This Transparency Report is published in accordance with the requirements for third country auditors in Article 45 (5)(e) of the European Communities (Statutory Audits) (Directive 2006/43/EC) for our financial year ended 30 June 2021.
Simon Perry, Senior Partner, PwC Channel Islands
I am delighted to introduce our 2021 Transparency Report. The annual publication is designed to help our key stakeholders and wider society within the Channel Islands understand our objectives, what we expect from our people and how we’re governed. While PwC is a multidisciplinary firm in the Channel Islands this report is primarily focused on our audit practice and related services. However, before looking at our Channel Islands firm in detail, it is worthwhile adding some context from the wider PwC Network.
- Network context
- Local application
- Equipping our workforce for the future
- A community of problem-solvers
- Enhancing audit quality
- Handing over the reins
Network context
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 156 countries with more than 295,000 people who are committed to delivering quality in assurance, advisory and tax services. We are committed to driving a strong culture of quality and excellence that is core to our purpose.
Over Summer 2021, we unveiled The New Equation, PwC’s landmark global strategy which responds to fundamental changes in the world, including technological disruption, climate change, fractured geopolitics, and the continuing effects of the COVID-19 pandemic. The New Equation is based on analysis of global trends and thousands of conversations with clients and stakeholders. It builds on more than a decade of sustained revenue growth and continued investment. The New Equation focuses on two interconnected needs that clients face in the coming years. The first is to build trust, which has never been more important, nor more difficult. The second is to deliver sustained outcomes in an environment where competition and the risk of disruption are more intense than ever and societal expectations have never been greater. For more information on The New Equation, please see pwc.com/gx/en/the-new-equation
Our new strategy builds on our ongoing commitment to quality.
Local application
I write this year’s report with an extra layer of reflection as it’s my last as Territory Senior Partner before handing over the reins to Nick Vermeulen in January 2022. Much of my time in post has been dominated by the impact of the COVID-19 pandemic. Like everyone on our islands, I am eternally grateful for the tireless care and effort of the doctors, nurses, vaccination volunteers, delivery drivers and others in different walks of life who’ve kept us safe and well, often at great risk to themselves. As we emerge from the acute phase of the pandemic, I hope that this sense of purpose and togetherness will provide the foundation for addressing other pressing challenges facing our community. This includes tackling climate change and opening up fulfilling opportunities for our children. We at PwC are determined to be at the forefront of this drive.
Looking specifically at our audit operations, I would like to commend the dedication and professionalism of my colleagues in delivering audit opinions within pre-pandemic timelines despite all the upheaval we’ve faced. Given the uncertainty within the economy, we believe that clear, credible and timely audit has been critical in sustaining market confidence and helping local businesses steer through uncertainty.
Inevitably, there are things I would have liked to have achieved in my time as Territory Senior Partner that have not been possible because of the constraints of the past 18 months. But I also feel that the catalyst of lockdown and the fresh perspectives emerging from the pandemic have given important impetus to digital transformation and flexible working, two of the key priorities I am confident that the firm will take forward. These developments will improve our ability to serve clients, support local communities and attract and retain great talent.
Equipping our workforce for the future
When I think of our workforce, I see all the different faces across our offices in Alderney, Guernsey and Jersey. Many have been born and bred on the islands. Others, like me, have made our homes here. In all, our diverse workforce brings together people from more than 30 nationalities. We are a firm that exists for the benefit of all Channel Islanders, and is very much rooted in the communities we serve. During my time as Territory Senior Partner, I am especially proud of our growing presence on the island of Alderney.
Supporting the wellbeing of our people during these difficult times has been the most important responsibility for me and my leadership team. We had already introduced flexible working and invested in fully mobile communications before the pandemic. These foundations paid dividends when we had to make the rapid switch to home working in 2020. The digital connectivity not only enabled us to work remotely, but also sustain mutual support, welfare and morale.
Now that our offices are open once again, it’s wonderful to see them brimming with people and life. I believe that our workforce’s enthusiasm to come back to work in the office for at least part of the week not only reflects the welcoming nature of the environment, but also the friendships and sense of togetherness that are so critical to our success.
In my view, it’s important for colleagues to engage face-to-face regularly. The personal interaction helps to spark new ideas, strengthen collaboration and ensure that everyone can benefit from informal coaching and advice from management. At the same time, our people have the option to work from wherever they want, as best suits them. That might be at home or on the move, or perhaps abroad for a few weeks as members of staff from overseas take the chance to reconnect with family and friends that they might not have seen for over a year. As leaders, we want to set an example by embracing flexibility in our working lives. When people see that they can advance their careers while working in ways that suit them and help them sustain a healthy work-life balance, they will be confident in embracing it too.
Technology certainly helps to make this balanced and agile way of working possible. Through our ongoing New World, New Skills programme, we’re helping our workforce to develop the capabilities and confidence to make the most of digital innovation. Using technology to take care of mundane tasks helps our people to focus more of their time on what they find interesting and creates real value for clients. In turn, harnessing the latest advances in analytics and interactive visualisation improves our ability to turn data into insights and take innovation to the next level.
Trust is every bit as important as technology in creating new ways of working. By focusing on outputs, not inputs, and giving people the autonomy to decide how they meet their objectives, we trust them to deliver.
While we knew in theory that flexible, digitally-enabled ways of working were the right way forward, the past year has provided solid proof of their efficacy. The combination of advanced technology and workforce upskilling, commitment and empowerment is reflected in rising revenues and client satisfaction scores. In the year up to 30 June 2021, we recognised this outstanding performance through bonuses for every member of staff up to director level.
