Category Archives: General

March 13, 2013 · 11:32 am

Guest post: The death of Chavez – what’s next for Cuba?

RSM’s Regional Leader for Latin America, Bob Burdett, provides first-hand his thoughts on the impact of the death of Chavez for its main benefactor – Cuba.

Word of Chavez’ death started circulating around Havana around 5 o’clock Tuesday (5th), first as whispers and then openly. By dinner it was the topic of every conversation – Chavez is gone. What will it mean for Cuba?

The massive demonstrations of mourning, probably planned long in advance, started early Wednesday morning in Havana and continued through Thursday.  TV coverage of the marches and speeches was non-stop. 

The question on everybody’s mind: What next? Aid and support from Venezuela has accounted for over 20% of Cuba’s GDP, enough to keep the country’s economy afloat. With a change in control in Venezuela will this generous support be continued? Some on the island speculate that the uncertainty around this question will spur Cuba’s leadership to a faster and more aggressive transition to a more open economy.

Movement in the direction of openness has already resulted in massive changes in Cuba over the past several months. Change is in the air, and you can sense a new optimism on the streets, in the official institutions, and in the private restaurants and other businesses suddenly opening in Havana.

Private ownership of property and growing categories of businesses is now legal. Most Cubans are now free to leave the country and travel abroad if they have the means to afford it. Most recently, Raul Castro, the President of Cuba, announced that he is in his final term of office, setting the stage for transition to a new generation. Another round of openings will be announced in July, and people expect them to go beyond anything announced so far.

As a consequence, foreign investment in Cuba in sectors as diverse as tourism and energy is growing at a rapid pace. The players are European, South American and Asian, led by China, all taking advantage of the void left by the absence of the United States. When America finally ends its decades-old embargo on Cuba, it will find the island filled by holiday resorts built and run by Italian and Spanish companies, energy companies with Brazilian and Russian names, and buses and cars from China.

Meanwhile Havana remains one of the most fascinating cities on earth, a remarkable jewel spared the devastation of modernisation suffered by most Latin American cities in the past 50 years. It is a time-warped museum where the pace is slow, the people are educated and kind, and materialism has taken a back seat to more human values, at least for now. 

But change is happening, and the likelihood is that the death of Cuba’s main benefactor is going to push Cuba much closer to the rest of the world.

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March 7, 2013 · 6:20 pm

Celebrating International Women’s Day

Each year around the world, International Women’s Day (IWD) is celebrated on 8 March. Thousands of events occur not just on this day but throughout March to mark the economic, political and social achievements of women. Organisations, governments, charities, educational institutions, women’s groups, corporations and the media celebrate on this day.

This year’s theme of International Women’s Day is “The Gender Agenda: Gaining Momentum” (see the website for more detail). Research has continually proven that gender balanced companies and boards are the most innovative and successful. We need the difference of opinion, of perspective and of approach that diversity brings. Figures published this week show the percentage of women on FTSE 100 companies has dropped. We need to embrace the theme of this year’s IWD and gain momentum, not only in driving change but in sustaining it for the long term.

Happy International Women’s Day.

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March 5, 2013 · 3:37 pm

RSM becomes lead sponsor of European Business Awards 2013/14

Since their inception in 2007 the European Business Awards have become one of the most engaging and best recognised business awards programmes in the world. At RSM we have been a proud sponsor and supporter over those six years and we are now excited to announce that we will be the event’s Lead Sponsor from 2013/14 onwards. This will complement our existing sponsorship of the RSM Entrepreneur of the Year category, as we remain committed to promoting entrepreneurship across Europe and the wider world.

On the last completed programme over 15,000 businesses, employing in excess of 2.7 million people and generating a combined turnover of over one trillion Euros, engaged with the European Business Awards in a quest to gain international recognition for their achievements, ethical policies and innovation. We have watched as a huge number of businesses, across a wide range of industries, from start-ups to established multinationals, have come together at awards events and competed for the eleven much coveted category titles.

