract the total fixed cost from the total contribution. The question required a profit figure. Question 7(a) offers us 12 marks to calculate the profits of divisions S and R at varying levels of external demand for the components made by S division.
Approach one to 7(a)
As all transfers must be made at opportunity cost, S division would be indifferent as to whether it sells to outside customers or to R division. Since the SRgroup has adopted the opportunity cost approach, the profits of the group as a whole atall three levels of demand will be thesame. But the split by division will o bviously vary as the e xternal demand on S changes. Table 4 shows the profits of both d ivisions for each level of demand, expressing the sales from S as a variable cost for R. In each case, the groups profit is $2,550,000.
Approach two to 7(a)
The first step when taking this alternative opportunity-cost method is to calculate S divisions profits using table 5. From this its clear that S could, if components
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4. Both divisions profits for the three levels of external demand approach one to Q7(a) S division 15,000 units 19,000 units 35,000 units Marks External sales: 15,000 x $200 $3,000,000 1 Sales to R: 20,000 x $105 $2,100,000 1 External sales: 15,000 x $200 $3,000,000 Sales to R: 4,000 x $200 $800,000 1 Sales to R: 16,000 x $105 $1,680,000 1 External sales: 15,000 x $200 $3,000,000 Sales to R: 20,000 x $200 XXXXXXXXXX XXXXXXXXXX $4,000,0001 Total sales $5,100,000 $5,480,000 $7,000,000 Variable costs: 35,000 x $105 ($3,675,000) ($3,675,000) ($3,675,000)1 Contribution $1,425,000 $1,805,000 $3,325,000 Fixed costs ($1,375,000) ($1,375,000) ($1,375,000) S divisions profit $50,000 $430,000 $1,950,000 R division Sales $8,000,000 $8,000,000 $8,000,000 1 Own variable costs ($2,500,000) ($2,500,000) ($2,500,000) 1 From S ($2,100,000) ($2,480,000) ($4,000,000)3 Contribution $3,400,000 $3,020,000 $1,500,000 Fixed costs ($900,000) ($900,000) ($900,000) R divisions profit $2,500,000 $2,120,000 $600,000 5. S divisions profits for the three levels of external demand approach two to Q7(a) 15,000 units 19,000 units 35,000 units Marks External sales $3,000,000 $3,000,000 $3,000,000 1 Opportunity cost 0 $380,000 $1,900,000 4 Variable costs ($3,675,000) ($3,675,000) ($3,675,000)1 Contribution ($675,000) ($295,000) $1,225,000 Fixed costs ($1,375,000) ($1,375,000) ($1,375,000) Profit (loss) ($2,050,000) ($1,670,000) ($150,000) 6. R divisions profits for the three levels of external demand approach two to Q7(a) S output R profit before opportunity cost Opportunity cost Profit Marks 15,000 units $4,600,000 0 $4,600,000 1 19,000 units $4,600,000 ($380,000) $4,220,000 1 35,000 units $4,600,000 ($1,900,000) $2,700,000 1 7. Impact on profits of R and the group if R buys components externally approach one to Q7(b) S external demand 15,000 units 19,000 units 35,000 units Marks External price: 20,000 x $170 ($3,400,000) ($3,400,000) ($3,400,000) 1 Transfer price from S: 20,000 x $105 $2,100,0000 1 Transfer price from S: 4,000 x $200 $800,000 1 16,000 x $105 $1,680,000 1 Transfer price from S: 20,000 x $200 XXXXXXX XXX XXXXXXXXXXX $4,000,000 1 Impact on profit ($1,300,000) ($920,000) $600,000 1 8. Group profit if R ignores transfer pricing policy approach two to Q7(b) S external demand 15,000 units 19,000 units 35,000 units Marks S divisions profit (from table 4) $50,000 $430,000 $1,950,000 2 R divisions profit $1,200,000 $1,200,000 $1,200,0001 Group profit (A) $1,250,000 $1,630,000 $3,150,0001 9. Group profit if R follows transfer pricing policy approach two to Q7(b) S external demand 15,000 units 19,000 units 35,000 units Marks S division profit (from table 4) $50,000 $430,000 $1,950,000 R division profit (from table 4) $2,500,000 $2,120,000 $600,000 Group profit (B) $2,550,000 $2,550,000 $2,550,0001 10. Impact on group profit if R ignores transfer pricing policy approach two to Q7(b) A B (from tables 8 and 9) ($1,300,000) ($920,000) $600,000
werent sold to R, have made an extra 4,000 x ($200 $105) = $380,000 at an external demand of 19,000 units or an extra 20,000 x ($200 $105) = $1,900,000 at an external demand of 35,000 units. We can now calculate the profits for R. First we work out the contribution as ($800 per unit $250 per unit) x 10,000 units = $5,500,000, which is worth two marks. S ubtracting the fixed cost of $900,000 from this figure to produce a profit before transfer costs of $4,600,000 gives us half a mark. We can then put this figure into table 6 in order to cal culate Rs profits at different levels of external demand for Ss components. Question 7(b) offers us six marks to calculate the impact on group profits if R ignores the transfer pricing policy and buys the 20,000 components it needs from an external supplier at $170 each.
Approach one to 7(b)
Because an opportunity transfer pricing policy is in operation, Ss profits would not change, but the profits of R, and therefore the group overall, would be affected as shown in table 7.
Approach two to 7(b)
Using this method, Rs profit stays the same for all levels of demand as follows: Revenue$8,000,000 Other variable costs ($2,500,000) Units purchased externally ($3,400,000) Fixed costs ($900,000) Profit $1,200,000 We can use this profit figure in table 8 to calculate the groups profits where R ignores the transfer pricing policy and in table 9 to calculate the groups profits where R follows the policy. Table 10 shows the differences between the groups profits in the two scenarios. The most common errors committed in answering 7(a) and 7(b) were presenting the figures poorly and failing to label or describe them properly. In the October issue I will look at what went wrong in Mays P2 paper to help candidates get it right in November, while in Velocity (www.cimaglobal.com/velocity) the examiner will offer tips on exam preparation and technique. Norwood Whittle is CIMA course leader at the University of Northampton and the lead marker for P2.
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Paper P1 Performance Operations
Since the very first sitting under the 2010 syllabus, all P1 papers have contained questions on investment projects, yet candidates still make the most basic blunders when applying standard appraisal techniques By the examiner for P1
he section on common errors in each P1 post- exam guide is a great resource. It helps students to see where past candidates have gone wrong when appraising investment projects and to ensure that they dont follow suit. But its clear, from seeing the same lapses listed repeatedly in these guides, that many students are failing to learn from their predecessors mistakes. There are three areas that you need to understand fully before you even come to calculate the net present value (NPV) of a project: the relevant costs and revenues; the timing of cash flows; and the application of taxation. The question will normally detail the initial investment and how it is depre ciated. This is important information, as depreciation is not a cash flow and somust not be included in your calcu lations. You need to check whether the figures provided for future costs include or exclude depreciation. If it is included, you need to remove it and use the figures excluding depreciation as the cash outflow. Too many candidates either dont adjust for depreciation or do it wrongly. Perhaps the area that causes most difficulty is the concept of opportunity cost. This is the value of the benefit foregone when choosing one course of action over the next best option. It has arisen many times in P1, where the decision to start a particular project will have an effect on current operations. In March 2013s paper, for instance, the question centred on a potential investment in a mobile tyre-fitting service. The effect of making the investment was that some of the customers who would previously have used the firms depots for replacing tyres would use the mobile service instead. The lost contribution from the depot sales needs to be treated as a cash outflow arising from the investment decision. Some candidates treated this as an inflow, which is obviously wrong. You should also note that in some scenarios the cash i nflows from a project may not take the form of sales revenue. Firms may decide to invest in equipment that will result in cost savings. These future savings represent the cash inflows from the project because, as costs are reduced, cash inflows will be increased.
The relevant costs and revenues
CIMA defines relevant costs and revenues as those that are appropriate to a specific management decision. These are represented by future cash flows, whose magnitude will vary depending on the outcome of the management decision. Ifstock is used, the relevant cost, used in the determination of the profitability ofthe transaction, would be the cost of replacing the stock not its original purchase price, which is a sunk cost. The only costs and revenues that should interest us, then, are future cash flows that will be affected by the decision. Any cash flows that arise, no matter what decision is taken, are irrelevant and can be ignored as can any past costs. Questions often feature a sunk cost for example, a feasibility study that has a lready been conducted. You should ignore such costs, since theyhave been incurred and the investment decision cannot affect them. Unfortunately, many candidates fail to realise this, adding these on to the initial investment.
appraisals the convention is to refer to year zero, year one, year two and so on. You need to be clear what this means. To make discounting easier, we make the simplifying assumption that cash flows arise at year ends, so cash flows in year one arise at the end of year one. But year-zero cash flows arise at the start of year one or right at the start of the project. These are not discounted, since they are assumed to arise now. The initial investment should therefore always be treated as arising in year zero and not bediscounted. Students still make the error of including the initial investment in year one and discounting it at the cost of capital. This is clearly wrong, because the initial investment is incurred at the outset and at todays time value of money. Also remember that any residual value in the project should be treated as a cash inflow at the end of the project. Its normally assumed that working capital will remain the same throughout the project. Unless you are told otherwise, you should treat the investment in working capital as a year-zero cash outflow. Most candidates do this, but what some then fail to do is to bring back the working capital as an inflow when the project finishes. The idea is that the firm sells any inventory, recovers its accounts receivable and pays its accounts payable, resulting in a cash inflow at the end.
The application of taxation
The timing of cash flows
The timing of cash flows is crucial, since the value of money today is not the same as it will be in a years time. In project
The tax calculations in project appraisals can be a minefield. If tax is included in the scenario, youll normally need to calculate tax depreciation and the corporation tax due on the net cash flows. Accounting depreciation is not an allowable expense for tax purposes, but the authorities have a system of tax depreciation that enables the net cost of assets to be deducted as an allowable expense. Note that the tax depreciation claimed in the final year is the tax- written-down value minus any residual value. It is worth checking that the total tax depreciation you calculate over the lifetime of the project equals the ini tial investment less the residual value. Tax depreciation is calculated each year at 25 per cent of the tax-written-down value of the assets. Lets look at the simple example of a firm called X with a project that involves an initial investment of $1,000,000 in
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1 Calculating the tax depreciation on Xs investment project Year Tax depreciation Tax-written-down value 0 0$1,000,000 1 25% x $1,000,000 = $250,000 $1,000,000 $250,000 = $750,000 2 25% x $750,000 = $187,500 $750,000 $187,500 = $562,500 3 25% x $562,500 = $140,630 $562,500 $140,630 = $421,870 4 25% x $421,870 = $105,470 $421,870 $105,470 = $316,400 5 $316,400 $200,000 = $116,400 Residual value of machinery = $200,000 $800,000 2. Calculating the tax payable on the cash flows of Xs investment project Year 1 Year 2 Year 3 Year 4 Year 5 Cash flow $500,000 $500,000 $500,000 $500,000$500,000 Less tax depreciation $250,000 $187,500 $140,630 $105,470 $116,400 Taxable cash flow $250,000 $312,500 $359,370 $394,530 $383,600 Taxation @ 30% ($75,000) ($93,750) ($107,811) ($118,359) ($115,080) 3. Calculating the net present value of Xs investment project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $ $ $ $ $ $$ Cash flow (1,000,000) 500,000 500,000 500,000 500,000 500,000 0 Residual value 200,000 Less tax (37,500) (37,500) (53,906) (53,905) (57,540)(57,540) payments XX XXXXX XXXXXXX (46,875) (46,875) (59,180) (59,179) XXXXXXX Net cash flow (1,000,000) 462,500 415,625 399,219 386,915 583,281(57,540) Discount factor 1.000 0.909 0.826 0.751 0.683 0.6210.564 Present value (1,000,000) 420,413 343,306 299,813 264,263 362,218(32,453) machinery that will have a residual value of $200,000 at the end of five years. The project has net cash inflows of $500,000 each year. The investment is eligible for tax depreciation. The company has a cost of capital of 10 per cent. Table 1 shows how the tax depreciation is calculated. The total tax depreciation
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over the life of the project is $800,000 that is, $1,000,000 less the residual value of $200,000. Table 2 shows how the tax payable on the cash flows is calculated (the tax rate is usually 30 per cent, butthe question will specify the rate). Acommon error is to include the initial investment and/or the residual value in the calculations. This is wrong, because both of these have already been included in the calculation of tax depreciation. We can now perform our NPV calculation, which is shown in table 3. Adding up all the present values on the bottom line of the table gives an NPV of 657,560. Some students treat the tax depreciation incorrectly as a cash outflow it results in a reduction in tax payable but is not an outflow itself. To work out the NPV we need to use the cash flows before deducting tax depreciation and then deduct the tax payments. In the exam you will be given information about the timing of the cash flows, but usually half is payable in the year it arises and the remainder is payable in the subsequent year. The NPV calculation is relatively easy. The harder aspect is getting the cash flows and tax fi gures right. Once you have gained a good understanding of these areas youll be able to tackle project appraisal questions with confidence.
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Global contact details

