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The accountant - Summer 2019


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  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    The policy objectives that governments usually commit themselves to attain within set time frames are expressed in generic terms and translated into statistical targets related to macroeconomic aggregates or averages. The main ones refer to full employment, economic growth, balance of payments equilibrium, sustainable environment, price stability and a fair income distribution. 
    The first four objectives fall under the general heading of ‘Production’; the last two under ‘Income Distribution’. To reach all objectives at one go, once these are defined in specific statistical values, is not an easy task. And often trade-offs are inevitable, especially within the short to medium term.

    ‘Sustainable development’ may be considered as a combination of the objectives of economic growth, sustainable environment and equity in the distribution of income within the present generation (intra-generation), and between the present and future generations (inter-generation).
    Indeed, the World Commission on Environment and Development defined ‘sustainable development’ as ‘a process that meets present needs without compromising the ability of future generations to meet their own needs’. This approach suggests that a sustainable future will come into being if the biophysical and social conditions required to support economic activity and human advancements are maintained from one generation to the next. Besides, it emphasises ‘meeting needs’ rather than promoting growth and satisfying consumer preferences as the defining characteristics of ‘development’. 
    To be effective in their mission, policymakers must create the appropriate tools to reach the set objectives; ideally, there is an economic tool for every policy objective. This means that the more policy combinations meant to be attained simultaneously are introduced the more tools are needed. However, if they are not available in the desired fine-tuned format , objectives could become unreachable.
    Governments are additionally constrained in their choice of policy tools by the international agreements to which a country is committed.  These generally refer to trade processes and related pricing or tax considerations, capital transfers and labour movements. Additionally, countries that are members of specific ‘unions’ , like the European Union or its Economic and Monetary Union (EMU), are further constrained in their policy choices because key price parameters like the currency’s rate of exchange or the base rate of interest are outside their influence. They are in the main ‘price takers’ in so far as these strategic parameters are concerned.
    In such cases, the application of the microeconomic techniques to evaluate the well-being (or welfare) economy wide (hence the application of ‘welfare economics’) will be restricted in its everyday implementation. Other measures, besides the price structures that result in the multitude of markets that make up the economy, will have to be considered and implemented. ‘Direct controls’ - introducing quotas; eligibility by personal status referring to age, gender, nationality or income; or upper/lower limits - are one such device.
    However, the issues emerging from the standard economic debate remain.  These refer to the role of markets; the private sector as producer and consumer; the public sector as an agent for resource allocation and redistribution; and legislation ruling the interrelationships between the government and the private market; producers and other producers and consumers; and consumers and other consumers and producers. Other issues involved concern  property rights, compensation, and the interrelationship between such rights entrenched at law and the ensuing entitlement to compensation.
    In turn, these considerations lead to the role of the courts of law in the smooth proceeding of market transactions and the growth of domestic and foreign trade. In a developed, mature economy, disputes have to be settled civilly and speedily. The role of the political system and the entire process of decision-making in a modern parliamentary democracy are equally important considerations. 
