Pricing strategies struggle amid supply chain chaos
Hong Kong businesses embrace digital transformation yet talent shortage bites
A global talent shortage is limiting the take-up of new technology for more than a third of businesses in Hong Kong.
A regional survey of business technology adoption by CPA Australia found 73% of respondents in Hong Kong said their company had a digital transformation strategy but 35% were struggling to find staff with the necessary talents.
Despite these challenges, more than 90% of respondents expect their organisation will take steps to improve technology adoption in the next 12 months. Increasing investment or upgrading technology is the most common action respondents expect their business to undertake (33%).
Video conferencing and group collaborations, cloud computing, and data analytics and visualisation are the most popular technologies currently used by businesses in Hong Kong. Companies expect their use of these tools to increase over the next year and are embracing digitalisation. Dr Albert Wong, member of CPA Australia’s Greater Bay Area (GBA) Committee said: “Over the past two years, travel restrictions have been a driving force for digitalisation. Many are motivated to undertake more technology upgrades and to transform newly created data into valuable business insights. Data-driven technologies, such as data analytics and visualisation (44%) have become the tools to use more for businesses in Hong Kong.”
Wong continues: “First of all, the Hong Kong SAR Government should clearly understand the types of talent required for the city’s future, then establish a forward-looking talent policy to expand the talent pool. This could include policies and programs to attract, retain and nurture innovative and tech-savvy talent with relevant skills. For example, strengthening technology collaboration with other cities in the Greater Bay Area (GBA) and nurturing our next generation in STEM.”
“The Government may also consider formulating an industry policy that helps to create a sustainable I&T ecosystem that specifically takes into account the development plan of the Northern Metropolis. Collaboration between government, academia, research institutions and enterprises is vital to expedite the development and adoption of technological achievements in the local business environment, as well as fostering more homegrown start-ups and talent.”
The strategies being used by businesses to tackle the lack of skills include upskilling or reskilling existing employees (39%), outsourcing work to a third-party provider (34%) and hiring contractors (24%).
Despite 65% of senior finance leaders agreeing that the volume and complexity of corporate risks have changed ‘mostly’ or ‘extensively’ over the last five years, just 29% rate their organisation’s overall risk management oversight as ‘mature’ or ‘robust’.
US organisations not keeping pace with growing risks
A report from the American Institute of CPAs (AICPA) and North Carolina State University’s Enterprise Risk Management (ERM) Initiative found that despite growing complexities, only 33% say their organisations have complete ERM processes in place.
The report includes insights from a survey of 560 US CFOs and senior finance leaders collected in early 2022. The survey covered a number of aspects related to their organisation’s risk oversight processes. It measured their assessments of the level of maturity in their organisation’s proactive management of these growing risks through usage of adoption of ERM processes.
KPMG Professor of Accounting and ERM Initiative at NC State director Mark Beasley said: “Our study finds that few executives perceive their risk management processes as providing important strategic value.”
Most executives (63%) do not believe their organisation’s risk management processes provide strategic advantage (‘no’ or ‘minimal’ advantage). Risk management is also only positioned by 45% to identify emerging strategic risks.
“This is despite the reality that risk and return are interrelated – organisations must take risks in the pursuit of strategic objectives. It is our hope that the ongoing uncertainties and rapidly changing business environment[s] will convince more executives of the strategic importance of having rich insights about risks facing the organisation as they make key strategic decisions,” Beasley adds.
There are several obstacles to advancing an organisation’s risk management process, with the most common reason being the belief that ‘risks are managed in other ways besides ERM’. Although the report found that over the last 13 years, the percentage of organisations claiming to have complete ERM processes in place has risen from 9% to 33%, they are still in the minority.
Given ongoing need to navigate a multitude of growing risks, more organisations will likely want to focus their efforts on strengthening their entity’s approach to managing the interconnected nature of risks to their business models. More senior executive involvement in risk oversight is being called for, with 74% of boards of directors signalling there’ll be significant changes to their existing continuity and crisis management planning.
Association of International Certified Professional Accountants vice president and managing director learning & development Ash Noah said: “Value in the business is much more than the balance sheet these days, and along with providing protection for the business, embracing ERM especially at a time when organisations must pay close attention to ESG risks, supports the creation of value and the long-term viability and sustainability of the business.”
Calls for action encourage readers to consider questions related to risk management in their own businesses. These cover current approaches and opinions, as well as strategies and indicators for key risks to plan for.
Financial sanctions hit record number
The UK’s Financial Reporting Council (FRC) has imposed record financial sanctions of £46.5m ($56.6m) for misconduct and breaches of standards (before adjustments for admissions/ early disposal), up from £16.5m in 2020/2021.