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Exam notice
Visit www.cimaglobal.com regularly for updates

November 2013 main exams
These exams will be held on 19, 20 and 21 November. Enter them by logging in to your My CIMA account. The standard closing date for entries is 5pm (BST) on 13 September. If you enter after this date, you will have to pay an additional late-entry fee. The deadline for late entries is 5pm (BST) on 19 September.
Tax rules for paper F1
Information about the relevant tax rules for the Financial Operations exam will be published on the institutes website at least six weeks before the date of theexam and will be reproduced on the question paper.
Script and administrative review services
September extra exam results
Exam fees
You must pay your exam fees when you submit your entries. These are as follows: l Operational and Management levels: 81 per exam. l Strategic level: 87 per exam. l T4 part B on paper: 110. l T4 part B on PC: 160. l Late-entry fee: 205.
Cancellations and changes
CIMA does not accept cancellations and will not refund fees. To change papers orexam centres, you will need to email exam.changes@cimaglobal.com before 5pm (BST) on 19 September. Changes requested before 5pm (BST) on 13 September will be free of charge, but the cost will be 66 thereafter. Full information on entering and sitting the exams, including fees, can be found at www.cimaglobal.com/exams.
The results will be released on 20 September. To receive yours via email, update your communication preferences online through your My CIMA account before 13 September. The results will also be sent out by second-class post or airmail to all students. The institute cannot give out results on the telephone or to personal callers at any CIMA office. Students who have taken the extra exams and wish to enter the November paper-based exams without being charged the usual late-entry fee will, after receiving their results, have from 20 to 25September to submit their entries online via their MyCIMA accounts. There is no option to enter any later.
A script review service will be available for Septembers three Strategic level papers and the T4 part B exam after the results are released. The service will beavailable to you only if youscored between 40 and 49 marks (between 20 and24 credits in T4 part B) in the exam for which you want a review. An administrative review service will be available for all Operational, Management and Strategic level papers. The application deadline for all services is 18 October. Further details about these and how to apply for them can be found in the After the exams section at www.cimaglobal.com/exams.
CIMAsphere
Exam papers and model answers
Pre-seen material for papers at Strategic level and T4 part B
The pre-seen material for the November T4 partB case study exam is available to download from www.cimaglobal.com/ t4preseen. The pre-seen material for the E3, F3 and P3 exams will be available to download from www.cimaglobal.com/ strategicpreseen in mid-October. Its your responsibility to download this material and familiarise yourself with it. A clean copy of the pre-seen material and further unseen material will be provided in the exams. You cannot take any notes with you into the exam hall.
Septembers question papers and model answers are available to download from the relevant Study resources pages on CIMAs website at www.cimaglobal.com/ Students/Exam-preparation/. Further model answers can be found in Velocity (www.cimaglobal.com/velocity).
CIMAsphere (www.cimaglobal.com/ sphere) is the institutes online community for management accounting students and professionals. This resource enables you to network with fellow students and is particularly helpful if you have any technical queries. In the buildup to the exams it will host Ask the tutor sessions in which industry experts and CIMA advisers will answer questions from students on various subjects.
Computer-based assessments at Certificate level
Post-exam guides
Post-exam guides for Septembers papers will be available in October. These are essential reading for unsuccessful candidates and those studying new subjects. They contain: l The exam questions. l The rationale for each question. l A suggested solution for each question. l The outline marking scheme. l The examiners comments.
For full information about entering for a computer-based assessment, visit www.cimaglobal.com/certificateentry. If you wish to sit Operational or Management level exams in November, you must have completed the Certificate level by 12September.
Queries
Visit www.cimaglobal.com/exams to see whether your question is answered there, or getin touch with CIMA Contact (cima.contact@cimaglobal.com) or your local office (see panel, page 51).
Code of ethics CIMA members and students are required to comply with the CIMA code of ethics. Ensure that you are familiar with the code and how to apply it. Further resources are available at www.cimaglobal.com/ethics. Also see this months Hot potato, page 10.
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technical notes
A first step towards reducing disclosure overload
By Paul Vos, senior financial markets manager, Shell International
In this issue: How automating balance sheet account reconciliation can lead to a real return oninvestment, p57
he increasing size and complexity of companies annual financial statements (AFSs) has created several negative effects that are cause for widespread concern. First, the sheer volume of a typical statement is not helpful to users. According to research by Deloitte1, the average length of a listed companys annual report was 56 pages in 2000. By 2010 it was just over 100 pages. Second, its many immaterial disclosures serve to obscure the relevant information, making it hard for readers
to see the wood for the trees. Third, b ecause some of the information it p rovides is beyond what the manage ment team needs in order to run the business, preparers have to incur considerable time, effort and cost in making all these extra disclosures. I have analysed the responses to three 2011 discussion papers issued by the International Auditing and Assurance Standards Board, the UK Financial Reporting Council (FRC) and the European Securities and Markets Authority. These publications prompted 120 stakeholders including standard-setters,
regulators and the preparers, auditors and users of AFSs to submit extensive and thoughtful replies covering more than 1,000 pages. The vast majority of stakeholders said that they frequently encountered immaterial disclosures and nearly all users saw this as problematic. Information overload reduces their ability to make investment decisions, which could mean that they rely less on these statements in future. This state of affairs is not only detrimental to individual investors and creditors; it could ultimately also make the distribution of capital in the economy less efficient. To make matters worse, a decline in reliance among investors on AFSs has a negative effect on the companies that issue them. They could lose a channel for communicating with investors and thereby lose a method of attracting capital. This could, in turn, oblige firms to rely more upon other channels, such as investor relations presentations. Standardised and mandatory reporting through AFSs is widely believed to generate societal benefits the positive externalities first identified by research in 19712. This commits firms to reveal
The Financial Reporting Councils model of the factors fuelling disclosure overload
Standard-setters
are keen to be seen as effective.
Regulators
want to minimise the risk of attracting any criticism. They focus on inclusion, rather than exclusion, while their reviewsmay appear to seek tick-box compliance with the disclosure requirements.
Auditors
are anxious to avoid any challenge and adverse publicity. They rely on manuals of accounting produced by the big four; their illustrative accounts and Gaap checklists address all disclosure eventualities; they have a tick-box view of compliance; andtheyre influenced by what everyone else is doing.
AFS preparers
fear breaching the regulations, so err on the side of caution. They build on previous years disclosures, focusing on what to insert (regardless of materiality), rather than what to omit, in orderto ensure compliance. Theprospect ofan external review by auditors or regulators reinforces their tick-boxapproach.
Their disclosure requirements arederived from an anti-abuse viewpoint and are driven by the need for verifiability.
Source: FRC, Cutting clutter: combating clutter in annual reports, 2011.
