Issue 4 Volume 20 October 2024 DRIVING BUSINESS SUCCESS START-UP CFOS CFOs of fast-growing start-ups on the challenges of their roles SMPS & SUSTAINABILITY Tips for small- and medium-sized practitioners planning to offer sustainability services SECOND OPINIONS How can SMPs best help small businesses bounce back? PLUS: Agnes Chan, Chairman of the Hong Kong General Chamber of Commerce, on the need to help the city’s businesses thrive, not just survive KEEPING THE CROWN
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PRESIDENT’S MESSAGE APLUS DEAR MEMBERS October 2024 1 Roy Leung, President “ It has been a year filled with significant milestones, challenges, and triumphs that have set a formidable foundation for the future of our Institute.” For my final President’s message in A Plus, I want to look back on the year and reflect on the remarkable journey we have undertaken together. It has been a year filled with significant milestones, challenges, and triumphs that have set a formidable foundation for the future of our Institute. Over the past year, one of my primary focuses has been on enhancing member engagement and support. We have made concerted efforts to create platforms for meaningful interactions, such as the Members’ Forum and networking lunches to provide invaluable opportunities for the Institute’s leadership to connect with members and hear your view directly. These events have been pivotal in fostering a sense of community and belonging among our members. This also applies to our efforts to strengthen our support in professional development as well as personal well-being. While we continued to provide CPD courses covering critical areas such as accounting, sustainability, audit and assurance, and ethics, we also ramped up efforts to organize various sports, recreational and networking activities. I had the opportunity to attend many of these events and was delighted to see our members display their exceptional talents beyond the workplace. Over the course of the year, we have diligently utilized press events and releases to disseminate the Institute’s work to the public. Our communications have underscored vital issues, including our budget proposals submitted to the government, survey on the talent supply within the accounting sector, and findings from the teen money management survey. Furthermore, our advancements in establishing sustainability reporting standards have attracted substantial attention, fortifying our Institute’s position as a thought leader in the industry. Indeed, as the standard setter for sustainability reporting in Hong Kong, our work was recognized in the Vision Statement issued by the government in March 2024, and we have proudly led the development of the HKFRS S1 and S2, with the exposure drafts launched in September. Furthermore, we introduced the 1-2-7 Sustainability Capacity Building Framework to foster a sustainability mindset and enhance knowledge across our community. Our ESG workshops, under the Pilot Green and Sustainable Finance Capacity Building Support Scheme by the government, have also been wellreceived, reflecting our commitment to sustainability. The Institute also continues to forge strategic partnerships across borders. Our recent memoranda of understanding with the Chinese Institute of Certified Public Accountants and the Institute of Singapore Chartered Accountants exemplify our commitment to international collaboration. To develop future talent, we have increased our outreach efforts. Since January, the Rich Kid, Poor Kid programme has conducted over 40 sharing sessions, reaching more than 9,000 young students. Collaborating with the Education Bureau, we also engaged over 9,000 secondary students, providing them with insights into our profession. The participation of many of our members has played a significant role in inspiring the next generation. For tertiary students, we conducted more than 60 QP Talks in the past 18 months, reaching over 4,000 students, while the enhanced Experiential Business Learning Programme offered internships, job shadowing, and training opportunities, ensuring students gain practical experience in the field. These achievements indicate our commitment to advancing the profession and promoting a sustainable future. To make sure our members and stakeholders are informed of these important efforts, we have improved our communications by enhancing direct email communications and social media outreach. The recent launch of the CPA Community, which invited a select group of dedicated members, serves as a centralized platform to engage individuals who share our mission to disseminate key messages aimed at promoting the profession’s image. This represents a significant milestone that I hope will establish an essential channel enabling us to enhance the impact of our initiatives. As I conclude my tenure, I am filled with optimism for the future of our Institute. The foundations we have laid this year will undoubtedly pave the way for continued growth and success. I am confident that with your continued support and dedication, we will reach even greater heights. Thank you for the privilege of serving as your President. It has been an honour to lead such a dynamic and forward-thinking organization. I look forward to continuing my participation as a member of the Council and the Immediate Past President.
