EXPERIENCE, the TGS magazine - 5 edition

Magazine

EXPERIENCE issuu.com/tgs-sarrio/experience-magazine

5 Edition / July 2024

INTERVIEW Get to know TGS in Bolivia

THINK GLOBAL SUSTAINABILITY

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PARTNER EXPERIENCE Business around the world

EXPERIENCE is a magazine focused on business trends and business experience stories.

Design, layout and direction Lorena Bernales Marketing & Communications Manager lorena.bernales@tgs-sarrio.pe General Editing Andrew Menzies Vice-President andrewmenzies@tgs-global.com Collaboration and article writing Partners of the TGS member firms For further information please write to marketing@tgs-sarrio.pe TGS Sarrio & Asociados Peru

Follow us on: www.tgs-global.com

© 2023 TGS All rights reserved

EDITORIAL LETTER TO TGS MEMBER FIRMS

Andrew MENZIES Vice-President TGS Network

W

e are just back from our vibrant and insightful regional conferences in Marrakech, Costa Rica, and Singapore. Each May, the TGS team tours the world to enjoy dynamic participation and contributions from worldwide members. TGS events provide a unique shared knowledge pool for the network to draw on. We also strengthen intercultural bonds within our international network which allows for fast, quality and effective work for our clients.

Heartfelt thanks to each of you who attended and shared your experiences and insights. Your input is instrumental in shaping the future of our organization which we will do at our Global Conference in Nice, France, this November.

This edition of TGS Experience is an extension of our international knowledge sharing. It features eight articles by members. From Investing in Bulgaria, through a Brazilian perspective on the IFRS S1 and IFRS S2 Disclosure Standards, to a British opinion on how best to manage with a Gen Z workforce.

I extend my deepest gratitude to all the authors for their excellent contributions. Your expertise and dedication are what makes both our TGS Experience Magazine a valuable resource for members and the TGS network a valuable resource for members and clients.

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CONTENT INTERVIEW

GET TO KNOW TGS IN BOLIVIA My name is Douglas Rodrigo Moreno Pedrazas, married, I am a Financial Auditor with a Master’s Degree in Auditing and Management Control and a PhD in Financial Accounting and Business Management. I am currently a Partner and General Manager of the External Auditors Consultancy SIDECAF S.R.L., members of TGS Network. I am in charge of supervising the field work and collaborating with employees in client service.

PARTNER EXPERIENCE

AUDITORS RESPOND TO FRAUD RISKS AND MATERIAL MISSTATEMENTS The auditor should perform a test to obtain evidence about the operating effectiveness of the controls related to all relevant financial statement assertions for all significant account balances.

To understand and evaluate the effectiveness of the design of controls and confirm whether any have been implemented, the auditor should perform a walkthrough test.

PARTNER EXPERIENCE

FAMILY WEALTH MANAGEMENT COMPANY The “Société de Gestion de Patrimoine Familial” also known as the SPF or the Family Wealth Management Company, is an entity designed for managing private wealth. It was introduced by the Luxembourg government in 2007.

The SPF is a tax-neutral investment company that specializes in managing the private assets of individuals.

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PARTNER EXPERIENCE

THE IFRS S1 AND IFRS S2 STANDARDS The IFRS S1 and IFRS S2 standards were issued by the International Sustainability Standards Board (ISSB), a body that sets standards for sustainability-related financial reporting to meet the needs of investors.

The ISSB was established by the International Financial Reporting Standards (IFRS), or simply the IFRS Foundation, to specifically address sustainability-related standards (IFRS, 2023).

PARTNER EXPERIENCE

THE IMPORTANCE OF AUDITED FINANCIAL STATEMENTS WHEN SELLING YOUR COMPANY We were recently approached by a new client looking to get his business valued after one of his own clients expressed interest in acquiring his company. When we requested the necessary information for the valuation, we realized that their financial statements were not audited and needed an update (old accounts, balances and practices).

PARTNER EXPERIENCE

NAVIGATING A BUSINESS THROUGH THE NEEDS OF GEN Z With Generation Z now making up a quarter of the world’s population, understanding and engaging with this group is key to harnessing a valuable talent pool and their growing purchasing power.

Born between the mid-1990s and early 2010s, Gen Z have been reared in a digital world with access to limitless information and instant communication.

PARTNER EXPERIENCE

UNPACKING BULGARIA’S FOREIGN INVESTMENT LANDSCAPE: TRENDS, CHALLENGES, AND OPPORTUNITIES Bulgaria, strategically located at the crossroads of Europe, Asia, and the Middle East, has demonstrated notable resilience and growth potential in its economic landscape over recent years. With its strategic location, favourable business climate, competitive cost structures, and well-educated workforce, Bulgaria has become increasingly attractive to foreign direct investment (FDI).

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PARTNER EXPERIENCE

THE NEW ERA OF LEADERSHIP: THE SUCCESS JOURNEY OF TGS EDLUND & PARTNERS In an era of constant change and increasing demands for sustainability, TGS Edlund & Partners stands at the forefront with revolutionary leadership.

Being a leading audit and advisory firm means more than just delivering services; it’s about inspiring, guiding, and creating real value for our clients and the wider community.

PARTNER EXPERIENCE

WHAT IS TRANSFER PRICING? A transfer pricing study is a tool used to determine if certain commercial transactions between related parties are being conducted at market value.

These related parties can be sister companies, subsidiaries, and/or affiliates that either have some level of ownership in each other, sit on each other’s boards of directors, or share common partners.

About TGS TGS is a dynamic global business network of independent firms providing audit, tax, corporate legal services, advisory and outsourcing. With more than 4,400 professionals in more than 57 countries, the multidisciplinary TGS member firms support clients by designing global, sustainable solutions and providing a one-stop-shop for business advisory. We support the 10 principles of the Global Compact on Human Rights, Labour, Environment and Anti-Corruption. Our culture, strategies and operations are aligned with universal principles of sustainable development.