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information in a non-selective and truthful way, preventing them from giving only the good news to investors. But realising these positive externalities does require that AFSs are actually used. In fact, where mandatory AFSs are not being used, it represents a loss for society. This is why disclosure overload is also a concern for the custodians of these externalities eg, policymakers, standard-setters and regulators. For our part, we need to make sure that disclosure requirements are appropriate, says Hans Hoogervorst, chairman of the International Accounting Standards Board (IASB). Bottom up, each requirement mayhave made sense when a standard wasintroduced. But, from a top-down perspective, do the disclosures in totality improve the clarity of financial reporting or do they make it more difficult to see what is really going on? Hoogervorsts American counterpart on the US Financial Accounting Standards Board, Leslie Seidman, observes that disclosure overload is one of the most common concerns that I hear from all types of stakeholders. Many tell me that financial reports are just too long and, as a result, that theyhave become much less effective tools for communicating with investors. Yet investors continue to say they want more information, particularly when there is a business downturn or failure. Often the information these investors want is available in the financial statements, but it is hidden in plain sight. Its apparent that all parties to the process are suffering the effects of overload. Yet its also clear from the continuing growth of immaterial disclosures that no one seems to be tackling the problem effectively. In its discussion paper, entitled Cutting clutter, the FRC sets out a charmingly simple and powerful behavioural model that suggests what is fuelling the trend (see diagram, previous page ). This model illustrates how the actions of one stakeholder affect those of the next one along the chain. Standard-setters, regulators, auditors and AFS preparers want to be seen as effective and are fearful of criticism. This is shaping their behaviour. Preparers are risk-averse and tend to err on the side of caution. Because regulators arent seen to challenge unnecessary disclosures, preparers and their auditors believe that they are better off simply making all disclosures as listed under international
Preparers and their auditors believe that they are better off simply making all disclosures as listed under IFRSs
financial reporting standards (IFRSs), regardless of their relevance, and providing notes to each line item listed in the primary statements, even if these dont provide material information. My research reveals that all stakeholders accept this behavioural model to a large extent (although auditors are slightly less united in their views). Judging from all the responses to the FRC discussion paper, I think that preparers and auditors cannot realistically be expected to solve the problem independently. Encouraging them to change requires strong and vocal support from regulators and standard-setters. So how could disclosure overload in statements prepared under IFRSs be reduced? The IASB is clearly well placed to show leadership here. I believe that a public endorsement by the IASB of the key recommendations made in Losing the excess baggage, a 2011 research report3 it commissioned two accounting institutes to produce, would represent the strong and credible support needed.
The proposals made in the report boil down to two approaches: l Reducing disclosure requirements in individual reporting standards. Being listed in an IFRS does not automatically make something material. l Disconnecting the decision to include a specific line item in the primary statements from the decision to provide information in the notes. Its not a given that a material line item always comes with material information and vice versa. Most parties acknowledge that both proposals are actually in line with IASB guidance. In theory, these should be irrelevant because only material disclosures are obligatory anyway. But, in practice, a clear public endorsement by the IASB of these approaches to disclosure will encourage preparers not to issue immaterial information automatically. Such an endorsement would be a robust and plausible first step. Although it would not dilute the IASBs existing guidance, it would have a positive influence on all other stakeholders in the reporting process. An endorsement would not meet approval in all quarters, of course, but the potential critics could merely be motivated by their reluctance to exercise greater judgement on matters of materiality. Because reducing disclosure overload requires preparers to be more discerning, such views would actually support the IASBs adoption of a more selective approach towards its disclosure requirements. Furthermore, by backing the recommendations the IASB could take a step towards a reporting regime based on a single p rinciples-based disclosure framework or one founded solely on disclosure principles in individual standards.
References 1. Deloitte, Swimming in words: surveying narrative reporting in annual reports, 2010. 2. J Hirshleifer, The private and social value of information and the reward to inventive activity, The American Economic Review, Vol 61, No 4, 1971. 3. New Zealand Institute of Chartered Accountants and Institute of Chartered Accountants of Scotland, Losing theexcess baggage reducing disclosures in financial statements to what is important, 2011.
Getty Images
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How automating balance sheet account reconciliation can lead toareal return on investment
By Mario Spanicciati, executive director, EMEA, and executive vice-president of operations at BlackLine Systems
nsuring that investments deliver returns is more crucial than ever during an economic downturn, as organisations work to limit their costs and allocate capital only for projects that they are sure will deliver a tangible return on investment (ROI). A seemingly mundane and so often overlooked process thathas been proved time and again to deliver an impressive return when optimised through automation is balance sheet account reconciliation. Account reconciliation is an under appreciated, yet crucial, process to help ensure an organisations financial integrity. Weaknesses and inefficiencies in the reconciliation process often lead to mistakes on the balance sheet and overall inaccuracies in the financial close. Inorder to ensure the accuracy of its financial statements, a company must first be certain that its underlying general ledger account balances are correct. The problem has been compounded by ever-increasing regulation and the convergence of accounting standards. Working to multiple sets of standards including IFRSs, Gaap and statutory accounts creates an even more onerous burden for global companies when
they close their books every month. Thenumber of reconciliations, tasks, journals and so on is multiplied for each setof books maintained. But, by making the most of the IT available, a business can automate its reconciliations and link accounts across different standards to minimise the amount of manual labour required for each financial close cycle. More than 90 per cent of companies still manually reconcile their balance sheet accounts and most of them use Microsoft Excel spreadsheets. A preparer opens a spreadsheet, types in the balance, some reconciling items and other information with the aim of validating that the accounts balance is correct. The spreadsheet is printed, either before or after approval, and placed into a binder. The preparer then logs the completion of the reconciliation into another spreadsheet for tracking purposes. There are many risks surrounding this process, not least of which is that manual data entry leaves the process wide open to human error. In the end, what appears to be a small mistake candramatically disrupt the resulting figures in the financial statements if its not caught in time. It seems that no one is immune to this risk. You only have to look at the errors
found by a university student named Thomas Herndon in an influential 2010 paper written by Harvard economists Carmen Reinhart and Kenneth Rogoff. Herndons analysis determined that theresearch conducted for their Growth in a time of debt report (based mainly on numbers entered manually into aspreadsheet), contained mistakes that drastically altered the global economic outcomes they suggested. It turns out that anyone even eminent professors can make errors when keying in data. Eradicating human error altogether may never happen, but automating previously manual processes significantly reduces the probability that incorrect fi gures will go undetected or even be entered wrongly in the first place. Consider a simple example where a journal figure keyed into a spreadsheet has itsdecimal point moved one place by m istake. Depending on the size of the business concerned, this could result in asingle account reconciliation that is off by 1m even tens of millions. The discrepancy in the numbers, of course, can increase exponentially when multiplied by the number of inputting errors and accounts to be reconciled. Then theres the case where some firms realise only after implementing a new IT solution that there are accounts that have never been reconciled yet are making their way on to the financial statements. While the errors found in Growth in a time of debt did not affect the bottom line of any company (it was an indepen dent report on national economies), they were certainly a wake-up call for many organisations still struggling with the temperamental nature of Excel. In an article for BBC News online 1 about the repercussions of spreadsheet mistakes and Excels accountability Colm ORegan noted: Our lives are g overned
