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Canada’s magazine of Corporate Finance

Winter 2014 •

RISK MANAGEMENT REPORT: A look at currency risk, risk analytics, and the role of sustainability in ERM


TOKENIZATION Using encryption and tokenization to safeguard against hackers


What finance needs to know about employee benefits - Part II Relying on the Indoor Management Rule


Canada’s magazine of Corporate Finance

Table of Contents Departments & Columns

Winter 2014 •


Industry Watch





Risk Management Report Insight into the risks of trading in domestic or foreign currency; a look at tokenization; and some thoughts on the role of sustainability in ERM


The Role of Sustainability in Enterprise Risk Management Embracing sustainability is the growing focus of good corporate citizens


Tokenization: Hackers’ Kryptonite Comprehensive encryption and tokenization can ensure protection from sensitive data exposure


The Decision to Trade in Domestic or Foreign Currency: How to Weigh the Risks


Beyond Compliance: Driving Growth with Risk Analytics


Features 20

Regulatory Relying on the Indoor Management Rule


HR Management Employee Benefits – What Finance Needs to Know – Part II

In the next issue:


With today’s networked economy, planning, budgeting, and forecasting are challenged with an increasing need to integrate. The next issue looks at best practices, applications, processes, and trends for streamlining and optimizing those cycles.

Trendwatch A look at hiring trends for 2015


Business Matters Safeguarding Your Business Through Marital Breakdown


Winter 2014




Industry Watch

Global best practices help CFOs to manage modern finance Modern technologies such as cloud, social, mobile, and big data are changing the competitive dynamics of the global economy. Organizations that know how to create digitally enabled business models leveraging modern technologies are thriving; leaders who continue to invest in traditional business models powered by legacy systems are putting their companies, employees, and shareholders at serious risk, says Oracle. To help CFOs master digital transformation, Oracle partnered with Financial Executives International (FEI) to identify the modern best practices that will help CFOs and their finance functions flourish in the Digital Age.

How CFOs can transform core responsibility areas with modern finance Reporting and compliance :

◉◉ Adopt a modern, technology-enabled close process. ◉◉ Speed ‘right-time’ decision-making using standardized processes and a strong data governance model. ◉◉ Leverage the cloud strategically to modernize finance. Using the cloud enables CFOs to redeploy the capital they save on IT maintenance and hardware to fund new business opportunities and makes it possible to reassign IT staff to work on technology-led innovations. Measure and respond:

◉◉ Leverage big data and advanced/predictive analytics to continuously refine and test business models and value propositions with customers. ◉◉ Ensure that everyone is making decisions based on the same source of highquality data. ◉◉ Invest in a platform that is designed to deliver information to decisionmakers, whether it’s an always-current dashboard available through secure login on a mobile device, real-time alerts when certain parameters or thresholds are triggered, or some other means of quickly and effectively visualizing and consuming data. Plan and predict:

◉◉ Replace complex, disconnected spreadsheets with modern planning applications. Look for modern functionality, such as mobile and collaboration, that makes it easy for business users to get up and running. ◉◉ Drive planning across the enterprise from various lines of business to exploit the “wisdom of crowds.” ◉◉ Reduce reliance on the annual budgets and leverage best-practice methodologies such as driver-based rolling forecasts that enable planning at the speed of business.

Winter 2014 Volume 25 Number 13 Publisher / Corporate Sales Mark Henry Editor Karen Treml Contributors James Lam, Senior Advisor, Workiva Francis Quinn, Director of Sustainability Technologies at Workiva Nathalie Reinelt, Analyst, Aite Group Scott Smith, CFA & Senior Market Analyst, Cambridge Mercantile

Azer Hann, Partner, Deloitte Canada Keri Wallace, Associate, Financial Services Group, Cassels Brock Nathalie Boutet. Family Law Lawyer, Boutet Family Law

Creative Direction / Production Jennifer O’Neill Photographer Gary Tannyan President Steve Lloyd For subscription, circulation and change of address information, contact Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to: Circulation Department

302-137 Main Street North Markham ON L3P 1Y2 t: 905.201.6600 • f: 905.201.6601 Subscriptions available for $40.00 year or $60.00 two years. 2014 Lloydmedia Inc. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Printed in Canada Reprint permission requests to use materials published in Canadian Treasurer should be directed to the publisher.

Procure to pay:

◉◉ Implement self-service procurement (‘eProcurement’) to control off-contract spending. ◉◉ Streamline purchasing with digital technologies that provide visibility and control overspending. ◉◉ Automate payables with digital technologies, such as e-invoicing and supplier Ontario Interactive Digital Media Tax Credit



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Winter 2014

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Industry watch portals, to deliver touchless transactions. Project Financial Management:

◉◉ Use analytics to proactively monitor the health of projects in real time. ◉◉ Standardize processes and data to ensure a single source of project truth across the enterprise for better analysis and reporting. ◉◉ Deliver real-time information via mobile and social tools to facilitate decision-making and project success. Change Management:

◉◉ Secure an executive mandate for change, starting with the CEO. ◉◉ Simplify and standardize processes and procedures as much as possible before embarking on a major transformation. ◉◉ Build an expertise in creating a culture of change management. Return on investment (ROI):

◉◉ Use predictive analytics instead of lagging indicators to rethink ROI on digital technologies. ◉◉ Look at strategic outcomes rather than just operational improvements to assess how digital technologies impact the business. There should be a more flexible allocation of resources as processes are automated and streamlined, as well as the ability to attract and retain talent using the latest social, mobile, and analytical capabilities. ◉◉ Consider a more focused ROI analysis for a better measurement of return in specific areas that have a specific strategic outcome.



Helping employees deal with personal and emotional issues has significant ROI ‘Return on Investment for Employee and Family Assistance Programs’, a study conducted by the Morneau Shepell research group, found that every $1 invested in an employee and family assistance program (EFAP) translates into a return on investment of $8.70 through a combination of improved productivity at work and less time away from work. “One of the most critical factors for business success is employee productivity: it impacts an organization’s bottom line,” says Paula Allen, vice-president of research and integrative solutions at Morneau Shepell. “The personal issues of employees impact their productivity and providing them with an EFAP can help to resolve those issues and protect their productivity.” The study is the largest Canadian study to assess the impact of employee and family assistance programs on employees and their productivity. It is based

on data collected from 80,000 cases in Canada of Morneau Shepell’s EFAP, the largest employee and family assistance program in the country. EFAP users completed a questionnaire at their first EFAP session after seeking help and another questionnaire at their last EFAP session, providing information on changes in productivity or absenteeism at work. ◉◉ 63 per cent of employees said their productivity at work had been negatively impacted in the four weeks before they contacted their EFAP because of the issue that led to them calling. ◉◉ Employees seeking help through their EFAP recorded a 35.9 per cent increase in productivity at work, compared to their productivity just before seeking help. ◉◉ Employees using their EFAP recorded less time away from work after getting help through the EFAP.

◉◉ 46 per cent of employees reaching out to the EFAP said they would have lost time from work were it not for the support they received through the EFAP. In addition one third of those employees also said they would have been off work for more than 20 days were it not for the support they received through the EFAP.

Allen adds, “An EFAP is a highly cost-effective and easy-to-implement step for an organization seeking to support its employees and protect the company’s productivity. The typical cost of an EFAP is about one per cent of the cost of a health benefits plan. An EFAP is available 24/7 to employees and their family members at any state of need or crisis. Because EFAPs have been around for a while, they are sometimes taken for granted. This new study shows their value very clearly.”

Two CIBC executives named among Canada’s most powerful women Laura Dottori-Attanasio, senior executive vicepresident and chief risk officer, and Christina Kramer, executive vice-president, retail distribution and channel strategy, have been named recipients of the Women’s Executive Network’s (WXN) ‘2014 Canada’s Most Powerful Women: Top 100 Awards’. “Laura and Christina are two very talented leaders who have consistently achieved great

results for our clients and shareholders,” says Victor Dodig, president and CEO, CIBC. “We are so proud to have such committed and capable leaders at our bank. They are role models to our team members, to their colleagues, and in our community.” A complete list of recipients can be found on the Women’s Executive Network website.

