icsa annual conference: day 2, morning sessions

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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 do we measure Culture?

Peter Neville Lewis MIRMICSA – March 8-9, 2016

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

15

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

22

23

Rules = $100 Billion +???

26

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

27

29

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

peter@principledconsulting.biz

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

4646

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

4747

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

4848

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

4949

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

5050

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.

5151

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

5252

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

5353

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

5454

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

5555

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!

5656

Questions and Answers

5757

Contact Details

Peter McAllister - Ethical Trading Initiative0207 841 4350Peter.Mcallister@eti.org.ukRon Reid – Shoosmiths LLP03700 868471ron.reid@shoosmiths.co.uk

Jonathan Orchard9 March 2016

Charity governance: maintaining internal financial controls

Who’d be a charity trustee?

59

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

60

• 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…..

61

• 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

62

• Operational staff• Supervisory staff• Managers• Senior managers• Chief executive• Audit committee• Trustees

Responsibility for internal control

63

Three lines of defence

64

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?

65

• Tone from the top• Risk appetite• Delegation of authority• Policies & procedures• Compliance• Transparency

Organisation culture

66

• Reserves policy• Understand underlying business model & associated

financial risks• Parameters for longer term financial planning• Agree budgets or KPIs

Financial strategy & sustainability

67

• Management accounts• Cash flow• Assess financial performance alongside programme

outputs• Risk management processes (operation of internal

controls)• External audit

Regular assurance

68

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

69Cost

Conclusion

70

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

95

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: jutta.tobias@cranfield.ac.uk

@juttko http://www.huffingtonpost.co.uk/jutta-tobias/

Thank you!

https://www.youtube.com/watch?v=OJFlLJw42uo

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