Issue 10 Volume 17 October 2021 DRIVING BUSINESS SUCCESS PLUS: PROFILE Francis Ngai, Founder and Chief Executive Officer of Social Ventures Hong Kong ACCOUNTANT PLUS Roman Lo CPA, Chief Financial Officer, Greater China Region, Rémy Cointreau SECOND OPINIONS How does the Capstone of the Qualification Programme prepare the next generation of CPAs for the future? Speakers at this year’s CPA Conference 2021 discuss how businesses can remain resilient and how finance professionals must adapt in order to prosper amidst the new normal CHANGING FOR THE BETTER
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PRESIDENT’S MESSAGE APLUS October 2021 1 The Financial Reporting Council (Amendment) Bill 2021 was passed by the Legislative Council on 26 October. Ahead of becoming effective, subsidiary legislation will be introduced to provide for the transitional arrangements and other remaining technical details. The Institute will continue to engage with the Financial Reporting Council (FRC) as we prepare for the implementation of the new regulatory regime under the renamed Accounting and Financial Reporting Council. As I told the media after the bill passed, our Institute has 48 years of history and it is difficult to transfer the current system and experience to others in a short period. I hope that a tripartite platform will be formed with the Financial Services and the Treasury Bureau and the FRC to ensure a smooth transition. The functions to be transferred to the FRC are currently handled by over 60 Institute staff. It may be beneficial if these staff continue to perform the relevant functions on behalf of the FRC during the transition period. Thanks to the members who took part in the Extraordinary General Meeting on 30 September. The two resolutions were passed by members who voted in person and by proxy, and the government has been informed of this. The minutes from the meeting are available now in the Members’ area of the Institute’s website. Council will pursue follow up actions in due course. While the roles and responsibilities of the Institute will change when the amended ordinance becomes effective, we will continue our work in helping members to prepare for the future. One of the ways we help members to prepare for the future is through professional development. One of these events was the CPA Conference 2021, which was held on 2 October. Congratulations to the team for putting in the hard work required to organize the conference. We had such an exciting and insightful day, and it was brilliant to be able to hold a full-scale face-to-face event. The past year has demonstrated that while virtual is definitely an important part of the future, there is something irreplaceable about holding physical events. In this month’s magazine, you can read two articles on the panel discussions that took place during the conference. The event was also recorded and will be turned into an e-Seminar soon as well. Look out for that if you weren’t able to catch it first time. Another physical event we were able to hold this month was the QP Top Student Award and Scholarship Presentation Ceremony 2021. Although delayed by two weeks due to Tropical Storm Lionrock, it was great to be able to come together and celebrate the achievements of some of the next generation of our profession. We welcomed Joseph H.L. Chan, JP, Under Secretary for Financial Services and the Treasury as guest of honour of the event. I would also like to thank the sponsors for their ongoing involvement in helping us to recognize the achievements of our young future members over many years. During the event, I shared with the young people receiving their awards some career advice and why joining our profession was the right decision for them. It’s not long to go until the Annual Dinner 2021. The event will take place on Friday, 12 November, where we will be coming “Together for the profession.” We will be celebrating how our fellow members support the development of the profession, and Hong Kong. We will celebrate the dedicated altruism of members who devote their time to assisting with the Institute’s Qualification Programme, professional development courses and events, mentorship programmes, and corporate social responsibility programmes. I do hope that you will join us for the event. Raymond Cheng FCPA (practising) President Dear members, “While the roles and responsibilities of the Institute will change when the amended ordinance becomes effective, we will continue our work in helping members to prepare for the future.”
CONTENTS Issue 10 Volume 17 October 2021 NEWS 01 President’s message 04 Institute news 06 Business news FEATURES 08 Getting businesses to move on Key takeaways for accountants in business from the morning session of this year’s CPA Conference 14 Thriving amidst change What skill sets are required for future accountants? Panellists in the afternoon session discuss 20 Second opinions How does the Capstone of the Qualification Programme prepare the next generation of CPAs for the future? 22 How to Technology company cloudThing on the steps to creating a paperless office 23 Thought leadership: Kera Kong The Product Manager, RMB Business Coordination Team, Bank of China (Hong Kong) Limited, on how the e-CNY will impact China’s digital payment sector 24 Leadership: Francis Ngai The Founder and Chief Executive Officer of Social Ventures Hong Kong on how non-profits can succeed 30 Accountant Plus: Roman Lo CPA The Chief Financial Officer, Greater China Region, at Rémy Cointreau on how his CPA skills help in the spirits industry 37 Meet the speaker What to expect from this year’s Annual Accounting Update conference SOURCE 38 Breaches to the code of ethics: A case study for PAIBs The first of two case studies in A Plus, developed by the Institute’s Ethics Committee 40 Five areas of focus for general insurers during 24 Making an impact Francis Ngai, Founder and Chief Executive Officer of Social Ventures Hong Kong, on building business solutions for social problems 08 Getting businesses to move on 14 Thriving amidst change
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 Junior Copy Editor Jeremy Chan Associate Editor Nicky Burridge Contributor Erin Hale, Jolene Otremba Registered Office 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Raymond Cheng Vice Presidents Rosalind Lee Ken Li Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Dr Wendy Lam Associate Director of Corporate Communications 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 IFRS 17 project planning and implementation Key topics to support management in effectively delivering IFRS 17 42 A “simplified” auditing standard? An overview of the IAASB’s exposure draft on the audits of less complex entities 43 Technical news WORK-LIFE BALANCE 46 Pushing towards the finish line CPAs recount their Standard Chartered Hong Kong Marathon experience 52 Young member of the month Kevin Lai CPA, Head ofAccounting at Richemont Asia Pacific Limited 54 Leisure Plus Spotlight on afternoon tea and what members are currently reading and listening to 56 Let’s get fiscal Some accountants are living their best life, says Nury Vittachi 30 Staying in good spirits Roman Lo CPA, Chief Financial Officer, Greater China Region, at Rémy Cointreau, on the changes he has helped implement at the French spirits group 54 46 Pushing towards the finish line Leisure Plus 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 2021. Print run: 7,135 copies The digital version is distributed to all 46,859 members, 17,407 students of the Institute and 2,358 business stakeholders every month.
