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The ICSA ANNUAL CONFERENCE 2016
Peter MontagnonAssociate Director, IBE
Corporate culture:the new frontierPeter Montagnon, Associate Director
Institute of Business Ethics
© IBE 2
Anthony Salz on culture
“Culture exists regardless. If left to its own devices, it shapes itself, with the inherent risk that behaviours will not be those desired. Employees will work out for themselves what is valued by leaders to whom they report.”
The Salz Review of Barclays Business Practice
© IBE 3
OECD survey of 88 companies
80% of boards strongly involved in design and implementation of integrity policy
20% say budget increased between 25% and 50% over last five years 60% say is an investment rather than an expense Almost two thirds have mandated oversight to a specific committee
( commonly audit or compliance) Two thirds of boards or senior management had severed relationship with
a business partner or revised projects because of risk of misconduct
Fewer than half of boards had received in person training in company’s integrity policy
Source: Trust and Business, Corporate Governance and Business Integrity, OECD 2015
© IBE 4
Business Ethics
Ethics
Values
Conduct
Risk
Behaviour & Culture
Trust & Reputation
Opportunity
Financial & Operational performance
© IBE 5
Building an Open Culture
Communication &
Awareness Campaigns
Supporting Context &
CultureCode of Ethics
Training&
Reinforcement
Monitoring&
Accountability
Embed Values Influences Behaviour & Conduct
Ethical ValuesReflected in the business model, purpose, strategy,
governance, ethics policy and decision-making process in the organisation
© IBE 6
© IBE 7
© IBE 8
© IBE 9
© IBE 10
© IBE 11
Thank YouPeter Montagnon, Associate Director
Institute of Business Ethics
© IBE 12
The ICSA ANNUAL CONFERENCE 2016
How do strong values improve organisations?
How Values, Decisions & Cultureare linked
Think• Values gives us• Character which forms our
Decide
• Judgement helps us make• Decisions which lead to
Act• Actions - repeated become• Behaviours = CULTURE of a GROUP
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Decisions - A Dual FunctionDecision MAKING
(Strategic & Holistic)Decision TAKING
(Execution & Delivery)
Do you know how all the people in your organisation make and take
Decisions?• Q. Are your Values clearly articulated?• Q. Are Values integrated into Decisions?• Q. Are the Behaviours expected monitored? • Q. Are Governance and Principles aligned?• Q. Is there an Audit trail for critical decisions?• Q. Is your Culture always to do the right thing?
Measuring Values and Ethics
• If we could determine the core Values of an organisation and the key Ethical positions of its members we would have a better insight into its Culture, how Decisions are made and how People are likely to behave.
• MORALDNA™ can provide these insights and the basis for a detailed Culture Audit.
MORALDNA™ Profiling -the evidence
We measure 13 Factors10 x Moral VALUES
3 x Ethical Conscienceswww.MoralDNA.org
(140, 000 profiles to date)19
Integrity–IntegritasAristotle & Ibn RushdFortitude = Courage (Moral)
Justice = FairnessTemperance = Self-Discipline/Thrift
Prudence/providentia(Lat) = Wisdom
Faith =Trust, Hope = Belief,Charity/Xaris(Grk) = Love/Care
Honesty, Humility, Excellence20
How we manage Ego and Decisions
3 Ethical ConsciencesOBEDIENCE (Law)
REASON (Logic)CARE (Love)
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What are the Rules? Acting with Personal Integrity? Who is this Good for?Who could we Harm?Do we test for Transparency?
RulesIntegrity GoodHarmTransparency
Ethical decision making is doing what’s RIGHT
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Integrity has no need of RulesAlbert Camus (1913 – 1960)
Integrity cannot be regulated. It comes from within
Mark Carney – Governor, Bank of England
It’s not hard to make decisions when you know what your Values are
Roy Disney
The final decision lies within us all
Questions???Thank you for listening!