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by Excel. This would probably ring true with accountants across the UK. One cannot help but look to a software package, now past its 30th birthday, that is becoming the scapegoat when things go wrong. Excel is only as good as the person using it. Streamlining the financial close process by automating account reconciliations is an important first step towards achieving integrity in the balance sheet numbers. The key benefits include: l Centralised control. Managers have real-time reporting and can rely on improved accountability from specific account ownership. l Improved monitoring. Balance changes, new accounts, delinquencies and other risk-associated events can be monitored through email alerts. l Increased productivity and efficiency. Standardised templates with defined formats, including access to policies and procedures, enable reconcilers and managers to concentrate on content rather than form. l Reduced operational costs. The savings to be gained purely from the elimination of paper, binders and storage associated with the account reconciliation process can add up significantly. IT support and maintenance costs are other potential hard cost savings. Accountants can be reassigned to more strategic roles. l Reduced audit costs and risks. Data presented in a consistent format, as well as the direct accessibility of recon c il iations, enables auditors to revise their audit approach and to do this from theiroffices, reducing both staffing and travel costs. Having complete and consistent reconciliations across the entire organisation reduces the risk of unrecorded adjustments or material misstatements popping up. l Improved accessibility. The system canbe configured to give 24/7 access from any mobile device to all important r econciliations, numbers, reports and supporting documents. l Increased data security. All key information is backed up electronically. Calculating a tangible ROI for any technology investment is extremely important. As companies resort to ever more expensive initiatives to ensure their survival, there is no longer room to take a relaxed approach to reconcil iations. In the past, one small mistake would have been serious, but a minor
One cannot help but look to a software package, now past its30th birthday, thatis becoming the scapegoat when things go wrong
inconvenience in the long run. Today, one simple error can have huge impli cations for an organisation. Thanks to advances in technology and solutions specifically designed to automate and optimise the financial close process, it has become simpler than ever for firms to keep on top of their books and ultimately ensure accuracy and reliability in their financial statements. Analyst reports are readily available to show ROIs of well over 100 per cent in most cases for companies that have automated their financial close processes. Documented case studies show quick and substantial returns, with a payback period of as little as three months. One firm determined that its total investment was recovered in the savings on paper alone in the first year. The time savings for preparers from the efficiency improvement are estimated
at anywhere from 20 per cent to 40 per cent. Supervisors and managers time savings can be as much as 50 per cent because of the very visible workflow and consistency provided by a standardised, automated system. There seems to be acommon view that automation enables auditors (both internal and external) to devote their time to more important matters than chasing down binders full of spreadsheets and constantly checking the account reconciliation and close control processes. The advantages of automating the account reconciliation and financial close processes far outweigh the costs, but technology alone is not enough. Proper training in reconciliation techniques, standardised templates, ongoing monitoring and support from senior managers are all key factors in creating a top-class reconciliation process. Given the risks and errors inherent in the manual approach, the smart combination of technology, proper training and continuous process improvements will lead to a faster, more controlled financial close, producing greater confidence in an organisations results ultimately resulting in a justifiable ROI for the project.
Reference 1. Colm ORegan, The mysterious powers of Microsoft Excel, BBC News online, 21April 2013 (bit.ly/ExcelErrors).
Getty Images
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The Transforming the finance function Mastercourse
What you learn on
ubrey Joachim, FCMA, CGMA, isabusiness and management accounting practitioner with more than 30 years experience in a range of sectors. A past president ofCIMA and a graduate of the Australian Institute of Company Directors who holds anMBA from Sydney Graduate School ofManagement, he now travels the world as atrainer, coach and mentor.
This one-day course is designed to show the next generation of finance professionals why they need to broaden their scope if they are to addgreater value to their organisations andhow to do it. The intended bottom-line outcome is good financial performance management based on a clear understanding of the organisations strategic objectives. The course, managed by BPP Professional Education, covers all aspects of why finance teams have to transform their approach, presenting an overview of the reasons. The need for change is unrelenting, with the biggest driver being the growing demand for the financefunction to play a greater role ata strategic level and not only in determining financial strategy. Transforming finance is a neverending journey of change, because thebusiness environment is evolving constantly, as is the organisation. Istartthe course by considering how financialprofessionals can transform the function with the help of powerful management accounting tools. This means not only collating numbers butalso looking at whats driving the organisation to get to those numbers. Indoing so, finance professionals become finance partners, working with peers in every part of the organisation to add tangible value. As a result, the finance function can be considered not as a cost but rather as a value generator. Research by global management consultancy Hackett Group, which works with CIMA, has found that in best-practice organisations around the world up to half of the finance function works to support strategic decisionmaking. I use case studies to highlight organisations where the finance function has made such a positive contribution using management accounting tools and techniques. One of these is Shell, whose CFO, Simon Henry, identified thatthe finance function added 15 per cent to that groups net present value at one point.
One of the best-practice case studies focuses on the achievements of Shells finance team
High-tech hints and tips
Getty Images
World-class performance as a finance professional can be achieved through contributing to an organisations strategy by making full use of big data and analytics other areas that I cover on the course. Applying these resources, the function can provide a futuristic view through predictive analytics andenhance the insights that the
organisation derives from using key performance indicators, activity-based costing and high-level variance analysis. When you combine management techniques such as lean and Six Sigma with social media platforms and business intelligence tools, the impact can be significant, making the management accountant a dynamic member of the team. It can mean working as a partner to sales in the field or as a production partner in the factory. Management accountants must therefore have skin in the game, as Warren Buffett puts it. This means thatifa business outcome is successful they will receive plaudits for their contribution. Conversely, if it fails they will accept responsibility along with others on the project. The ultimate impact of finance transformation is working smarter rather than harder. This could entail areduction in the size of the function as management accountants become even more integrated into the organisation. To some degree the function as we know it may become extinct before long. Its clear to me that financial professionals must change to offer a far more dynamic and value-adding proposition. For further details about Transforming the finance function, visit www.cimamastercourses.com
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The latest developments from CIMA, plus upheld decisions
The institute
CIMA issues revised How the institutes members handbook benevolent fund helps members he members handbook,
avehicle for the institutes constitutional documents and some ofits subordinate documents, has been updated. The publications content has been revised and its navigability improved to make iteasier for management accountants to refer toasan aid to compliance. The handbook contains CIMAs charter, byelaws and regulations. These govern the conduct of all students and members, plus that ofCIMAs management through itscouncil. Theyunderpin the institutesregulatory framework, forming the building blocks for the professional standing of its members and students through regulation, monitoring and, where necessary, disciplinary procedures. In short, theyhelp to ensure that members are competent, trusted and working in thepublic interest.
The handbook contains the following: l The laws of the institute. l CIMAs code of ethics. l Guidance on licensing and monitoring, professional conduct and external oversight of CIMA. Any feedback on the revised handbook should be sent to elaine.smyth@cimaglobal.com
Overview of contents
IMA operates a benevolent fund thats designed to help management accountants and their families in times of difficulty. Mark, for instance, is a member who, having worked as a management accountant for ten years in a variety of organisations, suffered a stroke that affected his ability to work. The left side of my body was hit by astroke in the middle of the night, herecalls. By the time the ambulance arrived, I had passed out. Initially, Mark hoped for a swift recovery and return to work. But, while he recovered in a rehabilitation unit, itbecame apparent that the damage to the right side of his brain would keep him out of action for longer than hed first expected. At this point the benevolent fund provided a grant to support him financially through his rehabilitation. The grant has made a big difference to my recovery, he says. It means that Im able to go outdoors with my son, for instance, and Im able to use that time totalk to him. I couldnt do this if I hadnt received the grant. I have a lot to be grateful to CIMA for and I can assure you that I think about this daily.
Notices of uphelddecisions investigation committee