NEWS Institute news Business news 4 October 2021 Resolution by agreement Tang Siu Kun, Stephen CPA Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional behaviour under sections 100.5(e) and 150 of the applicable Code of Ethics for Professional Accountants. Tang was a founder of Magic Holdings International Limited and the chairman of its board of directors. In March 2021, the Market Misconduct Tribunal (MMT) fined the company and its directors for late disclosure of inside information on a proposed acquisition of the company in 2013. The MMT found that the company’s disclosure of the proposed acquisition, which would have a positive impact on its share price, had been delayed for approximately three months. The MMT also found that Tang breached the disclosure requirement under the Securities and Futures Ordinance and did not take all reasonable measures to ensure that proper safeguards existed to prevent the company’s breach of the disclosure requirement. He was fined and disqualified by the MMT from being a director or being The Institute will hold its annual dinner on 12 November at the JW Marriott Hotel Hong Kong. Themed “Together for the profession,” the event will celebrate how the diligence and skills of Institute members support the development of the profession and the wider community. It will celebrate the dedicated altruism of members who devote their time to assisting with the Institute’s Qualification Programme, professional development courses and events, mentorship programmes, and corporate social responsibility programmes. Members can book their seats via the Institute’s website. Call for Council and committee applications The Institute’s Nomination Committee is inviting applications for 2022. Members interested in contributing to the development of the profession in a meaningful way next year can put their names forward to join the Council as a co-opted member or committees. Members can learn more about the committees from the Institute’s website and should submit the nomination form before 26 November. EGM outcome Both resolutions regarding the reform of the regulatory regime of the accounting profession were carried by a majority of members voting in person or by proxy at the Extraordinary General Meeting (EGM) held on 30 September. The government has been informed that the resolutions passed. The minutes from the EGM are now available for members to read. They can be found in the “Members’ area” of the Institute’s website. Young Members Virtual Conference 2021 Themed “Building an arsenal for young accountants – new trends and skillsets for future-ready CPAs,” the Young Members Virtual Conference 2021 will be held on 6 November. The conference will bring a panel of speakers to share their insights on the skill sets young CPAs need, covering subjects relating to artificial intelligence, big data, cryptocurrencies, security token offerings, listed companies, as well as environmental, social and governance reporting. Those interested should enrol by 4 November via the Institute’s website. Minutes of Council meetings The abridged minutes from the August and September Council meetings are now available for members to read. They can be found in the “Members’ area” of the Institute’s website. Annual Dinner 2021 to celebrate members
APLUS involved in the management of a listed company for 24 months. Tang was also ordered to undergo a training programme to be approved by the Securities and Futures Commission. Regulatory action: Based on the foregoing, especially the actions taken by the MMT, and in lieu of further proceedings, the Council concluded the following should resolve the complaint: 1. Tang acknowledge the facts of the case and the areas of non-compliance with a professional standard; 2. Tang be reprimanded; and 3. Tang pay costs of the Institute of HK$15,000. Disciplinary findings Lin Ching Yee, Daniel CPA (practising) and Kwong Kam Wing, Kelvin CPA (practising) Complaint: Failure or neglect by Lin to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 230 Audit Documentation, HKSA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, HKSA 330 The Auditor’s Responses to Assessed Risks, HKSA 450 Evaluation of Misstatements Identified during the Audit, HKSA 500 Audit Evidence, HKSA 530 Audit Sampling and Other Means of Testing and its subsequent revised version entitled Audit Sampling, and HKSA 540 Audit of Accounting Estimates and its subsequent revised version entitled Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Failure or neglect by Kwong to observe, maintain or otherwise apply HKSA 220 Quality Control for Audits of Historical Financial Information and its subsequent revised version entitled Quality Control for an Audit of Financial Statements. Lin and Kwong were partners of JBPB & Co. and Grant Thornton, two firms that have since been deregistered. JBPB & Co. and Grant Thornton expressed unmodified auditor’s opinions on the consolidated financial statements of E. Bon Holdings Limited, a Hong Kong listed company, and its subsidiaries (collectively, group) for the years ended 31 March 2010 and 31 March 2011 respectively. Lin was the engagement partner and Kwong was the engagement quality control reviewer of the audits. The Institute received referrals from the Financial Reporting Council (FRC) about deficiencies in the 2010 and 2011 audits. For both years, the audit team failed to perform sufficient audit procedures and prepare adequate documentation in relation to provision for inventories and revenue from sales of goods. For the 2011 audit, the audit team failed to obtain sufficient evidence and prepare adequate documentation on revenue from contract variations and claims and relevant expenses, and on share-based payments made to the group’s personnel. Decisions and reasons: The Disciplinary Committee reprimanded the respondents. In addition, Lin and Kwong were ordered to pay penalties of HK$200,000 and HK$100,000 respectively, and to pay costs of the Institute and the FRC totalling HK$3,635,673.70. When making its decision, the Disciplinary Committee considered the particulars in support of the complaints and certain mitigating factors, which included the respondents’ good compliance history and their