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HK$70.00 A close look at the evolving global discussion on the accounting for business acquisitions and goodwill Issue 4 Volume 16 April 2020 DRIVING BUSINESS SUCCESS PLUS: CRISIS MANAGEMENT The importance of contingency planning in uncertain times PROFILE Fiona Nott, Chief Executive Officer of The Women’s Foundation SECOND OPINIONS How should businesses communicate throughout the COVID-19 crisis? REMOVING THE SHIELD

PRESIDENT’S MESSAGE APLUS April 2020 1 I would like to begin by congratulating the new bureau secretaries recently appointed by the central government. The Institute has long had a very good working relationship with the Financial Services and the Treasury Bureau (FSTB) and we look forward to continuing this with the new Secretary Christopher Hui Ching Yu. One area we had been interacting with the FSTB recently on was the reporting deadline of 31 March for listed issuers with 31 December year-ends. I would like to thank the FSTB, the Securities and Futures Commission and the Hong Kong Exchanges and Clearing Limited (HKEX) for their support, including the guidance issued, in this regard. Due to the hard work of the issuers’ finance teams, and their auditors, almost all of the 1,792 issuers published financial data, and the vast majority (1,399) published their preliminary results announcement with auditors’ agreement and a further 314 published results without auditors’ agreement. Indeed, just five did not report any financial data due to COVID-19. We are now focusing on 31 March year-end issuers, with the HKEX having recently issued guidance that includes relief measures similar to those announced in February and March for these entities. Although hard work is the usual practice during the reporting season, this year has required the preparers and practitioners to work in different manners to normal, due to travel restrictions and other difficulties. In fact, the COVID-19 outbreak has really forced all of us – and particularly the accounting practices – to review our operation routines, move out of our own comfort zones and significantly change the usual ways of conducting our work. I’m impressed by how staff have been able to meet output deadlines over the last few months through no traveling, working from home and f lexi-hours, greater adoption of cloud-based technologies, using new portals to exchange and share information, teleconferencing and more. This precious experience shows us that we can remodel and fine-tune our entire modes of operation when the pandemic is over. This will hopefully provide the imperative to address some of the longstanding concerns within the profession, particularly around long working hours, significant traveling and work-life balance – and to better prepare the profession for the future. Change isn’t easy, but when it has been forced upon us, we’ve responded. I hope there will be some lasting improvements from this crisis. The government has announced two rounds of relief measures as part of its Anti-epidemic Fund, alongside those announced in the 2020/21 budget. Some of the new measures may be of interest to members, such as the Employment Support Scheme, the Enhancement to SME Financing Guarantee Scheme, and the Distance Business Programme. To help members find relevant details, the Institute has launched a new webpage, under the COVID-19 – CPA Information Centre, with links and other useful information on the schemes. The page will be updated as more of the schemes are implemented. Please do check it out. Although Hong Kong has again recently been recording a low number of new daily COVID-19 cases, the disruption will continue globally over the next few months. As many of Hong Kong’s industries are engaged in cross-border businesses or are reliant on tourism, they too will remain disrupted. For the Institute, this continued disruption includes cancelling the June examination session, including for the Qualification Programme. While this may be of disappointment to some students and members, the well-being of all involved is our priority. Helping our members is always the Institute’s top objective. Despite our reserves and cash positions having significantly dwindled – particularly due to the membership fee waivers for the last two years and the cancellation of the June examination session – the management is trying hard to contain costs and find ways to give further concessions to members. I look forward to discussing the proposals at Council in due course. It’s hard to believe that it’s been over three months since the beginning of the COVID-19 pandemic. With an uncertain recovery process, the Institute remains committed to preparing for the future, and ensuring our members’ success. We have had a few days of very hot weather in late April, my mind turned to summer. Who knows what this summer holds, with no certainty that last year’s social disruption is behind us. Whatever happens, this summer is sure to be different to a typical one. The holidays, barbeques, hiking and trips to the beach with family and friends will be affected. But the outbreak has shown how accountants are resilient and have an ability to adjust, improve, and overcome. “ With an uncertain recovery process, the Institute remains committed to preparing for the future, and ensuring our members’ success.” Johnson Kong President Dear members,

CONTENTS Issue 4 Volume 16 April 2020 NEWS 01 President’s message 04 Institute news 06 Business news FEATURES 08 Time for Plan B How companies can implement contingency planning measures to navigate uncertainties amid the COVID-19 pandemic 14 Second opinions How should businesses communicate throughout the COVID-19 crisis? 16 Leadership: Fiona Nott The Chief Executive Officer at The Women’s Foundation on the fight for more women in leadership roles in the city 23 Meet the speaker What to expect from the Institute's virtual China Tax Conference 24 Settling the standard A look at the global debate on how goodwill accounting can improve for better disclosures about acquisitions 30 Accountant Plus: Loretta Chiu The Associate Director of Barings (U.K.) on bringing her accounting expertise to the asset management world 36 How to Dr Scarlett Mattoli, Clinical Psychologist at Psynamo Group, on working heathily from home 37 Thought leadership: Lydia Leung The Associate Director, Valuations Services, at IHS Markit, on the impact of the COVID-19 pandemic on business valuations SOURCE 38 IRD issues guidance on cryptocurrency taxation An overview of the Inland Revenue Department’s guidance on digital assets 40 Reviewing the OECD’s COVID-19 analysis A look at how the OECD’s new 16 08 Time for Plan B The full perspective Fiona Nott, Chief Executive Officer at The Women’s Foundation, on why there is room to improve gender equality in Hong Kong

DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Copy Editor Jemelyn Yadao Junior Copy Editor Jeremy Chan Contributors Nicky Burridge Registered Office 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia President Johnson Kong Vice Presidents LamChi Yuen, Nelson, FongWan Huen, Loretta Chief Executive and Registrar Margaret W. S. Chan Head of Corporate Communications and Member Services Rachel So Editorial Manager Paul Smith Editorial Coordinator Maggie Tam Office Address 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants April 2020. Print run: 7,300 copies The digital version is distributed to all 45,690 members, 19,458 students of the Institute and 2,358 business stakeholders every month. guidance can help taxpayers affected by the pandemic 43 Massive U.S. tax relief act to combat economic fallout from COVID-19 A look at the new tax relief measures to help individuals in the United States 44 TechWatch 210 WORK-LIFE BALANCE 46 Hitting the right notes CPA musicians on why music goes far beyond being just a pastime 52 Young member of the month Tony Yeung, Assurance Senior Manager at Moore 54 Leisure Plus Spotlight on home entertainment; what members are currently reading and listening to 56 Let’s get fiscal Accounting skills can and will save your life one day, says Nury Vittachi 30 Breaking borders How Loretta Chiu, Associate Director of Barings (U.K.), went from being an accountant working in the Cayman Islands to helping portfolio managers in London 54 46 Hitting the right notes Leisure Plus

NEWS The Institute released its Quality Assurance 2019 Annual Report this month. The report summarizes the work and practice review outcomes of the Quality Assurance Department, as well as the changes introduced to its practice review and professional standards monitoring programmes last year. In 2019, the department carried out 354 practice reviews of practice units with audit clients, an increase of 15 percent from 2018. The Practice Review Committee considered 374 practice review reports in 2019. The percentage of directly closed cases had improved slightly from 61 percent to 65 percent. However, the number of complaints or referrals to the Financial Reporting Council (FRC) cases increased to 18, including 9 cases relating to practices with listed clients. “Despite the FRC having taken on the regulations of listed company audits, we see benefits in continuing to carrying on the professional standards monitoring function. The function has been in existence for more than 30 years and is useful for the Institute’s post-implementation review of professional standards,” wrote Elsa Ho, the Institute’s Director of Quality Assurance. “Accordingly, we will retain this programme and continue to refer non-compliance matters identified under this programme to the FRC in future.” New webpage on government relief measures The Institute has created a new webpage to inform members about some of the measures introduced by the Hong Kong government to mitigate the effects of the COVID-19 pandemic on various sectors and residents. The webpage contains information and links related to relief measures under the Anti-Epidemic Fund and the measures included in the 2020-21 budget. It can be found in the “COVID-19 – CPA Information Centre” section of the Institute’s website. June 2020 exams cancelled amid COVID-19 concerns The Institute announced this month that the June 2020 examination session has been cancelled, after monitoring the developments of the COVID-19 pandemic. This covers all professional examinations, namely the Qualification Programme, Practising Certificate Examinations, and the Aptitude Tests. The decision was taken to prioritize the health and well-being of the Institute’s students and the communityat-large. The Institute also took into consideration the business conditions of member firms and their workloads. The next examination session will be December 2020. Further details will be announced closer to the start of the enrolment period. Institute to hold almost 15 webinars in May To help members access the training they need, the Institute will hold almost 15 webinars in May covering a wide range of topics. Check them out on the HKICPA Events app or the event calendar on the Institute’s website. Webinars now part of Support Programme Webinars are now part of the Institute’s Support Programme for members who are unemployed or planning to rejoin the workforce, in light of the continuing replacement of face-to-face events with webinars. The Support Programme offers 5 percent of webinar enrolments free-ofcharge to eligible members. Council meeting minutes The abridged minutes from the January Council meeting are now available for members to read. They can be found in the “Members’ area” of the Institute’s website. Institute news Business news Quality Assurance 2019 Annual Report now available Quality Assurance 2019 Annual Report 4 April 2020