The investigation committee found aprima facie case of misconduct for Amarjit Jassi, a registered student, to answer in relation to a complaint that he: had acted unprofessionally by invoicing a third party for advice given, although no agreement regarding payment for services had been made andthe discussions were informal in nature; and had disclosed confidential information to the third partys employer in a malicious and vindictive attempt to cause harm after the third party had refused to pay the invoice. Pursuant to regulation II.8(e) of the royal charter byelaws and regulations, the committee invited Jassi to consent to the imposition of the sanction of a severe reprimand by way of consent order without further proceedings towhich Jassi agreed. A finding upholding the complaint was recorded and an order was issued for the imposition of a severe reprimand. The investigation committee found aprima facie case of misconduct for JonBradbury, ACMA, CGMA, to answerin relation to a complaint that hehad provided accounting services in2008-12 without being registered as member in practice with CIMA. Pursuant to regulation II.8(e) of the royal charter byelaws and regulations, the committee invited Bradbury to consent to the imposition of the sanction of a reprimand and fine of 500by way of consent order without further proceedings to which Bradburyagreed. A finding upholding the complaint was recorded and an order was issued for the impositionof areprimand and a fine of 500.
Supporting members and their families in their hour of need
Presidential engagements
12 September Executive committee meeting andnew members celebration, Leeds. 18 September Appointments committee. 19-21 September The Society of Accountants in Malawis lakeshore conference, Malawi. 27-29 September Memberss annual conference,Zimbabwe.
The benevolent fund relies on the generosity of more fortunate CIMA members for the financial resources thatit needs in order to support members and their families through difficult periods. Members can donate online or set up regular donations through their My CIMA accounts. For further information, visit www.cimaglobal.com/benevolentfund
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Your guide to recent and forthcoming CIMA events
Events
Past events
CIMA 2013 GBC national finals Throughout May, multiple locations The institutes flagship 2013 Global Business Challenge, sponsored by Barclays, has been in full swing around the world in recent months. National finals took place across three continents, as teams from Malaysia to Pakistan and the UK toGhana battled it out to win a place in the global final in South Africa. Girl power triumphed in the Malaysian final at INTI International University as an all-female team of students clinched the national title. Representing Universiti Teknologi Malaysia, Team E-Z found it was anything but easy as they battled to beat four other teams. The Middle East showcased its growing potential, with more than 100 teams from 24 universities across the region, including the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait and Oman, registering to take part in the competition. All six finalists presented strong business cases, but Middlesex University, Dubai, once again produced the winning side as Pinnacle emulated the successes of its predecessors. Not to be outdone, South Africa produced a nail-biting national final, with Simplified Solutions beating three other teams to clinch victory in Johannesburg. Head judge David Cropper, CIMA Africa regional board chairman, said: We were extremely impressed with the quality of work presented. Thetalent displayed makes us hopeful that the youth of today will lead South Africa into a brighter future. Cricket day bowls them over 22 June, Toronto The CIMA school cricket tournament was a big hit in June, with the Toronto Police team winning the CIMA Mayors Trophy. Rogers Communication won the CIMA Media Trophy and E&Y the CIMA Accountants Trophy. Torontos mayor, Rob Ford, and CIMAs president, Malcolm Furber, were on hand to present the prizes.
UK Interviewing technique forinterviewers 12 September, 6.30pm for 7pm Haydock Contact Anna Willis on 0208849 2334 or visit www.cimaglobal.com/ northwestengland andnorthwales
Coming events
Networking with professionalism andconfidence 16 September, 6pm for 6.30pm Rotherham Sue Tonks, managing director of Synergy Consulting and Training, will teach you networking skills that will last you a lifetime. Visit www.cimaglobal.com/ northeastengland
Glasgow 2014: 300 days togo until the XX Commonwealth games 24 September, 6pm for 6.30pm The Corinthian Club, Glasgow Mark Drummond, financialplanning managerat Glasgow2014, will reveal the plan to take the project from 300 days to go to being games ready, including lessons learnt from London2012. Visit www.cimaglobal.com/ scotland Memory techniques 25 September, 6.30pm for 7pm Stoke-on-Trent Contact Julie Witts on 0247684 9380 or visit www.cimaglobal.com/ westmidlands
Bank of England overview of the economy 26 September, 6.30pm Cambridge Contact Cathy McGrath on 01508 522025 or visit www.cimaglobal.com/ eastmidlandsandeastanglia CPD technical update leadership for finance professionals 2 October, 9am Birmingham Cost: 60 members, 30 students, 95 guests Email mastercourses@ cimaglobal.com CIMA North West autumnball 12 October, 7pm Liverpool
Cost: 50 (discounts apply fornew members and students see CIMAs website for furtherinformation) Contact Anna Willis on 0208849 2334 or visit www.cimaglobal.com/ northwestengland andnorthwales Canada CIMA Canada conference 29 October, 1.30pm-5.30pm ( followed by cocktails) Toronto Productivity: Canadas 21st-century challenge is the theme of this conference, which has Craig Alexander, chief economist at TD Bank, as the keynote speaker and CIMAs president, Malcolm Furber, as guest of honour.
Visit www.cimaglobal.com/events for updates and a full list of events, which are free unless otherwise stated. CIMA Mastercourses your catalyst for business change: visit www.cimamastercourses.com or call 0845 026 4722. To submit an event for this page, email ben.jackson@cimaglobal.com
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E
Illustration: Jrn Kaspuhl/Dutch Uncle
The human dimension is crucial to an organisations sustainable success

