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Issue 12 Volume 16 December 2020 DRIVING BUSINESS SUCCESS ROAD TO SUCCESS Ellis Cheng, Chief Financial Officer at Kerry Logistics Network Limited, on how he keeps the company and his career moving HK$70.00 PLUS: CORPORATE GOVERNANCE Strategies of the winners of this year’s Best Corporate Governance Awards PROFILE Jacky Lai, Assurance Partner at EY SECOND OPINIONS How can you leverage mindset to change behaviour?

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PRESIDENT’S MESSAGE APLUS December 2020 1 Last December, when I was elected President, I wouldn’t have believed you if you told me about the year we have had. For my final message as President, I would have expected to discuss alongside the changes we had made to the Institute, all the events and outreach activities we’d engaged in over the year. Although we were unable to hold these events, and I have often felt like a Virtual President, I am pleased that we have been able to undertake the three major tasks I set out for the Institute to focus on. Firstly, releasing the seventh long range plan. This became the Strategic Plan 20202022 published in June, which includes 27 key action items that the Institute will develop and implement by 2022. Secondly, improving our member services. We have achieved this through holding free live webinars and expanding our e-programme offering, setting up a new Members-Help-Members initiative for small- and medium-sized practices, running seminars dedicated to members who work with the Audit Commission, Treasury and Inland Revenue Department and engaging with members. Thirdly, enhancing the image of the profession. This year, we have improved our communications with members and the public through new video series, new social media channels, and celebrating the anniversary of some of our programmes. I have also been interviewed by the media about many topics that our profession is engaged in that are of interest to the public. Leading the discussion with the Securities and Futures Commission and Hong Kong Stock Exchange for concessions to meet the 31 March reporting deadline for December 2019 year-end listed companies affected by the COVID-19 outbreak was certainly a unique experience. I am glad to see that the challenge was very well managed. Like many times this year, the COVID-19 pandemic has caused disruption to our events this month. Both the Annual Dinner and the Best Corporate Governance Awards (BCGA) presentation ceremony have had to be adjusted. A video celebration was filmed and uploaded to the Institute’s website replacing the annual dinner, and features the Chief Executive of Hong Kong delivering a message for the profession. I urge you to watch the video. The BCGA presentation ceremony was replaced by a virtual press conference announcement, and the team is working on a video featuring the awards winners. You can read more about the awards in the article on page 24. I am very pleased to advise that at its last meeting the Council had endorsed the draft consultation paper on One Member, One Vote for the election of President and Vice-Presidents. The public consultation is planned to take place in the first quarter of 2021. I would like to thank the independent working group, set up early this year and chaired by Past President David Sun, for their hard work and wisdom. Another pleasing development this month has been successfully holding the Qualification Programme (QP) Module Examinations. These are the final module examinations of the current QP, and I wish the Institute success in implementing the new QP modules next year. As I reflect on the year, we have seen fundamental changes in how we work, live and play, but through it all I remain inspired by the incredible resilience, resourcefulness and resolution that I have witnessed. My journey to becoming President started while serving the Institute as a committee member back in 1994. It has been more than 25 years of continuing service and I believe I am the oldest reigning President of the Institute. Although the disruption this year has been immense, I still consider 2020, and at the age of 60, to be the apex of my professional career and I have lived a life that is full. So my fellow members, particularly young members, I want you to know that if you keep working towards your goals, they can be achievable. I would like to take this opportunity to pay tribute to my beloved mother who passed away two years ago and also thank my wife and two children, who are also accountants, for their tolerance and support given to me over the years. Finally, I thank my two VicePresidents, Nelson Lam and Loretta Fong, Immediate Past President Patrick Law, Council members and committee members for their concerted efforts over the year dedicated to our profession. I would also like to extend my special gratitude to the Chief Executive and Registrar Margaret Chan, the Institute’s management and staff for their professionalism throughout this challenging year. I have truly been honoured to serve as the President. I wish you and your family an enjoyable Holiday Season and a New Year filled with health, happiness and prosperity! For the final time... “We have seen fundamental changes in how we work, live and play, but through it all I remain inspired by the incredible resilience, resourcefulness and resolution that I have witnessed.” Johnson Kong (Virtual) President Dear members,