NEWS Business U.K. BIG FOUR PARTNERS PAID UP TO 25 PERCENT LESS AMID CORONAVIRUS The accounting industry in the United Kingdom has plunged into its worst crisis in a decade, with the Big Four cutting their partners’ pay by up to a quarter and mid-tier firms furloughing junior staff to build up cash reserves and cope with the impact of the coronavirus. The roughly 74,000 partners across the U.K.’s Big Four earned an average of £720,000 (HK$6.9 million) last year and are involved in company audits, tax and restructuring advice and consulting on transactions. PwC U.K. has deferred all staff appraisals to autumn and Deloitte U.K. is offering the option of reduced working hours for its staff, while maintaining a larger proportion of their salary. U.S. CFOS EXPECT LAYOFFS AMID CORONAVIRUS FASB TO DELAY TWO STANDARDS DUE TO CORONAVIRUS The Financial Accounting Standards Board in the United States issued the Proposed Accounting Standards Update on 21 April, indicating that it would impose a one-year delay in the implementation of the leases and revenue recognition standards due to the impact of COVID-19. The lease accounting standard would be effective for private companies and non-profits for fiscal years beginning after 15 December 2020 and interim periods within fiscal years beginning after 15 December 2021. The proposed effective date deferral for revenue recognition would be limited to private company franchisors. Those stakeholders would have the option to apply the new standard for annual reporting periods starting after 15 December 2019, and interim reporting periods within annual reporting periods starting after 15 December 2020. 1 IN 4 A survey of 140 companies in Hong Kong found that 15 percent of them had reduced base salaries for executives since the coronavirus began affecting the city’s economy. This is according to Executive Pay and Cost Containment Measures for COVID-19 in Hong Kong, a report released on 23 April by consulting firm Comptify Analytics. Of the companies surveyed, the study noted that 70 percent of the Hong Kong-based executives received a pay cut between 20 to 30 percent. The logistics and supply chains industries were found to be affected the most, with the study noting that 83 percent of companies have implemented pay cuts or furloughed employees to control costs. 15 PERCENT OF HONG KONG EXECUTIVES SEE PAY CUTS AMID PANDEMIC FRANCE TO BLOCK COMPANIES IN TAX HAVENS FROM STATE AID France will block companies registered in offshore tax havens from claiming aid from its government coronavirus bailout, following similar moves by Denmark and Poland. Denmark announced its measures only three days earlier. France’s Finance Minister Bruno Le Maire announced on 23 April that companies either registered or controlling subsidies in tax havens are not entitled to receive any share of the relief package. The rescue package increased by €45 billion to €110 billion on 15 April to support the economy hit by the coronavirus. “It goes without saying that if a company has its tax headquarters or subsidiaries in a tax haven, I want to say with great force, it will not be able to benefit from state financial aid. There are rules that must be followed,” said Le Maire. More than a quarter of chief financial officers in the United States foresee layoffs at their organizations because of the coronavirus pandemic, according to a survey by PwC. The firmpolled 313 U.S. companies and found that twice as many CFOs anticipate redundancies at their workplace compared with two weeks before the study, with 26 percent expecting layoffs. It found that the pandemic is now the top concern for CFOs, with more than three quarters citing the pandemic’s effect on operations and liquidity. FewCFOs believe their company will return to “business as usual” within a quarter, even if the coronavirus were to disappear immediately. 6 April 2020

