EXPERIENCE, the TGS magazine - 3 edition

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Magazine

EXPERIENCE

issuu.com/tgs-sarrio/experience-magazine

INTERVIEWS Ethical Audits PARTNER EXPERIENCE Business around the world NETWORK EXPERIENCE Business Takeaways from TGS Cape Town Conferenc

THINK GLOBAL SUSTAINABILITY

3 Edition / September 2023

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 Marcela Vargas CSR & Marketing Project Manager marcelavargas@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

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© 2023 TGS All rights reserved

EDITORIAL ETHICAL AUDITS: AN ASSET FOR YOUR BUSINESS

Silvia LÉTANG Vice-President Member Engagement TGS Network

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ntroducing our latest edition of Experience Magazine, dedicated to “Ethics in Auditing,” a topic intricately tied to Sustainable Development Goal 16 (SDG 16). In a world marked by complex financial landscapes and rapid business evolution, ethical considerations in auditing are paramount.

As auditors, our role is to safeguard financial transparency and integrity, underpinned by the highest ethical standards. This commitment isn’t just about compliance; it’s the bedrock of our profession’s credibility and long-term sustainability, aligning seamlessly with SDG 16’s aim for peace, justice, and strong institutions.

We have gathered contributions from leading TGS experts, seasoned auditors, and thought leaders in the field, offering insightful articles, expert perspectives, and real-world case studies to address key themes: • The Ethical Framework: Exploring core principles and codes of conduct that guide ethical auditing.

• Ethical Challenges: Examining daily quandaries like conflicts of interest and navigating gray areas.

• Whistleblowing and Accountability: Discussing the importance of whistleblower protections and mechanisms.

• Technology and Ethics: Investigating how emerging tech like AI and blockchain impact auditing ethics.

• Global Perspectives: Insights into how ethical auditing can be an asset to your sustainable business.

Join us on this journey to uncover the nuanced world of ethics in auditing, and support SDG 16’s pursuit of a just and peaceful world.

Thank you for your continued support of Experience Magazine.

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CONTENT INTERVIEWS

Ethical Audits We interviewed Tony Sjölund, head of International Desk of the TGS member firm in Sweden, about Ethical Audits.

He is an authorized public accountant and partner at TGS Edlund & Partners, an audit and accounting firm in Sweden. He mainly work with auditing and advisory for small and medium-sized founder-led companies and he is also responsible for the international department.

INTERVIEWS

Ethical Audits We interviewed Tan Tian Wooi, managing partner of the TGS member firm in Malaysia, about Ethical Audits.

Tan Tian Wooi is founder and Managing Partner of TGS TW PLT. He is a Chartered Accountant of the Malaysian Institute of Accountants and member of the Malaysian Institute of Certified Public Accountants. Both are members of the International Federation of Accountants (IFAC).

PARTNER EXPERIENCE

Business Governance Practices ensure Business Sustainability Regardless of regional economic development, the level of education of its inhabitants, or administrative improvement, incidences of misconduct, internal fraud, and corruption continue to tarnish the reputations of large firms and smaller organizations. The latter usually face less scrutiny as they get less media coverage.

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PARTNER EXPERIENCE

Internal Audit: the foundation to managing Risk As the COVID pandemic steadily evolves, new challenges continue to emerge, forming a brandnew, hybrid world. Because internal audit is also transforming, it is rapidly becoming a strategic tool for developing a new risk matrix that addresses the requirements of each company while redirecting its operational efforts. The internal auditor is transforming into a business consultant aiding in addressing uncertainty.

PARTNER EXPERIENCE

Ethics in the digital age: adapting auditing practices for Technological Challenges In the rapidly evolving landscape of modern business and technology, auditors face unique ethical challenges stemming from the integration of digital tools, data analytics, and automation into financial auditing processes. Ensuring the integrity, objectivity, and independence of audits has never been as much difficult for auditors who navigate these technological advancements.

PARTNER EXPERIENCE

A new era for whistleblowing, but why is it increasingly important?

There is a saying “What you don’t know won’t hurt you”.

In the game of risk management, what you don’t know is your greatest vulnerability.

Whistleblowing is growing in importance as a corporate governance mechanism, while it is increasingly recognized as a key internal control mechanism.

Whistleblowing is a term used to describe an act whereby wrongdoing is exposed.