CONTENTS Issue 04 Volume 20 October 2024 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 Always ready for business: Interview with Agnes Chan The Chairman of the Hong Kong General Chamber of Commerce on the current concerns of business and her passion for the profession 14 To the moon: How start-up CFOs turn ambitions into reality Institute members share what goals they currently have as start-up CFOs and advice for CPAs looking to join this fast-moving space 20 From compliance to competitive edge: SMPs helping SMEs to navigate the green shift How small- and medium-sized practitioners play a vital role in helping smaller enterprises navigate the complexities of sustainability SHORT PROFILES 30 Q&A with a PAIB Colin Wong, Finance Director at Citybus Limited 31 Q&A with a PAIP Kanice Ng, Senior Audit Manager at PKF Hong Kong Limited 46 Young member of the month Thomas Lau, Senior Lecturer at Hong Kong Metropolitan University COLUMNS 27 Thought leadership: Ada Chung The Privacy Commissioner for Personal Data and member of the Institute on key recommendations covered by PCPD’s model framework for ensuring AI security 28 Second opinions How can small- and mediumsized practitioners best help small businesses bounce back? Agility and a business development mindset is the name of the game in the start-up space, according to CFOs 30 Q&A with a PAIB 31 Q&A with a PAIP 14 To the moon: How start-up CFOs turn ambitions into reality
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 Managing Editor Jemelyn Yadao Contributor Jolene Otremba Registered Office 2/F Wang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Roy Leung Vice Presidents Edward Au Stephen Law Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Rebecca Tam Publication Manager Michael Wong 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 48 Institute insights: Navigating the Tech Wave: Insights from the Practice Management Series for SMPs Panellists share how they elevated their adoption of technology at their firms SOURCE 34 Unveiling HKFRS 19 T he potential costs and benefits of the new standard for eligible subsidiaries 37 Enhanced disclosures for business combinations A summary of the Institute’s response to the IASB exposure draft proposing amendments to IFRS 3 and IAS 36 38 Your views have been incorporated into the ISSB’s work plan A n overview of the ISSB’s feedback statement 41 Revised definition of a PIE in the HKICPA Code of Ethics K ey changes in the definition of a public interest entity following revisions issued in July 46Young member of the month 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 October 2024. The digital version is distributed to all 47,989 members, 12,765 students of the Institute and 2,183 business stakeholders every quarterly. 20From compliance to competitive edge: SMPs helping SMEs to navigate the green shift A look at how small- and medium-sized practitioners can position themselves for sustainability services 42 The proposed company re-domiciliation regime in Hong Kong K ey features of the regime and why the regime can be an appealing choice for the business community 44 Technical news
On 16 September, the Hong Kong Institute of Certified Public Accountants published the Exposure Drafts for HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climaterelated Disclosures (HKFRS Sustainability Disclosure Standards) for public consultation. The deadline for comments was on 27 October. Following extensive engagement with a wide range of stakeholders over the past few years, the Institute proposed full convergence of HKFRS S1 and HKFRS S2 with IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climaterelated Disclosures (ISSB Standards), to be effective from 1 August 2025. The Institute believes that Hong Kong’s full convergence with the ISSB Standards has global significance as it would bolster the connection of global capital with local businesses as well as those in Mainland China and other regions. “The issuance of exposure drafts of HKFRS Sustainability Disclosure Standards marks a significant leap forward for Hong Kong’s sustainability disclosure landscape. This demonstrates the Institute’s unwavering commitment to supporting the sustainable development of Hong Kong,” said Roy Leung, President of the Institute. “HKFRS S1 and S2 are crucial in aligning Hong Kong’s sustainability reporting with the global baseline. By enhancing consistency and comparability, these standards will better meet the needs of investors seeking reliable sustainability information.” As indicated in the government’s Vision Statement, the application of HKFRS S1 and S2 will prioritize publicly accountable entities including listed entities and regulated financial institutions in Hong Kong. The HKICPA welcomes latest Policy Address The Institute welcomes the diversified initiatives outlined in the Policy Address announced by the Chief Executive on 16 October to boost the local economic development. The Institute was pleased to see that certain policy proposals from the Institute were adopted by the Chief Executive. The Institute’s President Roy Leung said, “We expect that sustainable development and innovative technologies will become new impetuses for economic growth. We welcome the diverse initiatives in the Policy Address regarding the relevant aspects and solidify the existing edges of the financial services industry. These initiatives will further strengthen the sustainability of Hong Kong’s economic development. In view of this, the Institute will continue its close co-operation with stakeholders to foster development of the accounting profession, building capacity in the area of sustainability for various society sectors, with the aim of strengthening Hong Kong’s status as a leading international financial centre.” Read the press release to learn more about the Institute’s responses. Cross-straits, Hong Kong and Macau Accounting Profession Conference 2024 The annual Cross-straits, Hong Kong and Macau Accounting Profession Conference returned after a long hiatus on 28 October. With the theme “New Mission of Accounting Profession – Leading a Sustainable Future”, the event brought nearly 400 business and accounting professionals from across the cross-straits, Hong NEWS Institute news Business news 4 October 2024 HKICPA issues exposure drafts of inaugural Hong Kong Sustainability Disclosure Standards Cross-straits, Hong Kong and Macau Accounting Profession Conference 2024, held on 28 October, brought prominent business representatives and accounting leaders together from across the cross-straits, Hong Kong and Macau to discuss recent hot topics.