Winter 2014

Industry Watch

Canadian companies not using social media to find talent Only 23 per cent of employers say they use social media to find talent, says Hays Canada. The report, based on a national poll of more than 1,000 hiring managers, human resources professionals and candidates, also revealed that half of employers lack recruitment strategies and jobs are often marketed to the wrong audience. The poll evaluated the strategies and types of digital tools Canadian companies use to attract talent and where people search for work online. While employers tend to favour generic online job boards, post-secondary career sites and traditional online ads, candidates gravitate to social media such as LinkedIn, Facebook, and Twitter. The same poll also uncovered that the small number of employers who do use social media often miss their target by posting jobs on consumer-oriented channels.    Not surprisingly, employers say their efforts to fill positions via consumer sites often translate to negative results. Twothirds of candidates sourced through social media are not an ideal fit and are considered ‘mediocre to poor’ at best. A further 22 per cent are deemed ‘very poor’. “Despite the popularity of social media among professionals, Canadian employers fall well-short in their effort to connect with and attract qualified talent,” says Rowan O’Grady, president, Hays Canada. “In an economy that suffers from a skills shortage, it’s crucial that employers carefully evaluate how they’re engaging

online. Failing to do so results in wasted resources, lost time and zero results.” The Hays ‘Where People Are Guide’ shows that many companies lack a recruitment strategy and overlook social media as a way to interact with talent and nurture a candidate pool. When asked how social media fits into their company’s networking efforts, more than half (58 per cent) believe growing a following is important but cannot pinpoint why. A further 34 per cent are unsure about the size of their current social media following. “Posting a job on a consumer social channel is like showing up late to a cocktail party and trying to force a conversation about economics when everyone is talking about cars. It just doesn’t work,” says O’Grady. “A company’s strategy should be about starting a twoway conversation and building credibility and a following by regularly sharing useful content. Proactively engaging and network-building in this way is crucial to identifying the best talent when professionals take steps to seek out a new employer.”

It’s not all doom and gloom Canadian employers clearly need help when it comes to social media as a networking and recruitment tool; however, their use of technology to extend reach to professionals appears to be heading in the right direction. Nearly 40 per cent of employers’ websites today are mobile-friendly and an additional 12 per

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cent are taking steps toward a mobileenabled platform, which is a key aspect of connecting with candidates wherever they happen to be. “I’m encouraged to hear employers are on the right technology path and I think that’s because it’s a no-brainer,” says O’Grady. “Digital and social tools constantly evolve. What’s big today is gone tomorrow and that’s a daunting prospect but we can make it less so. Our experience lies in helping companies connect with the talent they need while allowing them to focus on their core business.”

Key statistics from Hays Canada’s ‘Where People Are Guide’: Almost 100 per cent of candidate respondents are on at least one social media channel and more than 50 per cent use social media to job hunt yet, only 23 per cent of employers use social media to recruit ◉◉ 63 per cent of employer networks are comprised of consumers ◉◉ Candidates drawn from consumer channels are considered by employers to be mediocre (66 per cent) while 20 per cent are considered very poor ◉◉ 50 per cent of employers either do not or are unaware if their organization has a recruitment strategy ◉◉ 58 per cent of employers believe growing their social media following is a core business objective; however, 32 per cent are concerned about the threat social media can have on their brand

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Winter 2014

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Winter 2014

Risk Management

The Role of Sustainability in Enterprise Risk Management Embracing sustainability is the growing focus of good corporate citizens

By James Lam and Francis Quinn


nterprise risk management (ERM) has become a top priority for corporate boards and management over the past two decades. What many skeptics initially considered a passing fad has evolved into a global standard and regulatory requirement for managing risk. Recent surveys indicate that ERM has replaced accounting issues as the top board agenda item, while chief risk officer (CRO) appointments and ERM initiatives have become commonplace at complex, riskintensive organizations. Regulators have also set aggressive minimum standards in statutes and rules, such as Sarbanes-Oxley, DoddFrank, Solvency II, Basel III, and ORSA. Beyond regulatory compliance, ERM has produced business benefits – one of the first empirical studies showed firms that have implemented ERM enjoy an average 16.5 per cent premium in market valuation.1 Over the same period, sustainability has worked its way up to the top tier of management

Winter 2014

priorities for a similar reason – it’s good for business. Once little more than statements of environmental stewardship supported by corporate donations to environmental conservation projects, sustainability has become a critical strategic objective. Companies that embrace sustainability are growing and position themselves as good corporate citizens. In fact, companies that downplay or ignore sustainability run a serious risk – sooner or later, they are likely to encounter avoidable problems with regulators, investors, or non-governmental organizations, or inflict lasting damage to their reputation because of questionable operating practices. The rest of this paper explains how to integrate sustainability into the Lam ERM framework in four different areas:2

Governance and policy A good governance structure conveys the message that sustainability matters to senior management and the board of directors. Excellence starts at board level, with a committee to set policy and monitor progress



Regulatory Risk Management news

“Excellence starts at board level, with a committee to set policy and monitor progress toward tangible sustainability goals...” toward tangible sustainability goals. A key component of ERM is a risk appetite statement that defines specific metrics and risk tolerance levels for the core risks faced by the organization. An effective sustainability policy sets numerical goals with target dates where appropriate – for example, a commitment to reduce total carbon dioxide emissions from the 2012 level of 30 per cent by no later than 2020. A successful policy must detail: ◉◉ ◉◉ ◉◉ ◉◉ ◉◉

How the company will achieve the savings How much the initiative will cost How the company will monitor progress Who will review progress internally Which outside entity will conduct independent monitoring and to whom that entity will report

Risk assessment A significant obstacle to effective ERM derives from different perceptions of risk within the company. The CFO may focus on risks that affect financial performance and future growth, and the head of operations would focus on health, safety, environmental, and manufacturing risks. Companies must break down these silos to establish an enterprise-wide risk assessment. Only then can they establish appropriate priorities for risk management and avoid potential duplication of risk mitigation strategies. To facilitate ERM, the key players should meet at least quarterly to share their concerns and discuss enterprisewide, cross-discipline solutions. Each unit should prepare a risk control selfassessment (RCSA), setting out the



probability and severity of key risks, what risk controls exist, and how effective they are. Risk managers use RCSAs to develop risk mitigation strategies appropriate for the company as a whole. By adding new pieces, sustainability simply completes the risk management puzzle.

Risk management Assessment is only the first step – a company cannot manage a risk until it has determined how much of that risk it is willing to bear. It needs to make business decisions within the context of a risk appetite statement, prepared by risk professionals but reviewed and approved by the board. The statement spells out quantitative limits applicable across the entire company. A financial institution may commit to make socially beneficial impact investments, like microfinance or community development loans of a minimum fixed dollar amount or a target percentage of its portfolio. Once risk appetite is defined, risk managers can prioritize the risks they need to mitigate and how best to achieve the desired result. Community outreach is often the starting point in risk mitigation because many jurisdictions require a renewable license to operate. The decision to renew rests with local politicians, who must answer to the populations they govern. Licensing may represent a barrier to entry, as western retailers have discovered during their ongoing negotiations with local authorities to obtain operating permits for potentially lucrative markets in emerging nations.

allows users to drill down into greater detail about each item. Sustainability fits neatly into this structure once risk managers identify appropriate KPIs and KRIs for the associated risks.