After several years of economic difficulties in Europe, it is more important than ever that we recognise and encourage success and innovation. Recession can often nurture creativity and development and in the current climate Europe continues to be the birthplace of some of the most exciting and innovative businesses in the world. RSM is proud to be associated with these companies and with the EBA; in today’s environment it is a great opportunity to focus on the positive and promote success, business ethics and ingenuity.

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February 21, 2013 · 5:43 pm

Bob Dohrer of RSM re-elected Chairman of IFAC’s Forum of Firms (FoF)

I would like to congratulate my colleague Bob Dohrer, Global Leader for Quality and Risk for RSM, who has been re-elected as Chairman of IFAC’s Forum of Firms (FoF).

Bob’s second term as Chair of the Forum will officially commence on 23 July 2013 and run for three years.

The FoF, of which RSM is an original full member, was established in 2002 and aims to promote international standards including quality control, auditing, ethics and independence and training standards, laid down by IFAC standard-setting bodies.

Being a member of the Forum is critical as RSM and our member firms continue to focus on promoting high quality standards of financial reporting and audits worldwide. And, as Bob and I pointed out at a recent panel discussion hosted by the International Accounting Bulletin, the organisational structure of networks has a direct bearing on audit quality. RSM has rigorous quality control standards that must be met by member firms, and we are keen to ensure the same level of rigour applies across the entire profession to the benefit of the public interest.

Recently, regulators and other stakeholders from around the world have called for a number of proposals aimed at increasing auditor independence, raising audit quality and enhancing auditor reporting. I know that Bob cares passionately about standards, and is dedicated to improving audit quality, and in his role as Chairman of FoF, will contribute to our collective efforts to improve and advance consistent standards within our profession on a global basis.

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February 15, 2013 · 2:54 pm

Global outlook – 2013 mirrors 2012

2013, like 2012, looks like it could be a tale of a two-speed global economy. The industrialised nations will struggle with growth, while developing economies – particularly in Asia and sub-Saharan Africa – will again be the fastest growing economies. In a sense this is not surprising given the debt burden many Western governments are grappling with, but the prolonged period of relative decline in the West which we have seen over the last five years is starting to look like what some commentators are now labelling the ‘new normal’.

In RSM’s latest Talking Points publication, David Bartlett, an economic adviser to RSM, produces a neat overview of global economic trends. The Eurozone, while managing to claw itself back from the precipice, is unlikely to achieve significant growth in 2013. The United States, although averting fiscal calamity at the start of the year, still has unsustainable levels of debt that imperil economic recovery. On the plus side, the shale oil and gas boom could lead to a dramatic change in the U.S. energy landscape, help to deliver cheap energy for industry and consumers, and drive economic growth.

The major emerging markets should deliver improved growth in 2013, though looking beyond the BRICs, ‘second tier’ emerging markets are worth watching. According to the International Monetary Fund, Asian markets will grow; Indonesia (6.3%), Thailand (6%), Vietnam (5.8%) and Kazakhstan (5.7%) are all forecast to perform well. Sub-Saharan Africa has its star performers too: Mozambique (8.4%), Ghana (7.8%), Tanzania (6.8%), Nigeria (6.7%) and Kenya (5.6%).

The basic pattern – slow growth in developed economies, strong growth in emerging markets – is likely to be the defining characteristic of the global economy for the medium term. David Bartlett lists three key issues which developed countries will need to overcome to escape the slow growth trap: 1) the need for national governments to reconcile the requirement for fiscal austerity with economic growth; 2) the ability of industrialised economies to capitalise on commercial opportunities in fast-growing emerging markets; and 3) the capacity of developed economies to boost productivity. That’s quite a challenging ‘to do’ list, but apart from point ‘1’ eminently achievable. When the financial crisis broke, many commentators thought we would be in for a short, sharp recession. For the West, the burden of government debt has proved an enormous drag on growth, and is likely to be so for many years to come.

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February 8, 2013 · 6:39 pm

A Promising New Year for RSM China

Chinese New Year is upon us, which is the perfect opportunity to take a closer look at one of the most dynamic markets in the world today, in spite of the turbulent global economy.