In some crucial respects, however, the transformation of our workforce still has some way to go. We are really pleased that at all grades in the business we have a relatively equal split between men and women and negligible gender pay gaps, with an overall pay gap at the staff level of 2.6%. However, at the partner level, we still have work to do. Including partner pay into our gender pay calculation increases the gap to 36%. This is a consequence of having two female partners and 12 male partners. We are determined that with a strong pipeline of diverse talent, we will be able to close the gap. This won’t happen overnight and we need to double down on our efforts to create an inclusive culture, investing in leadership development and bringing through our high potential women if we are to achieve greater gender balance and see the pay gap improve over the next five years.
We want to make this a place where everyone can fulfil their potential. We recognise that this is not only the right thing to do morally, but is also critical to the performance of our business by broadening our perspectives and range of experience. Our inclusion and diversity commitment covers all stages of the employment lifecycle from recruitment and induction through to performance review and progression.
A community of problem-solvers
Beyond our work with clients, our digital and workforce transformation aims to improve our ability to help address the most important challenges facing businesses, communities and wider society here in the Channel Islands and beyond. Working at the intersection of technology, human ingenuity and business insight, we want to create a community of innovative and trusted problem-solvers.
The 2020 launch of our Hive Academy programme in local schools reflects our problem-solving drive. With support from two full-time PwC staff and over 50 volunteers, the Hive Academy aims to help young people build up the digital skills they need to develop rewarding careers and enable our islands to prosper within today’s fast-evolving global economy. This was an initiative I’d first seen running successfully in Northern Ireland and I was determined to bring it to the Channel Islands. By June 2021, more than 1,500 students in the Channel Islands had benefited from the hands-on mix of online and classroom training. We have also worked with 50 primary teachers to help them acquire the specialist skills that can help them to enhance their computing classes.
Equally pressing is the move towards Net Zero. Our lead advisory partner, Neil Howlett, has led the development of a series of recommendations on how PwC in the Channel Islands can meet the target within our own business in areas such as travel and energy usage. Just as critical is our work in advising clients. In particular, fund managers’ environmental, social and governance (ESG) performance is coming under increasing scrutiny. The Channel Islands’ place as a leading global centre for infrastructure and private equity investment means it can play a pivotal role in helping to finance the transition to Net Zero both here and worldwide. Many businesses are keen to play their part, but are still unsure about where to start and how to communicate ESG performance in a credible way. We’ve set up a dedicated Net Zero and ESG team, led by director, Alison Cambray, which is working with clients to help them develop their strategies and gain assurance over metrics and reporting.
Enhancing audit quality
Trust is a fundamental part of this purpose and central to meeting our objectives. Audit is a clear case in point. Audit can only be effective if it is trusted by investors, regulators and other key users of accounts. In today’s environment, we also need to recognise that trust is more fragile and difficult to earn than ever. That’s why we need to go further in strengthening audit quality and transparency.
In practical terms, the steps forward have included splitting the role of External Audit Leader and Territory Senior Partner. This separation has now been in operation for more than a year, enabling our audit lead, Karl Hairon, to dedicate all his time and expertise to developing audit quality and ensuring audit suitability.
We have also split the role of Quality Leader from that of the Risk Management Partner, again with a view to providing direct focus on maintaining and improving the quality of our audit work. Risk, led by Evelyn Brady, focuses on setting the right approach and ensuring the appropriate people are assigned to particular roles and engagements. Quality focuses on day-to-day management and compliance with regulations and internal procedures and John Luff is on point here.
Other important developments include the appointment of a new director responsible for audit methodology, Hani Salem. A key part of this role is advising on the most complex and judgemental aspects of audit practice.
I believe that our ability to sustain quality and trust benefits from strength in depth. This allows our audit directors and partners to rotate regularly and build up new experience. As the demands on auditors evolve, our investment in continuous improvement includes an increase of more than 40% in the average hours of audit training undertaken this year.
This investment has helped us maintain our audit quality scores as assessed by our latest inspection rounds from the Financial Reporting Council (FRC), the Institute of Chartered Accountants in England and Wales (ICAEW) and our own PwC internal inspection programmes.
However, we always know that we can go further. In pursuit of quality, transparency and trust within our audit practice and the wider profession, we are fully engaged with the work of the Department for Business, Energy and Industrial Strategy’s (BEIS) ongoing audit reforms. We want to work with BEIS to help develop and take forward beneficial and deliverable proposals.
We are mindful of the vital importance of independence among client-facing personnel in meeting the expectations of clients, regulators and the PwC network. This includes personal responsibility for record keeping alongside rigorous testing of the investments and other financial interests of partners, directors, their families and dependents. This is built into our Accountability Framework. In keeping with changes in how people live, work and engage, the scope of who is covered has widened and incorporates a broader range of relationships. Therefore, we have developed technology to help make this more extensive record-keeping more straightforward. Any technical breaches such as late entry or poor record-keeping have been met with financial penalties.
The other key foundation for transparency and trust is data integrity and security. We are therefore pleased to have achieved ISO/IEC 27001:2013 certification, the kitemark for quality in this area.
Handing over the reins
I would like to close my introduction by saying thank you to everyone I have worked with. Working with PwC in various locations around the world has been a fantastic experience. I have engaged with wonderful clients and colleagues. I have also had the opportunity – the privilege – to make a real difference.
I leave the post in the safe and capable hands of Nick Vermeulen. I have known Nick for more than 25 years and can attest to his original thinking, dedication to doing the right thing and warmth as a colleague and friend. Nick is a Guernsey native, who brings a wealth of experience of working in both technology and accountancy. His current role is innovation and technology lead, which will provide an important springboard for taking our firm forward in this new world.
Feel free to get in touch
I hope you find this report useful. If there are any issues that you would like to discuss, please feel free to get in touch.
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