Conclusion Sustainability has become an important business objective for leading companies because it supports their ability to grow and prosper over the long run. The modern corporation owes a fiduciary duty to its shareholders but cannot succeed without taking into account the interests of other key stakeholders. Sustainability leaders recognize a symbiotic relationship between the market for their products and their roles in society at large. In fact, a company today ignores societal relations at its own peril. The non-renewal of a single license to operate could have devastating consequences. Integrating sustainability into ERM puts companies in control of their destinies, enabling them to be proactive and forestall stakeholder pressures that might otherwise pose a threat to existing operations or future growth. James Lam has more than 25 years of risk management experience and is often cited as being the first chief risk officer. Lam is currently the president of James Lam & Associates, a leading risk management consulting firm. He also serves as a Senior Advisor for Workiva. Francis Quinn is the Director of Sustainability Technologies at Workiva. He has authored several books and white papers on sustainable development, CSR strategies, and policies on

Data management, reporting, monitoring, and feedback

competing in international markets.

Risk and sustainability data are complex and distributed throughout an organization. To report effectively on a regular basis, companies must invest in technology that aids in the collection, analysis, and management of risk, financial performance, and sustainability data. Furthermore, technology must allow for easy linkage of data across these disciplines in real time. The ideal format for reporting is a dashboard report. It summarizes key performance indicators (KPIs) and key risk indicators (KRIs) on the first page and

for enterprises to collect, manage, report, and

Workiva created Wdesk, a cloud-based platform analyze business data in real time. Wdesk includes a sophisticated productivity suite for business data collaboration and reporting that is used by thousands of corporations, including more than 60 percent of the Fortune 500. See what we can do for you at References: 1 Hoyt, R.E., Liebenberg, A.P. “The Value of Enterprise Risk Management.” (2011). Journal of Risk and Insurance, Vol. 78, No. 4. 2 Lam, J. (2014). Enterprise Risk Management from Incentives to Controls, Second Edition. Hoboken, NJ: Wiley.

Winter 2014

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Coming Soon Your guide to the world of telematics in Canada

Regulatory Risk Management news

Tokenization: Hackers’ Kryptonite Comprehensive encryption and tokenization can ensure protection from sensitive data exposure By Nathalie Reinelt


here are two types of companies: those that know they have been hacked and those that don’t know they have been hacked. In the last 24 months, one organization after another has come forward with news that its perimeters have been penetrated by cybercriminals. The headlines are so frequent that no one seems all that surprised anymore, and the reactions from participants in the security community span from relief that it was not their own organization to concern that it very well could have been. Even though readers are becoming increasingly desensitized to the headlines, the reality of these breaches is not falling on deaf ears. Security professionals, vendors, and global standards committees, e.g., EMVCo and the Payment Card Industry (PCI) Security Standard Council, are actively working to address this very broad issue while continuing to innovate technologies and standards that will protect consumer financial data—namely, encryption



Winter 2014

Risk Management and tokenization. What is also becoming absolutely clear is that cybercriminals are growing more sophisticated in their attacks and will exploit any possible vulnerability within the payment life cycle to get their hands on payment card data. Relentless, entrepreneurial hackers are not simply going to grow a conscience and change careers. As long as there is a financial payoff at the end of that cybertunnel, these criminals will continue to advance their knowledge and sophistication to win the cyberwar. About the only thing that is certain is that the attacks will continue and eventually another one will be successful. This is why the security industry is so focused on removing the incentive. Every organization should assume that they will be breached at one time or another and to varying degrees. If hackers are unable to obtain any useful data during these breaches, however, the damage to the affected organizations, their consumers, and the payments industry as a whole is minimized.

within their ecosystems, the only way to truly ensure that they are fully protected from sensitive data exposure is to deploy encryption and tokenization at every single point of potential compromise. It is clearly no longer enough to tokenize the data merely for storage and analytics. The recent breaches have made clear that all data needs to be either encrypted or tokenized at the point of capture (e.g., upon card swipe or online entry of the credit card number) and beyond. Perhaps the only positive outcome of these breaches is that other organizations are learning about vulnerable points of compromise that they may not have even realized were unprotected in their own ecosystem, PCI audits notwithstanding. As with any technology, there are multiple approaches to tokenization. While tokenization itself is not an emerging technology, the various methodologies used to deploy the technology continue to evolve. Although merchant and acquirer tokenization solutions have been in existence for

About the only thing that is certain is that the attacks will continue and eventually another one will be successful. Data security is not a new concept. IT and security professionals have always focused on protecting their infrastructure and data from cyberattacks. What is rarely reported is the frequency of attacks that organizations actually thwart on a daily basis, because those success stories do not make great headlines. Unfortunately, it does not matter how many wins an organization can claim in the cyberwar; it only takes one high-profile loss to call an organization’s entire security practice into question, which has proven to be incredibly damaging to the brands of recently breached merchants. How encryption and tokenization are deployed is equally important in data protection. Although merchants may have payment data encrypted and tokenized in various applications and databases

Winter 2014

nearly a decade, issuers are now also able to tokenize payment data before a transaction even occurs, thereby protecting themselves and their cardholders in the event of a merchant breach. So, what is the difference between merchant and acquirer tokenization versus issuer tokenization? Merchant and acquirer tokenization services obfuscate the payment card data as it flows through the merchant point-ofsale system, whereas issuer tokenization replaces payment card data with a token as soon as it is captured by a specific platform. Take Apple Pay as an example, which is the first deployment of issuer tokenization since EMVCo introduced the approach back in March 2014. This new tokenization

framework allows payment networks (e.g., Visa, MasterCard, and American Express) to provision tokens on behalf of the participating issuers (e.g., American Express, Bank of America, Capital One, Chase, Citibank, and Wells Fargo) to be securely stored in the secure element of the iPhone6. There are two primary reasons why issuer tokenization is different from the merchant and acquirer tokenization approaches: ◉◉ The tokens are provisioned at the point of capture when a payment card is added to Apple Pay, as opposed to merchant and acquirer tokenization solutions that tokenize the payment card data after the transaction has already taken place. ◉◉ The tokens will be provisioned and managed by the payment networks on behalf of the issuers, ensuring that merchants never see payment card data in the clear, which should be very appealing to merchants in the wake of all the recent point-of-sale data breaches.

Although issuer tokenization will address fundamental security vulnerabilities at the earliest possible point in the payment life cycle (e.g., issuance), it is still considered complementary to merchant and acquirer tokenization solutions, since it will be a while before issuer tokenization reaches ubiquity, and in the meantime merchants still need to protect their data within channels where issuer tokenization is not deployed. When it comes to data security, there is no silver bullet. There is such a thing as death by a thousand cuts, however, and both merchants and issuers can do much to chip away at cybercriminals’ fraud schemes to eventually send them packing – or, at a minimum, hacking elsewhere. For more information on tokenization, see Aite Group’s recent report ‘How Tokenization and Encryption Can Take the Wind Out of a Hacker’s Sails’, October 2014. Nathalie Reinelt is an analyst within Aite Group’s Retail Banking & Payments practice, focusing on the global payments ecosystem, including alternative payments, cross-border remittances and emerging technologies complementary to payment processing and commerce.