adoption of a reasonable course of action to conclude these proceedings. Mok Ching Ho CPA (practising) Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity in sections 100.5(a), 110.1 and 110.2 of the Code of Ethics for Professional Accountants (code), the fundamental principle of professional competence and due care in sections 100.5(c) and 130.1 of the code, Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and being guilty of professional misconduct. Mok was practising in his own name and responsible for his practice’s quality control system and the quality of its audit engagements. A first practice review of the practice identified significant deficiencies in a number of its audit engagements, in that there was no evidence of necessary audit procedures performed in key areas including purchases and sales, existence and valuation of inventories, and validity of expenses. In addition, Mok failed to make sure his practice had sufficient staff resources and adequate policies and procedures to ensure audits were performed in accordance with professional standards, and to establish a monitoring process for ongoing evaluation of the practice’s system of quality control. Further, the practice reviewer found that Mok had a sizeable portfolio of 258 clients in the period covered by the review and for most of them, Mok performed little or no audit work before issuing the audit reports. He also created audit working papers and made misleading representations to the reviewer in an attempt to give a false impression that the audits had been properly conducted. Decisions and reasons: The Disciplinary Committee ordered the name of Mok be removed from the register of CPAs for four years with effect from 18 October 2021. In addition, Mok was ordered to pay a penalty of HK$80,000 and costs of disciplinary proceedings of HK$73,630. The committee further found the extent of Mok’s lack of integrity and competence to be very serious, amounting to professional misconduct. Details of the resolution by agreement and disciplinary findings are available on the Institute’s website. October 2021 5
NEWS Business The International Ethics Standards Board for Accountants (IESBA) has appointed Gabriela Figueiredo Dias to be its new chairwoman. Figueiredo Dias will be the IESBA’s first female chairwoman when she takes office on 1 January 2022. She succeeds Stavros Thomadakis, who has led the IESBA since 2015. She is currently President of the Portuguese Securities Market Commission, the authority responsible for regulating and supervising the markets of financial instruments, which covers listed companies, asset managers, auditors and investment firms. “I am honoured to be selected as the next IESBA chair during this critical time of transition for the board and the profession,” Figueiredo Dias said in a statement on 6 October. PWC U.S. OFFERS PERMANENT REMOTE WORK TO EMPLOYEES WEALTH MANAGEMENT CONNECT SEES HOT DEMAND FOLLOWING LAUNCH The Hong KongMonetary Authority (HKMA) has sought feedback from academics and the finance profession after issuing a 50-page white paper entitled e-HKD: A technical perspective on 4 October, in a move seen as the HKMA’s first step towards introducing a digital currency in the city. The white paper lists seven major areas and explores potential architecture and design options for the digital currency. It will collect comments by the end of the year, according to the South ChinaMorning Post. The city’s central bank reaffirmed that it had not decided to launch the e-HKD and wanted to collect views before making a decision next year. “The knowledge gained from this research, together with the experience we acquired fromother central bank digital currency projects, would help inform further consideration and deliberation on the technical design of the e-HKD,” said Eddie Yue, Chief Executive of the HKMA. PwC in the United States is offering its 40,000 employees the opportunity to permanently work virtually and live anywhere they want, making the firm one of the biggest employers to embrace remote work in the U.S. amid the ongoing COVID-19 pandemic. Employees who choose to work remotely on a permanent basis will still have to come into the office a maximum of three days a month for in-person appointments such as critical teammeetings, client visits and learning sessions, according to PwC’s Deputy People Leader Yolanda Seals-Coffield, who added that the firmwas the first in the industry to allow full-time remote work to workers. Other firms such as Deloitte and KPMG have also been giving employees more choice to work remotely, Reuters reports. Hong Kong’s Exchange Fund has lost HK$13.2 billion in the third quarter as a result of a decline in the local stock market. The decrease, which follows gains of HK$51.3 billion and HK$51.4 billion seen during the first and second quarters respectively, compares to the HK$81.2 billion gain seen during the July to September period in 2020. The lacklustre stock market performance is attributed to the regulatory crackdown by Mainland authorities on the tech and private tutoring sector, leading the Hang Seng Index to drop by 15 percent during the third quarter, according to Howard Lee, Deputy Chief Executive of the HKMA, who announced the Exchange Fund’s performance during a Legislative Council meeting on 18 October. IESBA APPOINTS NEW PRESIDENT The Wealth Management Connect saw a warm response from both Hong Kong and Mainland China customers following its launch on 19 October. The scheme enables residents in Hong Kong and Macau to invest in wealth management products distributed by Mainland banks in the Greater Bay Area and vice versa. The HKMA approved 16 lenders on launch day to sell products in the city and in Mainland China. Banks such as Bank of China (Hong Kong), HSBC and Standard Chartered and 10 other lenders all indicated a positive reaction from customers, with many of them purchasing investment products across the border, according to the South China Morning Post. HKMA TAKES FIRST STEP IN EXPLORING DIGITAL CURRENCY HK$13.2 BILLION EXCHANGE FUND LOSES 6 October 2021