CONTENTS Issue 12 Volume 16 December 2020 NEWS 01 President’s message 04 Institute news 06 Business news FEATURES 08 The success ingredients in a pandemic Speakers at the PAIB Virtual Conference 2020 discuss how their businesses have learned to adapt and thrive during the COVID-19 pandemic 14 Second opinions How can you leverage mindset to change behaviour? 16 Leadership: Jacky Lai The Assurance Partner at EY on the importance of responding and adapting to change 22 How to Jannie Tam, Founder and Senior Director, at GROWDynamics Talent Development, on setting the ESG tone from the top 23 Thought leadership: Dr Nadira Lamrad The Director – Sustainability and ESG Advisory of the BEC on how businesses can commit to disclosing via TCFD 24 The Best Corporate Governance Awards at 20: Winning the long game Winners of this year’s awards share how they will continue to enhance corporate governance practices in the future 30 Accountant Plus: Ellis Cheng The Chief Financial Officer of Kerry Logistics Network Limited on what it takes to take a logistics company global 37 Meet the speaker An e-Series course set to help CPAs who are or intend on becoming a company secretary of a listed company SOURCE 38 Examining the new DIPN covering ship leasing and management tax concessions A look at the implications of the 24 08The success ingredients in a pandemic Winning the long game A look at how the Best Corporate Governance Awards are driving transparency, sustainability and responsibility across businesses

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 Director of Corporate Communications Dr Wendy Lam 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 December 2020. Print run: 7,330 copies The digital version is distributed to all 46,433 members, 18,152 students of the Institute and 2,358 business stakeholders every month. Inland Revenue Department’s newly-issued DIPN 62 42 A summary of the Institute’s new assurance technical bulletin for ESG reporting An overview of the Institute’s recently published guidance on environmental, social and governance assurance 44 Technical news WORK-LIFE BALANCE 46 Giving professional advice CPAs who volunteer at NGOs on what is most fulfilling about making time to serve the community 52 Young member of the month Corwin Kwong, Internal Auditor at The Salvation Army 54 Leisure Plus Spotlight on Christmas films; what members are currently reading and listening to 56 Let’s get fiscal Here’s to a happier, newer year, says Nury Vittachi 54 46 Giving professional advice Leisure Plus 16 A view of the new Jacky Lai, Assurance Partner at EY, on how audit is evolving from a technological perspective and the steps he is taking to drive this fundamental change

NEWS The Institute elected Raymond Cheng as President for 2021, following the 48th annual general meeting (AGM) on 10 December. Rosalind Suk Yee Lee and Li Kin Hang were elected as VicePresidents. Cheng, who is currently Chairman of HLB Hodgson Impey Cheng Limited, was first elected as a Council member at the 2010 AGM and has served on the Council since 2011. The two new Vice-Presidents joined the Council since 2018 respectively. Cheng has been actively involved in the development of the profession through his participation in a wide range of Institute working groups and committees, including the Audit Profession ReformWorking Group, the Registration and Practising Committee, and the Remuneration Committee. He is also the Chair of the Qualification Oversight Board. Seven members were elected at the Council election to serve for a term of two years: Alan Au; Alan Chan; Larry Cheng; Raymond Cheng; Fong Wan Huen, Loretta; Lam Chi Yuen, Nelson; and Wong Wing Hei, Ernest. Existing elected members who will hold office for one more year are Cheung Wai Lun, William; Choy Kai Sing; Ernest Fung; Rosalind Suk Yee Lee; Louis Leung; Roy Leung and Li Kin Hang. The Hong Kong government has also appointed Agnes Choi Heung Kwan and re-appointed Theresa Ng Choi Yuk as lay members of the Council for a term of two years from 1 December 2020 to 30 November 2022. Two continuing government-appointed lay members Wong Kam Pui, Wilfred and Au King Lun will fulfil the second year of their terms. The Immediate Past President Johnson Kong will hold office as a member of the Council until the conclusion of the 49th AGM. Results of Best Corporate Governance Awards 2020 announced The results of the Institute’s Best Corporate Governance Awards (BCGA) 2020 were announced during a media briefing on 2 December. About 500 annual reports and around 500 sustainability reports were considered in the initial stage. The judges noted some positive signs, including improvements in the quality of environmental, social and governance (ESG) reporting, and decided to give out a record number of 30 awards. A diverse range of candidates reached the final stages, and seven new awardees emerged, including those winning awards for the first time in the sustainability and social responsibility or ESG reporting section. This year, the awards celebrates 20 years of setting a benchmark for current corporate governance and sustainability standards in Hong Kong.“This year has been a year of disruption, due to the ongoing United States-China trade dispute and the global COVID-19 pandemic, and it is interesting to note that the awards were launched in 2000, the year that the dot com bubble began to burst. Throughout all this time, the importance of good corporate governance has always been clear, as a beacon of stability and a vital investor safeguard,” said Johnson Kong, Institute President and Chairman of Judging Panel of the BCGA 2020. The full list of winners and the Judges’ Report are available on the Institute’s website. Find out more about the corporate governance practices of some of this year’s winners on page 24. New auditing guide for ESG reporting now available The Auditing and Assurance Standards Committee has published Auditing and Assurance Technical Bulletin 5 Environmental, Social and Governance (ESG) Assurance Reporting to assist members performing assurance on ESG reports. It is available on the Institute’s website. Read more about the guidance on page 42. Annual report published The Institute’s 2020 annual report is available now. Themed “Leading with Trust,” the report ties in with the Institute’s Strategic Plan 2020-2022 published this year and includes photo essays of the Institute’s committees and panels members on how their efforts will keep Hong Kong’s accounting profession sustainable and prepared for the future. Virtual Annual Cocktail celebration video Due to the pandemic, the Institute cancelled its Annual Dinner and instead released a celebratory video to showcase its achievements in building trust with members, stakeholders and society throughout this year. Celebrate with us by watching the video, available on the Institute’s YouTube channel. Institute news Business news Institute elects new President and Council 4 December 2020