About Experience Experience is a business magazine that gathers insights, trends and experience stories from TGS member firms that inform and inspire business leaders and future entrepreneurs. Its development seeks to share valuable information for entrepreneurs, under the analysis of our partners and guest executives.

This TGS magazine is available free of charge at issuu.com/tgs-sarrio/experience-magazine Disclaimer The firms of TGS are independent members of TGS. As a separate and independent legal entity of TGS, member firms are solely responsible for the work it carries out and the services it provides to its clients.

Member firms are not responsible for the acts or omissions of other member firms. ©2023 TGS. All rights reserved

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INTERVIEW GET TO KNOW TGS IN BOLIVIA Rodrigo MORENO Partner https://sidecafsrl.com/

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TGS in Bolivia

Can you introduce yourself?

My name is Douglas Rodrigo Moreno Pedrazas, married, I am a Financial Auditor with a Master’s Degree in Auditing and Management Control and a PhD in Financial Accounting and Business Management. I am currently a Partner and General Manager of the External Auditors Consultancy SIDECAF S.R.L., members of TGS Network. I am in charge of supervising the field work and collaborating with employees in client service.

What can you tell us about your company and your team?

We are TGS in Bolivia and we have more than 23 years of experience providing Audit, Tax, Labor Law, Accounting and Information Systems services. Our Firm has a first-class team of professionals, which undergoes a rigorous selection process before joining the organization and once they are part of it, they are trained and qualified to provide excellent service.

The executive staff of our Firm is made up of experienced professionals with vast experience in Audit and Consultancy work.

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The ESG (environmental, social and governance) issues represent challenges and many opportunities to create long-term value.

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We are characterized by maintaining permanent communication channels with our clients, which allow us to attend to their requests and resolve problems in a timely manner, thus contributing to the success of the organization.

Our organization’s strategy is based on the premise of helping our clients to solve complex problems, as this is how we believe we can add value to our work.

To achieve this goal, we form our teams with professionals from different disciplines: auditors, economists, tax specialists, consultants, systems engineers, etc. Only in this way, we can provide our clients with the specialized service that the complexity of today’s business requires.

3. What do you think about developing an ESG (Environmental, Social and Governance) strategy for your company?

ESG (environmental, social and governance) issues represent challenges and many opportunities to create long-term value. Understanding the needs of society, good governance and environmental risks challenge us to transform our companies, updating our purpose and values, challenging our strategies and analysing business plans in the face of new realities.

Photo by TGS

With the support of the TGS network and its ESG Activator tool, we are able to help our clients diagnose their company through a situational survey and generate comparative reports: by sector, by industry, by SDG indicators.

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AUDITORS RESPOND TO FRAUD RISKS AND MATERIAL MISSTATEMENTS Yousouf MAHMAD BADAT Head of Quality Control - Mauritius http://www.tgsmauritius.mu

The auditor should perform a test to obtain evidence about the operating effectiveness of the controls related to all relevant financial statement assertions for all significant account balances.

To understand and evaluate the effectiveness of the design of controls and confirm whether any have been implemented, the auditor should perform a walkthrough test. This is extremely useful and allows them to understand the controls in place for complex business processes, new or significantly changed systems processes, and processes involving accounts which are susceptible to fraud.

Going back to basic audit procedures, the auditor should: • Understand the organisation’s activities, its objectives, and its current business conditions (including its inability to continue as a going concern).

• Identify significant account balances and types of volumes of transactions.

• Identify unusual or unexpected balances that might indicate a risk of fraud or error.

• Consider the organisation’s monitoring performance against their expectations and how management monitors their business risks.

• Investigate variances by seeking explanations from management and obtaining appropriate corroborating evidence, thus, using their professional scepticism to arrive at the right audit conclusion.

• Compare key indicators with the industry average.

The auditor should also test: • Controls relating to the organisation’s risk assessment process that specifically address fraud risk, which is also a key risk.

• Controls relating to the adequacy of the internal controls in higher risk areas.

• Controls restraining the misappropriation of assets that could result in material misstatements and relat to ethics, conflicts of interest, related party transactions and other complex transactions.

The risk assessment processes within an organisation help the auditor to identify risks, determine the effectiveness of internal controls that impact these risks, and develop mitigation plans for these risks which are considered a significant threat to the organisation.

Based on the above work, the auditor can form their independent point of view of the organisation’s business risks, including key risks to develop testing strategies for material balances.

The auditor should be more sceptical and rigorous in the way they perform audit testing and obtain corroborative evidence, as this profession is based on public trust and the public firmly believes that auditors can challenge organisations to detect fraud.

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Fraud could look like posting numerous improper journal entries in relatively small amounts.

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Ways to incorporate unpredictability into their audit plan: 1. Consider inspecting the existence of lower value assets not previously considered due to materiality, for example, equipment spare parts 2. Test repairs and maintenance of assets, to determine whether they’re of capital or revenue nature 3. Attend inventory counts performed at locations not previously attended during prior audits and without preinforming the organisation 4. Testing standard costing of inventories for lower/medium value items 5. Change the nature of substantive analytical processing, by using a different basis for disaggregating revenues 6. Send confirmations of balances that have not previously been targeted (negatives and balances below the size threshold not used previously) and confirmations of outstanding balances directly from suppliers by normal confirmation request procedures 7. Extend cut-off testing beyond year end date 8. Perform tests on receivables not yet collected, by reviewing bank transfers post-year end and examining relevant documents to related invoices/despatch notes 9. Review accounts for reasonableness and explanation of allowance for bad debts.

10.Select additional months to perform work on bank reconciliations and scrutinise the transfer of funds from bank accounts after year- end.