APLUS KPMG in the United Kingdom and one of its senior partners have been reprimanded, and the firm fined £455,000 (HK$4.3 million), due to deficiencies during an audit of a U.K. company. The partner was fined £29,250 and will have three of her audits subject to a quality performance review by the firm. She is also required to undergo further training, according to a statement by the Financial Reporting Council (FRC) on 2 April. The FRC noted that the firm failed to “apply sufficient professional scepticism, or to obtain and document sufficient appropriate audit evidence in part of their checks.” The fine is the latest sanction against the firm in recent years. KPMG and the other Big Four firms in the U.K. have faced scrutiny by regulators after instances of subpar audit work have come to light, leading to parliamentary calls to end their dominance by splitting them up. 639 TIMES Akesobio, a Chinese cancer drug developer, saw its HK$2.58 billion initial public offering in Hong Kong oversubscribed 639 times, making it the most popular biotechnology listing among the city’s retail investors. The Zhongshan-based company’s offer of 15.95 million shares in the city, a tenth of its global shares offering, sawHK$166.5 billion in investors’ funds locked up when the offer closed on 17 April. It is also Hong Kong’s largest listing so far this year, following Beijingbased Pharmaron’s HK$5.3 billion listing last November. The company aims to complete the trials and apply for approval to market them in the second half of 2020. CHINESE DRUG COMPANY’S IPO IS OVERSUBSCRIBED KPMG U.K. FINED MORE THAN £450,000 FOR AUDIT FAILINGS CHRISTIE’S ORDERED TO PAY MORE THAN US$16 MILLION FOR TAX EVASION Christie’s, the London-based auction house, agreed to pay US$16.7 million to settle allegations that it had failed to properly collect sales taxes in NewYork from 2013 to 2017. The settlement, announced on 9 April by the Manhattan District Attorney’s (DA) office, follows a lengthy investigation into how Christie’s and its affiliate companies in Amsterdam, Dubai and Hong Kong failed to collect sales taxes on works sold by foreign offices but delivered to clients in NewYork. The DA says Christie’s attempted to consolidate its international private sales operations in a division operated out of London following flawed tax advice that it would not need to collect NewYork tax on sales to NewYork clients as a result. PAYPAL AUSTRALIA FACES MATERIAL LOSS FOLLOWING EXTERNAL AUDIT PayPal Australia has warned that the company could take a financial hit following the completion of an external audit into the company’s compliance with financial crime laws. Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia’s financial intelligence and regulatory agency, was appointed in September 2019 to examine PayPal’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. AUSTRAC was granted an audit extension on 27 February following a request from PayPal, ref lecting the size and complexity of PayPal Australia and the company’s international business operations. It is due to issue a final report at the end of August. A British court has ordered EY in the United Kingdom to pay US$10.8 million to a former partner who blew the whistle on suspected money laundering at a major gold refinery in the United Arab Emirates. Amjab Rihan, a former EY partner, claimed he was let go after raising concerns about an audit of Dubai’s biggest gold refiner Kaloti in 2013. Rihan told the court that the firm tried to suppress a report that identified multiple problems at the refiner, including allegations about the importation of gold fromMorocco that had been coated with silver to avoid export restrictions. EY insisted it had acted properly in reporting the actions of the auditor and that the judge created “an unprecedented legal duty.” US$11 MILLION EY TO PAY TO WHISTLEBLOWING AUDITOR Hong Kong’s small- and medium-sized enterprises (SMEs) are to receive loans of up to HK$4 million under a new scheme set up by the Hong Kong government to mitigate the economic impact of the COVID-19 pandemic. Starting from 20 April, the Hong Kong government will guarantee 100 percent of loans of up to HK$4 million made to SMEs at low interest rates, but will require company directors to provide a personal guarantee. However, more than 60 percent of SMEs are dissatisfied with the government’s support measures, with 40 percent hoping for a grant scheme instead of a loan scheme, according to a survey by the British Chamber of Commerce. The coronavirus pandemic has seen the city’s unemployment rate hit a high of 4.2 percent, while banks have approved more than 9,000 applications for loans and other relief measures worth HK$57 billion to help companies pull through the pandemic. HONG KONG SMES STILL NOT HAPPY WITH CORONAVIRUS LOANS April 2020 7

CRISIS MANAGEMENT Contingency planning In February, employees from Jaguar Land Rover, the United Kingdom’s largest car manufacturer, flew back from Mainland China with suitcases full of Chinese-made car parts. Even with this action, the group, which produces nearly 400,000 vehicles a year in its three U.K. factories, warned it was at risk of running out of parts in just two weeks due to the disruption the coronavirus outbreak had caused to its supply chains. Ralf Speth, Chief Executive Officer of Jaguar Land Rover, said at the time: “We are safe for this week and we are safe for next week and in the third week…we have parts missing.” From broken supply chains to falling consumer demand to staff being prevented from going into the office, businesses around the world are being impacted by the coronavirus pandemic. The World Economic Forum has estimated that a short-lived outbreak could lead to a 3 percent contraction in global gross domestic product in 2020. Meanwhile, with travel restrictions and socialdistancing measures expected to remain in place for many months, economists are predicting rising levels of corporate layoffs and bankruptcies throughout the year. The pandemic has highlighted the importance of contingency planning and crisis management for companies, and the consequences of not being prepared. Even before the current outbreak, a host of issues, ranging from climate change to geopolitical tensions, were creating increased risks to companies’ business plans. John Donker, Partner, Forensic Services, at PwC, says managing a crisis is now a fact of business life. In PwC’s Global Crisis Survey 2019, conducted well before the current situation, 69 percent of participants reported having experienced at least one crisis in the past five years, with 95 percent anticipating facing one in the future. “Whether it is a global event or a more isolated one, like a cyber-attack or social media attack, the risk is there and how a business is able to deal with and emerge from a crisis is directly related to how well it’s prepared,” Donker says. Christopher Arnold, Head of Small and Medium Enterprises/ Small and Medium Practices (SMEs/SMPs) and Research at the International Federation of Accountants (IFAC), agrees: “In these unprecedented and uncertain times, it is more critical than ever for all organizations, including SMEs and SMPs, to focus on crisis and risk management, as well as business continuity planning.” Rani Kamaruddin, Partner, AML and Sanctions Regulatory Compliance, at KPMG China, points out: “Most companies have contingency plans for short-term disruptions, such as typhoons or serious f looding, however, these plans may not be adequate in the face of a challenge that may be larger in scale or more severe by its nature, such as the COVID-19 outbreak.” Failing to have a contingency plan in place can have wideranging implications for a company. Matthew Li, Founder of NOVA CPA and a Hong Kong Institute of CPAs member, points out that potential impacts include everything from lost revenue and loss of corporate reputation, to human resources (HR) problems, potential health and safety liabilities and even higher insurance premiums in the future. TIME FOR PLAN B The coronavirus pandemic highlights the importance of proactive contingency planning and crisis management for companies. Nicky Burridge finds out the best ways to craft a contingency plan and what businesses can do to remain agile amid the harsh realities of a crisis Illustrations by Harry Haysom 8 April 2020