APLUS Resolutions by Agreement Tam Kwok Chung, John, CPA (practising) and John Tam & Co. Certified Public Accountants Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections 110.1 A1 (c) and R113.1 under Chapter A of the Code of Ethics for Professional Accountants. The respondents issued an accountant’s report for a solicitor’s firm under the Accountant’s Report Rules (Cap. 159A). They did not conduct their procedures fully in accordance with the rules and the Institute’s Practice Note 840 (Revised) Reporting on Solicitors’ Accounts under the Solicitors’ Accounts Rules and the Accountant’s Report Rules. The respondents failed to identify errors in the firm’s ledger and the firm’s lack of prior written notification to clients when its fees were settled by withdrawing money from clients’ accounts. In addition, there were deficiencies in the respondents’ procedures on testing of bank reconciliations and confirmation of bank balances. Regulatory action: In lieu of further proceedings, the Council concluded the following action should resolve the complaint: 1. The respondents acknowledge the facts of the case and areas of non-compliance with professional standards; 2. The respondents be reprimanded; and 3. The respondents pay an administrative penalty of HK$25,000 and costs of the Institute of HK$15,000 jointly. Li, Tang, Chen & Co. Complaint: Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing, HKSA 500 Audit Evidence, and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. The firm expressed an unmodified auditors’ opinion on the consolidated financial statements of China Smarter Energy Group Holdings Limited, a listed company, and its subsidiaries for the year ended 31 March 2015. Both the engagement partner and the engagement quality control reviewer of the audit have since resigned from the Institute. In the audit, the firm did not properly assess the method, bases and assumptions used by the company’s management and valuer in valuing intangible assets acquired in a business combination. The firm also failed to identify the company’s error in accounting for the consideration shares issued for the business combination, in that the fair value of the shares was not measured at closing market price on the date of acquisition as required under Hong Kong Financial Reporting Standard (HKFRS) 3 (Revised) Business Combinations and HKFRS 13 Fair Value Measurement but at a significantly lower issue price. Regulatory action: In lieu of further proceedings, the Council concluded the following action should resolve the complaint: 1. The firm acknowledges the facts of the case and areas of non-compliance with professional standards; 2. The firm be reprimanded; and 3. The firm pays an administrative penalty of HK$50,000 and costs of the Institute of HK$15,000 and of the Financial Reporting Council of HK$228,799. Disciplinary finding Wong Wang Tai, Ivan, CPA (practising) and Ng Ka Hong, CPA (practising) Complaint: Failure or neglect by Wong to observe, maintain or otherwise apply HKSA 230 Audit Documentation, HKSA 500 Audit Evidence and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Failure or neglect by both Wong and Ng to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants. In April 2019, the Institute completed a practice review on McMillan Woods SG CPA Limited, a corporate practice that is now de-registered. The review covered the practice’s audit of the 2017 consolidated financial statements of a Hong Kong listed company and its subsidiaries. Wong was the engagement director and Ng was the engagement quality control reviewer of the audit. The practice review found significant deficiencies in the work carried out by the audit team under Wong in relation to valuations of an investment in an associate acquired, convertible notes issued as consideration for the acquisition, and certain share options granted by the company. Ng failed to adequately evaluate the audit team’s judgements and conclusions, and review selected audit documentation as required under HKSA 220 Quality Control for an Audit of Financial Statements. Decisions and reasons: The two respondents were reprimanded. The Disciplinary Committee ordered Wong and Ng to pay penalties of HK$80,000 and HK$120,000 respectively. In addition, Wong and Ng were ordered to pay costs of disciplinary proceedings of HK$89,386 and HK$39,004 respectively. When making its decision, the Disciplinary Committee took into consideration the particulars of the breaches committed in this case, the parties' submissions, the respondents’ admission of the complaints, and Ng’s past regulatory record. Details of the Resolutions by Agreement and disciplinary finding are available at the Institute’s website. December 2020 5