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NETWORK EXPERIENCE

TGS African Managing Partners Conference Managing partners from TGS African member firms met in Cape Town, South Africa for a two-day practice development conference TGS African Managing Partner Conference participants created a business and network development plan for the development of TGS Africa. The first arm of the ambitious two-part plan is to have at least one TGS member firm in each African country in the next 7 years. This will take TGS presence in Africa from seven to forty-seven member firms.

About TGS TGS is a dynamic global business network of independent firms providing audit, tax, corporate legal services, advisory and outsourcing. With more than 4,200 professionals in more than 55 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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ETHICAL AUDITS

Photo by Lance Audit

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Interview with: Tony SJÖLUND Head of International Desk https://edlundpartners.se/en/

What can you tell us about yourself, about your firm and about your team?

My name is Tony Sjölund. I am an authorized public accountant and partner at TGS Edlund & Partners, an audit and accounting firm in Sweden. I mainly work with auditing and advisory for small and medium-sized founderled companies and I am also responsible for our international department. I find great joy in working with clients in the SME segment as it gives an opportunity to work closely with the clients and entrepreneurs on issues that are important both to them as owners and to their businesses.

TGS Edlund & Partners was founded 10 years ago with the vision of developing and renewing the audit and advisory industry for small and medium-sized companies in Sweden. Our business consists of audit, tax, advisory, accounting and payroll services and the company has about 45 employees. We have a strong focus on advisory services and specialize in ownership changes, restructuring, capital issues and financial solutions. We are often advisors to sellers or buyers in ownership changes and transactions.

What kind of Audit services are offered by your firm?

We mainly perform standard financial statutory audits and other types of audit assignments, for example reviews of interim financial challenging task.information or sustainability reports, reviews according to special agreements or opinions that are needed according to the Swedish Companies Act, such as e.g. in the case of share issues, mergers, etc. We have the ambition that our audits and review assignments should provide something more to the clients besides the audit report or opinion. Since we get an insight into the company’s operations we can highlight risks and opportunities for improvement that we recognize in our reviews.

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However, ethical issues are often touched upon in our financial audits and not least in the advisory services that we deliver. There is also a clear connection I think between ethics and sustainability matters that are increasingly important for our clients.

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What does ethical auditing mean to you and how does it apply to your firm?

I think ethics is fundamental in the profession since the services we deliver are based on trust in the industry and in us as auditors and accountants. Integrity, objectivity, confidentiality etc. are parts of the professional practice and are also contained in the regulations and guidelines that we as auditors have to follow. It is also important for us that our clients do not act in ways that could be seen as unethical since that could lead to higher risks in our assignments, and also could risk affecting our brand.

Currently we do not have ethical audits as a specific service in the way that we, for example, review how well a company complies with their ethical guidelines. However, ethical issues are often touched upon in our financial audits and not least in the advisory services that we deliver. There is also a clear connection I think between ethics and sustainability matters that are increasingly important for our clients.

Could you describe the importance of ethical values to your firm? How would you assess them?

That the company and our employees have basic ethical values is very important to us and a bit of a hygiene factor. Partly because it is directly linked to the trust that our customers, potential customers and potential employees have in us, but it’s also an important part of our corporate culture and our brand. We want our employees to be proud to work at TGS Edlund & Partners.

What benefits does it bring to your business to focus the audit towards ethics?

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Minimizing risk in the audit assignments is one part, we don´t want clients that for example operate in industries where risks for e.g. money laundering are higher. Another part is what I just mentioned, ethical values is an important part of our corporate culture and our brand.

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ETHICAL

AUDITS

Photo by TGS-TW

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Interview with: Tan Tian Wooi Managing Partner https://tgs-tw.com/

What can you tell us about yourself, about the Chamber and about your team?

My name is Tan Tian Wooi, the founder and Managing Partner of TGS TW PLT, Malaysia. I am a Chartered Accountant of the Malaysian Institute of Accountants (“MIA”) and member of the Malaysian Institute of Certified Public Accountants (“MICPA”). Both MIA and MICPA are members of the International Federation of Accountants (“IFAC”).

I have over 30 years of extensive experience in current practice, providing audit, investigation, due diligence, initial public offering exercises, merger and acquisition transactions, compliance, and business advisory services for public listed and private companies, banks, government agencies, trusts, societies, and multinational companies across various industries.

TGS TW PLT was established in 2019 and has expanded rapidly becoming one of the mid-sized accounting firms, with three offices located in Kuala Lumpur, Penang and Johor, which are the major economic regions in Malaysia. We have accomplished a few key milestones since establishment, including being appointed as the external auditor by 24 Malaysian Public Listed Companies.