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CRISIS MANAGEMENT Contingency planning Creating a contingency plan Agnes Chan, Managing Partner, Hong Kong and Macau, at EY and an Institute member, describes a contingency plan as being a blueprint for an organization to deal with an unusual event and enable it to return to its usual business operations as soon as possible. She suggests that a key first step in contingency planning is to create a cross-function crisis management team. This should include the company’s head, as well as representatives from frontline professionals, legal, IT, HR and corporate communications departments, and office administration. Edward Au, Southern Region Managing Partner of Deloitte China, says that in order to respond to incidents rapidly and effectively, and to minimize the impact on the business, companies should set out the tasks, roles and responsibilities of key players, such as people in HR, marketing and finance, in their contingency plan. He adds that the most successful plans contain a number of core elements, including launching and sustaining a crisis command centre, supporting talent and strategy, maintaining business continuity and financing, and shoring up the supply chain, as well as staying engaged with customers and the business ecosystem, and strengthening digital capabilities. Kamaruddin suggests companies should also plan for alternative work arrangements, such as having a second site where critical business activities can continue to be performed to limit disruption to the business. She adds that in the current situation, some companies have had to rent additional office space to ensure they can maintain distancing measures among staff. “Plans should also include measures to ensure timely and accurate communication with employees, customers and third parties, such as vendors and suppliers, to reassure them that you will stand shoulder-to-shoulder with them during these challenging times,” she says. Arnold at IFAC suggests SMEs and SMPs base their continuity plans on a PPRR framework, covering the four elements of prevention, preparedness, response and recovery to ensure minimal disruption to the company’s operations. He says companies should consider factors such as what supplies are critical to keep the business operating and how they will be obtained if global supply chains are disrupted, as well as closely monitoring cashflow on a daily and weekly basis. IFAC’s Guide to Practice Management for SMPs includes a module on risk management, which covers business continuity planning and disaster recovery. “The key to business continuity planning and disaster recovery is to look at it as an entire function and document the various components in one plan,” Arnold says. “It can include an emergency pack, that has documents, such as a list of employees with contact details, a list of customer and supplier details, financial and banking information, and insurance “Incorporating these elements is the best way of ensuring a resilient business model.” How integrated reporting mitigates crises Integrated reporting can help companies build sustainable business models that are better able to mitigate crises. The practice, which began after the global financial crisis, aims to help companies recognize values and risks beyond just the financial. Jonathan Labrey, Chief Strategy Officer at the International Integrated Reporting Council (IIRC), explains: “If companies are only managing their financial resources and are only accountable for their financial results, they are missing out on a lot of potential value in terms of human capital, intellectual capital and other types of value that go into building a sustainable business.” He adds that at the same time, companies also need to recognize things that were previously considered to be non-financial risks, such as climate change, over the short, medium and long term, as these issues now pose a risk to a business’ financials. “It is no longer satisfactory to separate financial and non-financial issues,” Labrey says. Integrated reporting also aims to bring an end to siloed thinking and decision-making within companies, and instead connect different teams and information within an organization to promote integrated thinking. The IIRC has developed a framework that helps companies recognize different types of capital and navigate different risks over different horizons to create sustainable long-term value. “Incorporating these elements is the best way of ensuring a resilient business model that helps companies orientate through really challenging times, like the one we are going through at the moment,” he says. Integrated reporting can also be a powerful tool for companies in their contingency planning as it highlights the various challenges they may face in the future. “It provides insight and foresight that is really helpful as a governance tool that should help to support businesses doing their contingency planning,” Labrey says. He adds that companies have often adopted integrated reporting in the aftermath of crises, and he expects to see increased take up of the practice as companies navigate their way out of the current situation. “We hope our framework can be a useful tool in helping businesses navigate what are going to be uncertain and difficult times that are coming down the track, even as we start to recover from the current crisis.” 10 April 2020

APLUS company details. It may include equipment such as back-up hard drives and security codes.” He adds that a procedures manual, which fully documents the processes and operations, should be prepared and the whole emergency pack should be stored safely and securely, possibly off-site. When creating his company’s own contingency plan and advising clients on theirs, Li at NOVA CPA says it was important to look at the company’s IT infrastructure, including back-up and recovery systems. “If your IT staff is unable to physically manage your data centre, your company might have trouble responding to the current crisis. That is where cloud-based, fully automated disaster recovery services come in,” he says. Indeed, having access to data is important in helping companies prepare for uncertainties and respond to crises, according to Terry Smagh, Senior Vice President and General Manager, Asia Pacific and Japan, at enterprise software company Blackline. “Data is power and those organizations that can access and communicate reliable information will be best prepared, even identifying issues before they become crises,” he says. “Finance teams need to have access to key performance indicators and financial metrics, both actuals and forecasts. By organizing such information into dashboards, leaders can make quick assessments and even faster decisions.” The risks businesses face are constantly evolving, so contingency planning should not be seen as a one-off exercise that can be put to one side once completed. Instead, “ Plans should also include measures to ensure timely and accurate communication with employees, customers and third parties, such as vendors and suppliers, to reassure them that you will stand shoulderto-shoulder with them during these challenging times.” April 2020 11