NEWS Business 80% OF TOP COMPANIES NOW REPORT ON SUSTAINABILITY Eighty percent of leading companies around the world now report on sustainability, according to a KPMG report. The figure is up from 75 percent in 2017. The report, The Time Has Come: The KPMG Survey of Sustainability Reporting 2020, details the sustainability reporting of 5,200 companies, representing the top 100 companies in each of 52 countries. It focuses on risks of biodiversity loss; reporting on climate change and carbon reduction; and reporting on the United Nation’s Sustainable Development Goals. One-quarter of the 52 countries polled by the firm have a sustainability reporting rate of 90 percent or more. The report also found that for the first time, more than 50 percent of companies are applying third-party assurance to their sustainability reporting. DEUTSCHE BANK HEAD OF ACCOUNTING ON LEAVE OVER WIRECARD SCANDAL Leading sustainability and integrated reporting organizations on 18 December published a co-authored report that aims to standardize the communication of sustainability-related information between companies and their stakeholders. Reporting on Enterprise Value: Illustrated with a Prototype Climate-Related Financial Disclosure Standard, by the Carbon Disclosure Project, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council and the Sustainability Accounting Standards Board, sets out a basis for the development of global standards for sustainability-related financial disclosure, and includes a prototype of a climate-related financial disclosure standard. It comes after the organizations issued a joint statement of intent in September, outlining a vision for a comprehensive and common corporate reporting system. NEW REPORT SIGNIFIES NEXT STEP TO ENHANCING CORPORATE REPORTING The partners of PwC in the United Kingdom are to take a 10 percent pay cut amid a fall in profits and slow growth caused by the pandemic. The move also comes as the firm attempts to protect jobs and bonuses for other staff, reported the Financial Times. PwC said on 17 December that revenue rose 3 percent to £4.38 billion in the 12 months to 30 June, while profit fell 8 percent to £938 million. The average distributable profit per partner dropped to £685,000, as the funding of staff salaries and bonuses was prioritized. “As is to be expected, the pandemic had a significant impact on our financial performance in 2020. However, I am proud that we have continued to invest in our people and regional growth opportunities,” Kevin Ellis, PwC U.K. Chairman and Senior Partner, said. PwC had previously pledged not to use funding through the furlough scheme or guaranteed loans. The Hong Kong Stock Exchange has seen a 24 percent increase in terms of funds raised this year, according to KPMG, pushing the city to second place behind NewYork in the global ranking of destinations for initial public offerings (IPOs). A total of HK$389.9 billion (US$50 billion) was raised from the 140 IPOs expected to be completed by year-end, according to the firm. Nasdaq tops the global ranking with 175 companies raising a combined HK$405.5 billion (US$52.3 billion), based on Refinitiv’s data. According to KPMG’s forecast, between 130 and 150 IPOs may take place in Hong Kong next year, raising between HK$350 billion and HK$400 billion. US$50 BILLION 140 COMPANIES RAISE PWC’S U.K. PARTNERS TO TAKE 10 PERCENT PAY CUT AMID PANDEMIC IN HONG KONG THIS YEAR Former EY partner, Andreas Loetscher, has reportedly temporarily stepped down as Deutsche Bank’s head of accounting after German prosecutors launched an investigation into his role as a lead auditor for one-time financial payments giant Wirecard, which is currently embroiled in a US$2 billion accounting scandal. In an email to staff seen by the Financial Times and Reuters, Germany’s largest lender announced that Brigitte Bomm, Global Head of Tax, would replace Loetscher with immediate effect, and that this change would be temporary. Loetscher, who was one of the lead partners for EY on Wirecard’s audits from 2015-2017, had joined Deutsche Bank in 2018. Wirecard collapsed in June in one of Europe’s biggest accounting frauds after it disclosed that €1.9 billion of corporate cash did not exist. 6 December 2020