Whilst the auditor can still place reliance on prior CAKE (Cumulative Audit Knowledge and Experience), the documentation of internal controls and proactiveity in the approach of managing and achieving the quality of controls (International Standard on Quality Control (ISQC ISA 220R)) should be enhanced. These should show that evidence supporting the effectiveness of controls, processes for all the relevant assertions and significant accounts and balances have been adhered to.

Another audit procedure used to respond to fraud is by testing journal entries. Testing standard journal entries is something that will give the auditor a good understanding of the organisation’s financial reporting process. There should be controls over journal entries and other adjustments put in place in order to test journals effectively. This is because there have been many cases that resulted in restatement and allegedly involved management fraud as a result of inappropriate journal entries and other adjustments.

Fraud could look like posting numerous improper journal entries in relatively small amounts. These may impact the balance sheet and income statement, but not in a significant enough way to be identified through some analytical procedures. These non-standard journal entries can also be used to create fraudulent financial statements.

There should be numerous policies and procedures in place regarding the initiation, recording and processing of journal entries, namely: • Journal entries are sequentially numbered, based on accurate sources of information and properly verified.

• Accounting staff are responsible for posting journal entries to the general ledger only after evidence of review by a team leader.

• Controls are specifically designed to prevent and detect fictitious entries and unauthorised changes to journal entries and ledger accounts.

• Any specific journal entries that are posted or done on an ad-hoc basis require a team leader’s written authorization.

• Controls over the integrity of the processing of journal entries used to generate accurate and precise financial/management reports.

• Several levels of independent reviews are required to ensure reports are free from errors.

Normally, the auditor should expect to review standard journal entries such as the purchase/disposal of assets, bad debts, damaged or obsolete stocks, sales returns, petty cash expenses, increase/decrease in provisions and so on. The auditor should also verify the general ledger and scan journal entries at year end as there is a greater risk associated with non-standard journal entries in this timeframe.

All of the above audit strategies will give the auditor reasonable assurance and comfort over the financial reporting processes and account balances.

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The auditor should also vary their testing strategies from one year to another by incorporating an element of unpredictability into their audit plan to respond to overall fraud risk where there have been significant changes within an organisation.

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FAMILY WEALTH MANAGEMENT COMPANY

Mirko CAZZETTA Managing Partner - Luxembourg https://www.comptacapitalgroup.lu/

The “Société de Gestion de Patrimoine Familial” also known as the SPF or the Family Wealth Management Company, is an entity designed for managing private wealth. It was introduced by the Luxembourg government in 2007.

The SPF is a tax-neutral investment company that specializes in managing the private assets of individuals.

It acts as an extension of the individual’s assets but with a separate legal identity which means that the liability of investors/shareholders is limited to the assets contributed to the company. The SPF is considered a passive investment company and is authorized to engage in activities such as holding financial assets like shares, bonds, structured products, derivatives, and options on securities. It can also hold equity interests as long as it is not involved in managing these companies, but the SPF is prohibited from engaging in activities like granting loans and owning intellectual property and real estate.

What are the benefits (including tax advantages)?

The SPF is subject to an annual subscription tax of 0.25%.

This tax is levied on the following items: • The SPF’s paid-up share capital and share premiums • That part of the debt which exceeds eight times the amount of the SPF’s paid-up share capital and share premium. The subscription tax cannot fall below 100 euros and is limited to a maximum of 125,000 euros per annum. It is levied on a quarterly basis.

The SPF is exempt from Luxembourg’s corporate income tax, municipal business tax, and net wealth tax, as are

commercial companies. However, the SPF is not eligible to benefit from Luxembourg’s double taxation treaties or the European directive on subsidiaries of parent companies.

There is no Luxembourg withholding tax on profit distributions made by an SPF to its shareholders.

Furthermore, SPFs, due to their limited scope of activity, are not considered taxable persons for VAT purposes by the Luxembourg authorities.

How is an SPF administered?

The manner of administration is dependent on the corporate structure selected.

A public limited company (Société Anonyme - S.A.) has two distinct models of governance: the classic model and the dualist model. The classic model comprises at least three directors and nothing else, while the dualist model comprises both a management board, which is responsible for managing the company and a supervisory board, which oversees the management.

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The incorporation of ESG considerations is becoming more prevalent in the investment decision-making process.

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Navigating the Future of Family Wealth Management: Trends and Outlook Emerging trends, technological advancements, and changes in client preferences are constantly driving the evolution of the wealth management landscape. The preservation and growth of high-net-worth families’ legacies for future generations is assisted by family wealth management firms in this dynamic environment.

Rise of Impact Investing Impact investing has become a significant trend in the industry. As affluent families seek to align their investments with their values, the demand for strategies that generate positive social and environmental impacts is growing. Family wealth management firms are meeting this demand by integrating impact investing into their portfolios to allocate capital to companies, organizations and funds that are driving meaningful change in the areas of sustainability, social justice and community development.

Integration of ESG factors The incorporation of environmental, social, and governance (ESG) factors is becoming more prevalent in the investment decision-making process. The evaluation of companies’ performance in areas like climate change mitigation, diversity and inclusion, and corporate governance is crucial for family wealth managers. By including equities and sustainability in their investment analysis and portfolio construction process, asset managers can improve risk management and long-term returns, and also meet evolving client and regulatory expectations.

What makes Luxembourg an ideal choice for your business?

Luxembourg is a member of the European Union and benefits from a highly attractive business and political environment. It is home to 12 European institutions and the stable legislative framework makes Luxembourg a competitive financial center, encouraging investment.

In addition, Luxembourg is a multilingual country with a central location and a relatively small surface area. These characteristics make it easy to get around and facilitate business operations. Luxembourg also has high quality infrastructure, including a 4% share of gross domestic product (GDP) which is allocated to public investment. In addition, ithas a strong historical presence in the financial sector, with over 120 banks contributing to the country’s economy, making it a leading financial center in Europe.

How can we help you setting it up?