    This system can either enhance the process of future economic and social development or act as an inherent drag by bringing into being attitudes and organisational structures that go against the long-term sustenance of systems that sustain economic restructuring, social engineering, and interpersonal support. This set-up becomes critically relevant especially in an economy where the share of economic activity undertaken by the state, as measured by shares of ownership of assets, tax revenues and government expenditure in the aggregate value of goods and services (the Gross Domestic Product), is comparatively high.
    Economic theory draws an ‘ideal scenario’ which represents the absence of control in a market by any one, or group of, producer or consumer. It is referred to as ‘perfect competition’ where all those involved in the dealings, whether buyers or sellers, are price takers: they decide on how to behave in such situations by determining on the amount they are prepared to offer for sale or to acquire. This set-up yields a series of prices/costs which reflect a commodity’s scarcity, the efficient utilisation of resources, and the generation of ‘fair’ profits.
    Such a market situation is rare in the real world. But it yields the conditions against which to gauge the ‘attributes’ of the welfare contribution of the many active markets. In turn, theory introduces other considerations as the structure of the markets is explicitly diversified, and, perhaps more important from a welfare viewpoint, as it is specifically acknowledged that all human action produces direct effects on the welfare of other consumers and producers. 
    These effects are referred to as ‘externalities’ because they occur directly outside the market system. Environmental issues and relative income distribution considerations fall under such heading.  They may be addressed by fiscal intervention through ‘appropriate’ taxation and subsidies or other measures, like zoning areas.
    Again, there are instances where markets fail because the nature of activity is such that the private sector may not be interested in the absence of certain long-term conditions. One such case would be a market marked by goods or services consumed jointly and equally by all. Consumers may not be prepared to reveal their willingness to pay for the service, and, consequently, producers cannot evaluate risks involved in production and distribution with a degree of confidence. So, governments are ‘expected’ to intervene and launch such commodities, known as ‘public goods’. These would be financed entirely, or in part, by general taxation or public sector borrowing.
    Of course, this reasoning does not constitute a blank cheque for public sector capital expenditure.  These investment appraisal techniques, based on discounted cash flow methods, can trace the ‘feasibility’ of an investment decision as other criteria are introduced besides the purely financial ones. And if carried out objectively – that is, in the absence of a hidden agenda where the investment tool is being used in such a way to attain a wanted result – then such statistical and quality evaluations could guide meaningful discussions on the subject under scrutiny. The enhancement of personal and social capital, - reflecting technology advances, demographic characteristics, and the dissemination of life skill formation - is a prerequisite for human development, social advancement and, consequently, economic growth.
    Such undertakings expect the availability of a large amount of information.  These statistical data sets – including consumer preferences reflected in prices, total expenditure outlays, cost of capital goods and services, values of past and projected imports/exports, labour skills and related wages - may simply not exist. Such lacunae do somewhat impair appraisals leaving the subjective nature of these social cost-benefit evaluations unable to be minimised.
    Discovering the relationship between welfare economics and sustainable development is not a straightforward exercise. Even in terms of pure theory, there are several moot points about the basic concepts themselves such as whether ‘sustainable development’ should be a policy issue independent from the ‘traditional’ policy objectives generally discussed within the confines of welfare economics. However, the themes are intrinsically intertwined with personal and social well-being and, for this reason alone, they are worth pursuing.