The COVID-19 pandemic has opened the door to increased pressure, opportunity and rationalization that can lead to fraud, according to a new survey released by the Association of Certified Fraud Examiners this month. The report, Fraud in the Wake of COVID-19: Benchmarking Report, found that 79 percent of anti-fraud professionals observed an increase in the overall level of fraud as of November, compared to 77 percent in August and 68 percent in May. Thirty-eight percent of the respondents said in November the increase has been significant, compared to 34 percent in August and 25 percent in May. The top three fraud schemes seeing increases, according to antifraud professionals, are cyber fraud, payment fraud and identity theft. The survey also found that 7 percent more anti-fraud professionals reported seeing financial statement fraud in November, compared with August. APLUS Paul Sarbanes, the United States senator, known for tightening the regulation of corporate accounting practices after the Enron scandal, passed away on 6 December at the age of 87. Sarbanes, withMichael Oxley, wrote the 2002 Sarbanes-Oxley Act, which was intended to ensure that publicly held businesses disclose to potential investors an accurate and complete portrayal of their financial condition. The Sarbanes-Oxley law gave prosecutors new tools to enforce laws against business executives who mislead and defraud investors, and was among the most far-reaching pieces of legislation regarding securities since the Great Depression reported The Washington Post. It came in the wake of accounting scandals at companies such as Enron, Tyco International andWorldCom. U.S. SENATOR BEHIND SARBANES-OXLEY ACT DIES FRAUD ON THE RISE THANKS TO COVID-19 CHINA PROBES ALIBABA OVER SUSPECTED MONOPOLISTIC PRACTICES The State Administration for Market Regulation, Mainland China’s antitrust watchdog agency, said in a statement that it recently kicked off investigations into Alibaba Group Holding for suspected monopolistic conduct such as “forced exclusivity.” The term refers to a business practice in the country’s Internet industry where companies make merchants choose only one platform as their exclusive channel of sales and distribution. “Alibaba will actively cooperate with the regulators on the investigation,” the company said in a statement. “Company business operations remain normal,” People’s Daily said in an opinion piece that the antitrust probe into Alibaba was intended for “better regulating and developing [Internet platforms] and promoting their healthy development to make a greater contribution to the high-quality development of the Chinese economy.” Coffee chain Luckin Coffee has agreed to pay the United States Securities and Exchange Commission (SEC) a US$180 million penalty to settle charges that it overstated its expenses, revenues and losses. It comes after the SEC found after an investigation that the company fabricated more than 2.12 billion yuan (US$311 million) in retail sales between April 2019 and January 2020, while understating its net loss by as much as 34 percent. The company also inflated its expenses by more than US$190 million to cover up the fabricated revenues, the SEC said. The company neither admitted or denied the SEC’s fraud claims filed in the Southern District of NewYork. “This settlement with the SEC reflects our cooperation and remediation efforts and enables the company to continue with the execution of its business strategy,” said Jinyi Guo, Chairman and Chief Executive of Luckin Coffee. LUCKIN COFFEE TO PAY US$180 MILLION TO SETTLE SEC CHARGES A working group jointly led by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission unveiled measures that will force the city’s financial companies to declare how their assets and investments have an affect on climate change. The mandatory disclosure requirements will be introduced in 2025, regulators said, while banks and large fund houses will have to carry out stress tests next year to make sure their business models and investments could cope with events related to climate change. All commercial banks in Hong Kong support the idea of stress testing for climate-related risks, said Eddie Yue, Chief Executive of the HKMA. The Green and Sustainable Finance Cross-Agency Steering Group was set up by seven regulators and government departments in May as part of a major drive to promote Hong Kong as a green fundraising hub. HONG KONG FINANCIAL COMPANIES MUST DISCLOSE CLIMATE-CHANGE POLICIES UNDER NEW RULES Ravi Menon, Managing Director, Monetary Authority of Singapore, urged the country to raise its auditing and accounting standards following a series of corporate scandals in recent years. “There have been several failures that are due to lapses in accounting, auditing, and some fraudulent activities are not as easily detected,” Menon was quoted as saying by Bloomberg. “It is an area that needs to be addressed.” Singapore’s corporate disclosure level improved this year, however it lags behind neighbouring countries like Malaysia and Thailand, according to an October report by the Securities Investors Association (Singapore). “When an auditor says this is in line with accounting standards, there is still a fairly wide range of what is acceptable,” Menon told Bloomberg. “Getting more precision has been quite a challenge.” SINGAPORE’S TOP CENTRAL BANKER CALLS FOR HIGHER AUDIT STANDARDS Credit: Maryland State Archives December 2020 7

PAIB conference panel COVID-19 AND BUSINESS At the PAIB Virtual Conference 2020, speakers discussed how their organizations were responding to the COVID-19 crisis, and their recommendations for professional accountants in business steering their own organizations through the disruption. Paul Smith reports. Technology adoption was a common theme among the speakers on the “Succeeding in uncertainty: managing organizational risk in times of crisis” panel, part of the Hong Kong Institute of CPAs’ PAIB Virtual Conference 2020, held – fittingly, virtually – in September. The moderator of the panel was Michael Chan, Chief Operating Officer, Inchcape Greater China, an Institute member, and member of the Institute’s Professional Accountants in Business (PAIB) Committee. He began by asking Maria Hui, Director, Marketing and Operations, Microsoft Hong Kong, about how usage of Microsoft products had changed during the pandemic. “For Microsoft, COVID-19 has been the biggest driving force for digital transformation across the world,” she said. She quoted Microsoft’s Chief Executive Officer, Satya Nadella, who said in April, “we have seen two years’ worth of digital transformation in two months.” “Everyone in the world is exploring options to help them to work remotely, and still at the same time be able to connect with their teams and maintain productivity,” she continued. For Microsoft, the growing use of its cloud services meant a renewed focus on protecting data. “We have been paying huge attention to the security, privacy and compliance aspects of using cloud platforms,” she noted. She summed up by saying, “we believe that more companies are shifting their investment to technology, to expedite their digital transformation journey as well as to empower their teams to work anytime, anywhere.” Data availability For Bloomberg, access to its data for customers and its employees is important. Anthony Lee, Buyside Risk Specialist, North Asia, Bloomberg L.P., noted that Bloomberg had always been a cloud-based system, long before the term rose to prominence. This limited the impact of the pandemic on Bloomberg clients who were able to continue accessing its products and services. Lee noted a change in recent years was the movement to a secure individual cloud-based sign in process authenticated by fingerprint. “Many clients already had their own Bloomberg terminal login, which means they could already access our system from home. We found that market volatility actually increased trading during the start of the pandemic, and it was one of our busiest periods,” he commented. For the company, the main impact was on its help desk staff. “This actually is a bit of a challenge at the beginning, because our support staff were working at home on smaller laptop screens, but they have since adapted to this environment by using larger monitors,” Lee said. “All in all, this period was a stress test on our technology, on our platform, and on our client relationships. But overall, we responded very well, without any major disruption.” Adjusting to changing behaviours Chan then turned to Alexander Li, Group Strategy Director, Mandarin Oriental Hotel Group. “I wonder for businesses that have so much invested in bricks and mortar, like Mandarin Oriental, how do they plan and or adjust their business model and targets set in view of COVID-19 and the United Top row, from left: Maria Hui, Director, Marketing and Operations, Microsoft Hong Kong; Michael Chan, Chief Operating Officer, Inchcape Greater China Second row: Alexander Li, Group Strategy Director, Mandarin Oriental Hotel Group; Suzanne Cheng, Chief Financial Officer, Hutchison Telecommunications Hong Kong Holdings Limited Bottom right: Anthony Lee, Buyside Risk Specialist, North Asia, Bloomberg L.P. THE SPEAKERS: Illustrations by Gianfranco Bonadies 8 December 2020