Risk Management

The Decision to Trade in Domestic or Foreign Currency: How to Weigh the Risks By Scott Smith

When local just makes sense For treasurers working with international companies that may be expanding into new markets or that are facing growing competition abroad, there comes a time to examine the exchange rate situation and consider the prospects of dealing in the currency local to their foreign trading partners. This can be a



daunting task for the cash manager who is often happier in the comfort zone of his domestic currency, which leaves no room for FX volatility or the complexity of hedging. However, when both the risks and the opportunities become too great to ignore, the treasurers who become too complacent will be pushed to make a choice – and how they make that choice and manage the consequences is crucial to the success of their organization. For any business that might set its sights on

Winter 2014

Risk Management the market potential of a new territory, especially with recent trade incentives presented by agreements such as CETA, the opportunity for growth will encourage them in that direction. But along with the considerations of geopolitical, economic, and social issues that should be evaluated, is the consideration of pricing or paying in the currency of those countries of potential expansion. For example, if you are exploring business prospects in China you may be aware that importing goods from the region could increase your costs by close to eight per cent – because you’ll be forced to pay in U.S. dollars and the supplier will add an additional charge to buffer the transaction costs. However, as the People’s Bank of China continues to relax its controls on the currency and allows for more international trade, we are seeing greater adoption of the Yuan by the world’s major financial institutions. In Canada that will likely mean a local settlement dealer in the very near future and not only will settling in Renminbi make more sense, but conducting business with this partner will become even more attractive. Alternatively, you might be working with a multinational that has settled nicely into a foreign market only to find itself with new adversaries that come from abroad but make their goods available in domestic prices. That competition forces a decision when the buyers become tired of the offloading of currency risk onto them. Whether you choose to deal in a local currency from a best practices perspective or from a place with little alternative, as a treasurer you must have a plan – which comes from knowledge and from the help of an expert risk management strategist, when necessary.

FX – Is it worth it to play? There’s no one-size-fits-all when it comes to judging foreign exchange risk and devising a method for containing it. But developing a currency policy tailored to your needs as you diversify into new markets and improve market share is one step in favour of better cash management and forecasting. When a treasurer sits down with his sales team to plan the course for the year and the SWOT assessment, when looking at financial

Winter 2014

It comes down to the overall business model, margin sizes, and industry – in particular how sensitive that industry is to rate fluctuation. statements and sales targets, exchange rate expectations should be part of the discussion. It comes down to the overall business model, margin sizes, and industry – in particular how sensitive that industry is to rate fluctuation. If you’ve observed how market complacency flipped to the dramatic inverse in recent months, you’ll know this assessment is no easy feat. The Euro swung precariously when the ECB’s forward guidance pointed toward new measures of stimulus this past summer. Analysts predicted the British Pound would lose more than 10 per cent of its value in the event that the Scottish referendum went forward. But what put traders into high gear was the revelation made in October’s Fed minutes wherein the language was cautious towards a rate raise. And if that wasn’t enough, the tumultuous ‘loonie’ stole headlines when the Canadian dollar dropped to a half decade low that same month. Thankfully, while there are many variations of risk tolerance to these events, so too are there policies and tools to match.

Hedging your decision It all comes out even in the wash; at least that’s what many small to mid-size companies who engage in a more passive FX strategy choose to believe. Treasurers who take this approach when dealing in multiple currencies perceive that as one exchange rate accumulates losses for them, another might bounce in their favour and ultimately balance margins out. However, this doesn’t allow for measurable forecasting with too many variables left unknown. Rather, there are simple and sophisticated products that

can both protect and even make good of market swings for potentially favourable returns. Forward contracts are the most basic tool that allow you to lock in your forecasted rate for a fixed amount of time. They’re quite flexible in that they allow for a settlement date based on the payment schedule you prefer. Those dealing in the currencies of less developed regions, for example, markets in Asia or South America, may opt for a non-deliverable forward – a short term agreement that requires no principal payment at the end of the contract. Diversifying your hedging portfolio by taking advantage of potentially favourable rate fluctuations, however, means employing an option strategy. When combined with a traditional spot or forward, a structured option allows a company to hedge its losses without having to forgo any gains in value. It’s a proven strategy but its usefulness will depend once again on margin sizes, risk tolerance, and the overall business model. If your company’s global footprint is expanding and thereby forcing you to become literate in some new currencies, be open minded to the advantages of working in the local coin – but keep your eye on the risks and plan accordingly. Scott Smith, CFA & Senior Market Analyst with Cambridge Mercantile, specializes in identifying and evaluating hedging strategies to assist corporate clients in effectively managing inherent risk to their business model, while providing market knowledge to manage these risks on a dynamic basis at Cambridge Mercantile’s office in Calgary, AB. He also writes the company’s Daily Market Commentary and is frequently quoted by both local and international media.



Risk Management

Beyond Compliance: Driving Growth with Risk Analytics While the purpose of the new rules is to improve quality, accuracy, and risk decision-making, the situation creates an extraordinary opportunity for financial institutions to drive growth By Azer Hann

“Siloed data collected in numerous applications and contained in hundreds of separate systems causes costly duplication at best and poor business and riskmanagement decisions at worst…” 18



icture a network of warehouses, each packed with a wide variety of food. Your task is to create a feast fit for royalty. To fulfill your obligation, you must be able to quickly source each ingredient from warehouses in the network, maintain its freshness as you bring it to your kitchen, ensure proper handling, and prepare exquisite dishes that transcend the sum of its parts. And, a surly celebrity chef, ever watchful, is on hand to grill you on food safety standards, ingredient choice, presentation, taste, and disposal. Canada’s major banks are currently facing an even more Herculean task. To meet major new regulations for governing and managing financial data, they must whip immense quantities of data from multiple programs across all their lines of business into one cohesive system. The system must then be able to maintain the integrity, relevance, and availability of data over the long term. All Domestic Systemically Important Banks (DSIBs) must soon be compliant with regulations from Canada’s Office of the

Superintendent of Financial Institutions (OSFI) and, at the international level, the Basel Committee on Banking Supervision (BCBS). (BCBS 239 defines principles for risk data aggregation and reporting.) The regulations come into effect for Canadian DSIBs at the end of 2016. To be ready to answer regulator’s questions about data performance and management and to achieve the desired level of compliance, the DSIBs will have to spend upwards of hundreds of millions of dollars. As treasurers are well aware, this comes at a time when other regulations are squeezing the capital they have available to invest. No pressure.

The opportunity While the purpose of the new rules is to improve the quality of data, the accuracy of reporting, and the rigour of risk decision-making of major banks, the situation creates an extraordinary opportunity for all financial institutions (FIs) to launch their organizations even further ahead. It’s the perfect time to transform their direction and strategy so they can take full advantage of the value in data. The message is – don’t do it just for compliance sake, do it to discover new

Winter 2014

Risk Management business opportunities, reduce costs, mitigate risk, and grow the business.

The challenge Besides having to round up massive amounts of existing data from all across the organization, more data is continually being produced. In fact, it’s growing exponentially in volume and demand. For instance, Deloitte found in 2012 that banks in Canada had created more data in the past five years than in the previous sixty. Data comes from inside and outside a company, and includes information on and from customers, competitors, analysts, markets in general – even social networks. It’s part of every working element across every FI’s entire operating structure. And just like a meal is inextricably connected to its ingredients, an organization’s performance is inextricably connected to how well its data performs. Right now the performance of Canadian DSIBs and other FIs most probably falls well short of its potential as a result of the way data is managed. Siloed data collected in numerous applications and contained in hundreds of separate systems causes costly duplication at best and poor business and risk-management decisions at worst. For example, an institution may have created multiple risk profiles for a customer who has purchased products from different business lines – e.g. a credit card, a mortgage, an RRSP mutual fund. By not being able to recognize that those risk profiles represent an integrated view of the customer, the business misses the opportunity to make tailored offers or loan decisions with all of the best available information. In addition, the data that was painstakingly created and maintained depreciates in value. At a minimum, what DSIBs must do and smart FIs should do is tear down these silos and build a single, aggregated data management strategy so that data can flow throughout business lines, its integrity can be regulated, and the information that matters most can be accessed easily to make important riskrelated decisions quickly. Even then, meeting the minimum requirements – to be compliant – won’t be enough over the long term. To remain competitive, FIs should capitalize on this

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opportunity to aim beyond compliance and establish the capacity to optimize the value of their data. Tomorrow’s successful FIs are those who create a data vision and strategy that permeates their operations today.