CRISIS MANAGEMENT Contingency planning Arnold says companies’ plans and approach will need to be regularly reviewed, and in the current environment, they may have to do this on a daily basis. Contingency plans should also be tested before they are needed. Donker at PwC says: “Stress-testing the plan with simulations before a crisis hits gives a company the chance to iron out any issues.” Mastering flexible working In the current crisis, introducing flexible working has been a key element of many companies’ contingency plans. Chan, who oversees EY’s cross-functional crisis management team, says EY’s first priority in response to the coronavirus outbreak was safeguarding the well-being of its employees. As a result, it introduced flexible working arrangements in January, including working-from-home and having team rotations in its offices to enable it to continue to operate as usual while safeguarding staff. Li at NOVA CPA suggests companies should get input from all parts of their organization when setting up home-working to help ensure the transition is smooth, with policies put in writing so that employees have clear guidelines. “Set goals and establish guidelines to help remote workers know what is expected of them so they can successfully meet their deadlines,” he says. But having staff working outside of a company’s IT network and infrastructure creates access and security challenges. As a result, Donker says companies must ensure employees have the technology to be able to work remotely and securely, including having laptops and the means to connect to the company’s systems using virtual private networks (VPN). He adds that companies should also stress-test the bandwidth of their VPNs to ensure there is sufficient capacity for all of their critical employees to access it at the same time. It is also important when using new tools for collaboration, such as third-party apps, to focus on data security and confidentiality. “Some tools are advanced in technology and user experience but have relatively poor security capabilities, which may lead to potential data leakage. It is also important to check whether cross-border data transfer is allowed when sending information, such as personal information, to parties in other countries,” Au at Deloitte says. Kamaruddin at KPMG suggests cloud-based solutions should be incorporated into a company’s overall business contingency plan. “Establishing cloud offices enables more effective cooperation and remote desktop access could be a solution to enable the continuation of working from home,” she says. Aside from the technology, human elements also need to be considered, with a culture of trust and respect created between employers and their staff, Donker at PwC stresses. “Working remotely and without the interaction with fellow employees can, for some, be 12 April 2020

APLUS a lonely and isolating experience, especially if the cause of the crisis is, in itself something as worrying as a health crisis,” he says. “We would recommend that employers should put in place support mechanisms to ensure employees stay connected to teams, and promote a sense of belonging to the organization.” Arnold at IFAC agrees: “Management needs to recognize the disruption caused will impact employees in different ways, for example the balance of work and home-life, especially with those with children. A flexible approach is vital.” The role of CFOs and CPAs The top priority for chief financial officers in these circumstances should be conducting a financial stress-test and keep expenses in check. “If the impact is material and former budget assumptions and business plans are no longer relevant, CFOs should remain agile and revise them,” says Chan. Au suggests CFOs should also review their company’s existing debt and credit facilities to ensure they have cash available. “Most importantly, the CFO should also evaluate the state of resources available to the company and set up a plan to reduce cash outflows quickly to save cash while the company is recovering from a loss,” he says. Li adds that CFOs should create a short-term cash flow monitoring system to predict cash flow issues and monitor liquidity risks. “They will also want to keep a strict eye on working capital, especially as it relates to collecting receivables and managing inventory build-up,” he says. He points out that companies will also need to monitor direct cost escalations and how these impact their overall product margins. In some cases, it might be necessary to act quickly and renegotiate new terms with suppliers or customers. CFOs will also need to assess any potential losses they will incur as a result of a crisis situation, such as if they have had to cancel live events that were forecast to generate leads and revenue, and work out how they can fill this void. CPAs in general have an important role to play in helping their clients plan for a crisis. They can help companies develop, assess and test their contingency plans, including running simulations within the business, leveraging on their intimate knowledge of the interdependencies of a company’s business operations. Chan points out that CPAs can help organizations to formulate corresponding risk management strategies, and perform risk identification and analysis according to different scenarios – all integral parts of creating a contingency plan. CPAs can also help companies stress-test their financial plans for the next one to three years, considering multiple different scenarios, according to Li. He adds that when experiencing a crisis, companies may need help revising their business plans or budgets to remain agile, as well as reviewing operating costs to try to reduce any non-essential expenses. Smagh at Blackline says CPAs can help their clients by providing real-time visibility and analysis of their financial assets and resources. “CPAs who are able to extract realtime insight, instead of months-old data, will enable leadership to pivot quickly to meet customer and stakeholder demands and respond effectively during challenging times,” he says. Smagh adds that having access to information can help assess the viability of alternative measures or calculate a company’s exposure, both internally and externally, to various issues, helping an organization determine the best way forward. Arnold points out that SMPs already have an extensive understanding of their clients’ business operations, putting them in an ideal position to provide assistance in a crisis. In some cases, he suggests CPAs may be able to advise clients on new business models, such as helping a restaurant offer takeaway services, including managing online payments and deliveries, while for others that have to close completely during lockdown, they can help access government support, renegotiate payments with suppliers or creditors and look at what assets could be sold to raise cash. “The COVID-19 crisis will likely change the course of history,” Arnold says. “The uncertain and unpredictable environment provides an opportunity for professional accountants to elevate their role as the strategic, trusted, business adviser.” In PwC’s Global Crisis Survey 2019, 69 percent of participants reported having experienced at least one crisis in the past five years, with 95 percent anticipating facing one in the future. “ CPAs who are able to extract real-time insight, instead of months-old data, will enable leadership to pivot quickly to meet customer and stakeholder demands and respond effectively during challenging times.” April 2020 13

