By Ian Lavis on behalf of Praxity Global Alliance
Regional Chairs speaking at Praxity Global Conference have revealed huge differences in business disruption, risks and opportunities facing accounting firms and their clients around the world.
The regional experts delivered insightful presentations on the current impact of Covid-19 and the predicted impact of significant regulatory changes in different countries.
They told delegates that continued disruption, while difficult to manage, will present new opportunities for independent accounting and consulting firms within Praxity to work together to help their clients survive and thrive.
In 2021, businesses will need more support than ever to respond to change in different regions. This will present new possibilities for Praxity member firms to develop cross-border collaborations. Indeed, many new partnering initiatives are under way.
Here, we summarise the key developments in each region, based on extracts from the Regional Chair presentations.
Regional Chair: Steffen Ahrens, Partner, FALK
Praxity representation: 983 Partners and 15,815 professionals
Praxity growth in 2019: + 1.9% to US$1,647m.
“There will be even more regulations due to severe cases of financial misconduct. They will probably be in place in the UK a little earlier and we will also have some sort of reaction in Germany. There are risks and opportunities and we have to prepare for both.” Steffen Ahrens, Partner, FALK.
- IT Summit – German speaking member firms in Germany, Austria and Switzerland (“DACH”) are working to identify how they can collaborate and help each other, including technical know-how, training and the use of software for things like electronic invoicing, database management and e-learning.
- M&A – plans are being developed to create a global M&A platform to help member firms do business and increase transparency.
- Benchmarking – Partners are evaluating whether the “Jour Fixe” benchmarking standard already established in North America and the UK could also work for Continental Europe.
- UK – substantial changes are being introduced following a succession of audit scandals, including a proposal to separate audit practice to ensure greater independence and restore trust in the profession.
- Germany – pressure is growing for changes to be made to the profession following the Wirecard audit scandal.
Regional Chair: Denis Usher, Managing Partner, Mazars Singapore
Praxity representation: 840 Partners and 18,638 professionals
Praxity growth in 2019: + 9.1% to US$904m
“We really believe the change in Australia’s foreign investment laws regulation is going to have a significant impact on investment into Australia, especially for Chinese companies. Also, the corporate tax reductions in India could be a big advantage for clients.” Denis Usher, Managing Partner, Mazars Singapore.
A gap analysis revealed no significant gaps in coverage although there maybe opportunities to develop business in Cambodia, Laos and Myanmar.
Regulation and tax changes
- Australia – new foreign investment law changes affecting mining and energy, agriculture and agribusiness, and infrastructure. The changes lower the bar as to how much can be foreign owned without requiring FIRB approval. There is likely to be a big impact on Chinese business.
- China – stricter entry and visa requirements are having a significant impact on the ground. Clients may consider management outsourcing services through Praxity member firms.
- India – major new tax changes including a 35% reduction in corporate tax to as slow as 15% for manufacturing companies. Also, cash subsidies for new or expanding companies of up to 25% Capex for 5 years.
- Singapore – strict new anti-money laundering and KYC regulations have been implemented.
Regional Chair: James Blake, COO, Mazars USA
Praxity representation: 2,194 Partners and 18,194 professionals
Praxity growth in 2019: + 13.1% to US$3,598m
“Less than 10% of firms’ professionals are working in offices or at client sites during the day. Firms are enhancing their remote capabilities and developing new ways to identify prospects, develop new solutions and recruit talent. There is great optimism for 2021, with all the firms predicting growth.” James Blake, C00, Mazars USA.
- Praxity North American International Virtual Tax Conference on November 16-20 will be free to all firms, clients and prospects and will include speakers from the US, Europe and Asia Pacific
- Mazars North American Alliance is a new agreement between Mazars, BKD, DHG, Moss Adams, Plante Moran and MNP to serve Mazars international clients into North America, which has also created opportunities for non-Mazars Praxity member firms.
Regulation and tax changes
- European audit reform will impact North American firms, especially with increased competition and plans to make statutory auditors more independent from their auditees. The Mazars North American Alliance expects to engage new clients as a result.
- The result of the US election may present firms with multiple opportunities, especially in terms of tax service lines.
Uncertainties and opportunities
- Firms are evaluating their policies and procedures to be prepared and efficient in client service delivery in the heaviest production periods in North America in January through April.
- Many firms developed advisory services to assist clients through the start of the pandemic and guide them on government assistance programs. Additional services have and are being developed to assist middle market privately owned business maintain their new operation structures as they emerge from the pandemic in 2021 and beyond.
Regional Chair: Luis Martinez, Managing Partner, Mazars Montevideo
Praxity representation: 74 Partners and 2201 professionals
Praxity growth in 2019: + 27.8% to US$75m
“It’s a very difficult moment. We need to focus on the sectors that we think will be ok, including IT, energy, food and agribusiness, and logistics.” Luis Martinez, Managing Partner, Mazars Montevideo.
- Mazars’ Covid-19 Global Tax and Law Tracker with information on legislation and tax measures is proving very useful for clients in LATAM.
- VBR is partnering an Israeli consultancy to provide high level cybersecurity and technology services.
- Praxity’s 2021 LATAM meeting in Miami will be open to North American and global firms.
Dealing with uncertainty
- GDP variation is huge. Overall, it is expected to fall by 5-10% in the region as a result of the pandemic.
- Against a backdrop of social and economic instability, cross-border collaboration within the Alliance will be more important than ever to help firms – and their clients – overcome challenges in the best way.
Africa & the Middle East
Regional Chair: Dr Ahmed Shawki, Managing Partner, Mazars Mostafa Shawki
Praxity representation: 118 Partners and ,3512 professionals
Praxity growth in 2019: + 2.9% to US$151m
“We have been hit very hard but there has been a surge in donor activity. This may give us an opportunity to present our services. We hope to increase our presence in areas where we expect donors to come in such as South Sudan and Yemen.” Dr Ahmed Shawki, Managing Partner, Mazars Mostafa Shawki.
- Plans have been put forward to promote Praxity’s capabilities in Africa & the Middle East both regionally and globally, including at Praxity’s 2021 Global Conference in New Orleans.
- Having successfully shifted to remote working, there are more opportunities for virtual meetings and training. This can save on travel and accommodation costs and potentially enhance participation numbers.
- There are calls for more regional training, especially IFRS9 and IFRS19, with input from professionals who have already done this training in other regions.
Risks and opportunities
- Covid-19 has stretched an already fragile, and in some parts non-existent, healthcare system and devastated economies. It has exacerbated governance failures, sectarianism and tensions, and deepened economic splits within and between states.
- Donor contributions from countries outside the region, and from UN and EU agencies, will multiply over the next few years. This will require accounting, auditing and consulting services. A unified strategy to approach donors can draw on Praxity’s existing expertise in the region.