APLUS Kong and Macau. The opening ceremony was officiated by distinguished guests including Michael Wong, the Deputy Financial Secretary of Hong Kong, Jiang Yong, Secretary-General of the Chinese Institute of Certified Public Accountants, Lee MengShiou, Vice Chairman of the Taipei CPA Association, Iong Weng Ian, President of the Union of Association of Professional Accountants of Macau, and Roy Leung, President of the Institute. Hua Jingdong, Vice-Chair of the International Sustainability Standards Board, kicked off the engaging discussions at the conference with his sharing on “Building a sustainable future together”. Keynote speeches and panel discussions covered essential topics like global economic trends, sustainability, and the role of small- and medium-sized practising firms. Leaders and experts shared invaluable insights, fostering collaboration and knowledge exchange across the region. Renewing membership for 2025 The 2025 renewal notice was issued to all members on 2 October. To complete the renewal process, members should take the following steps on or before 15 December: (i) submit the Annual Return for membership renewal, which includes your continuing professional development declaration and fit and proper declaration; and (ii) pay the annual fee online. Visit here to renew or check your renewal status. National Day Celebration Dinner for the Accounting Profession The Institute, in collaboration with the Association of Hong Kong Accounting Advisors, Hong Kong Association of Registered Public Interest Entity Auditors Limited, Hong Kong Business Accountants Association, and The Society of Chinese Accountants and Auditors, hosted a National Day Celebration Dinner to celebrate the 75th anniversary of the founding of the People’s Republic of China on 27 September. More than 500 guests and members joined the event together with the three guests of honour Christopher Hui, Secretary for Financial Services and the Treasury, Wang Song-miao, Secretary-General of the Central Government’s Liaison Office in HKSAR, and Liu Xiaoming, Counselor of the Commissioner’s Office of China’s Foreign Ministry in the HKSAR. CPA Community Launch Ceremony The Institute held the CPA Community Launch Ceremony on 17 October to kick off the CPA Community, a centralized hub designed to recognize and engage select members who have shown dedication to the Institute’s vision and mission to promote the profession. The aim of the initiative is to amplify the key messages identified by the Institute through curated information and updates. Mentorship Programme Homecoming Night To mark the 10th anniversary of the Institute’s Mentorship Programme this year, the Institute gathered over 110 current and past mentors and mentees on 9 October for a special evening. The night featured a heartfelt welcome from the Mentorship Programme Support Group Convenor, special recognition for mentors and mentees with more than eight years of dedication, engaging games, and networking over light refreshments. Since 2015, the programme has matched nearly 1,900 mentor-mentee pairs, with over 750 mentors and over 1,100 mentees benefiting from this enriching experience. Applications for the 2025-26 cohort will open in late November. QP Top Student and BAFS Student Award Ceremony 2024 The Institute hosted the QP Top Student and BAFS Student Award Ceremony 2024 on 21 September. Marking the 25th anniversary of the Qualification Programme (QP), the event honoured outstanding students of the QP and presented scholarships to deserving recipients. For the first time at this annual event, the Institute included BAFS secondary school students, celebrating the winners of the HKICPA Accounting and Business Management Online Quiz, along with students who achieved outstanding results in the BAFS mock exam and HKDSE exams. There was also experience sharing from top QP students and secondary school participants of the work shadowing scheme under the Experiential Learning Activity Series. Under Secretary for Financial Services and the Treasury Joseph Chan was the guest of honour. Council meeting minutes The abridged minutes from the June, July and September 2024 Council meetings are now available. The CPA Community Launch Ceremony took place on 17 October to kick off the new initiative. October 2024 5
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NEWS Business 1.2 million World Bank predicts the global supply of oil will exceed demand by an average of 1.2 million barrels per day next year, pushing down prices from an average of US$80 a barrel for Brent crude this year to US$73 a barrel in 2025 and US$72 in 2026. Its new Commodity Markets Outlook report published in October also finds that gold prices are likely to remain elevated in 2025, buoyed in part by strong central bank demand. In September, the value of total exports of goods rose by 4.7 percent over a year earlier to HK$398.1 billion, after a year-on-year increase by 6.4 percent in August, according to data released by the Census and Statistics Department. The value of imports of goods increased by 1.4 percent over a year earlier to HK$451.3 billion. Despite global economic uncertainties, the government believes improved Mainland economic prospects should support Hong Kong’s export performance. October 2024 7 1,200+ The number of start-ups Hong Kong Science and Technology Parks (HKSTP) will introduce to Beta Lab, Saudi Arabia’s start-up incubator, for investment decisions, according to HKSTP CEO Albert Wong. On 29 October, both parties signed an agreement in Riyadh to collaborate, giving HKSTP’s park companies potential access to financing from Beta Lab’s new US$300 million investment fund. The percentage of workers who see human skills like adaptability, leadership, and communications as integral to their career advancement, while 52 percent think their company values employees with human skills more than those with technical skills, according to Deloitte’s Workplace Skills Survey. The report highlights a possible imbalance in corporate learning and development programmes. The number of Hong Kong-listed companies that comply with Sharia standards that investors in Saudi Arabia can tap into through the Albilad CSOP MSCI Hong Kong China Equity ETF, the first ETF in Saudi Arabia to track the Hong Kong equity market. The ETF, which was scheduled to list on 30 October on the Saudi Stock Exchange, makes its debut with an initial size exceeding US$ 1.2 billion, according to Albilad Capital and its partner Hong Kong-based CSOP Asset Management. 30 APLUS 87% – Norman Chan, Chairman of Hong Kong Acquisition, a special-purpose acquisition company (SPAC). Singapore-based Synagistics, which provides digital commerce solutions, became the first overseas company to go public on the Hong Kong Stock Exchange through a merger with the SPAC on 30 October. “The listing of Synagistics via a successful de-SPAC transaction is a milestone for Hong Kong to introduce a new way for a company to go public other than normal initial public offerings. This will strengthen Hong Kong’s role as a listing venue and international financial centre.” Mark Koziel The incoming Chief Executive Officer of AICPA & CIMA, which operate together as the Association of International Certified Professional Accountants. Koziel, who will begin his role on 1 January 2025, will succeed Barry Melancon, who retires at the end of this year. Koziel is President and CEO of Allinial Global, the world’s second-largest accounting association. 6 months The length of time PwC ZhongTian has been suspended from conducting audit work in Mainland China over its work on the collapsed Chinese property giant Evergrande. The firm was also fined US$62.2 million. Other PwC operations providing non-audit services in China are not affected. “It is not representative of what we stand for as a network and there is no room for this at PwC,” the firm’s global chair Mohamed Kande said.