SECOND OPINIONS: HOW SHOULD BUSINESSES COMMUNICATE THROUGHOUT THE COVID-19 CRISIS? SECOND OPINIONS Crisis managment EWAN CLARKSON HUMAN CAPITAL PARTNER, PWC MAINLAND CHINA AND HONG KONG The COVID-19 crisis has radically changed the day-to-day lives of many – both professionally and personally. For many companies, “business as usual” has been replaced with “business survival,” as companies plan to stay ahead of the crisis. At PwC China our crisisresponse efforts meant quickly setting up an emergency committee to ensure a proactive “one voice” response, with our highest priority being the health, safety and wellness of our people. We remain focused on supporting our people, clients and communities to tackle the unprecedented challenges. Some critical points at the heart of our communications included: Purpose-led and values-driven: As a purpose-led and valuesdriven organization, we focus on “building trust in society and solving important problems.” At PwC, the firm’s purpose is guided by our values: acting with integrity, care, working together, making a difference, and reimagining the possible. These act as a guiding post for our actions and communications. Communicate, engage, advocate: Clear, consistent and regular communication with people at every level within the organization is important to ease anxieties. At PwC, we actively communicate with clients who are also experiencing the same challenges, and publish thought leadership to better inform stakeholders and the community. Speed and agility trumps perfection: In this time of high uncertainty, insecurity, and misinformation worldwide, staying proactive and responding quickly is essential to building trust and confidence. Move quickly, focus on facts and concrete insights rather than on unverified news or social media rumours. Offer reliable resources that inform and protect people, business and clients. Trust your people – foster a flexible culture: In early 2019 we introduced “WeFlex,” in the spirit of providing flexible working arrangements. The scheme allows our people the flexibility to choose where and how they work provided that it works for our clients, their team and the individual. With WeFlex already in place when the crisis emerged, it enabled almost 20,000 of our people to work remotely on the principles of trust, connectivity, and quality delivery. Empower people to lead without title: While the team leader is important, now is an opportunity for everyone to step up and demonstrate leadership at all levels with a single unifying purpose. A crisis impacts different people in different ways: Be sensitive to the impact the crisis has on different people and the different pressures being faced, whether they are supported by family, with children or alone, we focused on health and well-being, providing support structures through a 24/7 “life coach,” to help our people cope with the stress. At a time of crisis, a “people first” mindset, leadership, communication and agility are essential factors to build a sense of confidence and comfort. At PwC, we have been very fortunate and inspired to have the very best of our people and individual teams come together at the most trying of times. 14 April 2020 “In this time of high uncertainty, insecurity, and misinformation worldwide, staying proactive and responding quickly is essential to building trust and confidence.”