We have a well-qualified and experienced team of close to 110 staff, led by 6 audit partners with more than 15 years audit experience, including a Technical and Compliance Department led by a technical partner with more than 20 years of experience in financial reporting and auditing. Our team’s strength lies in team spirit, experience, and synchronicity, enabling us to adapt quickly to clients’ needs to deliver timely, high-quality deliverables. Additionally, our team is trained to conduct paperless audits with audit methodology enhanced through CCH ProSystem and fully equipped with up-to-date knowledge of accounting, tax changes and developments.

What kind of audit services does your firm offer?

We offer a full range of services including assurance and audit, and advisory services as below: • Statutory audit • Initial public offering • Financial due diligence • Internal audit • Information security audit • Fraud investigation • Merger and acquisition services • Special purpose audit • Inventory and asset audit • Certifications services • Dispute resolutions services In addition to the aforementioned assurance and audit services, we also offer a one-stop-shop service for accounting, tax compliance and business advisory services to both international and domestic organisations across all markets.

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Ethics are utmost important because they promote accuracy, openness, responsibility, and professionalism.

The audit profession demands a high level of ethical behaviors. As auditors, our primary responsibility is to form and express an audit opinion on the financial statements and report our opinion to the shareholders whether the financial statements are in true and fair view. The public places trust in auditors to proficiently fulfill our responsibilities and we must balance competing interests to perform our role, as such, we are required to apply ethical decision making.

Therefore, ethical behavior serves as the foundation of effective auditing to ensure the financial statements are free from material misstatements and faithfully represent the financial performance and position of the companies. Auditors have to put ethics first in order to build trust with the companies’ stakeholders, to avoid financial losses, and be successful in the long run.

Could you describe the importance of ethical values to your firm? How would you assess them?

In Malaysia, we have to comply with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants

(“MIA By-Laws”), that is equivalent to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (“IESBA Code”). For enforcement of these ethical standards, the Malaysian Audit Oversight Board (“AOB”) (equivalent to the PCAOB) will conduct inspection and monitoring programs on auditors of the public interest entities in Malaysia, such as us, to ensure the auditors are complied with auditing and ethical standards.

To meet the above requirements, the Firm has established a quality management system together with a set of policies and procedures, and handbooks in accordance with the professional and ethical standards, to ensure all partners and staff understand the importance of these requirements and are able to comply with. Briefing and training are regularly conducted as a reminder to everyone on the key requirements, as well as keeping them aware of the latest changes. We also carried out internal audit on our policies and procedures to determine whether they are operating effectively, and able to detect any unacceptable behaviors or violation of the ethical standards.

What benefits does it bring to your business to focus the audit towards ethics?

As ethical values are an integral part of our current practice, we recognized that quality of services / deliverables and commitment to ethical standards is essential to our entire operation i.e. setting of strategy, operating activities and business processes. The pressure to perform well has intensified in a competitive environment and ethical issues such as those involving Enron, Worldcom and etc. have eroded public confidence in the auditing profession.

Therefore, our quality management system is meant to establish and cultivate a culture that recognizes the relevance of ethical behaviors in performing our work and is able to reinforce this commitment throughout the Firm. We believe, with this effort, the Firm is capable of providing higher quality services / deliverables for clients, thereby earning the stakeholders’ confidence.

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Ethics promote accuracy, openness, responsibility, and professionalism.

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Photo by TGS-TW

What does ethical auditing mean to you and how does it apply to your firm?

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PARTNER EXPERIENCE

BUSINESS GOVERNANCE PRACTICES ENSURE BUSINESS SUSTAINABILITY Gary GARITA Control de Calidad y Planificación Estratégica www.tgs-global.com

COSTA RICA E&B Auditores Regardless of regional economic development, the level of education of its inhabitants, or administrative improvement, incidences of misconduct, internal fraud, and corruption continue to tarnish the reputations of large firms and smaller organizations. The latter usually face less scrutiny as they get less media coverage. It is sufficient to view a few episodes of Netflix’s “Dirty Money” or examine the most recent 2023 affectations on large North American and European institutions to find the same stories being retold, with striykingly similar causes and risk manifestations experts had foreseen and predicted.

The growing, unstoppable incorporation of information technologies to productive processes, the big data revolution, and, more recently, the “explosion” of selflearning systems and responses based on artificial intelligence never cease to amaze the world; they will undoubtedly kickstart transformation opportunities in the coming years. But novelties will also bring new, parallel risks to managing those new technologies; an early sign of those challenges is the startling rise of cybercrime.