organisations are consistently failing to cost the contribution of people to their performance or worth and that they seldom assess the risk to their success posed by poor people management. Measuring human capital means that businesses can assess quantitative data to track the success of initiatives such as recruitment or training campaigns and respond quickly to the findings. HRdirectors are increasingly being asked to act as business partners alongside CEOs and CFOs to inform business strategy. This is a positive development that should be encouraged. Without accurate and relevant information in this area, businesses willnot be able to optimise the return ontheir investment in human capital orplan effectively. Management accountants are ideally skilled to help atthis intersection by helping to analyse both financial and non-financial data and putting it to good use. Now, thats what Id call smart, smart, smart.
CIMA CEO column
state agents are well known for stressing the key factor affecting property value: location, location, location. But, when it comes to addressing what determines a businesss value, few corporate leaders cite the importance of people, people, people.
engaged in several new collaborations. Ourrecent survey with the Economist Intelligence Unit, for instance, showed that inadequacies in human capital management had led more than 40 per cent of the firms covered in the research to experience problems affecting their ability to innovate or hit key financial targets. More worrying still, only 12 per cent of CEOs in the sample told us that they were confident about the quality of the management information they were receiving on human capital. Together with the AICPA, we are designing resources in the area of human capital and workforce analytics. For example, organisations need to know the underlying cost and impact of losing and replacing talent. As a result, we are developing Cost of Losing Talent (COLT) and Cost of Replacing Talent (CORT). These tools are intended to help an organisations HR and finance teams assess the value of its employees. CIMA also recently joined forces with the Chartered Institute of Personnel andDevelopment to strengthen expertise in this field. This collaboration aims to foster closer working links between the finance and HR professions. It will focus initially on transforming how organisations understand, measure and report information about their people to drive business success. One of our first projects will focus on human capital measurement. This is designed to address a shared concern that
Many recent business crises can be traced back to failures in corporate culture that could have been picked upmuch more quickly had longer-term people-related indicators been given more weight. CIMA has long argued thatgreater emphasis should be placed on measuring the value of non-financial assets including a workforces skills, experience and motivation. Employees are key stakeholders in any business. They are also a key asset. It seems out of place, therefore, that investors assessing a company do not always have access to data about the people power behind the businesss outputs and financial achievements. Thereport that marked the launch of our CGMA designation in early 2012, Rebooting business: valuing the humandimension, highlighted this need. It predicted that business leaders would focus increasingly on the value afforded by factors such as customer relationships and the knowledge and human capital represented by employees. Nearly 200 of the 280 global CEOs we spoke to agreed that these non-financial factors were crucial value drivers. So the consensus is very much that the human dimension is central to an organisations sustainable success. To accelerate the development of accounting for people, CIMA has The COLT and CORT tools can be found at www.cgma.org/talent
Charles Tilley, fcma, cgma Chief executive, CIMA
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Watercooler Just checking that my email got through to you

