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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February 4, 2013 · 3:17 pm

Need for auditors to communicate the value we add is greater than ever

Auditors are often thought of as quiet, unassuming types – a stereotype which isn’t wholly untrue – but we clearly need to do much more to communicate to clients and other stakeholders the real value of the work we do. That was the consensus of a panel discussion organised by International Accounting Bulletin I attended last week, which included delegates from the Big 4, as well as mid-tier and smaller networks.

The lack of appreciation of the value we deliver has manifested itself in downward pressure on audit fees. The concern here is that, while accounting firms and networks like RSM are committed to maintaining and raising audit quality – even more so following the financial crisis – downward pressure on fees is undermining that objective.

In many cases the principle source of financial information investors have is the audit report itself, but the audit report is still predominantly a tick-box exercise with little personal insight from the auditor. There is pressure from a number of sources for auditors to provide more detailed disclosures in their reports (as they already do in France), which would make reports more insightful, and have the corollary benefit of enabling auditors to better demonstrate the value they add.

The reality, however, is that most consumers of audit reports have little grasp of the depth of analysis, and the problems the auditor has solved, before being able to produce a report that is an accurate reflection of an organisation’s financial position. Yet our profession has a long history of standards, quality control, peer review and inspections – all of which enhances the credibility of the information we provide. Shouting from the rooftops may not be our style, but we can certainly do better at talking ourselves up.

Another issue came up, which produced contrasting views, and I think is worth mentioning. A practitioner of the Big 4 present on the panel said that the organisational structure of accounting firms has no bearing on audit quality. I beg to differ. Networks structured like RSM have rigorous quality control standards that must be met by member firms. We have rejected applicants which associations would, and have, accepted. That’s a pretty important distinction, and one that the market needs to be clear on.

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