Tesla’s market capitalization hit just over US$1 trillion on 26 October, making it the sixth company ever in United States history to be worth US$1 trillion. Its value soared after Hertz, an American car rental group, announced plans to add 100,000 Tesla vehicles to its fleets in North America and Europe. Tesla’s shares went up by 12.6 percent and closed at US$1,025, bringing year-to-date gains above 40 percent. It took 12 years for Tesla to reach the US$1 trillion mark after its IPO, making it the secondfastest company after Facebook to do so following an IPO. Tesla is now one of six companies with a trillion-dollar value in the U.S., joining Apple, Amazon, Alphabet, Facebook and Microsoft. Founder Elon Musk’s stake in the company is now valued at US$ 172 billion. The Financial Reporting Council (Amendment) Bill 2021 was passed by the Legislative Council on 22 October. Under the new bill, the Financial Reporting Council (FRC) will assume functions from the Hong Kong Institute of CPAs such as the issuance of practising certificates to CPAs, registration and inspection of practice units, investigation of all CPAs and practice units and overseeing the remaining statutory functions of the Institute. The new legislation will take effect on a date to be appointed by the Secretary for Financial Services and the Treasury. Subsidiary legislation will be introduced to provide for the transitional arrangements and other remaining technical details. The Institute will continue to engage with the FRC as it prepares for the implementation of the new regime. TESLA VALUED AT OVER FRC INVESTIGATING PWC’S EVERGRANDE AUDIT The Asia Securities Industry and Financial Markets Association (ASIFMA) has warned that Hong Kong’s strict quarantine requirements are threatening the city’s status as an international financial hub. The lobby group, which represents 155 of the largest banks and professional services firms in the region, addressed a letter on 25 October to Hong Kong Financial Secretary Paul Chan calling on the government to produce a timeline for relaxing travel restrictions. Visitors to Hong Kong from 25 countries must still quarantine in a hotel at their own expense for three weeks, while travellers from elsewhere are subject to a two-week hotel quarantine. Authorities have failed to offer any timeline for relaxing the rules. The letter stems from growing frustration among the city’s business community as the rest of the region, such as Singapore, reopens. FINANCIAL INDUSTRY GROUP WARNS QUARANTINE MEASURES THREATEN HONG KONG’S STANDING APLUS Hong Kong Stock Exchange (HKEX) has over 200 initial public offering (IPO) applications as of the end of September, according to Chief Executive Officer of HKEX Nicolas Aguzin this month, signalling a positive outlook for the city’s IPO market for the last quarter of the year. During the first nine months of the year, 73 companies listed, raising a combined US$35.9 billion from IPOs and secondary listings, the most ever netted since records began in 1980, reports the South China Morning Post, using data from Refinitiv. “The IPO market in the third quarter reflects the cautious sentiment amid the regulatory development in Mainland China. However, the pipeline of IPOs in Hong Kong remains solid,” said Aguzin during a post-earnings conference. The FRC in Hong Kong announced on 25 October that it was probing China Evergrande Group’s accounts from 2020 over inadequate reporting on the company’s operating risks and its audit by PwC of their accounts for the full year of 2020 and the first half of 2021. The announcement said PwC “expressed an unmodified audit opinion in its auditor’s report of China Evergrande’s 2020 annual accounts but made no reference to going concern material uncertainties.” China Evergrande Group, the nation’s second-largest property developer, is faced with more than US$300 billion in debt and has been divesting assets in a bid to repay creditors. It has also missed three rounds of interest payments on its international bonds. MORE THAN 200 IPOS PLANNED, SAYS HKEX FRC AMENDMENT BILL PASSED: REGULATORY REFORMMOVES AHEAD US$1 TRILLION October 2021 7
COVID-19 offered many valuable lessons to organizations, including the need to have contingency plans put in place to handle crises and to embrace technology. Speakers at the morning session of the CPA Conference 2021 discuss the need for businesses to remain agile in responding to change and how CPAs can help build business resilience in the new normal. Jolene Otremba reports. When news of a new strain of coronavirus first broke out in December 2019, no one could have imagined the impact that it would have on the entire world. Little did anyone realize that it would be the start of a global pandemic that would ravage economies, disrupt supply chains and fundamentally reshape organizational behaviours. As businesses and industries scrambled to respond to an unprecedented situation, many lessons were learned as part of the journey. Earlier this month, a group of industry experts shared these learnings at the Hong Kong Institute of CPAs’ first ever conference for both CPAs in business and practice. Titled “Transcending Together,” the CPA Conference 2021 brought together speakers and panellists to share their experiences and to inspire Institute members and the larger business community to think about the latest industry trends stemming from the pandemic so far. Lessons from the crisis During the first panel discussion, the audience heard from Edwin Morris CPA, Group Chief Financial Officer, Jebsen &Co. Ltd., and Francis Ngai, Founder and Chief Executive Officer of Social Ventures Hong Kong (see profile on page 24). Moderated by GETTING BUSINESSES TO MOVE ON CPA CONFERENCE 2021 Morning session 8 October 2021
APLUS October 2021 9