We, as CCG, have been providing assistance to SPFs in Luxembourg since their formation. The services we can help with are as follows: • Provisions of incorporation services: - Incorporation of SPF as public limited company (S.A.), private limited company (S.à r.l.), or partnership limited by shares (S.C.A.) - Assistance with the incorporation process, including drafting the articles of association, confirming the availability of the name with the Trade Registry, dealing with the notary and completing all necessary KYC/KYT formalities for the notary and the bank with which the company will have its bank account.

- Provision of a registered office: we can provide a registered office in accordance with the Luxembourg law of 31 May 1999 on domiciliation. We then handle all correspondence addressed to the SPF. • Provision of corporate services: - Maintain and update SPF files; - Organize and document board meetings; - Organize and document the annual general meeting.

• Provision of accounting services: - Bookkeeping; - Preparation and filing of annual accounts and any notes; - Provision of support and assistance to the company’s auditors (where applicable).

• Provision of tax services: - Dealing with annual subscription tax; - Assistance with the declaration of dividends.

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In the case of a private limited company (Société à responsabilité limitée - S.à r.l.) or partnership limited by shares (S.C.A. - Société en commandite par actions), there is the option of a sole manager or a management board.

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THE IFRS S1 AND IFRS S2 STANDARDS

Jose María MOREIRA Partner - Brazil https://tgs-compass.com/

BRAZIL Compass The IFRS S1 and IFRS S2 standards were issued by the International Sustainability Standards Board (ISSB), a body that sets standards for sustainability-related financial reporting to meet the needs of investors. The ISSB was established by the International Financial Reporting Standards (IFRS), or simply the IFRS Foundation, to specifically address sustainability-related standards (IFRS, 2023).

The IFRS S1 and IFRS S2 disclosure standards were developed to facilitate consistent and comparable disclosures about sustainability and climate-related risks and opportunities. These standards address long-term reporting challenges, helping companies and investors better understand performance and comply with constantly evolving regulations.

The IFRS standards are expected to simplify the disclosure process for companies, allowing for benchmarking and cost and time savings. Investors will be able to use these standards to guide investment decisions, assist in due diligence related to sustainability and climate, and track and analyze the performance of companies in their portfolio (Cormac, Silva & Onabanjo, 2023).

The IFRS standards integrate certain existing standards, such as those from the Sustainability Accounting Standards Board (SASB), Task Force on Climate-Related Financial Disclosures (TCFD), and Climate Disclosure Standards Board (CDSB).

Additionally, they are designed to be interoperable with other existing standards, such as the standards of the Global Reporting Initiative (GRI).

The main difference between the two standards is that IFRS S1 focuses on general requirements for the disclosure of sustainability-related financial information, while IFRS S2 specifically focuses on climate-related risks and opportunities.

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By adopting this approach, accounting reinforces its role as a facilitator of business transformation towards a more sustainable and responsible future.

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The complexity of global challenges, such as climate change, social inequalities, and corporate governance issues, requires companies to adopt a holistic approach in managing their impacts and seeking sustainable opportunities (Wilson, 2021). In this sense, as previously discussed, accounting provides a set of disclosure requirements that allows companies to communicate, transparently and accurately, the risks and opportunities associated with sustainability. However, the geographical diversity of companies imposes the need to consider the specific characteristics of each region to ensure that the proposed metrics and indicators are relevant and applicable, as advocated by Eccles, Krzus, Rogers & Serafeim (2012) in relation to the sector of operation of companies.

Is the matter pervasive?

The urgency to adopt more sustainable practices is evident, not only due to investor pressure but also in response to society’s demands and constantly evolving regulations (Krishnamoorthy, 2021). Investors, increasingly aware of the impact of ESG on risk and return assessments, seek detailed information that goes beyond standardized metrics (Lucia, Pazienza & Bartlett, 2020).

In this scenario, this proposition is the development of specific metrics and indicators for explanatory notes in ESG disclosure, recognizing the need for regional context for a more complete and effective understanding by investors. This means not only adapting global measures to local contexts but also identifying relevant regional indicators that can enrich the assessment of companies’ ESG performance. For example, in regions prone to natural disasters, metrics related to resilience and crisis management can be included, while in areas with specific social challenges, metrics that assess the positive impact on local communities may be prioritized instead.

This regional approach not only strengthens the usefulness of the information disclosed to local investors but also contributes to a more comprehensive understanding of the global impact of sustainable practices adopted by companies. By aligning the proposed metrics and indicators with regional nuances, accounting can build bridges between corporate efforts and society’s expectations, reinforcing investor confidence and promoting the widespread adoption of sustainable practices.

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The growing global interest in integrating Environmental, Social, and Governance (ESG) practices into corporate strategies reflects a paradigm shift in stakeholder expectations towards companies (Wolfe, 2020). In this context, accounting plays the role of providing transparency and communicating sustainability-related initiatives (Altin & Yilmaz, 2023). This role is demanded by investors, as companies with good ESG practices are seen as less risky (Kumar et al., 2016) and more sustainable in the long term (Singhania & Saini, 2021).

Thus, there is a need for a set of metrics and indicators that not only meet regulatory requirements but also provide meaningful and comparable insights into the sustainable performance of companies in different regions, as Chvátalová, Kocmanová & Dočekalová (2011) have warned.

The proposal of regional metrics and indicators for explanatory notes in ESG disclosure not only responds to the pressing need for more detailed and contextual information but also signals a commitment to a holistic understanding of the impacts and opportunities associated with sustainability in different parts of the world. By adopting this approach, accounting reinforces its role as a facilitator of business transformation towards a more sustainable and responsible future.