    E.P. Delia published studies on the demographics, macroeconomic policy and sectoral development in the Maltese Islands. Recent publications include ‘Ethical investment in a dynamic society’ (2012) and ‘Evaluating Malta’s political economy’ (2017)
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication) 
    Studies by workplace psychologist Dr Nigel Oseland show that improved fresh air supply could increase employee performance by 20 percent. The research demonstrates that natural lighting and comfortable indoor temperatures also enhance performance. Modern workspaces should be guided by this philosophy from their inception to their design to the choice of suppliers. 
    This is an ambitious goal, but developers must make sure that comfort criteria are not met at the detriment of environmental sustainability. Fresh air supply, temperature control and lighting are energy intensive systems that contribute significantly to the environmental footprint of any development. On the other hand, the greenest of buildings remains ineffective if it is designed with only environment concerns in mind: environmental considerations cannot ignore the well-being of tenants and visitors.
    This is the balance that Trident Park, the exciting redevelopment led by Trident Estates plc, seeks to strike. Located within the Central Business District in Mrieħel, Trident Park will be Malta’s leading green office campus.
    The environmental performance of a building will be maximised after a significant area was allocated for landscaped gardens instead of development. The strategy behind this was to steer away from intensive development and dedicate more space to external landscaped areas. 

    Sustainable office developments achieve excellent indoor comfort conditions using cooling technology that controls the temperature of the building fabric rather than blowing cold air via conventional air conditioning systems. Employees prefer office spaces with openable windows, balconies and terraces rather than sealed spaces where the only fresh air comes from ductwork.
    Heritage sites present a bigger challenge for designers and architects, so it is heartening when heritage buildings, that have been listed and saved, are incorporated in a new design that fully respects its heritage. Bulldozing old structures to make way for more intense office space destroys the character that distinguishes us from the rest. The challenge of the designer is how to restore and retain some of the old structures without compromising on the aesthetics and performance of new ones. 
    The design of Trident Park has been informed by this philosophy landscaped gardens feature between office blocks with the complex set within a linear landscape separating it from the public main road. The ambience promotes relaxation relaxed, while the development design maintains the integrity of the unique aesthetic quality of the structures and the surrounding built environment. New buildings will feature exceptional quality architecture in harmony with the visually striking art deco façades. The styles and materials of the art deco originals are complemented by a contemporary idiom that meets and exceeds the environmental and infrastructure expectations of businesses. 
    Buildings will be constructed and finished to high international standards. The Class A offices will provide among the best functionality, infrastructure and a working environment in Malta. Trident Park will offer the finest office space attracting both international and local tenants. To achieve this, high levels of workmanship are being engaged using first-class materials throughout the various stages of development, raising the bar in the local construction industry.
    As part of its corporate social responsibility, the development considers ways to decrease the number of vehicles on the roads and alleviate problems related to traffic congestion and parking problems in the area. These measures work to reduce the carbon footprint resulting from conventional means of transport and minimise environmental degradation caused by the project. 
    New opportunities will be created to motivate staff members and visitors to travel by alternative means of transport while promoting other ways that increase the commuter-to-car ratio. Offices can implement green travel initiatives and facilitate their take-up by setting up an executive Green Travel Task Force to discuss and implement initiatives related to the environment and travel. The taskforce’s ultimate responsibility will be to encourage employees to embrace and adopt the initiatives proposed. Trident Park expects to welcome its first tenants in the first quarter of 2021.

    Charles Xuereb
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    Securitisation in a nutshell
    Securitisation, which forms part of the Capital Markets Industry, is essentially the “process” by which an issuer brings together other financial assets to form a single financial instrument which can be listed on reputable exchanges. The Issuer can then market different tiers of this instrument to investors. Any type of financial asset can be packaged into this instrument, and its intention to re-package the instrument and to promote this to investors in the marketplace. All types of assets and receivables can be securitised, be they existing or future, movable or immovable, tangible or intangible.  The holder of the asset, known as the Originator, transfers their asset(s) to a securitisation Special Purpose Vehicle (SPV) together with all associated cash flows and risks. This SPV can then make securities available for investment backed by the assets contained within the instrument. Such securities can be described as bonds, pass-through securities or CDOs (Collateralised Debt Obligations). The investors’ returns stem from the principal and interest that is collected from the underlying debt, which is then distributed through the new financing capital structure.