APLUS During this critical time with all the increased uncertainties prompted by the COVID-19 pandemic, it is essential that listed companies maintain continuous, effective communications with their investors. Timely response to enquiries can enable investors and other stakeholders to make well-informed decisions and minimize the potential impacts on the company’s stock price. Furthermore, if listed companies do not respond to the inquiries from stakeholders, negative messages or rumours could arise in the market. It is the responsibility of the listed companies to clarify all false information. Silence can sometimes imply acceptance or agreement of the news. Investor relation officers (IROs), as the front-line communicator to investors and other stakeholders, should actively inquire into internal and external matters and developments from key personnel (including but not limited to executive directors, head office department heads and general managers of subsidiaries etc.). They should also take a proactive role to advise the board and/or senior executives (e.g. the chief executive officer and chief financial officer) to update the public as soon as practicable by issuing announcements on inside information and other key matters that may have impact on the business and operations of the company. During this critical situation, IROs should use communication tools that can reach investors instantly. For inside information, announcements should be made through the Hong Kong Stock Exchange’s (HKEX) website. Thereafter, they should post the announcement and update information on the company website. Social media platforms like Facebook and WeChat are also effective communication tools. Last but not least, IROs are reminded to adhere to the legal requirements when responding to inquiries – whether related to the impact of the COVID-19 crisis or not – from investors and other stakeholders by not disclosing inside information unless such information is made available to the public via publishing an announcement. The Hong Kong Investor Relations Association (HKIRA) communicated with the HKEX and issued a guidance note at the end of February with an overall objective to ensure the investing public continues to receive sufficient information to make informed investment decisions. More details on investor relations best practices can be found in the HKIRA’s Investor Relations Best Practice Guide, available in both English and Chinese. ESTHER CHAN MANAGING DIRECTOR, STRATEGIC FINANCIAL RELATIONS LIMITED DR EVA CHAN CHAIRMAN HONG KONG INVESTOR RELATIONS ASSOCIATION For businesses, the need to communicate has never been as essential as in the wake of the COVID-19 pandemic. Such need has been particularly pressing for listed companies, as the outbreak period coincided with their statutory obligations to announce yearly results. While many businesses have been able to contain the impact of the pandemic on their operations, including overcoming challenges in maintaining relations with customers, suppliers and business partners, this has required communications, both internal and external, to be initiated in a prompt and comprehensive manner. Though the general principles of communication remain true, higher frequency and broader scope of reach have been called for. What is more, businesses must now keep abreast of the latest COVID-19 developments, prepare for possible issues that are pertinent to them and their stakeholders, and formulate countermeasures; subsequently reaching out to relevant parties through appropriate channels. Also, to ensure two-way communication, channels for feedback must be kept open and direct. Timeliness, accuracy and consistency – the pillars of effective communication, have never been more crucial. Perhaps one of the greatest challenges that COVID-19 has created is the sudden ban or limitation on physical communication. While businesses already with online communications platforms have adapted seamlessly to the new conditions, those that were lagging behind soon found themselves scurrying for quick solutions, including the possible need to overcome technical difficulties and play catch-up in areas of information technology-literacy. The impact of the unprecedented scale of COVID-19 has posed another unique challenge to businesses – the need for constantly evolving contingency plans. The lockdown of cities and countries have hit particularly hard on businesses that operate on a regional scale. Contingency plans must therefore be timely implemented; neither too late, which would result in chaos or even create health threats, nor too early, which might cause confusion or obsolescence of such plans if significant changes occur after their implementation. Communicating within the optimal window of opportunity is therefore paramount. Legal implications represent yet another critical issue to be wary of, including new rules and regulations imposed by different governments or authorities due to the pandemic – all must be thoroughly reviewed prior and during formulation of communication plans. Businesses that survive the current crisis will undoubtedly become stronger and more communication adept, and will be future-proof in the brighter days to come. “ Though the general principles of communication remain true, higher frequency and broader scope of reach have been called for.” “ It is the responsibility of the listed companies to clarify all false information. Silence can sometimes imply acceptance or agreement of the news.” April 2020 15

LEADERSHIP PROFILE Fiona Nott 16 April 2020

APLUS While volunteering in New Delhi for a non-profit focused on girls’ education, Fiona Nott saw upfront the gender equality issues that plagued society in India. She returned to Hong Kong inspired by her trip – but with the need to knowwhether Hong Kong really was any better. “I think when you work in business in Hong Kong, you have a perception that it is an advanced city and we all see there are many women leaders in business as well as in law and finance. But when you look deep into it, the picture is quite different across the city,” says Nott, Chief Executive Officer at The Women’s Foundation (TWF). “When I saw the statistics and issues, I was quite shocked and I wanted to give back to the city that had given so much to me.” The big picture shows the city faces a number of challenges. “As of last year, we have one in six women living below the poverty line; we have a very low female workforce participation rate at 55 percent with Singapore, Malaysia, Australia and Mainland China at 60 percent and Japan at 70 percent; we see a majority of women are graduating from university and entering the workforce in increasing numbers, but as they progress throughout their career there’s a significant drop off and we have a real drop off of female leaders when we get to management level and certainly at board level. Also, only 13.6 percent of directors at Hang Seng Index company boards are women,” says Nott. “And underlining all of that is gender stereotypes and how that leads to these issues.” In terms of gender pay gap, Nott says that Hong Kong currently stands at 22 percent, which is worse than 10 years ago. “That’s really concerning. It’s linked to the fact that we have a low number of women progressing in their careers and we have a disproportionate number of women in low-paying jobs.” TWF, a Hong Kong-based nongovernmental organization (NGO), which was established in 2004, wants to shift those numbers. It seeks to improve the THE FULL PERSPECTIVE Despite being a global financial centre, Hong Kong lags behind other countries in the region in terms of the number of women in leadership and on company boards. Fiona Nott, Chief Executive Officer at The Women’s Foundation, tells Jemelyn Yadao why there is a business case for gender diversity, not just a social one, and the role of CPAs in achieving gender equality April 2020 17

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