Thus, talking about corporate governance is a timely concept, considering that it is still valid despite the significant last-century transformations the field of administration has experienced and the goals it pursues.

The internationally respected Basel Committee defines corporate governance as the underlying relationships

between a company’s management, its board, shareholders, and other stakeholders that establish the organization’s structural goals and the methods used to achieve and develop those goals.

Corporate governance practices are not exclusive to the private corporate world. The Organization for Economic Cooperation and Development (OECD) and the G20 Group have discussed the importance of good corporate governance practices in organizations that manage public funds through the application of macro principles that require additional legislation in the affiliated countries; one would not assume that corporate governance practices only apply to the private sector since their introduction in the 20th Century.

According to OECD, the purpose of corporate governance is to facilitate the necessary trust, transparency, and accountability required to foster long-term investment, financial stability, and business ethics. Governance contributes to more substantial growth and the evolution of inclusive societies.

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Corporate governance persuades organizations to respect human values such as transparency (...).

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There are diverse paradigms to effective corporate governance that share fundamental traits applicable to various governance models.

What should an organization anticipate following the implementation of corporate governance practices?

In private companies, governance practices are predominantly voluntary rather than mandated; nevertheless, a common misconception has led many to think that only regulated entities or state organizations are bound by law to implement them.

Such practices are no longer required to provide growth and sustainability opportunities for an organization. A three-pillar figure clearly exemplifies governance practices: each pillar represents internal structure, risk management, and compliance management. The three facets find their foundation on each company’s unique circumstances, a financial peak level is no longer a requirement to implement a governance practices.

The structural definition of the organization must be understood in its entire context, including its current standing and the envisioned type of organization envisioned. Board membership is crucial, particularly in family-owned organizations where succession plans must be agreed upon to ensure permanent viability.

This pillar also considers the organization’s internal structure, complexity, the formation of related parties, and the identification of all stakeholders. A clear structure acknowledges the board’s duties, ethical conduct, business strategies, and the value offered to society.

Companies must also address all aspects of risk management. Risk management activities coordinate, direct, and regulate an organization considering the

uncertainties hindering its objectives. A modern company that fails to proactively identify and quantify its risks is destined to decline.

Risk will be permanently present in every organization operation; stakeholders must strive to eliminate every risk factor. Corporate governance elements such as human capital, internal processes, information technologies, and external events must be continually monitored and analyzed by corporate authorities.

The third pillar supports compliance with local laws, regulations, treaties, and international laws related to the business operation that may impact the organization operations.

Following the principle that no one can disregard the law, organizations must remember that regulations are to be observed. Constant changes in the regulation of supervised entities, taxing and economic agreements between countries, reconfiguring economy blocs, and shifting restrictions on money laundering could substantially impact the organization’s future existence.

Senior and top management must admit that unchecked, rampant organizational growth is as hazardous as not billing at all. Proper organizational development can only be attained in environments with tight control and management. The concept “the greater the revenue growth, the more significant the control investment should be” is a synonym of success.

Economies change rapidly, customer loyalty has changed significantly, and only a few brands have reached a global establishment status, those successful firms have left many competitors behind in a dust cloud. The successful corporate governance principles and practices companies have embraced have helped them succeed by lifting the limitations that may have hindered their organizational transformation. Corporate governance persuades organizations to respect human values such as transparency, truth, constant communication, ethical practices, and respect for natural resources, to ensure life in society and sustain balanced economies.

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The Basel Committee focuses primarily on bank governance, but its recommendations can be applied to private equity firms. The committee has issued thirteen principles ranging from board duties (the highest body) to supervisors’ roles, including private auditors and governments.

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PARTNER EXPERIENCE

INTERNAL AUDIT: THE FOUNDATION TO MANAGING RISK Gissela PACHECO Audit & Assurance Senior Manager www. tgs-sarrio.pe

Sarrio & Asociados SINCE 1979

Where to begin?

When should the internal auditor enter the game?

As the COVID pandemic steadily evolves, new challenges continue to emerge, forming a brand-new, hybrid world.

Because internal audit is also transforming, it is rapidly becoming a strategic tool for developing a new risk matrix that addresses the requirements of each company while redirecting its operational efforts. The internal auditor is transforming into a business consultant aiding in addressing uncertainty.

The internal auditor must be involved from the beginning of the automation decision-making process. Ideally, his role will include advisory and assurance components to assist the organization in achieving the desired performance, followed by implementation assurance services.