The solution The answer is to create a central data authority (CDA) headed by a senior executive, usually a chief data officer (CDO). A CDA complete with a responsible senior executive not only allows FIs to comply with regulations, it can also improve financial reporting, allay risks, increase trust in the quality of the data, and drive growth by uncovering new business opportunities. By removing silos and consolidating data assets – starting with risk data but eventually encompassing all data domains – FIs can embed their operating model with a sound strategy and solid foundation for managing and governing data. This will serve as a launch pad for higher-end value uses of data, which is where analytics plays a critical role. Additionally, a CDA that absorbs and adapts to new technologies serves to ‘incubate’ the future by positioning FIs to jump on opportunities quickly. The key is to create a foundation on which to appreciate data assets, comply with regulation, and grow the business. A few years ago, the senior executives of major FIs in Canada didn’t see the need for a CDA. It’s a sign of rapidly evolving perspectives – caused by a data explosion and, of course, mounting regulations – that most major Canadian banks have by now begun the process of establishing one. Deloitte has been assisting many of them in this major undertaking.

The next steps Successful information governance and management programs hinge on the adoption of an enterprise-wide strategy. If you work in a DSIB, you’re probably already engaged in a program to comply with BCBS 239; ensure you understand the new model well because, as treasurers, regulators will be coming to you for additional information. To help drive it ‘beyond compliance’, get truly engaged

with the broader view your organization should have for unlocking its data’s potential. If your company is not a DSIB, seize the opportunity to develop a strategy for the data that treasury uses. This will soon connect you with other functions within your organization and sow the seeds for a CDA. Make the case for how robust data and analytics programs can help your firm lead innovation in the FI sector. As a note, if your organization isn’t using them, rest assured others likely are. Start by identifying the right data champion. Then take stock of your data assets, both internal and external, and determine which are most important for your area. Examine also the cost to acquire or create quality data. The next step is to develop a data performance program, strategizing to align corporate data performance with corporate goals, and embed this throughout your organization. Implementation should start small with a specific initiative as a ‘test drive’. Share the outcome with the entire company, so the benefits of the new system are clear. Most of all, remember that creating a new direction and strategy for data governance and management at the organizational level will entail a sea of change in corporate culture. A CDA affects every employee by fundamentally changing how information is collected, stored, and handled. Change management needs to be amongst the top C-suite priorities. Eventually all FIs, big and small, will have to spend a great deal of money to overhaul their data systems. Capitalize on the opportunity, engage in the cultural shift to go beyond compliance, and embed risk analytics in the operations so that data can be used to contribute greater value. The results – an agile, high-performing organization that has the right data at the right time to make the right business decisions – will be worth the short-term disruption. After all, you have to break eggs to make an omelette. Azer Hann is a partner at Deloitte Canada and currently leads the firm’s national risk and capital management practice.




Relying on the Indoor Management Rule and Grant of Security Interest – A Common Problem A case study involving Accra Wood Productions Ltd. By Keri Wallace


hen dealing with commercial contracts, corporate lawyers often advise their clients to obtain evidence that the contract was properly executed and authorized to affirm the contracts enforceability. Typically, a copy of board resolutions is provided and a legal opinion with respect to due authorization and enforceability is delivered. These checks and balances can be costly, and some transactions cannot support the additional costs. For these types of transactions companies can rely on the indoor management rule, a principle that third parties transacting with companies may assume that internal company policies are complied with. In Canada, this principle is codified federally in Section 18 of the ‘Canada Business Corporations Act’ as well as various provincial equivalents of that act. Another issue that arises in the ordinary course for many equipment financers is the ability to take an interest in the goods of the debtor as security for the payment and



performance of their obligations. Again, though the recommended approach is to obtain a separate agreement granting security in the desired property, along with a copy of directors resolutions authorizing the grant of a security interest, these additional steps may not be worth the effort on smaller deals. The indoor management rule and the granting of a security interest within a purchase order were both affirmed by the British Columbia Supreme Court in Accra Wood Productions Ltd. (Bankruptcy of), 2014 BCSC 1259 (“Accra”). At issue was whether a supplier of goods on credit could rely on the assumption that the office manager of the debtor had the authority to enter into a secured credit agreement and whether security language embedded in a purchase order properly granted the supplier a security interest in the debtor’s property. The trustee in bankruptcy for the debtor disallowed the supplier’s claim on the basis that (i) the office manager who signed the credit application did not have the authority to enter into such agreement, and (ii) the security interest

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Regulatory language in the document was inconspicuously included.

Assumption of authority On the indoor management rule, the court considered, among other things, that the credit agreement included language above the signature block stating “authorized to execute this application on behalf of the customer” and found this to be a clear confirmation of authority. This is in line with commercial practice, especially for smaller contracts. Without the indoor management rule, a diligent person would request a copy of written resolutions of the board of directors authorizing the company to perform the obligations and stating a director or officer may sign on such agreement on behalf of the organization. Though large transactions may be able to justify such costs, a supplier of goods who ordinarily engages in business with a purchaser should be able to assume the representative they deal with has authority to bind the company. The indoor management rule therefore makes sense for the commercial contracts it protects, it produces an economic benefit by lowering the cost of diligence for smaller transactions. The cost of any diligence would likely be passed to the customer, driving up the cost of doing business. Accra reaffirms this, as the Court confirmed the supplier could rely on the indoor management rule. A factor in Accra that supported the Court’s decision to allow the suppliers reliance on the indoor management rule was that the purchaser and the supplier were in an ongoing relationship and the authority of the office manager

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was not challenged until the insolvency of the purchaser. The purchaser behaved as though it was bound by the terms of the agreement and so the supplier was able to assume that the purchaser was bound by the terms of the agreement. The principle is balanced by the concept that the party enforcing the obligations on the company may not rely on the indoor management rule where they knew or ought to have known the person signing on behalf of the company did not have authority. This avoids a situation where a clever person seeks out an innocent but ignorant employee of the debtor, so that the company will then be bound by the terms of the agreement without any negotiation.

Consistent with the contract Regarding the grant of security interest, based on the location and clarity of the security language it was found that “a reasonable step was made to bring attention to the signing party the presence of a security-granting clause in the agreement.” The court stated that the supplier did not have a duty to bring the security clause to the attention of the person signing for Accra, relying on the general principal that a party signing an agreement is bound by its terms, absent fraud or misrepresentation. The court distinguished Accra from Tilden Rent-A-Car Co. v. Clendenning 1978 Canlii 1446 (ONCA) and Arndt v. The Ruskin Slo Pitch Association 2011 BCSC 1530, noting that in those cases the provisions in question were on the back of the document in fine print and were inconsistent with

the overall contract, and as well, the counterparty was in a hurried or pressured state when signing. As the contract in Accra was for an extension of credit, a grant of a security interest was consistent with the contract. Again, though it is standard practice to obtain a copy of authorizing resolutions where a grant of security interest in all present and after acquired property is provided, the court did not find that +-the absence of such resolutions invalidated the security. The reasons of the Court affirm that the commercial practice of most suppliers on credit include these provisions in a contract. It should be noted that the fact that the terms were not an unusual size and the inclusion of

a statement above where Accra signed the agreement contained the grant of a security interest were relevant to the court’s decision. Still, where feasible it is good practice to obtain a copy of authorizing resolutions to ensure the transaction has been approved and that the corresponding agreements have been duly authorized and executed. Keri Wallace is an associate in the Financial Services Group. Her practice focuses on bankruptcy, corporate restructuring, banking, and finance matters, representing lenders and borrowers in a variety of financing transactions including secured financing, corporate restructurings, equipment leasing, and asset-based lending.

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HR Management

Employee Benefits – What Finance Needs to Know Part II By Karen Treml

I Tim Witchell, president, wealth management and employee benefits at HKMB Hub International.