The year promises to be an exciting year for our member firm in China. RSM China are increasingly challenging the dominance of the Big 4 on their home patch. RSM is already very well positioned in China – it was the first CPA firm to enter the country thirty years ago – and benefits from wide recognition from the work it does from its client base of western multinationals and state owned enterprises. The firm has generated strong organic growth in recent years. RSM was the first CPA firm to achieve revenue of RMB 1 billion (in 2010) and estimated revenue for 2012 is RMB 1.6 billion.

The outlook, then, is extremely positive. According to Mr. Gu, the Managing Partner of RSM China, the Chinese proverb “know your enemy and yourself and you will win every war” underpins RSM China’s approach to the Chinese accountancy market. Through intense competition with the Big 4, RSM China has come to know its business rivals intimately, and by refining its approach as such, RSM China is emerging as a main challenger. 2013, the year of the Golden Snake, promises to be a fascinating year.

One Happy New Year card that I have seen has the follow message:
“This year is the year of the golden snake. Although snakes are sometimes considered a slithery, serene creature, they are also known to embody esoteric knowledge and spiritual discovery which is why they are sacred to many ancient cultures around the globe.”

I would like to offer all of our Chinese colleagues a most happy and prosperous Chinese New Year.

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January 18, 2013 · 3:10 pm

Bridging the gap between management and boards

I read with interest a recent white paper written by The National Association of Corporate Directors and our US member firm, McGladrey, which delves into some of the gaps between what management communicates and what boards need to know. The report is quite detailed, and makes for fascinating reading. The report highlights that quite often management has a vested interest in withholding information, or distorting it, which means that boards may be making decisions without being in full possession of the information they need.

One of the key points to come out of the report is the dominant consideration given to financial data, often at the expense of non-financial information. Many directors are concerned that they are missing information which is vital to a holistic understanding of the business and its risks. Non-financial information may help to fill in that knowledge deficit, but too often this information does not find its way to the board. The example of how compensation committees often fail to pass non-financial metrics to the board is particularly relevant given the current furore over executive pay. A balanced pay package should include non-financial goals, yet if boards are deprived of that information, it can be difficult for them to focus on every business critical area when determining executive rewards.

Access to the right kind of information can mean the difference between success and failure. In the wake of the financial crisis, in which audit committees have been criticised for failing to act as an early warning system, this report is both timely and insightful. The information ‘gap’ between management and board may never be entirely bridged – and indeed information overload can be just as problematic as too little data – but more effective communication will be necessary to improve decision-making.

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December 28, 2012 · 12:13 pm

Business confidence in the Middle East and Africa trailing Europe

Can there be anywhere in the world less confident about its business prospects than Europe right now? Most people would answer that question with an emphatic ‘no’. But, during our recent annual conference in London, we polled the 280 delegates – from all corners of the globe – and got some contrary and interesting views.

36% of RSM members in Europe categorised business confidence in their respective countries as ‘good’ or ‘very good’. Surprisingly, both Africa and the Middle East scored lower than Europe on business confidence, despite many countries in those regions experiencing relatively high levels of economic growth. Just 25% and 22% of accounting professionals respectively in those regions rated business confidence as ‘good’ or ‘very good’.

Needless to say, business confidence is absolutely critical. If businesses do not feel optimistic, they will be reluctant to invest. As we all know, increased capital spending by private businesses will be needed to kick-start growth, but many organisations across Europe are still in cost-cutting mode.

Contrast this with Africa, where many economies are growing strongly. Confidence is relative of course, so it’s entirely possible to be less bullish despite a more favourable economic reality. The fortunes of African economies are closely tied to demand from the U.S., Europe and China, but with demand muted, and commodity prices falling, many African economies are facing growing headwinds.

Within Europe the picture is polarised. Whilst 62% of delegates from RSM Germany rated confidence as ‘good’ or ‘very good’, business confidence from UK delegates is significantly below the European average, with only the Spanish more pessimistic about their economic prospects among major European economies. Just 9% of RSM delegates from the UK ranked business confidence as either ‘good’ or ‘very good’, whereas RSM members from Spain are the most pessimistic among the five major European economies, with none rating business confidence as ‘good’ or ‘very good’.