Simultaneously, the new environment will set the tone for the auditing plan and risk assessment of new capabilities in key risk domains such as finances, operations, regulations, technology, and strategy. The program will ultimately establish priorities based on data regarding impact and vulnerability.

Unsure of where to begin?

A starting point is the realization that the internal audit function must have an operational orientation; it must integrate harmoniously with corporate governance and provide consistent, transparent information.

One of the first challenges for novel internal audit is automation. COVID-19 acted as a trend accelerator, speeding up digitalization, telecommuting, and reliance on technology. Those three factors driving the transformation are not mere trends. As technology continues to develop, automation will persist. Software, hardware, vulnerabilities, and opportunities are already evasive targets. Unless internal auditing takes place, nobody can identify the business value of automation.

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Making internal auditing more agile can help firms anticipate and respond more effectively to changing business risks,.

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Where are the most significant hazards?

Risk in Focus 2023, a report compiled by 15 Internal Audit Institutes in Europe, including Spain, provides an overview of the primary risks facing internal audits over the next three years. A growing number of intricately intertwined highimpact hazards pose a threat to businesses.

The report offers a list of what interviewed internal auditors perceive as top liabilities: • Cybersecurity and data protection: at the top of the list because of the rise in cyberattacks.

• Regulatory change and compliance: sustainability-related regulatory issues trigger this risk.

• igitalization and emerging technologies urge evolving platforms to be monitored by vigilant businesses.

• Diversity and talent management: the pandemic has exacerbated the shortage of qualified workforce and altered work practices.

• Business continuity and crisis response: companies face this risk by capitalizing on lessons learned.

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Making internal auditing more agile can help firms anticipate and respond more effectively to changing business risks, regardless of the organization’s type or state. Internal audit adds value and provides timely responses to strategy risks and emergent, unusual eventualities.

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PARTNER EXPERIENCE

ETHICS IN THE DIGITAL AGE: ADAPTING AUDITING PRACTICES FOR TECHNOLOGICAL CHALLENGES Nizar AL-SHARIF Independent consultant to TGS www. tgs-global.com

In the rapidly evolving landscape of modern business and technology, auditors face unique ethical challenges stemming from the integration of digital tools, data analytics, and automation into financial auditing processes.

Ensuring the integrity, objectivity, and independence of audits has never been as much difficult for auditors who navigate these technological advancements.

TGS will encounter upcoming challenges related to staying updated and addressing technology challenges effectively.

To ensure not falling behind, TGS needs to focus on two key aspects: staying informed about these developments and actively participating in continuous professional development. Additionally, regulatory guidance and oversight, supported by adaptable standards that keep pace with technological advancements, are crucial, efforts have been made to integrate the code of ethics to firms’ values and quality manuals.

Regulatory bodies, including the PCAOB and the IAASB, are taking proactive steps by introducing oversight programs to anticipate and respond to the risks associated with emerging technologies. In practical terms, major firms like the Big4 are already deeply involved in integrating AI-based risk assessment techniques. They are using automated systems to review all transactions for anomalies, check ledgers for discrepancies, identify misstatements, and detect fraudulent information. Furthermore, they are exploring innovative tools such as drones for conducting inventory examinations.

Auditors should take in consideration many challenges: 1. Data Privacy and Security: with the increased reliance on digital data, auditors must address ethical concerns related to the privacy and security of sensitive financial information. Safeguarding data against breaches and unauthorized access is paramount.

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As auditors adopt and integrate technological advancements into their practice, upholding ethical standards takes on heightened significance as it directly impacts the preservation of trust and credibility.

SEPTEMBER 2023 - 15 2. Quality and Accuracy of Automated Systems: as auditors rely on automated systems and AI-driven tools, ethical questions arise regarding the accuracy and reliability of these technologies. Ensuring that algorithms are fair, transparent, and produce reliable results is an ethical imperative.

3. Independence and Bias: the integration of technology will create close cooperation and direct implication with client’s data and ensuring the independence in this situation will suppose supplementary awareness.

4. Transparency and Disclosure: ethical auditors need to communicate clearly about the use of technology in the audit process. Transparency about how data is collected, analyzed, and interpreted ensures that stakeholders understand and accept the methodologies used.

5. Professional Skepticism and Judgment: the digital age requires auditors to exercise professional skepticism and judgment when interpreting complex technological outputs. Striking the right balance between trusting automated results and applying critical analysis is an ethical imperative.