CPA CONFERENCE 2021 Morning session Francis Fong, Honorary President, Hong Kong Information Technology Federation, the panellists talked about how the pandemic disrupted their businesses, how they responded and the key lessons from that experience. The panellists started by acknowledging that all businesses today have to deal with operating in a fluid environment that is constantly changing and full of uncertainties. The overarching recommendation from the panel was that companies need to be more proactive in mitigating their external risks. These include being well-prepared to deal with all sorts of scenarios, having a strong sense of purpose, making sure their propositions stay relevant, and to make long-term plans for purposeful engagement with customers. Kickstarting the conversation, Fong noted that the last 20 months have been a tumultuous time for all sectors. Those who clung on to the hope that the pandemic would soon pass and did nothing to adjust to their businesses have likely met a dire fate. On the other hand, those who quickly sprang into action and adapted themselves offer us many “survival lessons.” Morris reflected on the moment Jebsen, a marketing, investment, and distribution organization, realized the severity of the situation around Chinese NewYear in 2020. “We knew this was going to be a big deal – you could see what was happening – so the first thing we did was go to our banks in Hong Kong, lock in our money and check that the banks had the money and facilities there for us,” he recalled. Despite Jebsen being a large organization with many diverse business units, Morris said it was solvency problems that kept him up at night. “What if we couldn’t receive the money that was owed to us? We had to quickly tell our business units to monitor our customers and clients. It came to the point where we would have to assess who would survive,” he said. For customers who looked like they could weather the storm, Jebsen provided themwith support and extended their credit lines, but for those who looked like they wouldn’t make it, Morris said they had to make the difficult decision to pull the plug early on. “We had to cut them off, this was the balance we had to strike,” he said. Ngai, on the other hand, who comes from a non-governmental organization background, said the pandemic highlighted how fragile Social Ventures’ business model was and how it lacked resilience. This prompted his company to revisit its original mission statement and Building blocks Given the nature of the toy, LEGO, maker of the iconic toy bricks, has largely relied on brick and mortar retail shops to sell its products. But in 2018, the company decided it was time to move with the times and go online. The decision paid off, said Kenny Sham Director, Head of Marketing (Hong Kong, Taiwan &Macau) (pictured below), for the LEGOGroup during a keynote speech at the CPA Conference 2021. He explained that moving to e-commerce early on helped the company to weather two recent events: the social unrest in Hong Kong and COVID-19. “As people began to stay home, we realized that we had made the right move because people weren’t coming to the stores – they were online,” he said. During the first half of this year, the LEGOGroup’s consumer sales grew by 36 percent, it’s total revenue grew by 46 percent, and its operating profits soared 104 percent, compared to last year. Aside from going online, Sham also believes that LEGO’s success boils down to the fact that the company started to focus on several key areas. Firstly, when the pandemic hit, the company took the time to understand how its consumers had changed. It then made changes according to these new customer behaviours. Secondly, LEGO reacted and transformed quickly. “What’s amazing about our product is that it’s really hands-on, once children touch and build our products, that’s when they get addicted and fall in love with LEGO,” he said. “So what were we going to do?” The company rolled out a “Bricks at Home” campaign to help parents and children who were stuck at home. He noted that parents greatly appreciated this, as it meant their children would stay occupied while they worked. So it continued with campaigns to engage with their customers through e-commerce and online channels, partnering with companies such as HKTV Mall to roll out exclusive product launches. Thirdly, and perhaps most importantly, Sham said, the company held tight to their brand’s core values. “During the pandemic, this really got lost with a lot of companies; they sailed along not really understanding what their purpose, mission and core values were anymore,” he said. Through its monthly brand health check, it realized that issues such as sustainability, and diversity and inclusion were really important to their customers and to their staff, prompting the company to ramp up efforts in this area. On that note, Sham imparted one last piece of advice: “During a crisis, that’s when you really have to sit down and think about what your brand stands for and what you’re all about,” he said. 10 October 2021
APLUS “The pandemic really forced us to look at our entire overhead structure, and ask ourselves: how can we fix this and how can we change the fixed costs to become variable? This isn’t just an accounting issue, this is about the entire organization’s design.” to think of ways to adjust to the pandemic. “During the pandemic, you could see that our business model was fragile and lacked resilience, so we had to go back to our original vision and mission and try and figure out why we did what we did, and how we could move forward with that vision in a new environment,” he said. Social Ventures is a company that promotes social change and helps organizations to align their social purposes in order to create a better Hong Kong. Through innovative ideas and capitalizing on the fact that there was growing social awareness around sustainability and environmental issues, it took the opportunity to promote sustainable change, one of its core missions. It did this by partnering with several organizations to roll out initiatives such as Green Monday, a movement that encourages people to go meat free every Monday with the support of its Green Common business, Asia’s first plant-based grocer. “So, we expanded actually during the pandemic,” he said. “We even expanded to places like Taiwan, Shanghai and Singapore and we’re cooperating with a lot of chains now like Café de Coral and McDonald’s to introduce meat free Monday.” In both cases, business resilience came from the fact that they were forced to face a situation head-on. For Jebsen, it had to rethink how to deal with dwindling sales considering its overhead was billed to high volume sales. “The pandemic really forced us to look at our entire overhead