Someone has texted to say that theyve sent me an email. Really? Itmight have taken me time to email back, but Id have got to it. Weirder still was my initial reaction: I checked my voicemail. Why? Was I expecting a message on there askingme to check for a text asking me to check my email?
My inbox contains more than 40,000 emails, of which 4,996 (4,997 no, make that 4,998) are unread. Im not boasting; Im bulging. As part of the process of completing my time sheets I religiously sweep up anything that might have arrived from the net and slipped through mine. I do delete stuff. At least I move messages to a delete folder for safe keeping until the PC does it for me Im far too wary to destroy material myself. There is an abundance of guidance onhow to handle email. Write today, send tomorrow seems to be a favourite maxim or, as I call it, mail in haste, repent in panic. Remember that feeling of hitting the send button too soon? And how can Julia Streets would like to recall her email do anything other than pique the interest of the very person you dont want to open the email? Another top tip advises us to check our emails only once or twice daily. What? Nothing raises my pulse more than email separation. At an embassy reception Iattended recently, allcomers were obliged to part with their mobile devices at the door. My theory is that this was nothing to do with security. Rather, it was a deliberate ploy to reduce alcohol consumption, as many guests raced off early to be reunited with their gadgets. Iscrabbled around, never finding the email I needed had I moved it or not? Ishould have called the folder distraction. I could have consulted my list and finished the task in half the time. Back in the early 1990s the speed of communications relied on the efficiency of the mail-room junior and the postal service. Wethumped out typewritten correspondence in carbon-copy triplicate and our working day revolved around cries of: Whens the last post? Has it gone? We called that pressure. Keen for us to embrace email, my employer at the time ran a competition to reward the email-using employee of the month. I bet that firms staff competition is now for smallest inbox. I have always embraced progress, yet the nostalgic in me enjoys the fact that the lingering CC and BCC abbreviations hail from those crazy memo-in-areusable-internal-envelope days of carbon copy and blind carbon copy. So keen are some of us to keep on top of our email and social media updates that one handset isnt enough. How we juggle and, all too frequently, drop them. Our clumsiness is understandable: our thumbs are simply too tired to grip. (Thumb yoga, the next craze you heard it here first.) A top tip Im told: if you drop your mobile in liquid, switch it off and bury it in rice (dried, not cooked; grain length unimportant) for 24 hours. A top tip Im telling: laptop users prone to spillages should not try the same thing imagine the grains and groans from sticky-keyboard double-typing.
Spam a lot
My approach to email management relies on good old pen and paper. Ifamatter needs attention, itll make it on tomy list. I did try using my email programs task list, but that was soon overrun withflagged, linked items and ever-red unread notes. One client suggested that Ishould flag up emails and move them into a new folder called action. Imagine my frustration as
Julia Streets is the founder and director of Streets Consulting, an international business development, marketing and communications consultancy. Sheisalso a writer (author of The Lingua Franca ofthe Corporate Banker), after-dinner speaker andstand-up comedian. The Lingua Franca of the Corporate Banker is available from Searching Finance, Amazon and Barnes& Noble. Facebook The Lingua Franca of the Corporate Banker Twitter @streets_ julia Email julia@streetsinthecity.com
Illustration: Dmitry Litvin/Dutch Uncle
Analogue in
Ridicule it as I might, I do get our did you get it? obsession, because emails doget caught in spam filters. Who knew that the term spam emanated from thedastardly tactics of abusers on gaming bulletin boards? To scroll other users text off the screen, they would repeat the word spam over and over again. Wouldnt a longer word marmalade, say, or bulldozer have been moreeffective and require less effort? I like the idea of your email got caught in my marmalade filter. I confess that I have checked my emails many times while writing this column. I have even checked my folders for deleted emails and spam. And, tomy horror, Ive just found an old email in the latter from my editor asking about myarticle. This is a little embarrassing and awkward. I never replied. Oh, well. He should have texted. Thank you to everyone who has written to me sharing their experiences of corporate jargon, which Ive discussed in previous articles. The subject seems to have hit a common nerve. Do you have any tips about handling emails? Id love to hear from you.