PROFILE Agnes Chan ALWAYS READY FOR BUSINESS 8 October 2024
APLUS Backed by years of experience providing tax and business advisory services, Agnes Chan now leads the oldest business organization in Hong Kong. She talks to Jemelyn Yadao about ways to support the city’s small businesses to regain pre-pandemic levels of growth, and how her work as an accountant leads to new discoveries As the “voice of business”, the Hong Kong General Chamber of Commerce (HKGCC) hears the views and concerns of the city’s businesses, big and small, and right now the call for resilient companies is louder and clearer than ever. When it comes to Hong Kong small- and mediumsized enterprises (SMEs), over three quarters (77 percent) of them have not yet recovered to pre-pandemic levels and 39.2 percent of those expect their business to decline further this year, according to findings of the HKGCC’s recent SME Survey. “We tried to understand the biggest challenge, which is cash flow. They are also concerned about high rents, high labour costs and changing customer behaviour, for example a lot of people go to Japan because of currency. These are challenges that we have tried to address by bringing it to the attention of the government,” says Agnes Chan, Chairman of the HKGCC, and a member of the Hong Kong Institute of CPAs. She took up the position in May, succeeding fellow Institute member Betty Yuen, Non-executive Director at CLP Holdings. The chamber included urgent measures to assist SMEs in its submission for the 2024 Policy Address, which Chief Executive John Lee delivered on 16 October after Chan spoke with A Plus. Following the address, the chamber said it “lauded the decision to relaunch the principal moratorium under the SME Financing Guarantee Scheme, allowing businesses to apply for principal moratorium for up to 12 months, and extending the guarantee period to 10 and eight years for 80 percent and 90 percent guarantee products, respectively.” With 360,000 SMEs in Hong Kong, representing 98 percent of companies in the city, SMEs are the backbone of Hong Kong’s economy, says Chan. “We can’t let them down. We need to help SMEs with potential to continue,” she adds. “The entrepreneurship in Hong Kong is strong. With everybody focused on building up an innovation and technology (I&T) hub, it’s important to note that these I&T companies all start small and grow with government support and with different investors, so that’s why we see the importance of helping them, especially in the current operating environment.” Chan believes the focus should not only be on helping SMEs grow, but also on their sustainable growth. As part of this, the chamber is driving a “transformation agenda” for SME members. “Out of our more than 4,000 members we have a large group of SMEs, and we are helping them to drive digitalization and innovation, adopt artificial intelligence, understand what environmental, social and governance is, and how to integrate cybersecurity. Once they go digital, cybersecurity risks would be a major challenge,” says Chan. “Besides Photography by Wai Tsang Interview with Agnes Chan, Chairman of the Hong Kong General Chamber of Commerce October 2024 9
PROFILE Agnes Chan having the government address some of the immediate cash flow issues, SMEs need to do their part by, for example, digitalizing some of their processes. I think the roll-out of e-consumption vouchers helped many SMEs to digitalize and adopt e-payments.” Her views echo those expressed by the Chief Executive during the Policy Address, who said SMEs needed to strive “for selfimprovement” amid “a transitional period” of the economy. Accountants are uniquely positioned to support struggling SMEs, Chan notes. “I’ve been in this field for decades so I do see our value in helping SMEs grow. We see so many different scenarios and business models that we can share the success stories as well as the pain points with SMEs.” With cash flow being the biggest challenge faced by SMEs, accountants have the expertise and experience to run diagnostics on the company’s business operations to find possible improvements in cash flow management, cost control and forecasting, she adds. International outreach Another priority for Chan is to build up the HKGCC’s connections globally. Aside from the challenges faced by SMEs, large corporations are continuing to look for new markets amid the effects of geopolitical shifts on supply chains. “Some need to move their manufacturing base to places offering more competitive pricing, and some of our members have set up IT offices in Vietnam because of the tech-savvy younger generation there,” she adds. “International outreach is something we do to identify new markets and to help businesses strengthen their presence in the key markets. Our members have visited the Middle East and Association of Southeast Asian Nations (ASEAN), and we are working on trips to Europe and United States as we also want to cover traditional markets.” ASEAN, in particular, and its economic significance to Hong Kong, have been a key focus recently. Hong Kong’s Chief Executive visited Laos, Cambodia and Vietnam from 28 July to 2 August, and Chan was part of the high-level delegation. “Visiting those places in person, and talking to the government officials on trade and investment on some of their policies and areas of focus, you see a lot of opportunities and mutual benefits,” says Chan. During the trip, 55 memoranda of understandings (MoUs) were signed in various fields, including trade, finance, aviation, fintech, education and digital technology. “This shows a very wide coverage. ASEAN has always been the second-largest trading partner of Hong Kong, so it’s not a new market as such, but it shows that we are strengthening our focus in these markets. In Laos and Cambodia, you see a lot of infrastructure projects that we can provide support, and in Vietnam, the rising middle class are looking at how to invest their money,” says Chan, who signed an MoU with the Cambodia Chamber of Commerce in Phnom Penh and another in Hanoi with the Vietnam Chamber of Commerce and Industry during the mission. Hong Kong and the three countries also contemplated easing visitor entry requirements in both directions. “In Cambodia, the Deputy Prime Minister was suggesting a special economic zone for Hong Kong businesses. By going there and talking about business, you can really negotiate more incentives for our people,” says Chan. The trip also served as an opportunity to promote the value of Hong Kong’s professional services for ASEAN companies, she adds. “We are very strong in terms of professional services, and every place that we visited, they really look to the professional services team to help them.” In a recent chamber survey, members ranked ASEAN as their key area of interest for the upcoming year. Chan says plans are in place to send delegations to Cambodia and Vietnam at the end of October “ Talking to the government officials on trade and investment on some of their policies and areas of focus, you see a lot of opportunities and mutual benefits.” 10 October 2024