structure, and ask ourselves: how can we fix this and how can we change the fixed costs to become variable? This isn’t just an accounting issue, this is about the entire organization’s design,” added Morris. For Social Ventures, much of its support comes from fundraising, and without that, it had to quickly think on its feet to find newways to raise funds. “Take our ‘Run Our City’ programme for example. Because of the lockdown we couldn’t do this and we lost an important revenue. So we had to adjust our strategy and decided to change it to ‘Run to the Moon’ where participants individually ran, and we added up all the miles in the end to see if we could run to the moon.” Another lesson for these two companies was figuring out how to be better prepared for future shocks, which involved understanding the businesses’ purpose. “When you do this, it’s good because you are actually reminded of your passion and why you wanted to do any of it in the first place,” Ngai said. “So we always encouraged companies to go back to the drawing board and work Above from right, counter clockwise: Edwin Morris CPA, Group Chief Financial Officer, Jebsen & Co. Ltd.; Francis Ngai, Founder and Chief Executive Officer of Social Ventures Hong Kong; and Francis Fong, Honorary President, Hong Kong Information Technology Federation. October 2021 11
CPA CONFERENCE 2021 Morning session out why they decided to go into the business in the first place.” With purpose and a plan, businesses are better able to deal with any incoming challenges. Ngai noted that the reason why so many businesses failed when the pandemic hit was because they were too shortsighted. Morris agreed, adding that companies that have not experienced a crisis tend to not plan for the long term. He said: “They generally plan for the short term; as long as they are alright today and tomorrow, they don’t think about what might happen later, and that’s where many of them went wrong. They didn’t have the awareness and the ability to suddenly change.” One of the biggest lessons from the crisis is that companies need to be prepared to embrace sudden change and have a longer-term vision. For example, Fong raised the topic of working from home and impact investing. “The trend now is towards Business 2.0. The Hong Kong Management Association and Social Ventures have already launched ‘Business with Purpose,’” he said, referring to the new platformwhich was co-created by the two organizations to advance social impact considerations and innovations in business. Some of the activities that they support include talks and seminars, consultancy services, awards and advocacy campaigns in the hopes that it can create a stronger ecosystem to advance purpose-led values and leadership among the business community. “And companies are now talking about this. What is your purpose? Businesses have to think about that.” Indeed, understanding this purpose is also important in attracting the next generation of workers, who are no longer happy to settle for a role solely with attractive monetary returns. They’re looking for companies with a social purpose. As such, purposeful brand creation is also important for talent attraction and retention moving forward, the panellists agreed. On that note, Morris conceded that the new normal means that companies have to look inwards and be prepared to face a situation that can change at any time. “Do you have the tools and people in place, and does your company have senior management level buy in? How can you be ready for any of that?” Digital transformation With those questions in mind, it was the perfect transition for moderator Jeffrey Chan FCPA (practising), Chairman of the Institute’s Working Group on Practice Management under the Small and Medium Practices Committee, to invite the second panel to share their views on digital transformation and how it has impacted business operations and the accounting profession. The panellists were Michael Chan FCPA, Co-Founder and CEO of Vis Mobility Limited, Dickman Chiu CPA, Group Financial Controller of 100x Group, Toa Charm, Chairman of OpenCertHub, and Andrew Lee, Partner, Greater China Markets, EY. Michael Chan said that companies need to understand that digital isn’t the enemy and that it is there to help solve customers’ and businesses’ pain points. There are many innovative technological tools and choosing the right one is really about finding a technology that solves your customers’ pain points. However, the biggest resistance towards technology, according to Charm, is a fear of the technology itself. “Technology is an enabler, it’s not the enemy,” he said. “If you look at it and say ‘it’s too expensive,’ and ‘it’s too hard to learn,’ you will never change.” Charm pointed to DBS Bank and Standard Chartered as well as virtual banks as examples of banks changing their business model using technology in order to gain resilience. He said that they had already been finding ways to use technology to enhance their services, “If you look at it and say ‘it’s too expensive,’ and ‘it’s too hard to learn,’ you will never change.” 12 October 2021
APLUS and the pandemic simply accelerated what they were already doing. The end result was that it allowed their businesses to grow, because they were digitally ready. Jeffrey Chan agreed that digital transformation is absolutely necessary today, so he asked the panellists: how can the profession prepare for this? The panellists believe that technological adoption required a mindset change first. But this can prove challenging, noted Chiu. “As accountants, we don’t like change; we go by the rules. But in this change environment, we can’t be the hindrance to any change, we must embrace it,” he said. Indeed, he said that this is where the profession can actually bring added value to a company. “If we embrace the technology to help customers solve problems, this is the value that the profession is bringing to the table,” Chiu said. Lee recognized that change can be intimidating. As such, it is important that senior management of all business functions understand the purpose of digital transformation and they need to have a plan and communicate this to their staff. But firstly, finance professionals were advised to