Peter Neville Lewis MIRMHon Research Fellow, Brunel University, London
Financial Decision MakingJenny Robertson, ExCel London, 9 March 2016
Schedule for today’s session1. Examination and requirements
2. Syllabus areas
3. Analysis of November 2015 examination questions and answers to include:
• syllabus area
• structure of the question
• approaches to tackling the question
• level of detail needed in answer
4. Summary and advice
5. Any questions
Examination and requirements
• 3 hour paper
• 15 minutes reading time
• Answer four questions from six
• Mix of numerical and discursive questions based on scenarios
• Financial information
• 25 marks per question
• Question parts and mark allocation
Examination and requirements
For numerical questions:
• Layout of your answer
• Show all workings
• Analysis and interpretation
For discursive questions:
• Read the question carefully
• Identify the instruction
• Relevant discussion
Syllabus areas
• Financial governance: objectives and environment –weighting 10%• Management performance measurement –weighting 5%• Making distributions to shareholders –weighting 10%• Long-term investment decisions –weighting 20%• Business combinations and share valuation –weighting 15%• Capital markets and long-term financing decisions –weighting 20%• Working capital management and short-term financing –weighting 10%• Corporate risk management –weighting 10%
Remember, the whole syllabus is examinable.
November 2015 examination and answers
Question 1
• Working capital management/management performance measurement
• Explanation and analysis using key ratios
• Overtrading: meaning and symptoms
• Select suitable ratios, accurate calculations for both years, interpretation
• Key areas of credit management: credit analysis, credit control and collection system
November 2015 examination and answers
Question 2
• Long-term financing/corporate risk management
• Cost of equity using dividend growth model (DGM) and CAPM
• Numerical and discursive (briefing paper)
• Calculations: growth rate over 4 years, formulae for DGM and CAPM
• Explain Beta. Assumption of models for comparison and validity
November 2015 examination and answers
Question 3
• Raising equity finance and stock market efficiency
• Numerical, evaluative and discursive
• Calculations for rights issue
• Identification of options available and evaluation using calculations
• Explain the meaning of semi-strong form efficiency and implications for financial managers
November 2015 examination and answers
Question 4
• Making distributions to shareholders
• Briefing paper: discursive
• Theory and practical factors regarding both dividend policy and the project
• Reasons for share buy-backs
November 2015 examination and answers
Question 5
• Long-term investment decisions. Investment appraisal- sensitivity analysis
• Numerical (mainly) and discursive
• Calculate NPV: timing of cash flows, annuity tables
• Sensitivity analysis calculations (amounts and percentages) and comment
• Strengths and weaknesses and other methods for handling risk (scenario analysis, probabilities and expected NPV)
November 2015 examination and answers
Question 6
• Long-term investment decisions/divestment decision (business combinations)
• Numerical and discursive
• DCF analysis for evaluation: all cash inflows and cash outflows. Capital allowances and taxation
• Reasons for divestment
Key recurring problems
• Poor time management
• Poor presentation
• Inappropriate/irrelevant discussion
• Disorganised answers
• Use of bullet points instead of discussion
Summary and advice
• Learn the whole syllabus: don’t try to question spot
• Answer four questions: time management
• Read each question carefully and answer each part fully
• Practise technical and analytical areas
• Understand the implications and limitations of the calculations required
• Lay your work out clearly and show all workings
Questions…
Thank you
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Modern Slavery Act 2015
Transparency in Supply Chains – the new reporting requirements
Ron Reid Peter Mc AllisterPartner Executive DirectorShoosmiths LLP Ethical Trading Initiative
ethicaltrade.org | shoosmiths.co.uk
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Part 6 : Transparency in Supply Chains• An organisation must prepare a slavery and human trafficking
statement of each financial year of the organisation (s 54(1))• A commercial organisation must comply with the Act if:
it supplies goods and services, andhas an annual turnover of £36m; andit carries on business or part of a business in the UK
• Came into force on 29 October 2015• Statutory guidance published
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The Statement• A statement of the steps the organisation has taken during the financial
year to ensure that slavery and human trafficking is not taking place:
In any of its supply chains; andIn any part of its own business
OR
• a statement that the organisation has taken no such steps
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When will statements be due?