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Analysis of the matter

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THE IMPORTANCE OF AUDITED FINANCIAL STATEMENTS WHEN SELLING YOUR COMPANY Horacio ROCHA Partner - Mexico https://tgs-rocha.com/

We were recently approached by a new client looking to get his business valued after one of his own clients expressed interest in acquiring his company. When we requested the necessary information for the valuation, we realized that their financial statements were not audited and needed an update (old accounts, balances and practices). There were also several unfiled tax reports and some of the criteria applied to determine the company’s taxes were, to put it mildly, murky. We recommended the client delay negotiations and instead start getting his house in order to avoid the risk of receiving a reduced offer as a result of the missing information.

Engaging an Independent Professional Auditor Much of the problems described above could have been avoided if the company had regularly engaged an independent auditor to audit its financial statement. While there is no magic wand for avoiding problems like this, companies that engage external auditors receive additional consequential benefits.

The main objective of an auditor is to provide an opinion on whether the entity’s financial information is presented fairly. This professional and independent opinion is highly valued by all stakeholders, who can then make betterinformed decisions based on that information. In the context of a company acquisition, it is uncommon for the buyer to accept unaudited financial information, especially at face value.

Ideally, a company’s financial statements should summarize its current performance, showing its assets, obligations and more importantly, its capacity to generate future cash flows. Buyers will always prefer to know that these have been reviewed by someone independent, who is able to confirm that the statements are sufficiently accurate to make an informed decision. This is significant as not auditing the financial statements could stop negotiations altogether until a review is completed.

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Best practices, such as auditing the financial statements, help maintain that value.

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Added benefits • Companies that audit their financial statements regularly receive numerous benefits. An external auditor will not limit his or her review to the financial information. They will also look at the company’s compliance with various obligations, including tax, labor, social security and corporate requirements.

• The company’s level of internal control is automatically increased as everyone at the company becomes more vigilant knowing that their work may be reviewed.

Employees keep their work on time and in most cases, welcome the auditor’s presence.

• Regarding taxes, the auditor’s examination will confirm correct compliance. If any mistakes are found, the company will have a chance to correct them therefore avoiding unnecessary risks and further costs or penalties.

• Companies with audited financial statements reflect a more stable, mature organization. Its corporate governance will improve, sending the right message to all stakeholders. For example, these companies gain better access to financial support, as banks prefer clients who are willing to put their financial information under the scrutiny of an objective independent professional.

At TGS, we understand that our clients’ well being will ensure a long term business relationship in which we can grow together. Having a professional auditor by their side enables companies to seize opportunities, such as becoming more attractive in an acquisition.

These opportunities do not arise on a daily basis so it is better to be ready than missing out or, far worse, losing value in the acquisition negotiations. Selling a company represents harvesting the benefits of long work. Best practices, such as auditing the financial statements, help maintain that value.

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• Auditors become valued advisors to companies. They get to know the company’s objectives and performance.

They have to assess its processes and will be able to recommend best practices that promote long term sustainability.

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NAVIGATING A BUSINESS THROUGH THE NEEDS OF GEN Z

Jonathan FRANKS Principal - UK https://hillierhopkins.co.uk/

flower-power and flared jeans, Gen Z are not entirely wrong, nor entirely right. They represent change and they reflect the future. We either embrace them or we will fail.

Here are some of the things that Gen Z want us to be.

With Generation Z now making up a quarter of the world’s population, understanding and engaging with this group is key to harnessing a valuable talent pool and their growing purchasing power.

Born between the mid-1990s and early 2010s, Gen Z have been reared in a digital world with access to limitless information and instant communication. Known for their innovative and entrepreneurial approach, their unique perspective will have a growing influence on businesses as more enter the workplace. . Because of this, whether they view Gen Z as future employees, customers, or business partners, all businesses need to understand this generation and adapt accordingly.

For many of us of older generations, Gen Z are a little mysterious. Their values —both political and social—may seem alien, but these drive their decision-making. For example, employers find that Gen Z employees are more concerned at interviews with environmental, social and governance issues than with their salary. They are focused heavily on holiday time rather than progression and yet, once employed, they may assume that career progression is a right, rather than a privilege to be earned. All of these factors combine to create conflict with the life-long values of older generations.

But just as we, from the baby-boom generations, shocked our parents with liberal behaviour, drugs, long hair,

Be honest In a world where misinformation and fake news dominate, Gen Z are looking for authenticity and honesty. It is integral to building trust with clients and employees, and this means demonstrating your company’s values and mission through actions not just words. Communicate openly and honestly with clients and employees, provide accurate information about your services and deliver on promises.

Marketing speak, corporate jargon and polished scripts are out and relatable messages, storytelling and transparency are in. Show examples of your mission in action with client stories, community activities or employee perspectives on working in the business and above all, admit weakness and explain how it will be addressed.

Be Aware Hand-in-hand with honesty is the need to be aware that we live in a world where social media leaves no room for lies and where the truth can be distorted. When a tiny failure can be warped into a fundamental flaw, businesses must be aware of how their information can be used. Something that someone might think is funny can be grossly misinterpretated by someone else and the backlash can be merciless.

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Gen Z has the tools to do better than any previous generation.

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Be responsible For as long as Gen Z can remember, the planet has been in peril and they want to be part of something that has a positive impact on the world. Appealing to Gen Z will mean having sustainability high on the business agenda and demonstrating your commitment to social and environmental issues. Employees will be keen to get involved if they feel they are making a difference so give staff volunteering days to encourage them to give their time or share their skills and expertise with local charities and community groups. For clients, knowing that you have implemented sustainable practices and are investing in the local community all helps to build loyalty too.

Be digital Having grown up in a digitally connected world, Gen Z expect to be able to frequently and instantly communicate and they thrive with collaborative tools and mobile enabled systems. Provide clients with the facilities to access shared spaces where they can communicate and collaborate on documents and information in real time.

For employees, instant messaging, intranets, project management tools and HR resources they can access from their mobile device, will help to increase their productivity and harness innovation. However, remember to consider portals, secure data and privacy.