go to the drawing board and think about what they want to transform into, whether it’s in finance or in its business operations. “If you don’t have a clear idea of where you want to get to, then it’s really pointless,” he added. Also driving hesitation for adopting new technologies is the fear that technologies such as artificial intelligence (AI) and robotics will eventually replace manpower. Lee said that those fears are understandable, but equally unfounded. He argued that professionals should spend more of their time upskilling and to find ways to get the technology to add value to what they are already doing. He encouraged the audience to look at the numerous free programmes set up by the government, associations and education institutions to upskill. “In the end, humans can’t be replaced,” he said. “The whole world is moving towards adopting new technology, so use your skill sets and keep your profession relevant. Use the technology to enable yourselves to do your jobs more efficiently and to add value to your company. It’s strategic, and besides, you’re also improving yourselves.” Charm said that the pandemic was a huge wake-up call for businesses globally, and that digital transformation is now part of that change management. “No one likes change, and we’ve already been pushed out of our comfort zone, so any change has to come from having a sense of urgency – it’s the urgency that will drive change,” he said. Charm then cited a statistic from a study conducted by PwC, which found that by 2030, around 30 percent of the work force today will be replaced by some form of AI. While he said that this doesn’t mean jobs will be lost, it does mean that certain job functions will change, and that CPAs must find newways to stay relevant and add value using new technology. Finally, the panellists had some closing remarks regarding technology adoption and change in small organizations versus big organizations. While large companies may have the resources, they are not as agile as smaller companies, Lee said describing it: “It’s like trying to get an elephant to turn around!” As for small companies, Michael Chan argued that they are just as well equipped to make changes, saying that a lot of the available technology is not actually that expensive. But at the crux of it all, digital transformation is inevitable. The panellists ended the discussion by encouraging the audience to keep an open mind. “This transformation is really about everyone embracing all the technology and to have a positive mindset change. Ask yourselves: ‘how can I apply these technologies to my daily work?’ This is the challenge you should give yourself,” he said. “Use the technology to enable yourselves to do your jobs more efficiently and to add value to your company. It’s strategic, and besides, you’re also improving yourselves.” Above, from left: Dickman Chiu CPA, Group Financial Controller of 100x Group; Michael Chan FCPA, CoFounder and CEO of Vis Mobility Limited; Jeffrey Chan FCPA (practising), Chairman of the Institute’s Working Group on Practice Management under Small and Medium Practices Committee; Toa Charm, Chairman of OpenCertHub; and Andrew Lee, Partner, Greater China Markets, EY. October 2021 13
Finance professionals must now spearhead the transition towards digital transformation in their organizations and make key decisions as trusted advisors. Speakers at the afternoon session of the CPA Conference 2021 speak on the evolving role of those leading the finance function. Jolene Otremba reports. The role of finance professionals has been evolving for a while as the industry responds to digitalization. COVID-19, without a doubt, has been a catalyst to accelerate some of those changes, and as a result, many professionals today have seen their roles rewritten. This was duly ref lected during the CPA Conference 2021 titled: “Transcending Together.” Panellists and speakers from a range of industries came together to discuss how the finance function has transformed from being a back-office support function to earning a seat at the table as a business-facing function that supports and enables decision-making. Furthermore, they discussed the new environment that is driving an evolution in the roles and skill sets that are required for future accounting and finance professionals. Future of the finance function Taking part in the third panel, which was moderated by Francis Fong, Honorary President of the Hong Kong Information THRIVING AMIDST CHANGE Afternoon session CPA CONFERENCE 2021 14 October 2021
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CPA CONFERENCE 2021 Afternoon session Technology Federation, were Keith Chan CPA, Chief Financial and Technology Officer of McDonald’s Hong Kong and Anthony Lin FCPA, Financial Controller of Gammon Construction. Fong opened the discussion by asking the panellists to share their thoughts on what they think were some of the biggest changes that resulted from COVID-19. Both panellists highlighted that their roles as finance professionals have fundamentally changed, and that these changes are not temporary, but are for good. “In the past, we were like historians; we looked at what happened and made recommendations, but now, we are forward-looking. We now help businesses to make forwardlooking decisions to better prepare them to move their businesses ahead,” Lin said. Indeed, one of the key points that Chan highlighted was the fact that digital transformation has given finance professionals much greater depth and insight because of the amount of data it has procured. Turning to McDonald’s as an example, he said that the company serves more than one million guests per day, hence accumulating sizable amount of data across its business. “Because this data translates into insights, we know exactly what to anticipate and we have the speed to get insight. We can then be actionable especially if you analyse the data well. This helps us to anticipate and have the agility to deal with any changes. This is how we have gone from having hindsight to having foresight.” In other words, the future for finance professionals will be more focused on data, analysis and making data-driven decisions. Moving forward, the fast adoption and evolution