APLUS “We have been paying huge attention to the security, privacy and compliance aspects of using cloud platforms.” “Cash is king, so how do organizations decide what to prioritize for investment?” “You’re really having to be a lot more flexible in what your product offers customers during this time.” “This is something you need your team to think about – other ways of getting the same revenue, or even getting market presence.” “This period was a stress test on our technology, on our platform, and on our client relationships.” THE SUCCESS INGREDIENTS IN A PANDEMIC December 2020 9

PAIB conference panel COVID-19 AND BUSINESS States-China trade conflicts?” he asked. “Businesses today really need to focus on how customer behaviours and needs have changed,” Li replied. “Some of these changes will be for the short term, whereas others have fundamentally changed. In the context of Mandarin Oriental’s business, travel demand in the short to medium-term will be very different to before. For example, we’re expecting domestic and regional demand to bounce back first.” He noted that in Mainland China this had already happened, and demand was almost at prepandemic levels. His organization expected leisure demand to return before corporate, and group demand after that. This meant that for the next 12 months, the company would focus on domestic, regional, and leisure demand. “We’re having to change our product focus to match that. For example, by changing a few rooms into playrooms for children,” Li said. “You’re really having to be a lot more flexible in what your product offers customers during this time.” Responding dynamically 2020 has been a big year for telecommunication companies, with the roll out of 5G cellular networks around the world, including in Hong Kong. But the pandemic has also challenged the business models in the sector. Chan then asked Suzanne Cheng, Chief Financial Officer, Hutchison Telecommunications Hong Kong Holdings Limited, and an Institute member, “At Hutchison, how are you planning to adjust your business model in view of these times?” Cheng noted that the pandemic had been a challenge, but this created opportunities. “We think there’s always an opportunity and threat. In terms of threat, we’ve experienced a very substantial increase in travelling restrictions, which affects revenue.” This was, however, a good chance for sales and marketing staff to think creatively of other ways to generate revenue, she added. For Hutchison, this includes offering contracted roaming packages given the view that travel restriction will be released one day, which offer a competitive pricing to customer and provide them flexibility for future travelling after the relax of restriction. This offer had helped the company to stabilize roaming revenue and even sign up new subscriptions, even though there are heavy travel restrictions, she said. “This is something you need your team to think about – other ways of getting the same revenue, or even getting market presence.” The need to change operations had been a stress test for the company’s systems, requiring enhancements to systems and servers, and cloud-based systems. “This facilitates all staff working from home, and ensures the system is able to handle it all,” she said. Cheng also noted that the company’s corporate clients were requesting more support. “With more corporates allowing their employees to work from home, strong support for stable connection and mobility is a must. We have got a lot of requests for enhancing the virtual private network services and server capacity for customers. Given the new 5G technology, we work together with clients to implement different types of solutions to improve work efficiency.” Retail clients as well were increasingly going virtual, as footfall had decreased at shops, meaning it was important to review existing operations. While retail may be out of favour, Chan noted that people in Hong Kong are excited for 5G infrastructure to be ready in order to enjoy the fast Internet speed. Handling a “black swan” event Chan asked Bloomberg’s Lee about his conversations with investors. “Can you give us a peek into the brains of executives as to what are the top risks they are discussing, considering, or even spending time on?” Lee replied that Bloomberg has a diverse mix of client types across finance, from banking to insurance, asset management, corporate treasury, and more. “Most of them are in the business of managing money, and they may find opportunities in market volatility,” he said. Typically, when a shock hits the system the primary consideration for businesses is liquidity, “or to be more accurate – the lack of liquidity,” he said. For asset managers’ senior management, the worries were about honouring redemptions and the performance of portfolios. “Can they liquidate their portfolios without incurring heavy losses? Will their bond portfolios face default? Market liquidity concerns,” he said. For corporate treasurers, he reiterated the concerns shared by Mandarin Oriental’s Li about revenue streams drying up. “They worry about how to pay for their “ Some of these changes will be for the short term, whereas others have fundamentally changed.” 10 December 2020