6. Continuous Monitoring: digital auditing often involves continuous monitoring of financial data. Ethical questions may arise about the frequency and depth of monitoring, especially when it involves employee activities, which could impact privacy and trust.

7. Emerging Technologies: as new technologies like blockchain, machine learning, and big data analytics become integral to auditing, auditors face ethical dilemmas concerning their understanding, competence, and ability to audit effectively in these domains.

To narrow the expectation gap, particularly among stakeholders who hold high expectations, especially regarding the utilization of technology, improved data accessibility, and the handling of big data, it is crucial to prioritize transparency in auditors’ actions. This includes a steadfast commitment to ethical standards and meticulous documentation of their work, but also direct contact with clients with transparency and confidence about the quality of work done.

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As auditors adopt and integrate technological advancements into their practice, upholding ethical standards takes on heightened significance as it directly impacts the preservation of trust and credibility. By remaining vigilant, adapting to the challenges posed by the digital landscape, and unwaveringly adhering to core ethical principles, TGS members can effectively navigate the digital era while simultaneously safeguarding the integrity of their profession.

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PARTNER EXPERIENCE

A NEW ERA FOR WHISTLEBLOWING BUT WHY IS IT INCREASINGLY IMPORTANT? Anamaria DIACONESCU Marketing Director www. tgs-romania.com

Executive Summary There is a saying “What you don’t know won’t hurt you”. In the game of risk management, what you don’t know is your greatest vulnerability.

Whistleblowing is growing in importance as a corporate governance mechanism, while it is increasingly recognized as a key internal control mechanism. Whistleblowing is a term used to describe an act whereby wrongdoing is exposed. It gained impetus following the collapse of Enron in 2001 arising from financial reporting fraud, which culminated in Time magazine selecting three whistleblowers as its Person of the Year in 2002.

The proper management of corporate whistleblowing is an increasingly important issue globally, so much so that the European Union has adopted a directive to make such systems mandatory.

For now, companies with more than 250 employees must apply the rules in the first round, while companies with 50250 employees have until December 2023 to comply with the legislation. The Directive, transposed in the Romanian legislation under the Law 361/2022, requires common minimum standards to be set for whistleblowers, specifies the precise scope of application, the persons to whom, the matters to be covered and the circumstances in which whistleblowing, even anonymous whistleblowing, should

be provided, and requires that whistleblowers are protected by ensuring that appropriate whistleblowing channels are in place and operated.

On the face of it, this is another challenge for companies, but it is in everyone’s interest to have a properly functioning mechanism for reporting wrongdoing that can reduce the damage caused by unpleasant incidents.

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As a closing remark, the success and overall efficiency of the training will highly depend on the quality of the trainers, that should be qualified speakers with expertise in whistleblower frameworks.

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Questions remain as to the efficacy of whistleblowing: Is it a substantive or symbolic mechanism of governance?

For being a meaningful component of corporate governance and not just a tick in the box, whistleblowing should: • Meet the benefits of a correct implementation.

• Be properly defined in the Policy and Procedures of the company.

• Be constantly promoted by the management, with the right tone of voice and consistent training on all levels, starting with the awareness phase and continuing with the implementation per se.

Why is whistleblowing beneficial for an organization?

Helps combat fraud When fraud flourishes within an organization, it will be damaging, with businesses struggling to recover from the financial and reputational effects it creates. By encouraging whistleblowing, the company can find out about it happening before it gets out of hand. This will help it maintain good relationships with suppliers, clients and shareholders and limit any fallout.

In the recent case of a German pharmacy, for example, the owner was diluting doses of cancer medicine and reclassifying expired drugs. It transpired that he had committed fraud in at least 60,000 cases, leading to him overcharging health insurance companies by €17 million.

In addition, he endangered the lives of patients, with more than 4,000 said to have experienced harm.

Two whistleblowers were too afraid to report the incident internally, so they spent time gathering evidence to report externally. Had the culture at the pharmacy welcomed whistleblowing, the case could have been resolved much earlier.

Reduces the risk of reputational damage A good reputation is essential to a business. It can make the difference between winning and losing contracts, gaining and losing investors and affect whether customers want to buy from your company or from the competition.

When an issue is raised through internal channels, it allows the department in charge to tackle it appropriately as well as discreetly. More crucially, an anonymous system helps someone who doesn’t feel safe or confident sharing information with their employer to come forward.

If there isn’t an internal solution, they may choose to take the information elsewhere or disclose it publicly, potentially damaging the company’s reputation.