    Clear, transparent regulation
    The advantages of securitisation are increased liquidity in the market place and, unlike corporate debt, for example, credit risk is mitigated by a pool of securitised assets. It is a flexible, efficient, low-cost means of raising capital, and can be an effective method for transferring risk away from one entity to another. Investors are attracted to the potential for higher rates of return, the ability to invest in specific pools of assets, and achieving diversification in their portfolios.
    In 2014, the Maltese Government passed the Securitisation Cell Companies Regulation which, in conjunction with the Securitisation Act of 2006, created a pioneering framework in Malta for securitisation transactions. The result is a cell structure for securitisation vehicles whereby assets and liabilities can be set aside under one legal structure. This has created a clear framework for both Originators and Investors alike and made Malta into a prime location for securitisation activities.
    The level of protection that regulations afford to investors, whereby they have a legal right to any assets attributed to a segregated cell, further bolsters the attractiveness of the Island’s financial framework. Should an Issuer become insolvent, for example, then each cell is protected from the others, so the Investor’s investment is better protected. While the benefits of the Maltese securitisation framework apply to any asset class, Malta is particularly well placed as a jurisdiction for the securitisation of transport-related assets, given the additional benefits of Malta’s maritime and aviation legislation that can be applied to such transactions.
    In February 2019, the Malta Financial Services Authority issued a Circular on the Securitisation Regulation regarding Implementation of the Securitisation Regulation which highlights the importance of the Anti-Money Laundering (“AML”) requirements as set out by the AML Regulations. This Regulation is enforced and followed in Malta which means that all parties involved in the securitisation “process” are protected.
    The Securitisation Tax Rules enable securitisation vehicles established in Malta to eliminate tax leakage and achieve tax neutrality in Malta, in respect of the securitisations for which they are established. No Maltese tax is withheld/payable on payments of interest, nor on the transfer of securities issued by a securitisation vehicle to a holder of the vehicle’s securities, provided that the investor is not resident in Malta, does not have a permanent establishment in Malta, and is not owned and controlled (directly or indirectly) by, or acts on behalf of, an individual who is ordinarily resident and domiciled in Malta. 
    In November 2016, the Legal Notice (LN 383 of 2016) was amended to include the management of Securitisation Vehicles as part of the definition of Investment Schemes under Part Two of the Fifth Schedule to the Value Added Tax (“VAT”) Act. The management and administration of Securitisation Vehicles is not subject to VAT without credit. The interest and/or dividends the SPV outflows are not subject to Withholding Tax, and as it is resident in Malta, it can benefit from tax treaties with a large number of major jurisdictions. The EU Parent Subsidiary Directive and VAT exemptions on management services are also strong points in favour of investing in Maltese SPVs.
    Another advantage of having a securitisation cell company is that any assets that have been allocated to a particular Cell will be completely segregated from any other Cells under the structure. This ensures that the investment made by Investors will not be compromised should any asset under another Cell default or declare bankruptcy. The benefit of this is that the Issuer is allowed to create specific products with varied risk metrics and investment terms to target a specific profile of Investors while being able to leverage on timing and cost efficiency that the use of these structures brings. There is also the possibility that any Cell can be liquidated while other Cells remain in operation. Last but not least, SPVs do not require a license from the Malta Financial Services Authority (MFSA), so there are no licensing costs to be incurred. A lower rate of initial capital is also possible as there are no minimum requirements in this area. The SPVs would simply need to notify the MFSA that it is their intention to act as a securitisation vehicle. The SPV will also notify the MFSA of the creation of each Cell under its structure.
    Everything close at hand
    Malta itself has a proven track record when it comes to investments of this nature. The market boasts strong, experienced players with broad and successful track records in brokering securitisation deals. The local tax authorities take an economic approach to financial investment on the island, and their proximity and accessibility make them a valuable partner. This, combined with strict, transparent rules to protect Investors, Originators and other securitisation creditors ensure that Malta is a leading location within the European Union for securitisation SPVs.

    Mark Borg is a Fund Manager at Alter Domus Malta.
    Mark joined Alter Domus in November 2013.
    He currently works in the Fund Administration Department and is mainly responsible for administering Regulated Entities and Securitisation Vehicle structures.
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    The sixth update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation through Council Directive 2018/822/EU (commonly referred to as “DAC 6”) is now in force. 
    DAC6 imposes mandatory disclosure by intermediaries (and taxpayers, in specified situations) of certain arrangements with an EU cross-border element where the arrangements bear certain “hallmarks” set out in the Directive. These include not only transactions that are tax-motivated, but also ordinary transactions that may have a “potential tax effect” even though they are not driven by tax planning motives. 
    EU Member States, including Malta, must transpose DAC6 into national law by 31 December 2019 and apply the new rules from 1 July 2020. However, these new rules have retroactive effect with an obligation to report on all transactions since the date of the Directive’s implementation, 25 June 2018. 
    This means that intermediaries and taxpayers must take immediate action to keep track of any potentially reportable arrangements that have occurred on or after that date. 