of technology and data will need to be married with human judgement in order to make any business decision, according to the panellists. “It’s not about ‘man versus machine,’ it’s about ‘man plus machine,’” said Chan. As such, what are the new requirements and how can finance professionals advance their careers in this new normal? Fong asked. The panellists first noted that there has to be a change in mindset and a need to accept that things have changed under the new normal. Resisting this inevitability, they added, will pose additional challenges. “Recognize that these trends are here to stay and that we won’t go back – so either we stay “You have to use the numbers and data to tell a story and explain a situation that will lead to a major decision being made, so our roles have a lot more dimension to it today.” Above, from left, clockwise: Keith Chan CPA, Chief Financial and Technology Officer of McDonald’s Hong Kong; Anthony Lin FCPA, Financial Controller of Gammon Construction; and Francis Fong, Honorary President of the Hong Kong Information Technology Federation. 16 October 2021
APLUS “A quick win only happens when you can genuinely show how a technology or a new initiative helps with something. That’s the only way everyone will embrace it.” ahead, or you’re left behind. The world is not going to go back to the way it was. This is innovation by default,” Chan said. Secondly, the panellists said that finance professionals can’t just see themselves as number crunchers anymore and have to embrace roles such as performing analyses and communicating recommendations. “In the past, the finance function in my company was 70 percent transactional accounting and 30 percent advisory, but it’s now the other way around. We are used as a sounding board for making decisions,” Chan added. As data and technology continue to play a bigger role, Lin said the third thing that finance professionals must embrace is the changing team structures within finance departments today. Rather than simply having finance professionals on a team, other professionals and experts will also make up the finance function. These could include IT professionals, engineers, data analytics experts and scientists. “There is more data, more IT and engineering and you are partnering more with businesses,” Lin said. “You have to use the numbers and data to tell a story and explain a situation that will lead to a major decision being made, so our roles have a lot more dimension to it today.” Knowing this, Fong asked the panellists what the profession needs to do to better prepare for these changes. They responded that change management should come from the top down, and boils down to how you can inspire and inf luence your people. “Change management must start with the leadership team, and there has to be buy-in at that level. A quick win only happens when you can genuinely show how a technology or a new initiative helps with something. That’s the only way everyone will embrace it,” Chan said. Turning to the data journey, Chan also suggested that finance professionals consider adopting what he calls the four stages of data usage. “We can summarize it into: the two Ds and two Ps,” he said. The first “D” is data, which Chan said should be descriptive enough to explain what has happened and what a situation has evolved into. The second “D” is diagnostic analytics, which is used to explain why something has happened. “If you are able to answer this, you’re already one step ahead,” he added. Moving on to the Ps, the first “P” is predictive analysis, which allows you to make an educated guess about what will happen, and the second “P,” which is prescriptive analysis, uses artificial intelligence to explain what data and areas you can improve upon and make something happen. “At the end of the day, the most important thing you have to show is how something adds value,” Lin said. “Not only do you have to help solve a problem, but you also have to demonstrate the added value and given purpose to get buy-in.” A social purpose positioned for a better future Businesses today face the momentous task of having to balance profits, build trust with their stakeholders, while doing good in society. This was the key message delivered by former senior civil servant and government official John Tsang at the CPA Conference 2021. According to Tsang (pictured right), who was the longest serving financial secretary for Hong Kong and is the Founder of nonprofit organization Esperanza, the global environment has changed significantly, and businesses and governments are being held accountable to everything that they do. “It isn’t just about profit anymore; employees and customers all have an active participation in your business, and they hold institutions to a higher standard,” he said. There is also growing expectation that companies have a strong social purpose that aims to do good for society. Indeed, Tsang said that corporate social responsibility is no longer something “niceto-have” but key to a company’s long-term survival. Quoting the 2020 Edelman Trust Barometer, he noted that the study revealed that distrust in governments, businesses, non-governmental organizations and media is at its highest today. While the cause of this fear is largely because of uncertainties surrounding an unpredictable future, he says it is a wake-up call for businesses to start thinking about how they can effectively rebuild trust. “How can institutions strike a balance and change the environment in which they are operating in, so that they can rebuild that trust in themselves and in society?” he asked. “The good news is that it’s not mission impossible,” he then said. However, what is required is a change in mindset around social purpose, which, he said, should be the first step. Next, he advised institutions to communicate a clear purpose and mission statement to stakeholders, and then make a consistent delivery on those promises. “If the public can see that what you are doing is going to make the world a better place for future generations, you can win their trust. This is the way businesses are going to have to do things moving forward,” he said. October 2021 17
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