Hartford Business Journal

8 Hartford Business Journal • January 26, 2015 www.HartfordBusiness.com Q&A Company boards face greater scrutiny, regulatory pressures Q&A talks about key consid- erations for company boards and audit committees in 2015 with Rich Caporaso, managing part- ner of KPMG's Hartford office. Q: There is an intense focus as regulators and investors scru- tinize a board's contribution to strategy, risk, and compliance. Do boards need to set benchmarks on their strategy and risk? Compliance seems easy enough to regulate but do boards need to quantify in advance the risks they are willing to take? A: Boards increas- ingly are playing a critical role in not only helping companies to avoid missteps but also in taking smart risks in order to inno- vate, grow and remain competi- tive. In discussions about growth opportunities, boards need to think about how the company measures and rewards innovation success and whether the compa- ny's culture and processes create the right environment for growth through innovation. Regarding compliance, in this environment of complexity and change, it is very important for the board to be acutely aware of the tone from leadership and to reinforce the culture of the orga- nization, including the culture of compliance. Q: With the recent nega- tive publicity around massive security breaches at several companies, what consider- ation should boards be giv- ing to cybersecurity? Is this a boardroom issue? A: Cybersecurity is most cer- tainly a boardroom issue. It's criti- cal to approach cybersecurity as an enterprise-wide risk management issue, not just an IT issue. Threats to intellectual property and infor- mation systems, not to mention compliance risks and the potential for reputational damage, lawsuits and loss of customers have elevat- ed cybersecurity to a critical busi- ness priority for many boards. Among the considerations: What are the company's big- gest vulnerabilities? Do they have a cyber-incident response plan? Addressing cybersecu- rity holistically today requires a risk management team that includes a cross-section of the organization — IT, the chief financial officer, risk man- agement, marketing, human resources, auditors and others. Q: What are some of the changes that can be expected from audit committees in 2015? What are some of the demands they will be facing? A: In our interac- tions with audit com- mittees and business leaders in recent months, we've been hearing that it has become increasingly difficult for audit committees to over- see major risks (cyber risk, supply chain and operational risks, legal and regulatory risks) in addition to their core respon- sibilities (financial reporting and related internal controls, and oversight of internal and external auditors). Additionally, it is critical for audit committees to understand new accounting changes, includ- ing the Financial Accounting Standards Board's (FASB) new revenue recognition standards that will have a major impact on a company's financial, IT and accounting processes. This will require audit com- mittees to reassess whether they have the time and exper- tise to oversee effectively. Meet- ing the workload challenge will require creating efficiencies that will free up time for more substantive issues. In addi- tion, keeping the audit commit- tee agendas focused on major risks and core responsibili- ties is essential to committee effectiveness. Q: And what are some of the governance trends boards will be facing in 2015? How active will shareholders be? Will this inspire boards to take proactive steps in their governance struc- ture to head off challenges? A: Activist shareholders aren't going away any time soon. Gov- ernance will continue to be at the forefront of a board's most impor- tant responsibilities. In a recent KPMG survey, some 60 percent of respondents said that, as a result of the activist environment, their company has increased its level of engagement with shareholders. Proactive outreach to shareholders on issues including performance, executive compensation and strat- egy are all important. n RicH capoRaso Managing partner, KpMG's Hartford office Greater Hartford accounting firms facing workforce shortage By sheena Butler-Young sbutler@HartfordBusiness.com H artford area accounting firms say they are on a hiring spree to address a region-wide personnel shortage driven by heavy workloads, increased competition for talent, and professional burnout. West Hartford-based BlumShapiro, the largest regional accounting firm in New England with over 400 employees spread out across five offices in Connecticut and Massa- chusetts, brought on 38 new accountants to start the year. Marcum LLP added 50 new hires to its New England offices, including about 20 in Connecticut, while Whit- tlesey & Hadley recently hired six new accountants, including three that started this month. "Accounting firms are definitely looking to hire; there is a huge need," said Carl Johnson, BlumShapiro's man- aging partner. While accounting has historically been an in-demand profession, a few changes in recent years have amplified competition among firms and corporations recruiting talent, said Mohamed Hussein, a professor and head of UConn's accounting department, which graduates over 100 accounting majors per year. Greater workloads precipitated by the 2002 Sarbanes- Oxley Act created a need for more accountants, while the easing of requirements to become a certified public accountant in Connecticut has ramped up competition for new hires. Under a 2000 rule change by the state's Board of Accountancy, prospective CPAs no longer need experi- ence at a public accounting firm to earn their certifica- tion. Instead, the board now accepts two years work experience at public, non-public (private/industry), or government institutions, as long as there is supervision by a CPA. That is creating more competition from pri- vate-sector companies looking to recruit students right out of college. "A lot of corporations like The Hartford, Aetna and Travelers, for example, are aggressively recruiting our students," said Hussein. "They all have leadership pro- grams that train students and help them to become cer- tified public accountants." Growing from within Most public accounting firms start new hires as asso- ciates and then advance them to seniors, supervisors, managers and finally to directors or partners, said Drew Andrews, managing partner at Whittlesey & Hadley, which is based in downtown Hartford. A number of firms are experiencing shortages in senior and supervisory level positions, typically filled by accountants with three to four years of experience. That's when many accountants, industry experts say, decide to stay in or leave the field. And it's not uncom- mon for many younger accountants, particularly those working demanding hours at big four firms (Deloitte, PwC, Ernst & Young, and KPMG) to get burnt out. "It's really unfortunate because some very talented peo- ple leave the field too early," said BlumShapiro's Johnson. "If they would hang in there just a little longer, I think they would find that public accounting is an outstanding profes- sion with great economic outcomes and work-life balance." Michael Brooder, partner-in-charge of Marcum's Hartford office, said his firm has historically felt the shortage in senior and supervisory positions so they have focused on grooming staff from within to take on those jobs. Many firms say they have ramped up employee engagement and retention efforts so they don't find themselves facing future workforce shortages. "We've really focused on getting the right people in at the entry-level rank who can grow with the firm and then provide them more focused training so that they can decide that public accounting is right for them and that our firm is the place for them," said Andrews. Another issue, Brooder said, is that it's harder to poach a senior or supervising accountant from a competing firm. Like Whittlesey & Hadley, Brooder said Marcum has enacted a strategy in which the firm hires more recent graduates for entry-level positions and engages in pro- active retention strategies to keep them. Offering flexible schedules and work-at-home options are among the list of employee-friendly strat- egies in place at Whittlesey & Hadley to counteract professional burnout, said Kathy McCarthy, the firm's director of human resources. "It's about employee engagement and it's about giv- ing people an opportunity to provide feedback," said McCarthy. "The more you can engage employees, the better chance you have at retaining them." The accounting graduate pipeline With 539 students currently enrolled in UConn's accounting program, Hussein said the school has seen steady growth in the number of accounting majors each year. Interest in the profession, Hues- sein said, has blossomed because of the significant availability of jobs. However, there is also an accounting professor short- age being felt around the country that has restricted many schools' ability to enroll all students interested in the pro- fession. That has also contributed to the industry's per- sonnel shortage, Hussein said. n To attract fresh talent Hartford accounting firm Whittlesey & Hadley hosts career exploration days for college students interested in joining the profession. in the photo, Whittlesey & Hadley's Managing partner Drew andrews talks to college students about what it's like working at the firm. P h o t o | c o n t r i b u t e d Focus AccounTinG

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