    What are the reporting timelines?
    Relevant Member State’s competent authorities are required to file information on reportable cross-border arrangements referring to the period from 25 June 2018 to 1 July 2020. Information must be filed by 31 August 2020 and will be exchanged among Member States by 31 October 2020. 
    In cases of non-compliance with the new measures within the stipulated timelines, penalties may be imposed.
    What is a cross-border arrangement and what features render a cross-border arrangement reportable under the Directive?
    A “cross-border arrangement” means an arrangement (or series of arrangements) concerning either more than one Member State or a Member State and a third country where at least one of the following criteria is met: 
    • Not all participants in the arrangement are tax resident in the same jurisdiction;
    • At least one of the participants in the arrangement has dual residency for tax purposes;
    • At least one of the participants in the arrangement carries on a business in another jurisdiction through a permanent establishment situated in that jurisdiction, and the arrangement forms part or whole of the business of that permanent establishment;
    • At least one of the participants in the arrangement carries on an activity in another jurisdiction without being resident for tax purposes or without creating a permanent establishment situated in that jurisdiction;
    • Such arrangement has a possible impact on the automatic exchange of information or the identification of beneficial ownership. 
    Cross-border arrangements are reportable if they fall within one of the “hallmarks” set out in five different categories in Annex IV to the Directive. These hallmarks are broadly scoped and represent certain typical features/characteristics and elements of transactions that present an indication of tax avoidance or abuse of direct taxes. Certain hallmarks are linked to a “main benefit” test and, as a result, an arrangement falling within such hallmarks will only be reportable to the extent that the main benefit test is fulfilled.
    The main benefit test is satisfied where one of the main benefits expected from an arrangement is a tax advantage. Therefore, , the following are the three key points to consider (in chronological sequence) when undertaking the test: 
    (i) establishing what the “arrangement” is;
    (ii) determining what “tax advantage”, if any, is expected;
    (iii)  determining if this is a “main benefit” of the arrangement by comparing the value of the expected tax advantage with any other benefits which are likely to be derived as result of the transaction. 
    Unfortunately, the term “main benefit” and the concept of “tax advantage” are not defined in the Directive and interpretations in this respect are still being developed. Until guidance in this respect is available and the scope is clearly defined, it is suggested that one should interpret these broadly. 
    The table below summarises the hallmarks and highlights those to which the main benefit test applies.

    Who is an intermediary?
    An intermediary can be any person (legal or natural) who designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement, or anyone who provides assistance and advice with respect to such services. Such a person must also meet at least one of the following additional conditions to be considered an intermediary: 
    (a)  be resident for tax purposes in a Member State.
    (b)  have a permanent establishment in a Member State through which the services with respect to the arrangement are provided.
    (c)  be incorporated in, or governed by the laws of, a Member State.
    (d)  be registered with a professional association related to legal, taxation or consultancy services in a Member State. 
    This means that many people may be affected by the Directive, including lawyers, tax advisers, corporate service providers, banks and trustees. 
    The Directive stipulates instances where the obligation to report an arrangement shifts to the taxpayer, including where the intermediary is a non-EU intermediary (where the intermediary does not satisfy at least one of the conditions referred to in points (a) to (d) above), where there is no intermediary involved (for example in an in-house arrangement) or where the taxpayer is notified by the intermediary that he/she (the intermediary) has the right to a waiver due to legal professional privilege.
    Concluding comments
    Until the Maltese rules implementing the Directive are introduced, it is advisable that arrangements from 25 June 2018 onwards are monitored and records of potentially reportable arrangements are maintained. 
    Ideally, these records are sufficiently detailed and include (amongst others) details of the potentially applicable hallmark/s, the relevant arrangement and dates and the intermediaries involved (if any).
    At this stage, it would be prudent to give apply a broad interpretation to the Directive when considering which arrangements may be reportable in 2020.
    Neville Gatt is a tax partner, heads the tax line of service at PwC and lectures at the University of Malta.
    Mirko Rapa is a tax partner at PwC.

    Audrey Azzopardi is a senior manager at PwC working in the tax line of service
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    Many countries around the world are coming to terms with the consequence of their development. In particular, poor air quality is a primary cause of premature death in a number of cities. Increases in pollution, excessive waste and climate change have become major causes for concern requiring radical changes in the way society functions and calling for decisions to be made with sustainability in mind.
    The financial system, too, has an important role to play and a mechanism is emerging to deal specifically with these threats. Sustainable Finance ensures that the capital is allocated to investments that contribute to a sustainable future.
    Sustainable Finance is the process of looking at investment decisions, by taking into consideration Environmental, Social and Governance (ESG) factors. This can either be in the form of Green Finance or more broadly in the form of Sustainable Investing. Research suggests that companies that embed sustainability in their business model benefit from improvements in their long-term operating performance, which positively impacts the company’s cost of capital and share price.
    Over the past years, sustainability has moved into the mainstream and studies carried out by an international investment bank noted that millennials are three times more likely to make life decisions based on sustainability factors, in particular embracing ESG factors when selecting their investments. Furthermore, Morningstar, a reputable funds research website, reported that in recent years the use of ESG data has more than quadrupled.