• Transitional provisions:
‾ Organisations with a year end date between 29 October 2015 and 30 March 2016 will not be required to publish a statement for the 2015-16 financial year of the organisation
‾ Organisations with a year end of 31 March 2016 will be the first businesses to publish a statement for the 2015-16 financial year
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Websites• If the organisation has a website it must:
Publish the slavery and human trafficking statement on that website; and
Include a link to the slavery and human trafficking statement in a prominent place on that website’s homepage.
• If the organisation does NOT have a website it must:
Provide a copy of the slavery and human trafficking statement to anyone who makes a written request for one; anddo so before the end of the period of 30 days beginning with the
day on which the request is received.
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Penalties• Civil proceedings:
In High Court of England and Wales: injunction brought by Secretary of State;
or
In Court of Session in Scotland: specific performance of a statutory duty under section 45 of the Court of Session Act 1988
• Breach of an injunction is punishable with an unlimited fine
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Contents of statement• The organisation’s structure, its business and supply chains• Policies in relation to slavery and human trafficking• Due diligence processes relating to slavery and human trafficking in its business
and supply chains• The parts of its business and supply chains where there is a risk of slavery and
human trafficking taking place and what steps has it taken to assess and manage that risk
• Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against key performance indicators
• The training about slavery and human trafficking available to its staff
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Due DiligenceDue diligence should:
be proportionate to the identified modern slavery riskthe severity of the risk, andlevel of influence an organisation hasbe informed by broader risk assessments that have been conductedinclude an ongoing assessment of riskInclude an expectation that the integrity of investigations is ensured
i.e. that it is not just lip service
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Assessing and managing risk• Research and identify the risks where the organisation has
operations or supply chains• Prioritise those risks• Allocate appropriate resources to assess and manage risk• Include goods and services e.g. agency staff• Country risks
Exposure may be greater in countries where protection against human rights abuses are limited
Check whether workers retain their ID/papers and if work arrangements using agents is commonplace
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Steps to take now• Review your policies relating to modern slavery• Review due diligence and auditing processes implemented• Review contracts with suppliers and third parties• Ensure slavery and human trafficking is covered in your human rights/CSR policy• Amend your whistleblowing policy to cover concerns about slavery, human
trafficking, servitude and forced or compulsory labour• Ensure the risk assessment includes identifying high risk suppliers and arrange a
site visit to those suppliers• Amend any audit regime of suppliers that you may have in place to add
compliance with slavery legislation• Don’t promise what you can’t deliver!
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Questions and Answers
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Contact Details
Peter McAllister - Ethical Trading Initiative0207 841 [email protected] Reid – Shoosmiths LLP03700 [email protected]
Jonathan Orchard9 March 2016
Charity governance: maintaining internal financial controls
Who’d be a charity trustee?
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The trustees are collectively responsible for Everything the charity does How it does it Exercise duty of care & duty of prudence Compliance with law & regulation
Trustees must make sure the charity Pursues its aims Uses its assets exclusively to achieve the charity’s aims Acts in the interest of its beneficiaries Delivers public benefit
Basic legal context
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• available time is limited• commitment is to the cause not compliance• their role is governance not management
And expectations on trustees are only set to increase
But they are volunteers…..
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• Internal control is a process• Constantly evolving to reflect changing risk• People are central – they exercise the controls• Only provide reasonable assurance• Understand cost/benefit of the control• What is enough?
Combination of experience, judgement and attitude to risk
Features of internal controls
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• Operational staff• Supervisory staff• Managers• Senior managers• Chief executive• Audit committee• Trustees
Responsibility for internal control
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Three lines of defence
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First line Second line Third line
Operations Oversight Independent assurance
• Frontline staff
• Line managers
• Support and compliance functions
• Senior management
• Internal and external audit
• Regulatory assessment
Assurance
• Organisation culture• Set financial
strategy/parameters• Get regular assurance from
management• Seek independent review when
needed
How can trustees meet the challenge?