70% of RSM members in the Americas and 66% in Asia/Asia Pacific rated business confidence as ‘good’ or ‘very good’. It’s a little surprising to see confidence in the Americas higher than Asia, but then Americans are known for their optimism, and with the prospect of energy self-sufficiency in the U.S. a growing possibility, there is good reason for feeling positive. Energy is one of the largest input costs for manufacturing businesses, so the shale gas boom could provide a much-needed competitive boost to U.S. industry.

Looking forward to 2013, 42% of RSM members in Europe think business confidence will decline over the next 12 months. Only African RSM members are less optimistic: just 25% thought confidence would improve, compared to 36% of Europeans.

RSM members have their fingers directly on the pulse of businesses in their respective countries, so this survey provides a fascinating overview of economic vitality. 2012 has been a tough year for the global economy, but there is reason to hope that the prognosis for 2013 will be a little better.

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December 21, 2012 · 2:58 pm

Accountants are the most trusted advisors to business

Accountants are normally quite unassuming people, not given to self-congratulation. It is pleasing, therefore, when other people recognise our strengths. So it is with a survey from Sage Omnibus of more than 1,000 businesses which identified accountants as the most trusted business advisor, and which was reported in Accountancy Age.

A fifth of businesses (21%) say they are more open and honest with their accountants than their bank managers. Exactly half (50%) of respondents believe their accountants provide the most valuable business advice, which perhaps isn’t too surprising. What is rather more surprising is that just 2% of respondents said their bank managers provide the most valuable business advice! In fact 4% would rather take business advice from their friends, and we aren’t even told who these friends are. Needless to say, these friends probably are not bank managers!

While I think we can take some comfort from the results of this survey, we must not be complacent. Despite the financial crisis and the perceived failure of the profession to sound the alarm bell, accountants retain a degree of respect which bankers are struggling to command. This is hugely important. The status of trusted adviser is much-coveted, and means that businesses and individuals turn to their accountants for advice in preference to other advisors. Trust, it is often said, is hard won, but easily lost. We need to continue to work hard to retain this trust.

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December 19, 2012 · 5:57 pm

The confusion over tax avoidance

Tax avoidance and evasion have become hotly debated topics during the global financial crisis as governments have sought to maximise tax revenues as part of their deficit reduction drives. In the UK the debate has become increasingly shrill and unclear as revelations about multinational businesses not paying, what some politicians and members of the public perceive to be, a high enough proportion of tax, have dominated recent headlines.

Margaret Hodge, a member of the British Parliament, has talked about businesses paying their “fair share” of tax and has said that tax avoidance is “completely and utterly and totally immoral.” The key phrase here is “fair share of tax”. There is no suggestion that any of the businesses talked about in the media recently are guilty of any wrongdoing, so what does Ms Hodge mean by “fair share”? To even accuse these businesses of being slippery goes too far. Multinational businesses are entitled – and expected by shareholders – to do all they can to minimise their tax liabilities. The problem with Ms Hodge’s remarks is that, in the eyes of the public, the distinction between legitimate tax avoidance and illegal tax evasion is being blurred, and this is leading to some unclear thinking.

Despite what some people may think, few businesses and individuals plan to pay more tax than they absolutely have to. Businesses may have channelled revenues to countries with lower tax rates, but there is nothing particularly new about that practice. It is only now, in the grip of a public debt crisis, that politicians are looking to make political capital out of this issue. Let’s be clear: tax law is created by politicians. If they want businesses and individuals to pay more tax, they have it within their power to change the law. If there are loopholes that need to be closed, then they can close them. Complaining about businesses who fully comply with their tax obligations is part of a growing anti-business rhetoric in some Western countries. There is a serious debate here – such as whether tax law is biased in favour of multinationals at the expense of domestic entrepreneurs and individuals, for example – but we need to have that debate in a clear and reasoned manner, and dispense with some of the more woolly language of recent months.

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