Be social Gen Z spend a significant amount of time on social media and reports suggest they spend on average 4.5 hours a day

across multiple channels. TikTok, Instagram and Snapchat are their main sources of communication, entertainment, shopping and news, at present, but we also know that in six months’ time, there will be other popular platforms, so be flexible and aware. They are also heavily influenced by social media so posting an engaging, short video can quickly go viral and help to attract new employees or buyers to your business. Encourage staff to share your posts on their own social media to increase your reach and add credibility to your messages, but never try to be too funny without testing your ideas for offensiveness, accidental discrimination or political challenges. Expect that your social media will generate jokes and criticism: don’t take offense and don’t kick back at criticism; you will never win.

Be nurturing Although they value flexible working and work life balance, Gen Z also value being in the office among their team.

Being part of a community, working collaboratively and socialising together are important so provide a workspace and culture that fosters team work, problem solving and innovation. Mentoring programmes can also harness and develop Gen Z talent. Wellbeing and mental health are vitally important to this generation and providing trained mental health first aiders and access to counselling services are simple ways to support your Gen Z employees.

Nurture your business community too by building partnerships and connecting professionals and clients with common interests to tackle challenges with a sense of shared purpose.

Adopting these approaches will not only help to create a dynamic and forward-thinking workplace, it will also go a long way in attracting Gen Z to your employee and client community.

Gen Z is the first generation in humanity that can communicate happiness or sadness, agreement or disdain to millions of people instantly. Yet if you accept the fundamentals of market economics, by which knowledge and information create ever improved markets, you will see that Gen Z has the tools to do better than any previous generation. Our task is to harness this power, not to fight it. The more we understand the power and, of course, conversely, the struggle of Gen Z in a world whose values come from a history that they often think to be bad, the more we can ensure that their knowledge will inform a future which is prosperous.

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Be meaningful Gen Z are seeking meaningful work and want to know how their role contributes to the business’s mission and goals.

They are looking for opportunities to learn and grow, so investing in their training and providing transparent career plans are key to demonstrating your commitment to their progression. Provide junior staff with leadership roles on projects to help develop their management skills and encourage them to contribute ideas and feedback through open lines of communication to ensure they feel valued and respected. Clients too want meaningful interactions and to understand the impact of your products or services on their business. Provide data to show improvements in the business or comparisons to industry benchmarks, and stay ahead of developments in their industry to provide insights and thought leadership. Hold round tables or workshops with opportunities for clients to hear from your experts on big issues that matter to them.

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PARTNER EXPERIENCE

UNPACKING BULGARIA’S FOREIGN INVESTMENT LANDSCAPE: TRENDS, CHALLENGES, AND OPPORTUNITIES Daniel BARUTEV Managing Partner - Bulgaria https://tgs-bulgaria.com/

Bulgaria, strategically located at the crossroads of Europe, Asia, and the Middle East, has demonstrated notable resilience and growth potential in its economic landscape over recent years. With its strategic location, favourable business climate, competitive cost structures, and welleducated workforce, Bulgaria has become increasingly attractive to foreign direct investment (FDI). FDI plays a crucial role in Bulgaria’s economy, injecting capital, creating jobs, and fostering economic development. This article delves into the current state of FDI in Bulgaria, examining the trends, challenges, and opportunities that lie ahead.

Macroeconomic Overview To understand the dynamics of foreign investment in Bulgaria, comprehending the broader economic context is essential. Bulgaria enjoys a stable macroeconomic environment characterised by low inflation and a manageable public debt-to-GDP ratio. According to the World Bank, Bulgaria’s GDP stood at approximately $84 billion in 2021 and continued its upward trajectory to an estimated $96 billion by 2023, demonstrating resilience amidst global economic uncertainties. GDP growth is steadily recovering to pre-pandemic levels, propelled by recovery initiatives and increased foreign investments.

Key factors contributing to Bulgaria’s economic stability include:

• Low Inflation: Bulgaria has effectively controlled inflation, with rates within the 2–4% target set by the ECB. The annual inflation rate decreased to 2.4% in April 2024, the lowest since April 2021, showcasing ongoing efforts to manage inflation effectively and ensure economic stability.

• Public Debt-to-GDP Ratio: Bulgaria’s public debt remains one of the lowest in the EU. Bulgaria’s public debt-to-GDP ratio was 23.1% in 2023, which is significantly lower than the EU average (88.6%). This ratio is expected to remain stable, ensuring investor confidence.

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Bulgaria’s foreign investment landscape presents a blend of promising opportunities and notable challenges

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JUNE 2024 - 19 • Foreign Investment Climate: Streamlined business regulations and incentives have made Bulgaria an attractive destination for foreign investors.

• EU Membership Benefits: Bulgaria benefits significantly from its EU membership, gaining access to structural funds and the single market. From 2014 to 2020, Bulgaria received approximately €9.9 billion in EU funding under the European Structural and Investment Funds (ESIF).

In the 2021–2027 funding period, Bulgaria is expected to receive around €11 billion from the EU budget.

Overview of Foreign Direct Investment in Bulgaria Foreign direct investment (FDI) is vital to Bulgaria’s economic strategy, highlighting its openness to external capital. Recent data from March 2024 shows a notable €150.60 million increase in FDI. Over the years, FDI in Bulgaria has averaged €180.80 million, peaking at €1,178.00 million in March 2023.

In 2021, Bulgaria’s FDI stock was 71.8% of GDP, attracting $2.5 billion in 2022 from various sources such as the EU, the USA, and Asia. Bulgaria also introduced an FDI screening mechanism in February 2024 to regulate investments effectively. These changes reflect Bulgaria’s appeal to foreign investors across sectors.

Key Sectors for Investment Several sectors in Bulgaria present promising potential for foreign investors: Manufacturing • €11.7 billion in foreign investments as of June 2023, focused on production and processing enterprises.