APLUS In May, Agnes Chan, Senior Advisor, Chairman Office at EY Greater China, was elected Chairman of the Hong Kong General Chamber of Commerce, which has over 4,000 members. to build on the MoUs signed and reinforce HKGCC’s collaboration with the two countries. After the Policy Address, the HKGCC also welcomed the injection of HK$1 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) and expansion of the coverage to e-commerce to ASEAN countries. The increasing importance of Southeast Asia and the Middle East to the global economy will be one of the topics explored during the chamber’s flagship event, International Business Summit, taking place on 28 November. The conference will bring together business leaders and experts from around the world to share their industry forecasts as well as discuss the impact of new technologies. Business as usual In the Global Financial Centres Index (GFCI) 36 Report published in September, Hong Kong ranked third globally, up from fourth place in the March version of the index. Its scores were among the highest for business environment, human capital, infrastructure, and reputational and general competitiveness. Chan says the news brought a boost of encouragement for both herself and the general business community. “Whether this means Hong Kong is back to business as usual, my view is as an international financial centre, Hong Kong is always ready for business. I like to draw people’s attention to the diverse and dynamic financial infrastructure of Hong Kong. The news also demonstrates the city’s resilience, because we’ve really gone through a lot since 2019 and October 2024 11
PROFILE Agnes Chan COVID,” she says. However, a closer look at the GFCI report shows a more cautionary picture. “It’s just a onepoint difference between the number two and number three spots, and with number three and number four, it’s two points. So what does that mean? Hong Kong needs to work hard. We can’t be complacent,” says Chan. “We have to continue to enhance our IFC capabilities. I really think the Greater Bay Area integration and the opportunities of the emerging ASEAN market, the Middle East and North Africa, will help push Hong Kong higher up the ranking.” Meanwhile, the issue of labour shortages persists in Hong Kong, and the government has been addressing this with talent admission schemes. In sharing her thoughts on how to tackle this issue in the long term, Chan, who is Senior Advisor, Chairman Office at EY Greater China, refers to her conversations with chief executive officers who she advises, helping them identify and assess new market opportunities. She says the choice of CEOs when considering where to set up their headquarters in Asia usually depend on the “three Es” – environment, estate (or real estate) and education. “In terms of environment, people are getting more environmentally conscious, so what is the environmental situation like in Hong Kong?” she says. “With the second ‘E’, it’s about whether we can provide more reasonably priced accommodation for expats.” Chan also supports the government’s push to develop Hong Kong as a “headquarter economy” to attract enterprises from outside Hong Kong to set up headquarters in the city. This could in turn attract talent, she says. “Businesses follow the opportunities, people follow the business. Headquarter economy offers employment opportunities with mobility, and people may be The percentage of SMEs that cited cash flow as the biggest challenge for the next 12 months by 74.3% of SMEs, followed by high rents (33.8%) and high labour costs (25.7%), according to the findings of the Hong Kong General Chamber of Commerce’s SME Survey, released in August. 74.3% A leading tax advisor, Chan is a member of the National Committee of the Chinese People’s Political Consultative Conference and a member of the Exchange Fund Advisory Committee of the Hong Kong Monetary Authority 12 October 2024
APLUS interested in these opportunities where they can move around the region.” Besides efforts to attract overseas professionals, Chan thinks reskilling and upskilling the local workforce is also key both to retain them and ensure they thrive in a fast-changing environment. The first to know Becoming an accountant felt predestined for Chan. Her elder brothers are accountants, while her father would jokingly call himself a “CA – a Chinese accountant.” “He was very good with his abacas because he used to run a small business himself,” she says. As a child, she saw the fun in calculating change during trips to the wet market with her mother. She recalls racing against vendors to calculate the change and winning. Chan, who joined EY in Australia in 1986 and returned to Hong Kong in 1991, worked her way up in the field of tax, eventually becoming a leading tax advisor in Hong Kong. The former managing partner of the EY firms in Hong Kong and Macau speaks with admiration about the accounting profession and credits it as giving her an edge. “I still love this profession because we get to know things very much in advance,” she says. Chan gives the example of a former client who, without her realizing it, was at the forefront of electronic navigation systems or GPS technology. “A guy from the U.S. came to Hong Kong and said ‘I have this intellectual property and it can tell you where you are.’ I was totally lost. He wanted to set up in Asia, and see how to structure his business. Now thinking back, this is the well-known GPS technology. We always get to learn new stuff.” Chan’s memory is well-stocked with jobs that made her career as a tax specialist exciting. They include the time she first learned about tax-free zones in Dubai when companies first started showing interest in going into the Middle East, and when clients sought advice on how to structure their business during the peak of the dotcom bubble in 2000. “We looked at how to capture the residual profit in a very low tax country when the Internet first took off. And at that time, Bermuda was the first place that recognized e-signature legally. I remember trying to find Bermuda on the world map hanging in my room, figuring out what to do. Of course now, the whole tax landscape has changed with global minimum tax.” These memories serve as advice for accountants just starting out in their careers. “You need to know what is happening globally as well as locally. You can’t just know what’s happening within your firm,” says Chan. Overcoming struggles With the global and sometimes urgent nature of the work, Chan remembers long days at the office. “There was a period of time when I left home at 6:00 a.m. because I have to talk to a client in Australia because they wanted to list in Hong Kong, and finished at midnight because I had calls with Canada or the U.S.,” says Chan. To maintain balance, she sets time aside to do the things she loves outside of work, such as cooking and baking with her son. “I make banana bread and sushi, and get him involved in the process,” says Chan. “I started cooking in Australia because it was expensive to eat outside. I love tasting good dishes when eating out and then recreating them at home. Cooking also helps build up your relationship with family.” Her weekends are mainly spent doing Church duties. “My weekends are quite busy, but it somehow helps me relax from a busy life,” she says. Chan’s other favourite way of relieving stress is going back in time with the help of historical Chinese dramas, or C-dramas. “The costumes are very detailed, and I love the scenery and watching the horses running,” she says. “You also learn something from these dramas. You learn about history and culture, and how people struggle and overcome it.” “ Businesses follow the opportunities, people follow the business. Headquarter economy offers employment opportunities with mobility, and people may be interested in these opportunities where they can move around the region.” October 2024 13
SMES Start-up CFOs 14 October 2024
APLUS Illustrations by Gianfranco Bonadies Brian Tang’s company is growing fast. He founded Hong Kongbased PRtech start-up Tango Digital in 2020, and since then it has seen a 20-times surge in profit and is now expanding into new markets. As with any fast-growing start-up, there is the risk of founders and their teams being overwhelmed, which is why Tang recently hired his first chief financial officer. “As we expand into different markets, looking at merger and acquisition (M&A) and other bigger moves, we think it’s the right time to bring in a more strategic and experienced CFO who would help guide our structures across markets and work closely with myself and investors to grow our business,” says Tang. His company uses social listening, artificial intelligence (AI) content generation and automated solutions to help companies safeguard their online reputation and avoid PR crises. Someone who will be familiar with the new hire’s initial few days or months on the job is William Chong, Finance Director at Glints, a Singapore-based start-up that runs a recruitment and career development platform. Chong, who is a member of the Hong Kong Institute of CPAs, joined the company just after it had raised US$6.8 million in Series B funding in 2019 and launched in Vietnam, Taiwan and Hong Kong. He notes that at a certain stage of a start-up’s growth, bringing in a CFO has its benefits. While outsourcing financial management and financial reporting is common among small businesses and allows them to better manage their budgets, companies that are scaling up quickly will inevitably need to have their finance function well taken care of. “For start-ups, things change every few months. You have to be able to build backend systems and processes that are flexible enough so that you can move in an agile manner. A CFO can also think with the end in mind, and say ‘at this stage, you should get to this point,’ and then work backwards and build the aforementioned systems and processes quickly and within a controlled budget. That’s the benefit of hiring someone more seasoned and experienced,” says Chong. The attraction of start-ups The response to Tang’s CFO job ad was “overwhelming.” Over 300 candidates applied, with many having previously worked at larger organizations, including the Big Four. The reasons for wanting the role ranged from having an interest in AI and technology to “the growth and potential upside of being involved in a start-up at our stage,” Tang says. Institute member Rebecca Chan took on the CFO role at a biotech start-up with career development in mind. She already had 35 years of working experience in Hong To the moon: How start-up CFOs turn ambitions into reality What makes a great start-up CFO? Institute members who choose to navigate start-up growth challenges, over the stability and allure of larger companies, share their experiences with Jemelyn Yadao October 2024 15