APLUS liabilities. Do they have enough banking liquidity? Enough credit lines to stay solvent to weather the storm?” he said. “Invariably the storm will pass. Then everyone will begin to think that we are waking up from a nightmare,” he said. But he warns that the opportunity to revisit risk management frameworks should not be missed in order to prepare for the next wave, or a completely different shock. Organizations should consider questions like “do I need to run regular stress tests?” and “how do I build early warning test signals to the market, to the business?” so that they can react much faster next time, he recommended. They also need to revisit their management structures, for example by building an independent risk team to review various risks. “CFOs or their finance teams may want to look at the impact of International Financial Reporting Standard 9 Financial Instruments for fair value hedging, or to apply hedge accounting to their balance sheet in order to reduce profit and loss volatility,” he suggested. Investing for the future Chan picked up on Lee’s comments about liquidity to move the discussion on to investment. “Cash is king,” he noted, “so how do organizations decide what to prioritize for investment. Suzanne, could you share how your organization has changed its capex and research and development strategy?” he asked. “We are in the full force of developing and improving our 5G coverage,” Hutchison’s Cheng replied, noting that the company had a very strict 5G coverage target. “Even with or without COVID, this is something we are putting our full force on.” As the pandemic had increased the importance of 5G, the company had not slowed down its investment in the technology. “With COVID, “ They worry about how to pay for their liabilities. Do they have enough banking liquidity? Enough credit lines to stay solvent to weather the storm?” December 2020 11

PAIB conference panel COVID-19 AND BUSINESS the only difficulty for us to face is providing more protection to contractors,” she said. The roll-out of 5G had also required the company to invest in related solutions. She noted that the company had helped the Hong Kong Chinese Orchestra to livestream concerts over 5G in the summer. “We used 5G technology to provide a seamless livestreaming portal for them,” she commented. Cheng thought that the pandemic would lead to changes in how contracts were negotiated. “After the challenging situations, now with all the contracts we are working on we carefully review the lengths and terms. Also, indemnity for uncontrollable situations like COVID-19. What we do now is in every contract make sure both sides are protected if there is any sudden change in the economic environment. Both parties should be trying their best in order to get the best exit, or to explore the best ways to work together alternatively to deliver a service,” she said. Acting with precision Chan then turned to Li at Mandarin Oriental to ask if his organization had changed its investment strategy. “Has your organization decided to reduce investment, or even not to further invest in hotels?” he asked. Li replied that he would love to be sharing the situation of Hutchison, and continue to invest everywhere. “For companies that have experienced demand falling to zero, there are broadly two stages you go through in terms of investment,” he advised. The first stage is to stop investing. “If you’re in travel, the first thing to do is turn capex off, because as you said Michael, ‘cash is king’. You need to figure out what the future is going to look like, or at least attempt to.” The second stage is to ask whether your company is going to survive, and determine what you need to do in order to help it. He raised the question of “what do I need to invest in to accelerate out of this crisis as a winner?” noting that studies of past economic shocks had found that the companies that had won had invested in the right areas. He offered one piece of investment advice. “You have to be precise with the bets you are placing. What are the things that are really going to make a material difference? The capex process then becomes a lot more rigorous than it may have been in the past,” he commented. Empowering individuals Microsoft’s Hui then spoke about her company’s investment strategy. “At Microsoft we always believe 12 December 2020