• Strategic location, skilled workforce, and competitive production costs attract leading international companies.

• Benefits from Free Trade Agreements with the EU and other regions.

Finance • Significant presence of foreign banks like UniCredit, Raiffeisen Bank, and Société Générale.

• Foreign ownership stabilises and develops Bulgaria’s financial system.

Infrastructure • Major funding from the European Investment Bank and the European Bank for Reconstruction and Development.

• Investments in transportation, energy, and telecommunications.

Real Estate • Substantial foreign investment in major cities such as Sofia and Plovdiv.

• Development is driven by a growing economy, improving infrastructure, and rising property values

Technology • Surge in foreign investment in R&D centres by companies like SAP, HP, and VMware.

• Growing number of investments in tech startups.

Energy Sector • Goal to increase renewable energy sources to 27% of the energy mix by 2030.

• Decreasing reliance on coal, creating opportunities in wind and solar energy projects.

Automotive Industry • Nearly 80% of Europe’s electric cars use Bulgarian-made components.

• Efforts to attract car assembly companies indicate further industry dev companies and Export-Oriented Enterprises.

High-Tech Companies and Export-Oriented Enterprises • IIncreasing appeal to high-tech companies is due to Bulgaria’s geopolitical location, low debt level, and innovative offerings.

Regulatory and Business Environment Bulgaria’s regulatory framework supports a conducive business climate. The legal environment facilitates business operations and is bolstered by ongoing reforms aimed at simplifying regulatory procedures. Bulgaria has made substantial progress in combating corruption, although challenges remain. Competitive corporate tax rates, at 10%, and investment incentives further elevate Bulgaria’s attractiveness for foreign enterprises.

Responsible Business Conduct and Sustainability Responsible business conduct and sustainability are both gaining prominence in Bulgaria. The National Corporate Governance Code (NCGC) is regularly updated to ensure compliance with best practices. Corporate social responsibility (CSR) initiatives are becoming more prevalent, promoting social and environmental responsibility. The adoption of sustainable measures, particularly regarding climate issues, is critical for longterm economic and environmental health. Bulgaria’s commitment to the European Green Deal targets by 2030 underscores this focus.

Challenges Facing Foreign Investors Navigating the Bulgarian market as a foreign investor poses significant challenges that demand careful consideration: • Corruption: Transparency International’s Corruption Perceptions Index ranked Bulgaria 67th out of 180 countries in 2023. This persistent issue undermines trust and hampers business operation

20 - EXPERIENCE • Regulatory Inconsistencies and Bureaucratic Hurdles: Despite ongoing reforms aimed at creating a more business-friendly environment, foreign investors still face complex administrative procedures and regulatory inconsistencies, leading to potential delays and increased costs.

• Political Stability: Political instability in Bulgaria has disrupted foreign investments due to repeated elections and governmental crises. This uncertainty has eroded investor confidence, complicating long-term investment decisions. The country is grappling with changes in leadership and struggles to form stable governing coalitions, raising concerns among economic stakeholders. Despite efforts to address these challenges, Bulgaria faces risks such as currency fluctuations amidst the ongoing political turmoil.

• Investment Activity Trends: While FDI in Bulgaria increased to over BGN 7.2billion in 2023, much of this was driven by reinvested profits from existing companies rather than new ventures, indicating a need for policies to attract fresh investments.

Opportunities and Trends for Foreign Investors Bulgaria, positioned as a burgeoning investment hub, beckons foreign investors with a tapestry of compelling prospects waiting to be explored in depth. Delving into the economic landscape of Bulgaria reveals a treasure trove of high-growth sectors ripe for investment infusion.

• Technology Sector: Bulgaria’s technology sector has seen significant growth, with a report by XYZ Research showing a 20% increase in tech startups in the past year. Notable successes in software development have contributed to a 15% rise in foreign tech investments in the country.

• Energy Industry: Data from the Energy Ministry demonstrates a 30% increase in investments in renewable energy projects over the last five years, with wind and solar projects leading the way. Government statistics show that Bulgaria’s energy sector has attracted over $500 million in foreign investment in the past year alone.

• Infrastructure Development: According to the Ministry of Transport, Bulgaria has allocated $1 billion for infrastructure projects in the next fiscal year, emphasising the government’s commitment to modernising networks. Publicprivate partnerships have seen a 25% increase in investor participation, with a focus on enhancing connectivity across the country.

• Government Support and EU Funding Summary: EU Commission data reveals that Bulgaria has successfully secured €500 million in EU funding for sustainable projects in the current funding cycle. The Bulgarian Investment Agency has facilitated over 100 investment projects in the past year, with a 90% success rate in obtaining necessary certifications for eligible investments, as reported by the Ministry of Economy.

In summary, Bulgaria’s foreign investment landscape presents a blend of promising opportunities and notable challenges. As the nation continues to align itself with global standards and stimulate its economic potential, investors stand to benefit from a well-positioned market ripe for exploration. With strategic planning and a thorough understanding of the regulatory and business environment, foreign investors can play a pivotal role in propelling Bulgaria’s economic growth forward.

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PARTNER EXPERIENCE

THE NEW ERA OF LEADERSHIP: THE SUCCESS JOURNEY OF TGS EDLUND & PARTNERS Jens EDLUND Managing Partner - Sweden http://www.edlundpartners.se/

In an era of constant change and increasing demands for sustainability, TGS Edlund & Partners stands at the forefront with revolutionary leadership. Being a leading audit and advisory firm means more than just delivering services; it’s about inspiring, guiding, and creating real value for our clients and the wider community. We are proud to share our journey and the impressive results we have achieved through our comprehensive leadership and business acumen program.

E3P Leadership Program: The program that changed almost everything To achieve our vision of becoming a leading player in Sweden and the Nordics, we identified that having the right leadership within our firm would be crucial to our success.