Abigail O’Neill, Mosey & Mosey Benefit Consultants.

n the last issue we explored the various elements that surround the sustainability of benefits plans, as well as the need to structure them in a way that provides for the needs of a diverse workforce. We looked at the need for collaboration between human resources and finance and concluded that there is in fact a shift toward HR, finance, labour relations, disability, health, workers’ safety and insurance, and management all coming together at the table to share information and to ensure they are speaking from a common voice in terms of the approach they want to take for managing costs and designing programs. This issue, we look at how the offerings around ‘wellness programs’, employee assistance programs, and post-retirement benefits form a part of the overall strategy for managing costs and maintaining healthy and happy employees.

The ROI in wellness

Susan Bird, president of the McAteer Group

Valerie Travis, senior consultant, health & benefits at Aon Hewitt



The Canadian Centre for Health and Occupational Safety (CCHOS) believes that workplace health and wellness programs should be a part of the overall company strategy for a healthy workplace and that health and safety legislation and other workplace policies or programs can provide a basis for a workplace health (or health promotion) program. Historically, ‘wellness’ has been seen as a human resources initiative that sounded good and felt good, but for all of its warm and fuzzy,

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HR Management and although it was something that was talked about a lot, not much action surrounded the talk. “Wellness has been around for 30 years and it has never really received the traction everybody had hoped for,” says Tim Witchell, president, wealth management and employee benefits at HKMB Hub International. “There are different drivers. In the U.S. healthcare system it is a very important feature from an employer’s perspective because the employer is directly involved in providing the basic medical services – doctor’s visits, surgeries, and hospital stays, all of those go into the employee benefit program and so, if companies can introduce wellness aspects to their employee culture, they can see a reduction in their cost almost immediately and certainly within six months, twelve months, and the three to five year period. So it is introduced and actively promoted in the U.S. system because the cost savings are very real. In Canada, the base medical arrangements are all provided through government health arrangements. As such, the returns are not seen vis-à-vis fewer doctor visits, lowered hospital stays, etc., but rather, in such things as less absenteeism and high productivity. These are less measurable, hence, perhaps, the lack of traction.” Abigail O’Neill, a consultant at Mosey & Mosey Benefit Consultants, agrees. She says that the challenge with wellness is that people are in fact talking a lot about it, and it is key, but the uptake isn’t that high. This, she feels, is because there is a cost associated with wellness plans and because benefit plans are already a huge investment, adding additional costs on top of that introduces more challenges – particularly for small- or mid-size employers that often don’t have a big base from which to work.

Robert Crowder, president of The Benefits Trust, also feels that there is a challenge for small- and mid-size employers. “For small employers there is less choice available and it can be difficult to see the value. When value can’t be seen, then people are looking for the cheapest price. It always comes down to showing the value.” However, Valerie Travis, senior consultant, health & benefits at Aon Hewitt, says she is seeing that some of her more progressive clients are taking action and are building comprehensive wellness programs. “It is clear that several things have changed,” she says. “Certainly the focus has shifted away from ‘how do we reduce the benefits under the plan in order to control costs,’ to a greater focus on ‘how do we keep the plan competitive so it’s something the employees value. At the same time, how do we shift our focus to a different area and control costs differently?” There is a shift toward realizing that such things as lower disability costs, lower drug costs, lower health costs, higher productivity, and lower absenteeism, are a by-product of keeping employees healthy – which translates to all those things that hit the bottom line with a very tangible benefit. “What we are seeing,” says Travis, “is all those voices at the table speaking from one common vision – the need to make sure there is a plan to support the employees that need it while managing the bottom line and investing where there will be a good return on investment.” In recent years, tools have come available that project and measure ROI – an important consideration when talking to the c-suite and finance teams about wellness. They may buy into the idea but there needs to be a business

“In recent years, tools have come available that project and measure ROI – an important consideration when talking to the c-suite and finance teams about wellness…”

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case to invest money in new programs. By actually gathering the data and doing the analytics, it is possible to build that case and determine that not only does investment in particular areas and particular ways speak to the conditions employees are struggling with, but that they are actually manageable and can result in bringing the costs down. Analytics make it possible to project ROI as well as measuring it after the program has been in place for a period of time. “That is the exciting phase,” says Travis. “We are getting to that point with a lot of our clients where we are moving into the measurement phase and are able to demonstrate that there’s been a tangible benefit due to healthier employees – the result of improved productivity and reduced absenteeism – and that the benefit is going to continue to grow. The shift that needed to take place was to get into that tangible outcome domain to be able to say ‘yes, we are going to get something from investing in the area’.” Of course, different organizational structures are going to contribute more to benefitting from the investment in the wellness program. For example, if an HR team is working to build a wellness program on its own while wearing a lot of other hats, it may end up adding a couple of programs such as a gym membership program and ‘lunch and learns’. But, if those initiatives don’t have the marketing push behind them, and if they don’t have the support of the c-suite, then likely the return on investment will not be what was expected or hoped for. “Where we’ve seen companies successfully launch a program,” says Travis, “they have brought in a partner right from the outset that has helped them determine what they want to accomplish and how they are going to get there. The partner will help to bring together the different initiatives that might already be offered, as well as new initiatives, and look at it from an integrated approach. They help ensure the management’s buy-in into the initiative and look to visibly promote it to the organization. They get the marketing, the promotion, the communication. They make it fun and engaging because, if the employees participate, you are going to



HR Management see the benefits; if they don’t – you won’t. That is a main differentiator between organizations.”

EAPs – the hidden benefit Much like wellness initiatives, employee assistance programs (EAPs) have also gained popularity over the years – and certainly since the introduction and implementation of the ‘National Standard on Psychological Health and Safety in the Workplace’. However, according to Susan Bird, president of the McAteer Group, many people still do not know about their EAP and this comes down to education to make people aware of what they have available to them. EAPs can be very helpful and useful – they can do wonders for people in various situations. In fact, Bird feels that EAPs are such a useful benefit that they should be mandatory. O’Neill agrees EAPs are useful but says that employee assistance programs are difficult to assess as far as a correlation between use of the program and reduction of benefit costs. She also explains that in the last number of years there has been a real focus on mental health awareness and that it continues to be key. “When you look at EAP data, drug data, and disability data, it often correlates, so it’s important to promote the EAP piece, says O’Neill. “It seems to be a silent entity and it should not be. The support offered in EAPs can help for overall wellness.” Witchell and O’Neill both point out that EAPs are not particularly expensive on a per employee basis and, in the long run, because the EAP is intended to stop situations from getting worse, it is always going to be less expensive to invest in someone’s health before there is a larger problem,” says O’Neill. In that regard, she adds, EAPs are always going to cost less than the other elements in a benefits plan. The added benefit is that employees perceive their employers well when they are providing a comprehensive plan, so employers should ensure that their employees know about the EAP offerings.

Post-retirement benefits The conversation around benefits plans, wellness programs, and EAPs, naturally leads to that of post-retirement benefits and the costs involved in sustaining



employee’s benefits after they retire. Most post-retirement benefits are not funded, says Muneer Feeroze, managing partner at Canadian Benefits Associates. He explains that in many cases companies are not setting aside money but rather, are funding the benefits on a pay-as-yougo basis. Therefore, if a company goes bankrupt, its retired employees become creditors. “Because of funding problems within the post-retirement benefits space, a lot of companies are considering shutting them down for future retirees. Shutting them down to current retirees is not always as possible and really comes down to what the ‘promise’ was to the employees. If benefits were provided on a contingency and not as a contracted ‘given’, and if the company has reserved the right to change them, they are able to do so. But if they have not, it’s an intended promise they are bound by. It really comes down to a

“The areas of opportunity lie in benefits plan design, and how and where dollars are spent can impact both spend and ROI…” combination of what was contracted and how it was communicated.” However, that doesn’t mean that post-retirement benefits can never be changed. They can – if appropriate notice is given and if the right to change has been included. Sometimes companies need to dial back the benefits in order to stay viable and this requires dialogue with the employees to explain the situation and find solutions. If a company is forecasting, they should be able to have this conversation and make changes before the situation is critical. For existing employees, Feeroze says it is important to communicate the changes to them and to explain why. They need

to be given adequate notice and, in some cases, an employer might also need to offer alternative and other forms of compensation. He adds that it is easier to dial back the current workforce – they have some recourse to explore other options, whereas retirees generally have no other options if an employer dials back their benefits. Bird points out that it is sometimes possible to have dialogue with employees around whether the retirees are going to share the costs. If you have the right discussions, they will, she says. If they are aware that it might cost them $150.00 for something that is worth much more than that, they are likely willing to sign on for that. It is a discussion primarily around cost sharing rather than backing out entirely and, generally, people would rather cost share than not have benefits at all. O’Neill agrees and says that it is different for every employer. It is hard to balance decent programs and costs. It’s an ongoing process, she says, and it is key to do an inventory every year to determine if the plan fits ongoing or whether adjustments are needed. Cost containment is not easy but there are many ideas out there for how to manage costs.