The regulator’s fourth Annual Enforcement Review of the FRC also found that a record number of cases (13) had been solved in the year 2021/2022. Additionally, there an increase of over 100% in non-financial sanctions, up from 28 to 62.
The FRC said that the increase in the number of total financial sanctions reflects the seriousness and high number of cases concluded. It also said it reflects the regulator’s growing capability to take on the large and complex cases which are an increasingly prominent feature of its work, supported by a 23% growth in the enforcement Division’s headcount.
The report revealed that the increased focus on non-financial sanctions has continued. Non-financial sanctions, which are carefully tailored to the facts of each case, are becoming increasingly sophisticated with a focus on tackling the underlying causes of failure in order to reduce the risk of recurrence.
While the regulator has continued to encourage and incentivise full cooperation, progress has been slower than hoped.
For the vast majority of concluded cases, a lack of audit evidence and a lack of professional scepticism featured.
FRC executive director of enforcement Elizabeth Barrett said: “High-quality financial reporting and audit are vital to provide users of financial statements with confidence in the accuracy of those statements and to uphold trust in corporate Britain.
“The level of financial sanctions imposed in the year underscores the important dissuasive role they continue to play, while the further increase in the use of bespoke non-financial sanctions reflects the ongoing emphasis placed on identifying the underlying causes of failure and effecting long term positive change. Such sanctions play a key part in our role as an improvement regulator.”
P11D submissions may be different this year onwards
HMRC’s End of Year Expenses and Benefits Services submission changes may involve changes for your clients.
HMRC has advised that from 6th April the interactive PDF service will no longer be available to submit returns for the 2021/22 tax year onwards.
The P11D form is used to report benefits in kinds. These are items or services your clients or your client’s employees receive in addition to salaries. For example, business entertainment expenses or company cars.
Where this happens, the P11D form must be filed with HMRC following the tax year in question every 6th July, with any tax due to be paid by 22nd July.
With these changes, if your clients have relied on the End of Year Expenses and Benefits Services for submissions of up to 150 employees, they’re no longer able to:
- Create P11D forms for their employees
- Create, send, and amend P11D forms electronically or for printing and posting
- Notify HMRC that there’s no Class 1A National Insurance liability
KeyPay UK country lead Chris Deeson says that employers with up to 150 employees that have been using the End of Year Expenses and Benefits Services have two options:
- Use HMRC’s PAYE Online Service, allowing submissions for up to 500 employees and P46(car) submissions; or
- Use an HMRC recognised payroll software that allows P11D functionality
HMRC's PAYE Online Service sounds cheaper in the short term, but payroll bureaus should look at an all-in-one package that may streamline the process and could reduce costs in the long run.
Deeson writes: “On average, bureau payroll managers use 6 systems before they start processing the pay run across expenses, leave, time and attendance, rota management, document management, etc. Not only does this generate extra work on behalf of the payroll processor to match up the data, but it also adds significant costs such as paying for each system and employing someone to maintain those systems.”
Businesses could consider using technology to automate processes and integrate their existing cloud accounting software to increase efficiencies, free up time, and reduce costs.
High demand for tech-savvy accountants
Businesses increasingly value tech-savvy accountants as a new survey finds 88% of businesses agree having an accountant who understands technology is important.
Increasing importance of tech skills is emphasised by two-thirds of respondents saying they would pay more for tech-focused accountants, compared to those without these skills.
Research conducted on behalf of digital marketing agency for the accountancy industry PracticeWeb surveyed 400 people who described themselves as a small and medium-sized enterprise (SME) business owner or partner with an accountant. Full results can be found in PracticeWeb’s insight report in association with AccountancyManager.
Of those surveyed, 88% agreed that having an accountant who understands technology is important. This statement was ‘strongly’ agreed with by 33%. They would also pay more – 66% said they would pay more for a ‘tech-savvy’ accountant, with 19% ‘strongly’ agreeing with this.
Business clients also expect to find their accountants online, with 58% saying it was very or extremely important to find evidence of expertise, such as articles or guides, on an accountant’s website.
In terms of communication, 59% wanted to receive communication from their accountant via email, with 48% expecting phone calls and 39%, in-person meetings.
The survey also found that compliance appears to be getting more difficult. PracticeWeb last conducted this survey in 2021 and found that about 5% more businesses said they found dealing with HMRC extremely or very challenging, with 33% of businesses responding this in 2022.