A French care home company came under scrutiny over the treatment of its residents only when a journalist exposed failings brought about by the business cutting corners, even though it was in receipt of public funding.

If the company had fostered an effective speak-up culture, it might have been able to address the shortcomings before they became public and caused a sharp drop in the company’s share price.

Reduces the risk of legal prosecution Where individuals and businesses seek to undertake criminal behavior, there is the chance of legal proceedings occurring. In particular, directors can be held liable for offences carried out by the organization if they consented or connived in an illegal activity or caused it through neglect of their duties. Having a whistleblowing system in place within the company can significantly reduce this risk.

In the case of a German car company, the CEO was charged with fraud and conspiracy after it emerged that the company had purposefully fixed the results of emissions tests in order to seem like they met regulatory requirements, even though they did not. This might have been avoided with an early warning from a whistleblower.

Reduces losses Early detection of misconduct can reduce the impact it has on the organization financially. The company can stop it before it costs regulatory fines, downtime and lost business.

Business tycoon Warren Buffet once said of whistleblowing channels “on occasion, I have learned of important problems at our subsidiaries that I otherwise would have missed. The issues raised are usually not of a type discoverable by audit but relate instead to personnel and business practices. Berkshire would be more valuable today if I had put in a whistleblower line decades ago.”

Improves ESG rating and organizational culture A whistleblowing system can help with environmental, social and governance (ESG) ratings. By embedding a speak-up culture in the workplace through a whistleblowing system, the management is showing employees that they are valued and that their safety and security are the company’s priorities. This is a key element of the social aspect of ESG. In addition, it helps companies improve compliance and risk management in terms of governance too.

18 - EXPERIENCE When people fail to report wrongdoing, the main reason is often not the fear of retaliation but the suspicion that nothing will be done about it, based on poor organizational culture. Companies often see whistleblowers as motivated by revenge or greed. But studies consistently show (source: The Economist “The age of the whistleblower) that most are driven to right a wrong. That is why more than 90% of them sound the alarm internally first, rather than running straight to the authorities or newspapers. Given the choice, they would rather warn than accuse.

Makes the company healthier: More reports is better than fewer reports A recent study performed by the Harvard Business Review published under the title “Throw Out Your Assumptions About Whistleblowing” found that companies that have more complaints from whistleblower hotlines actually have fewer lawsuits, smaller bills from legal settlements, and fewer fines. Moreover, companies with more internal reports have more positive attributes (e.g., they are more profitable and have better governance practices).

Photo by TGS Romania

On the surface, most people would assume that companies with more issues being reported are more troubled, but the number of internal reports seems to reflect a positive feedback culture more than the extent of problems occurring within the company. All companies have their share of concerns, but not all companies have a culture where employees feel secure and valued when sharing feedback. The conclusion was that, on balance, more reports are a good thing, reflecting greater trust in management by employees and a greater flow of information to management about potential problems.

SEPTEMBER 2023 - 19 How to embed a whistleblowing culture within your organization?

A robust whistleblowing regime should be an integral part of governance best practice for all companies. The first step in achieving it is by introducing a standalone, dedicated Whistleblowing Policy demonstrating the company’s compliance with the law and providing clear guidance to potential whistleblowers.

Reference to this Policy should still be made in the Integrity Policy and other documents, such as Code of Ethics and the Suppliers Code of Conduct, or any other similar documents.

The Policy and procedures document should be easily accessible and cover in a concise manner the following: • Purpose/Scope • Definitions • Types of wrongdoing • Reporting channels • Guidelines for submitting reports • Competences of the receiver of the complaint • Protection of reporting person/ Protection from retaliation • Incident investigation • Responsibilities of investigator and supervision • Corrective acts and legal actions • Information and training Training, training and… training!

Recent research performed by Harvard Business Review “Business ethics: Whistleblowers Are a Sign of Healthy Companies”, shows that from the discussions with compliance officers at firms, many executive leadership teams stated a “goal” to have zero reports. This is not hard to accomplish if the company doesn’t make its employees aware of the policy & procedures, of the reporting channels or comfortable using them.

Here comes the importance of regular and consistent training.

Designing a comprehensive training program for whistleblowing engagement based on the provisions of the Whistleblowing Policy is crucial to ensure that all employees are aware of their rights and responsibilities regarding reporting unethical or illegal activities within the organization and understand the procedures they should follow.

Each organization should have in place training programs on two levels: Training Program Whistleblowing Engagement for Employees The objective is to educate all employees about the importance of whistleblowing and of the Whistleblowing Policy, focusing on the process of reporting concerns and the protection available to whistleblowers.