Partnering for benefits In the past, benefits were ‘just there’, but as the cost of benefits increases more and more, ROI becomes an important component. CFOs need to work with HR to balance employee offerings and associated cost. The areas of opportunity lie in benefits plan design, and how and where dollars are spent can impact both spend and ROI. With the many elements and considerations that are involved with benefit plan design, a starting point for plan sponsors is to work with a consulting firm that has experience in designing programs that cater to a number of different populations within a workforce. The other strength realized when working with a benefits partner is that the consultant can provide the analytics, the benchmarking, and the data that is needed to ensure that the program being designed is going to be relevant not just today, but for the long run. That ensures maximum value now and in the future.

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ISSUES & EDITORIAL THEMES Issue  Q1 2015 Planning, Budgeting, and Forecasting

With today’s networked economy, planning, budgeting, and forecasting are challenged with an increasing need to integrate. This issue looks at best practices, applications, processes and trends for streamlining and optimizing those cycles.

Issue  Q2 2015 Managing Investor/Stakeholder Relations

Good investor and stakeholder relationships are the key to a sustainable enterprise. We look at the various aspects of stakeholder relations and discuss best practices for effective stakeholder management.

Issue  Q3 2015 The Cross-Functional CFO

The role of today’s CFOs is one of driving broader transformation of the enterprise wide operating model. We look at the trends and best practices in such areas as corporate portfolio management, capital allocation, and performance management.

Issue  Q4 2015 Managing and Mitigating Enterprise Risk

A look at identifying and evaluating risk (financial, operational, reporting, compliance, governance, strategic, reputational, etc.), prioritizing and managing exposure, and the processes for managing it.


Each issue includes regular editorial columns which look at governance, regulatory, and compliance issues, as well as HR Management, executive profiles, industry updates, news, events, and more ...

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Coming events

Integrated Payments Solutions


November 2-5 Association of Financial Professionals AFP Annual Conference 2014 Washington, DC

February 3-5 Smart Card Alliance 8th Annual Payments Summit Salt Lake City, UT

November 4-6 Comexposium CARTES & Identification Exhibition 2014 Paris, FR

February 3-6 ABA Insurance Risk Management Annual Forum Orlando, FL

November 12-14 BAI BAI Retail Delivery Conference 2014 Chicago, IL

February 15-17 ATMIA ATMIA Annual Conference Las Vegas, NV

December 3-4 Airline Information Inc 8th Airline and Travel Payments Summit & Co-Brand Conference San Francisco, CA December 8-9 Members Meeting Smart Card Alliance Coral Gables, FL 2015 January 11-13 National Retail Federation The Big Show New York, NY January 14-15 NAPCP Canada 2015 NAPCP Canadian Commercial Card and Payment Conference Toronto, ON

February 19-20 InfoTech Canadian Financing Forum 2015 Vancouver, BC February 23-25 IIR USA PrePaid Expo USA Las Vagas, NV March 2-4 BAI BAI Payments Connect Conference Phoenix, AZ March 11-12 CFO Magazine CFO Rising East Miami, FL March 30 – April 1, 2015 ProcureCon Canada Toronto, ON

Visit us online



Winter 2014


AODA Compliance Your mandatory compliance report is due! By Karen Treml


he Accessibility for Ontarians with Disabilities Act, 2005 (AODA) became law on June 13, 2005. Under this legislation, the government of Ontario has developed mandatory standards for accessibility that identify, remove, and prevent barriers for people with disabilities. The act applies to all levels of government, non-profit associations and corporations, and private sector businesses across Ontario that have more than one staff member. The act provides the government with the authority to set monetary penalties to enforce compliance to the standards. The maximum penalties under the act include: ◉◉ A person or unincorporated organization that is guilty of a major offence under the act may be fined up to $50,000 dollars for each day the violation remains unresolved ◉◉ A corporation that is guilty of an offence under the act can be fined up to $100,000 per day ◉◉ Directors and officers of corporations who have fiduciary responsibility and are guilty may be fined up to $50,000 a day

The AODA consists of five parts, known as standards, each of which covers an aspect of accessible daily living. Compliance to the various standards has been spread out on a timeline with deadlines for compliance ranging from January 1, 2010 through to 2021. The ‘Accessible Customer Service Standard’ was the first standard to come into effect. It requires non-profits and businesses in Ontario to be compliant as of January 1, 2012. All organizations with 20 or more

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employees must report their ongoing compliance with the ‘Accessible Customer Service Standard’ on or before December 31, 2014. Failure to file a report may result in penalties.

How to file 1. Go to (you will require your business number); 2. Log in if you have an existing online account or sign up for one 3. Select ‘Accessibility Reporting’ and follow the prompts

Information & Communications

◉◉ Producers of educational or training material - textbooks ◉◉ Educational and training resources and materials ◉◉ Training to educators ◉◉ Educational libraries- print-based resources 2016 General Requirements

◉◉ Training of staff and volunteers Information & Communications

◉◉ Accessible feedback processes

If you have 50 or more employees, you must also file a report with the government confirming that you have: 1. Created accessibility policies 2. Developed a multi-year accessibility plan 3. Considered accessibility when purchasing or designing electronic kiosks. 4. Designed new websites or updated existing websites sufficiently to be accessible.

Need help with accessibility? If you find yourself needing information or assistance, Accessibility Ontario ( provides training and consulting services to nonprofits, businesses, and municipalities in Ontario and assists in helping them in understanding and complying with the act.

Future deadlines 2015 General Requirements

◉◉ Policy development ◉◉ Accessible self-service kiosks

2017 Information & Communications

◉◉ Accessible formats and communication supports employment ◉◉ Recruitment ◉◉ Employees and accommodation ◉◉ Performance management, career development, and redeployment 2018 Design of Public Spaces

Make or redevelop: ◉◉ Accessible recreational trails and beach access routes ◉◉ Accessible off-street parking lots ◉◉ Accessible service counters, fixed queuing guides and waiting areas with fixed seating 2020 Information & Communications

◉◉ Producers of educational or training material to make available supplementary print materials ◉◉ Educational libraries to provide multimedia/digital resources

For more information and complete guidelines, visit




2015 Hiring Trends The year ahead will be a time of intense development and opportunity in the finance and accounting industry.


he finance market in Canada is booming, and hiring managers across the nation are struggling to find and retain top talent. As the economy continues its recovery, and more boomers approach retirement age, job candidates – especially those with expertise in accounting, auditing, compliance, financial analysis, and business systems – now have the advantage. Hiring trends indicate that temporary staffing is on the increase nationwide, and financial consultants are enjoying plentiful and diverse work opportunities. Fifty-eight per cent of Canadian CFOs said it’s challenging to find skilled candidates, says a Robert Half survey. Here are some of the findings, by province:

British Columbia The manufacturing industry shows consistent growth, and the province’s natural resources sector is making a comeback. Other areas undergoing revitalization include real estate, information technology, and distribution. In Vancouver, particularly, specialized candidates are becoming harder to find. Competition in the hiring arena is fierce, particularly for analysts, controllers, and tax managers. In-demand skills include financial analysis, systems and software proficiency, full-cycle accounting expertise, and communication skills, as well as industry-specific experience.