APLUS that investment is the right way to grow the business sustainably,” she said. Investment helped to grow the ecosystem of its products, and help its user community to achieve more. The pandemic had seen the company invest more in data centres. “We’ve enhanced our capacity at such a rate that we’ve accelerated our two-year investment plan to make it happen in three months,” she noted. The company had also launched new features for its products, including Microsoft Teams, to support remote working. Companies can hold seminars, and collaborate virtually using the platform. The company was also seeing its clients accelerating the use of virtual platforms. She noted that the demand for different features and functionalities required investment to develop them. This required providing employees the right tools to deliver them. “At Microsoft we enable every employee with a service device, a lightweight and powerful machine, so that they can work anytime and anywhere. It is our belief that we must carry on investing so that everyone can be successful, and to help the economic recovery,” she said. Chan then asked her to describe the key factors the company considers important to motivating staff during times of uncertainty. Hui said that the most important way to motivate staff was to empower them. “We need to make sure that they have the necessary equipment, trust, and support from the company to help them to, first, work remotely, and to allow them to help our customers and partners.” As well as their service device and mobile phone, employees can borrow equipment from the company including chairs, laptops, monitors and other peripherals. The company has also made its on-boarding training available online, so that new employees can access it without distracting existing employees to provide training. Workplace training is also offered remotely. She turned to the importance of building a trust culture. “Twenty years ago, managers would like to see employees sitting in front of them. Now we want to empower them to work remotely. Trust is a very key element. We need to measure employees on how they encourage and support our partners and the Hong Kong ecosystem, not by how long they sit in front of the computer,” she said. Trust and f lexibility are key for Microsoft. Even during the pandemic, the company did not close its offices, but provided employees with f lexibility to choose the best way to work for them. Employees could choose to come in or to work from home. She concluded by saying that there needed to be a fun element. “Even though we are connecting remotely, it’s very important that we continue to have fun,” she said. To help, the company had various virtual activities. “We have the virtual exercise time, virtual team lunch, and virtual happy hours – where we send cocktails to our employees homes, and everyone can enjoy the time together,” she said. Supporting a return to the office Chan ended the roundtable by asking Bloomberg’s Lee how they motivated their employees. Lee began by saying that his organization applied many of the same principles as Hui’s. “I truly believe that the motivation for our employees, and for myself as well, comes from achieving, or even overachieving, our business goals – under a 100 percent safe and comfortable environment,” he said. For employees, the company had embraced work from home, f lexible work hours, and virtual workouts and mental health sessions to motivate and support them. Although the company had begun by closing its offices, they had since reopened. “We are not downplaying the benefits of going back to work, and are strongly encouraging staff back,” he said, while noting that the safety of the offices was the priority. The company also offered support to its employees returning to work through paying for travel or parking. “At Bloomberg, there is the belief that we want faceto-face meetings, which are a lot more effective, and we think that clients are a lot more appreciative of them. But only under a safe environment,” he said. The panellists viewed the pandemic as an unprecedented development. “It is a ‘black swan’ event,” said Lee, “and many will realize how inadequate their risk management frameworks are.” Organizational changes are therefore needed, and it was clear from the discussions that the pandemic will leave lasting changes in business. “ The motivation for our employees, and for myself as well, comes from achieving, or even overachieving, our business goals – under a 100 percent safe and comfortable environment.” December 2020 13

SECOND OPINIONS: HOW CAN YOU LEVERAGE MINDSET TO CHANGE BEHAVIOUR? SECOND OPINIONS Ethics GEOFF KWAN PRINCIPAL, THE INTERNATIONAL ETHICS STANDARDS BOARD FOR ACCOUNTANTS In today’s complex work environment, what is ethical is not always straightforward. Professional accountants often must learn to navigate their way through a myriad of complicated issues to reach an ethical solution that serves the public interest. The International Ethics Standards Board for Accountants (IESBA), recognizing the increasing challenge to act ethically, recently released changes to its International Code of Ethics for Professional Accountants that reinforce the importance of having the right mindset that encapsulates certain behavioural characteristics expected of professional accountants. An inquiring mind is one key component of a mindset that drives ethical behaviour. The IESBA’s Role and Mindset revisions introduce this concept as a new requirement for all professional accountants and underlines two key elements: consider the source, relevance and sufficiency of information obtained; and be open and alert to a need for further investigation or other types of action. Having an inquiring mind means having a sense of curiosity and not simply taking circumstances and information at face value. It will also guide a person to ask the right questions and obtain the necessary information to make decisions that are evidence-based and defensible. The Role and Mindset revisions also emphasize the risk of bias (internal factor) and organizational culture (external factor) as factors that may influence a professional accountant’s ability to make ethical decisions. Conscious or unconscious bias affects a person’s ability to be objective, creates pre-conceived ideas about people or situations, and causes misjudgement of the relevance and value of information. The revisions highlighted eight common examples of types of biases, such as confirmation bias, anchoring bias and groupthink. Another example included is “automation bias,” which is particularly relevant considering the increasing role of technology in the profession. The revisions also highlight the influence a positive organizational culture has on the professional accountants’ ability to have the right mindset. In this regard, the revisions particularly recognize the role of leaders and tone at the top in setting the right organizational culture. Doing the right thing is not always easy and may come with adverse consequences. For an individual to behave ethically, having the right mindset must go hand in hand with determination, courage and character. Recognizing this, the revisions emphasize the importance of having the strength of character to act appropriately by standing one’s ground and by challenging others in a manner that is appropriate to the circumstances. 14 December 2020 “An inquiring mind is one key component of a mindset that drives ethical behaviour.”

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