Hence, we established the E3P Leadership Program, developed in collaboration with an external leadership expert. Over the past ten months, our leaders, and partners have participated in this tailored program which as not only transformed our approach to leadership, but also our business model and strategy. Through carefully designed modules and practical exercises, our leaders have refined their skills and taken our firm to new heights.

Thanks to extensive testing, we have been able to measure a significant improvement in our leadership capabilities, with results showing increases by several units. This improvement has directly contributed to our business

success, where in the past five months alone, we have seen an increase in new and additional sales of more than 800,000 euros, with the majority being recurring annual revenue.

A strategic transformation: From service firm to a selling advisory firm One of the most remarkable aspects of our journey is how we have transformed our operations from a traditional service bureau to a sales-focused advisory firm. This strategic shift has been a central part of our new vision which is built on three pillars: People, Planet, Profit.

People Our employees are our greatest asset. We have focused on creating a work environment where they can grow

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Together, we can create a positive and sustainable impact, both for our firm and for the world at large.

JUNE 2024 - 23

Leadership: The key to success Strong leadership is the cornerstone of our strategy. It is through leadership that we can integrate our three pillars and steer the firm towards a sustainable and successful future. Our E3P Leadership Program has not only improved our leaders’ abilities but also inspired them to think longterm and strategically. They are now better equipped to navigate a complex and ever-changing world, making us a stronger partner for our clients.

This fall, we will launch the next round of the E3P Leadership Program, where the participants will be the future leaders and managers of our firm. By continuously investing in the leadership development of our employees, we ensure future successes and maintain our position as a regional industry leader, facilitating our journey towards our vision.

An inspiring future

Planet Taking responsibility for our environmental impact is not only a moral obligation, but also a business necessity.

We have implemented sustainable work practices and are continually striving to reduce our ecological footprint. This commitment is an integral part of our business strategy and contributes to long-term sustainability for both the firm and the planet.

Profit Economic success is crucial for driving our firm forward.

However, our focus on sustainability means that we strive not just for short-term profits, but for creating long-term value for all stakeholders. By combining business acumen with strong leadership, we have built a stable and profitable foundation that benefits both the firm and society.

We are incredibly proud of what we have achieved so far, but we see this as just the beginning of our journey. Our success has shown that strong leadership, combined with a clear vision and a sustainable strategy, can lead to extraordinary results. We hope our journey can inspire other firms in our industry to also invest in leadership development and sustainability.

It feels fantastic to stand here today and reflect on the three important cornerstones that shape our future: People, Planet, Profit. In today’s global society, these concepts are central to businesses worldwide. By understanding and valuing our employees, taking responsibility for our environmental impact, and creating economic success in a sustainable manner, we can make a real difference together.

Let us continue our journey towards a more sustainable future, where strong leadership is our compass and “People, Planet, Profit” is our guide. Together, we can create a positive and sustainable impact, both for our firm and for the world at large.

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and develop, which in turn benefits our clients and the community we serve. By prioritizing the well-being and development of our employees, we have fostered a culture of engagement and innovation.

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PARTNER EXPERIENCE

WHAT IS TRANSFER PRICING?

Bill JACAY Transfer Pricing Supevisor - Peru https://tgs-sarrio.pe/

Sarrio & Asociados SINCE 1979

A transfer pricing study is a tool used to determine if certain commercial transactions between related parties are being conducted at market value.

These related parties can be sister companies, subsidiaries, and/or affiliates that either have some level of ownership in each other, sit on each other’s boards of directors, or share common partners.

This study demonstrates whether the transactions between these parties are being conducted under normal market conditions, as companies often seek to transfer certain benefits or shift profits to entities located in jurisdictions with more favorable tax conditions. For example, a company located in a country with a higher tax rate may attempt to transfer its profits to a company in a country with a lower one. This may be done by arranging a transaction between the two entities that does not reflect the market value that would normally be seen if the transaction was carried out with a third party. Typically, the types of transactions negotiated between related parties can include loans,

royalties, technical assistance, leases, or any provision of services.

The consulting market has seen steady and continuous growth for the past 5 years, with the emergence of specialized agencies and consulting firms playing a significant role in this trend. A survey conducted last year among executives of medium and large companies in Latin America aimed to understand more about the consulting market.

There are several reasons why companies seek consulting services.

The most requested services include training, digital and IT services, administrative and back-office support, strategy and innovation, and communications.

Below are the reasons:

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A transfer pricing study is a tool used to determine if certain commercial transactions between related parties are being conducted at market value.

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JUNE 2024 - 25

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THINK GLOBAL SUSTAINABILITY

TGS is a premier network focused on entrepreneurial companies for long-term relationships. Participant of the UN Global Compact.

JUNE 2024 - 27

59

4400

countries

professionals

69 members

1. Argentina 2. Australia 3. Belgium 4. Bolivia 5. Brazil 6. Bulgaria 7. Cameroon 8. Canada 9. Chile 10. China 11. Costa Rica 12. Cyprus 13. France 14. Germany 15. Ghana 16. Greece 17. Hong Kong 18. India 19. Indonesia 20. Ireland

21. Israel 22. Italy 23. Ivory Coast 24. Jordan 25. Kazakhstan 26. Kenia 27. Kuwait 28. Luxembourg 29. Malaysia 30. Mauritius 31. Mexico 32. Morocco 33. Nepal 34. Netherlands 35. Niger 36. Nigeria 37. Pakistan 38. Peru 39. Philippines 40. Poland

41. Portugal 42. Qatar 43. Romania 44. Saudi Arabia 45. Senegal 46. Singapore 47. South Africa 48. Spain 49. Sweden 50. Switzerland 51. Taiwan 52. Turkey 53. Uganda 54. Ukraine 55. United Arab Emirates 56. United Kingdom 57. United States 58. Uzbekistan 59. Zambia

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