Training Program Whistleblowing Essentials for Designated Person(s) and case managers The objective is to offer specialized training for providing the essential skills and expert knowledge to the designated persons that have been tasked to receive, handle, and investigate complaints.

As a closing remark, the success and overall efficiency of the training will highly depend on the quality of the trainers, that should be qualified speakers with expertise in whistleblower frameworks. The trainers should use a variety of teaching methods to engage participants and ensure that they understand the key concepts.

Sources: • Harvard Business Review • The Economist • Financial Times • Forbes • The Oxford Research Magazine • Bloomberg • Time

Photo by TGS “TGS Members - Madrid 2023”

20 - EXPERIENCE

SEPTEMBER 2023 - 21

NETWORK EXPERIENCE

TGS AFRICAN MANAGING PARTNERS CONFERENCE

Andrew MENZIES Vice-President International Development www.tgs-global.com

Business Takeaways from TGS Cape Town Conferenc Managing partners from TGS African member firms met in Cape Town, South Africa for a twoday practice development conference TGS African Managing Partner Conference participants created a business and network development plan for the development of TGS Africa. The first arm of the ambitious two-part plan is to have at least one TGS member firm in each African country in the next 7 years. This will take TGS presence in Africa from seven to forty-seven member firms.

The second arm of the TGS African development plan is to increase business between members and to create a shared pool of resources that can be used by all firms. TGS Nigeria needs 20 extra staff to win an audit but don’t have the capacity? No problem. A call to TGS South Africa secures qualified, experienced remote team members.

Referral business (and a shared on-demand workforce) are major benefits to being part of an international network but they don’t come without thoughtful effort. TGS African member firms are taking the time and energy to paint Africa orange together.

The TGS brand brings an international stature to well-recognized local firms across Africa The TGS network hosts three regional conferences for all members every May (EMEA, ASIA PAC and AMERICAS) and a global conference for all members every November. This year’s TGS global conference will be in Miami.

The TGS African Managing Partners Conferences were created to remedy the African TGS members’ under-representation in the traditional TGS EMEA conferences. The TGS network was founded in central Europe in 2012 and has, for the moment, a disproportionately high concentration of firms in that area.

22 - EXPERIENCE Cape Town conference participants were working to boost the presence of African audit and accounting firms in TGS and in the global business community. Thanks to them, African concerns and business perspectives are gaining recognition in TGS regional meetings. What’s more, small and medium-sized international businesses now have a clear, orange answer to questions about working with, in and out of Africa.

The 2023 TGS African Managing Partner Conference event was organized by newly appointed TGS Regional Leader and TGS shareholder, Fabrizio Aldrighetti and his team.

Pan-African audit, accounting, advisory, tax and legal TGS coverage by 2030 In two days of socializing, team-building and workshopping, the TGS African Managing partners completed a plan to achieve African coverage in audit, accounting, advisory, tax and legal service provision.

Any SME wishing to bring their firm to Africa will be able to call on TGS to act as a one-stop-shop for all their needs.

Firms will have their hands held by local experts as they deal with country-specific or pan-African business set up and financial management. Multinational firms will also find value in the TGS Africa coverage for tax, audit and financial reporting.

While these pan-African services are more traditionally covered by the Big 4, the TGS response offers an equally high quality of service with the advantages of more cost-efficient and personalized processes.

Foto by Adobe Stock

Any TGS team working on the African and international requirements of small and medium-sized businesses will be only an arms length from the TGS firm managing partner. One brand, one service quality, hundreds of competent international professionals with local expertise.

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Any TGS team working on the African and international requirements of small and mediumsized businesses will be only an arms length from the TGS firm managing partner. One brand, one service quality, hundreds of competent international professionals with local expertise.

”

SEPTEMBER 2023 - 23

24 - EXPERIENCE

THINK GLOBAL SUSTAINABILITY

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

SEPTEMBER 2023 - 25

57

4200

countries

professionals

66 members

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

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

39. Poland 40. Portugal 41. Qatar 42. Romania 43. Saudi Arabia 44. Singapore 45. South Africa 46. Spain 47. Sweden 48. Switzerland 49. Taiwan 50. Turkey 51. Uganda 52. Ukraine 53. United Arab Emirates 54. United Kingdom 55. United States 56. Uzbekistan 57. Zambia

Foto by Adobe Stock

26 - EXPERIENCE

www.tgs-global.com