Most respondents (56%) found their accountants through recommendations, but a significant portion (33%) found them online. Once a potential accountant is identified, 62% of businesses said they would contact them to find out more and 13% will check their reviews online. However, 16% will visit their website first and 5% will check their social media channels.
Only 10% said their accountants were not using online accounting, showing high demand and reliance on cloud-technology in the sector.
PracticeWeb managing director Dan McNamara, said: “This latest research shows how important being on top of your game technology-wise is for the modern-day accountant. Businesses don’t just value their accountant being tech-savvy – they now expect it.”
Money laundering grows by 263% in the decentralised finance sector
Money laundering in the decentralised finance (DeFi) sector has grown by 263% in the first two quarters of 2022 according to analysis by CryptoMonday.
DeFi protocols have been conduits of up to 69% of funds associated with illicit activity. This is a significant rise from 19% in 2021.
CryptoMonday CEO Jonathan Merry says “While illicit activity within the entire crypto ecosystem has significantly decreased, it’s in the ascendency within the Defi space. The sector seems to be going through the same teething challenges that crypto faced a while back which explains that uptick in the last couple of years.”
This activity takes two major forms: stealing funds through exploits and misusing DeFi protocols to launder funds.
The increase in illicit activity is partly because DeFi protocols are wholly decentralised. This makes tracking transactions difficult as it allows for peer-to-peer (P2P) trading of cryptos. As well as this, unlike centralized exchanges (CEXs), DeFi platforms don’t have an emphasis on Know Your Customer (KYC) information making it attractive for criminals wanting to obscure exchanges.
It has also been found that North Korean hacking groups are behind most of the crypto heists in DeFi hacking. For example, the infamous Lazarus Group used various DeFi platforms to launder crypto worth $91mil they had stolen from one CEX in 2021. Currently, North Korean hackers have stolen over $840mil on DeFi sites. The US is concerned, as evidenced by its placement of sanctions on these groups, as there are concerns that money from these attacks are partially funding weapons of mass destruction.
FAF makes appointment to GASAC
The US’ Financial Accounting Foundation’s board of trustees has appointed Zachary Jackson to the Governmental Accounting Standards Advisory Council (GASAC).
Jackson’s initial term will conclude on 31 December 2023. He will be eligible to serve another two terms of two years each.
The GASAC advises the Governmental Accounting Standards Board (GASB) on strategic and technical issues, project priorities, and other matters that affect standards setting.
Members of the GASAC are responsible for consulting with the GASB on technical issues on the Board’s agenda, project priorities, matters likely to require the attention of the GASB, and such other matters as may be requested by the GASB or its chair.
Jackson will fill the position left vacant by the departure of Duncan Baird, former Executive Director of Arkansas Public Employees Retirement System who served from January of 2019 through March of 2022.
FAF board of trustees chair Kathleen Casey said: “The FAF and the GASB are pleased to welcome Zachary to the GASAC. With his current duties as the Indiana State Budget Director, and his more than 17 years of progressive experience in financial management, budget development, and government affairs, his perspective and insight will be a valuable addition to the GASB’s upcoming project and agenda items.
“We would also like to thank Duncan, for his service to the GASAC and his time and commitment to helping us improve financial reporting for all of our stakeholders.”
44% of UK businesses experienced a cyberattack last year
New research has revealed that almost half of surveyed UK businesses experienced some sort of cyberattack last year. However, the professional services sector ranks in the top 5 industries most prepared for a cyberattack.
The Hiscox Cyber Readiness Report 2022 was compiled in collaboration with Forrester Consulting and is based on a survey of 5,181 key professionals from 8 countries. It calculates comparative cyber security risk levels and each sector gets a score from 7 to 70, with 7 being the lowest risk and 70 being the highest.
The professional services sector in the UK had a Hiscox Cyber Risk Score of 36, only 5 points more than the UK’s best prepared sector.
Research also shows that larger businesses received the most cyberattacks. Of UK businesses with over 1000 employees, 63% reported experiencing a cyber incident of some kind. These firms also suffered the most severe financial losses from this. Companies reported median financial costs of £50,000 ($59,369). This is more than double the UK median annual loss of £21,097 per company due to cyber incidents.
However, only 28% of UK businesses said that reviewing cyber policies and procedures was a top spending priority for the next 12 months. A dedicated cyber security role was also absent from 42% of UK firms.
Hiscox UK Cyber CEO Gareth Wharton commented: “The last year has presented significant cyber security risks for UK businesses, with essential industries being subject to the highest risks, according to our threat ranking table. We know that this threat isn’t limited to particular countries, and while it’s evident that UK businesses are continuously investing in cyber defences, it’s important that increased investment continues to prevent grave financial losses.”