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www.fm-magazine.

com September 2013

Why a paywall is n0ton the menu atthe guardian s online newspaper

Financial Management | September 2013

Our generation Y survey is one of the most comprehensive of its kind

A word from the president

CIMA LinkedIn group: tinyurl.com/ ahxyoda

Malcolm Furber, FCMA, CGMA CIMA president

Financial Management | September 2013

Financial Management | September 2013

CIMA CEO column Charles Tilley p65 Watercooler p66

Financial Management | September 2013

I worked on Implementing global accounting standards in an intergovernmental organisation

Financial Management | September 2013

[The IOM by numbers] Represents

member states Employs

I have seen our budget increase sixfold from $200min 2012

Financial Management | September 2013

This months dilemma

Finance and HR can have more impact by working together

poll of the month

No, but a significant improvement is needed: 54%

No, its in good shape: 10%

Financial Management | September 2013

Disengaged staff hitting profits

Expansion back on CFOs agendas

For CGMAs, the following content is now available online

Financial Management | September 2013

A big fraud or a fraud killer?

Chris Kennedy, chief technology officer and co-founder ofTrustev

Policy myopia: a ticket to dystopia

Financial Management | September 2013

Illustration: Karolin Schnoor /Dutch Uncle

Financial Management | September 2013

Illustration: Lyndon Hayes/Dutch Uncle

Financial Management | September 2013

Financial Management | September 2013

The insider view: South Africa

Financial Management | September 2013

[South Africa by numbers]

largest economy GDP growth in2012

CPI inflation in 2012

Source: Statistics South Africa

Financial Management | September 2013

Illustration by Leandro Castelao

Source: The Banker, Bloomberg, Thomson Reuters

Agricultural Bank of China

BNP Paribas (France)

Wells Fargo (US)

Mitsubishi UFG* (Japan)

China Construction Bank

JP Morgan Chase (US)

*As at 31 March 2013

By tier-1 capital as at 31 December 2012 ($bn)

Financial Management | September 2013

the smart continent

Mightier than the sword

Financial Management | September 2013

5.98bn 85% 644m

[The mobile phone market by numbers]

Financial Management | September 2013

Estimated percentage of Africas population that are smartphone users

[The mobile phone market by numbers]