SMES Start-up CFOs Kong Stock Exchange and three of the Big Four. What was missing was insight into working at a corporate. “I thought by joining the company, my career would be more complete,” says Chan, who was previously co-head of the IPO and head of accounting affairs team of the listing division of the HKEX. She joined Cloudbreak Pharma in 2022, and one of her recent focuses is to prepare the company’s listing on the HKEX through section 18A. The company, which was founded in 2015 in California, is a clinical stage biotechnology company developing ophthalmic drugs for chronic eye diseases with few treatment options. “We basically develop eye drop treatments, and focus on first-inclass and best-in-class products, which means no one has developed it before, because our founder doesn’t like to do products similar to what are already available,” Chan explains. For Chong, meeting the founders convinced him that joining Glints was the right move for him. “The culture of beginner’s mindset very much aligned with what I was looking for. And the founders are very mature and intelligent. Through my interaction with them, I felt like I could be part of the right team to grow and scale the company,” he shares. An “engineer at heart” – he has a bachelor’s degree in civil engineering – Chong says that working at a start-up allows him to “build,” which was a welcomed change following his time in investment banking. Current priorities QuantumPharm, a Chinese AI-driven drug and new material discovery company, also known as XtalPi, caused some market excitement in June this year when it listed in Hong Kong. It became the first company to list under Chapter 18C of the Hong Kong Listing Rules, which came into effect in March 2023 and makes it easier for specialist technology companies to list in the city. Its CFO immediately saw how the new Chapter 18C regime would benefit a wide range of innovative high-tech companies like XtalPi. “The IPO was a landscapechanging, precedent setting transaction for the Hong Kong market because previously for deep tech companies like us, we didn’t have many choices when it came to IPO. Most listed in the United States, but with the geopolitical sensitivity and the A share market slowing down approval for new IPOs, Chapter 18C opens up another channel for deep tech companies to tap into the capital markets,” says Ronald Tam, CFO of XtalPi, and an Institute member. “I think it has a profound positive impact on the deep tech space in China and is certainly a very attractive option for young start-ups.” When Tam joined the company as CFO in 2020, he insisted on doing another round of pre-IPO fundraising, emphasizing the importance of maintaining firstmover advantage. “I suggested to my cofounders that we don’t know whether the market window will open or close in the next few 16 October 2024
APLUS To foster the growth of start-ups, the Hong Kong Chief Executive announced in the Policy Address 2024 plans to launch the “I&T Accelerator Pilot Scheme”, allocating HK$180 million in the form of matching funds to attract professional start-up service providers with proven track records in and beyond Hong Kong to set up accelerator bases in the city. quarters, so while the market condition allows, we should switch on the fundraising engine to build a war chest in anticipation of any adverse market conditions,” recalls Tam. Today, given it’s recent listing, Tam is focused on corporate governance. “We need to continue strengthening our corporate governance, including setting up various subcommittees at the board level to engage external parties to look at specific internal control matters,” he explains. “I also need to work closely with business because any capital market fundraising exercise should go hand in hand with business development needs.” Financial reporting remains a very important task, he adds. Fundraising mode For most start-up CFOs, securing and managing funding is a priority. “As a pre-revenue biotech company and a start-up, we have to manage our funding very carefully and ensure there is adequate funding for our research and development purposes, and we need to adopt multiple strategies involving internal and external parties. Meeting and finding investors is part of my day to day,” says Chan at Cloudbreak. The best approach to achieving this is to learn all that needs to be learned in the biotech world. “You need to understand the scientific side from the teams, to understand our projects’ potential and align our financial strategy accordingly. This is actually tied to my character as a lifetime learner,” Chan says, adding that this allows her to help investors understand the industry trends and the clinical trial process. In the mid to long term, Tang of Tango Digital expects his new CFO to focus on fundraising, M&A or any growth plans. “Help guide the company on profitable growth and be a constructive voice in our management team to keep everyone in check,” he says. “ You need to understand the scientific side from the teams, to understand our projects’ potential and align our financial strategy accordingly. This is actually tied to my character as a lifetime learner.” October 2024 17
SMES Start-up CFOs For Chong of Glints, to accomplish fundraising in today’s environment, he says the company had to shift to finding a balance between growth and operational efficiency. “In the past, most companies looked to survive through fundraising. But the fundraising is more challenging today given the macroeconomic environment. So right now, more focus is given to processes, establishing operational excellence,” he explains. Letting fires burn With the lack of resources, start-up CFOs will need to have the ability and willingness to roll up their sleeves and pivot quickly. One of Chan’s responsibilities when she first joined was to set up the company’s Hong Kong office. “Building something from ground zero was not something I had experience on. In the past, I would not need to care about which telecom service provider to use, which office space we should rent, or which decoration company we should hire,” says Chan, speaking on the work that needed to be done internally to prepare for IPO. “On the external side, Cloudbreak was new to Hong Kong at the time, so I had to introduce the company to many stakeholders and do a little PR work. For a smaller company, you cannot just do the CFO role or just looking at the numbers. You have to do a little bit of everything.” Compared to what CFOs at large companies do, a start-up CFO’s role will have similarities, but there are important differences that Chong points out. “At a larger company you would have some protocol SOP set up by your predecessors, and with a larger number of headcount, a lot of time would be spent making sure people are on the same page to make things happen. But in a start-up, you often have more work than you can handle. Everywhere you see fires burning – you put out the worst fires and for the rest you just let them burn.” This mindset pushes him to prioritize and always think about