Alberta The oil and natural gas industry drives growth in this province, causing hiring frenzies and talent wars to run rampant. As a result, recruitment, retention, and skills shortages have become major challenges for hiring managers. With



competition so intense, many top candidates receive multiple offers. Hiring managers are using bonuses to lure choice candidates, and they are also extending jobs offers with built-in incentives tied to the longevity, stability, and long-term growth of the business. Consequently, Alberta has some of the highest salaries in the country. Hard-to-fill jobs include CFOs, controllers, financial analysts, business analysts, cost accountants, projects accountants, payroll and billing personnel, and senior accountants with financial reporting experience.

Manitoba Manufacturing is driving development in this province, as in other parts of the country. Salaries are rising, and hiring managers are increasingly relying on extra perks to woo candidates. For example, they offer vacations, bonuses and flexible work arrangements that promote worklife balance. With unemployment so low, hiring managers have to work doubly hard to find the skilled workers they require, especially for the public sector.

Ontario A competitive hiring environment is pushing managers to expedite the recruitment process and get creative with their retention strategies. The skilled candidates most in demand are payroll administrators, accounts payable/ accounts receivable and billing specialists, financial analysts, staff and senior accountants, controllers, and internal auditors. Across this province, financial institutions seek compliance and risk management professionals. Toronto has always been Canada’s banking capital, and this sector continues

to grow, with full-time and contract accounting positions on the rise. Stellar technical and analytical skills are in great demand, especially in financial services, healthcare and property management. In Ottawa, the fastest-growing areas include education, healthcare, not-for-profit and government.

Quebec Bilingualism continues to be highly sought-after in Quebec, and employers are willing to pay more for it. Another compensation booster is the Chartered Professional Accountant (CPA) designation, which includes CA, CMA, and CGA accreditations. Businesses experiencing hiring challenges are in the finance, insurance, technology, construction, banking, mining, manufacturing, and property management sectors. The roles that are hardest to fill include financial analysts, controllers, internal auditors, cost analysts, and finance professionals who specialize in payroll, credit, and collections. The year ahead will be a time of intense development and opportunity in the finance and accounting industry. Managers, especially those in top-growth areas, need to pay careful attention to hiring and compensation trends, then refine and augment their recruitment and retention strategies accordingly. This article is provided courtesy of Robert Half Canada, parent company of Accountemps, Robert Half Finance & Accounting and Robert Half Management Resources.

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Business Matters Regulatory news

Safeguarding Your Business How do you to protect a business from marital breakdown? By Nathalie Boutet


hether you are the owner of a significant family enterprise or an executive in a major corporation, you and your organization will undoubtedly be touched numerous times by family breakdown and the wide spread impact. What can you do to safeguard your organization and its valuable human assets from such an intangible yet destructive force? How do you avoid common pitfalls when going through a legal separation, which can have devastating impacts on you, your family, and the financial viability of the business?

Plan a strategy that is aligned with your values and stay with it With over 22 years of experience working with

Winter 2014

thousands of families, the best results I see in my practice happen when my clients commend strong principles and objectives from the professionals supporting them in the process. A legal separation does not proceed in a straight, predictable line. It is more like a commercial transaction, full of twists and turns and unpredictable events. Spouses are ill prepared for the emotional and financial challenges of a separation. They face emotions such as fear of losing time with their children, anxiety around support issues, and how to maintain their lifestyle when assets and income are divided. When caught up in the stress of daily uncertainty during separation, it is easy to lose sight of what is important to us and react negatively or out of character, only to regret it the next day. Some bad decisions can cause irreparable damages to the business.



BUSINESS MATTERS Business owners can draw on skills honed in their business lives when they face a debilitating event such as a marital breakdown, to inspire cooperation. Business owners are skilled at creating a business plan with defined objectives, making revenue projections with goal posts, and establishing budgets to guide how to make decisions about the business. They know how to seek (and usually follow) the advice of controllers, accountants, and other professionals that will help them bring their objectives to life. All of these steps are the foundation of their success. Once this information is in place, a shift happens. An alignment occurs because business owners and their advisors all work together towards the same objectives. If new twists and turns happen, the whole team stays the course and focuses on the same defined objectives. A common mistake is to not use the same approach when dealing with a marital breakdown: not defining objectives and not gaining alignment with the legal and financial teams. One client, a senior accounting partner in a firm, comes to my mind. Through their difficult separation, his former wife took an excruciatingly painful amount of time to come to terms with the marriage breakdown and could not make firm decisions. With patience and an end goal in mind, my client did not waiver on his commitment to do what it takes, while respecting the process, to allow her the time to come to terms with the separation and reach a fair agreement for both. Separating spouses do better when they demonstrate strong leadership, like they do in business, in the face of the curve balls that life will throw during this difficult period. I encourage clients to develop principles that will guide them through this very difficult legal process, such as, “I will not involve the children in the process no matter what”; “I will respond to low blows with intelligent and measured actions”; “I will cooperate as much as is responsibly possible”; “I will not issue personal attacks against my former spouse or their lawyer”; or “I will facilitate the process to give my spouse what she/he is entitled to and try to move on as fast as possible so that my



Business owners can draw on skills honed in their business lives when they face a debilitating event…

children can move on from the conflict.” Through the lenses of these principles, people can then plan other things such as how assets could be divided or how much support could be paid. Simple but very effective.

Keep your dispute out of court Another mistake people make is not researching what legal separation process is best suited to their situation before embarking on it. There are six legal processes available to separating families: (1) spouse-to-spouse negotiation, (2) collaborative lawyer-tolawyer negotiation, (3) mediation, (4) traditional lawyer-to-lawyer negotiation, (5) arbitration and (6) court. Going to court is a last resort. In court people have no control over the outcome and their personal and sensitive business information becomes public. More importantly, judges have the power to make seriously disruptive orders including share transfers, a forced sale of the business, and in some extreme cases, issue orders to freeze assets. Collaborative lawyer-to-lawyer negotiation and mediation are much better suited for resolving marital disputes, especially for high net worth families. In these private outof-court systems, separating spouses constructively address their personal, business, and financial affairs and craft solutions that are personal to them and their business. Spouses working together can find more attractive tax and financial solutions associated with a potential transfer or sale of corporate or personal assets or with plans to transition the business if it is no longer possible to jointly operate with your former spouse.

In many circumstances, the collaborative law lawyers or the mediator will recommend the use of jointly retained, neutral professionals such as certified business valuators or pension valuators, which limit potential causes for conflict and in some cases astronomical professional fees. Collaborative lawyer-to-lawyer negotiation differs from traditional lawyer-to-lawyer negotiation in that collaborative lawyers are trained in the most advanced negotiation system called ‘interest based negotiation’, a Harvard University methodology. In addition, in collaborative law, if the file needs to go to court, which rarely happens, clients have to retain different lawyers to handle the litigation, causing all involved to deploy their utmost creativity to avoid a file transfer. I have seen time and time again extremely sophisticated and creative solutions emerge from collaborative lawyer-to-lawyer negotiation and mediation which would never be possible in court. The bottom line? Ensure that each member of your professional team helps you to achieve your personal objectives for your legal separation. Demonstrate strong leadership, like you do in your business, in the face of the unpredictable events you will encounter. Veteran Family Law lawyer, Nathalie Boutet, is a negotiation expert whose practice focuses on keeping divorces out of court. Working alongside thousands of separated families, she knows how to protect businesses from disaster. You can find her at or nboutet@

Winter 2014

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Canadian Treasurer Magazine Winter 2014  
Canadian Treasurer Magazine Winter 2014