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• Tone from the top• Risk appetite• Delegation of authority• Policies & procedures• Compliance• Transparency
Organisation culture
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• Reserves policy• Understand underlying business model & associated
financial risks• Parameters for longer term financial planning• Agree budgets or KPIs
Financial strategy & sustainability
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• Management accounts• Cash flow• Assess financial performance alongside programme
outputs• Risk management processes (operation of internal
controls)• External audit
Regular assurance
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Internal review of internal controls (eg CC8)
Regular internal review of high risk areas
Extend external audit
Develop tools for in-house internal audit
Commission internal audits on one-off basis
Recruit an internal auditor
Outsource internal function
‘Independent’ review
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Conclusion
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Jonathan [email protected] 020 7841 6360www.sayervincent.co.uk
@orchardj@sayervincent
Sayer Vincent contact details
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Mindfulness and your Emotional Intelligence
Jutta Tobias PhDCranfield University School of Management
Centre for Business Performance
What we will cover
1. Mindfulness generates space
2. The good news
It is a valid and reliable catalyst for developing “soft” skills, e.g. emotional intelligence
3. The bad news
It requires continuous practice (like physical exercise)
4. Take away 1 practical action for you
My Work
1 23.55
3.6
3.65
3.7
3.75
3.8
3.85
3.9
3.95
Wave 1Wave 2
Before training After training40
45
50
55
60
Emotional Intelligence
Awareness of myself Connecting with others
Controlling my impulses Developing relationships
75
adapted from Mayer & Salovey (1997)
Emotional Intelligence
Awareness of myself Connecting with others
Controlling my impulses Developing relationships
76
adapted from Mayer & Salovey (1997)
What is mindfulness?
Slowing Down to Speed Up
Creating space
Stimulus
(Re)Action
79M
ind th
e gap
What’s the business case?
How we make decisions
based on Dan Kahneman’s System 1 & System 2 theory81
How to?
Noticing
83
What did you notice?
Any useful intel?
Mindfulness in Oil Rigging?
85
Emotional Intelligence
Awareness of myself Connecting with others
Controlling my impulses Developing relationships
86
adapted from Mayer & Salovey (1997)
Impulse Control
87
271 x 54
How many of us today deal with difficulty
88
How to?
Slowing Down to Speed Up
Breathing in a box
91
Why should we?
How tuning into the present works
93
Cranfield working memory study
The Data The Story
Before training After training4244464850525456
Wor
king
mem
ory
“After a career spent at 100mph, The opportunity to take charge of my mindDealing with the stressors and strains of daily lifeWhilst increasing my performanceIs a real opportunity for me.” 94© Jutta Tobias 2016
Mindfulness champion
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Mindfulness Condition
Positive Emotions
Focusing on the Present
Better Decision-Making
Predicts
Predicts
Predicts
Predicts
Significantly predicts
Andrew Hafenbrack et al. 2013
The Link to Decision-Making
Emotional Intelligence
Awareness of myself Connecting with others
Controlling my impulses Developing relationships
97
adapted from Mayer & Salovey (1997)
How to?
Checking in with others
99
Why should we?
How we interact
101
Why don’t we?
Descartes’ Error
103
Emotional Intelligence
Awareness of myself Connecting with others
Controlling my impulses Developing relationships
104
adapted from Mayer & Salovey (1997)
What will you (really) remember about today?
Maya Angelou (1928-2014)
106
How to?
Perspective taking
Think of someone who has frustrated you Write down 3 conceivable reasons for his/her
actions/attitudes How would you think or feel at work if these reasons applied
to you? How can you connect with and inspire someone whose
actions may be based on these reasons? adapted from Flaxman & Bond, 2013
108
What next?
Mental exercise
110
Creating space for you
Stimulus
(Re)Action
111
Mind
the g
ap
Do try this at home
1. Mindfulness generates space
2. The good news
It is a valid and reliable catalyst for developing “soft” skills, e.g. emotional intelligence
3. The bad news
It requires continuous practice (like physical exercise)
4. Take away 1 practical action for you
Email: [email protected]
@juttko http://www.huffingtonpost.co.uk/jutta-tobias/
Thank you!
https://www.youtube.com/watch?v=OJFlLJw42uo
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