what drives the business, he adds. “Employees generally are given more autonomy and are empowered to make decisions. This is a key difference between a start-up and a more established company.” Advice for start-up CFOs CPAs interested in joining a start-up as a CFO should be prepared to multitask and work alongside a range of internal and external stakeholders, says Tam of XtalPi. He adds that CFOs add value by having a strong business development mindset. “The CFO and finance team cannot work without bearing in mind what is in the best interest of the business and in turn the best interest of our shareholders.” With Hong Kong’s continued aspirations of being a leading innovation and technology hub, Tam believes now is the best time for CPAs to be open to CFO or senior finance roles in the deep tech or start-up world. “I think they will be amazed about how fast the pace could be. Together, we can add value to global technology advancement.” The start-up ecosystem thrives on innovation, making continuous learning crucial. Chan’s advice for CFOs is to expand their knowledge and to embrace adaptability, as a start-up CFO has to have characteristics beyond strong accounting skills. She adds that having a diverse career journey has enabled her to take stock of past experiences that are most relevant to a start-up. “I would encourage people to move on to different roles, to see things from different angles. Then it will be much easier for them to handle challenges,” Chan says. CFOs should be prepared to get their hands dirty, especially in early-stage start-ups. “Things won’t be ready. Expect to see a backlog of stuff that you have to manage and take care of,” Chong says. Being successful in the role also requires a big shift in mindset. “If you join a start-up, you have to think like a business owner. The survival of the company is pretty much the top line. So even though I’m in charge of finance and legal right now, I also need to think about how we can drive revenue,” he says. Indeed, Tang sees himself teaming up with the new CFO to grow his company. “We will work closely together on budgeting, bookkeeping process, audits, expansion plans, strategic directions, investor relations – basically everything from top to bottom,” he says. “I view the CFO as a partner in the business and together we should make the company more efficient.” “ In a start-up, you often have more work than you can handle. Everywhere you see fires burning – you put out the worst fires and for the rest you just let them burn.” 18 October 2024
APLUS October 2024 19
SMPS Sustainability services From compliance to competitive edge: SMPs helping SMEs to navigate the green shift 20 October 2024
APLUS The growing urgency around climate change and other sustainability challenges has put increasing pressure on businesses of all sizes to rethink their operations and impact. While large corporations have the resources to establish robust environmental, social and governance (ESG) programmes, small- and mediumsized enterprises (SMEs) often struggle to navigate the complexities of sustainability. This is where small- and medium-sized practitioners (SMPs) can play a vital role. As trusted advisors to SMEs, SMPs have a unique opportunity to guide their clients through the sustainability transition. “The transition to sustainable practices and the reporting and assurance of sustainability information is truly a global transformation. Considering the level of global economic activity covered by SMEs, this transformation can be successful only if SMEs are part of the journey,” said Christopher Arnold, Director at the International Federation of Accountants (IFAC). “If we recall how essential SMPs are for supporting financial literacy in SME clients, we expect that pattern to repeat with sustainability literacy.” While it is the larger entities and listed companies that will be subject to mandatory reporting and assurance requirements, SMEs are impacted as listed companies will have to report on practices in their value chain and will hold their suppliers accountable. The shift towards sustainability is also driven by stakeholder pressures and a growing recognition of the financial materiality of ESG issues. Crowe (HK) CPA Limited saw a significant rise in the demand for sustainability consulting services around five years ago, prompting it to step into the sustainability space and offer such services. “Companies across various industries were starting to realize the importance of integrating sustainable practices into their operations to not only comply with regulations but also to meet the expectations of consumers and stakeholders,” says Edmund Li, Technical Partner at Crowe, and a member of the Hong Kong Institute of CPAs. Indeed, with a rise in information requests both from the value chain and from finance providers, an increasing number of SMPs are offering sustainability services, a trend that is growing globally, says Arnold. “Lenders are increasingly creating links between sustainability factors and risk, and taking these into account in their lending decisions. This makes the need for SMEs to establish processes, systems, and controls around sustainability information increasingly clear. These developments also highlight opportunities for SMPs to provide a range of different services, including advisory, reporting, agreed-upon procedures engagements, and assurance.” Kingsley Cheng, Partner at independent advisory firm PAL Advisory Limited, and a member of the Institute’s Sustainability Committee, points out that while SMEs are not always big enough to have dedicated sustainability teams, they still need to manage their risks and address customer or regulatory requirements. “This is where we can step in as experts and coaches to help them identify the right metrics, collect data, and develop tailored sustainability strategies.” Gloria So, Partner at SW Hong Kong, who How can small- and medium-sized practitioners position themselves for sustainability services? Jolene Otremba talks to SMPs that are already guiding small- and medium-sized enterprises in the multifaceted field of sustainability, and a global representative for SMP interests October 2024 21
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