    Understanding ESG Factors
    To evaluate the sustainability of an investment, investors need to assess ESG factors as part of their fundamental analysis. Investment firms are now incorporating ESG research and analysis in their investment process, recognising that these factors can impact long-term corporate performance and investment returns. The following are some considerations that help explain ESG factors:
    Environmental factors are how a company cares about the environment:
    • It looks at a company’s energy / water consumption and carbon emissions
    • The use of renewable and alternative energies,
    • The use of packaging materials and the responsible disposal of waste.
    Social factors are how a firm manages its relationships with employees, suppliers, customers and the communities:
    • The way the company best utilises its Human capital - its staff engagement and innovation capacity,
    • Employment practices - demographics and gender equality,
    • Its consideration of Health and safety policies.
    Governance factors are about a group’s leadership, executive pay, audits and internal controls, and shareholder rights:
    • The company’s Corporate Governance and the transparency appropriateness of its disclosures,
    • Business ethics and integrity,
    • Corporate Culture and values.
    In the investment universe, Sustainable Investing analysts recognise that a company’s intrinsic value is linked to the integration of ESG factors. Having the right level of disclosures to assist analysts in conducting fundamental analysis is key to enable companies to thrive in the longer term. As investors are seeking more ESG data, companies are presented with an opportunity to enhance their disclosures to meet these emerging demands.
    Financial Disclosures
    In recent years, investors have been reminded of the value of ESG factors after incurring substantial losses. The collapse of Enron and the oil spill in the Gulf of Mexico were just two of the incidents that highlighted the value of ESG factors. Given the significance of these issues, Stock Exchanges and independent bodies around the world require listed companies to regularly report their ESG performance. Many Multi-National Companies have embraced this new responsibility and included sustainability reports as part of their annual report and accounts.
    The importance of disclosures has led to a non-profit organisation to be formed in 2011, called the Sustainability Accounting Standards Board (SASB). The main purpose of this organisation is to develop sustainable accounting standards to assist companies in disclosing material ESG information useful to investors. The Financial Stability Board’s Task force on Climate Related Financial Disclosures issued a series of recommendations for companies to disclose the impact of climate related risks.
    The UN has also set out its Principles for Responsible Investment (PRI) which is a Sustainable Stock Exchange Investor Working Group. One of the principles defined is support efforts to encourage companies to make ESG-related disclosures. The expectation is that stock exchanges and regulators will enhance listing rules and regulatory initiatives to require the disclosure of sustainability strategies among listed companies.
    Malta’s perspective
    To what extent are Maltese Companies embedding Environmental, Social and Governance factors?
    As the Maltese economy is going through a period of accelerated development, a number of Maltese companies have started to pay attention to the importance of sustainability and the factors which underpin Sustainable Finance.
    Historically, Maltese companies have placed greatest emphasis on the social dimension, through CSR activities and charitable giving. In recent years, listed companies or regulated entities, have had to strengthen the Governance factor, particularly given the suite of regulatory changes coming from the EU. However, Environmental issues pose the biggest threat to sustainability as they have both the greatest impact and the greatest risk. Sadly, only a few companies have considered the Environmental factor so far and greater investment is needed.
    Research has shown that companies that invest in ESG stand to benefit from a lower cost of borrowing and an increase in share price. Maltese companies would, therefore, stand to gain by paying more attention to ESG factors as this will ultimately secure longer-term return to investors and ensure greater sustainability for its stakeholders.
    With limited resources and ever-increasing demands of a growing and aging population, sustainability is the root for further growth. However, sustainability is not only about growth and returns; it is about ensuring that we are responsible for our actions and decisions so that the future does not lose to the present.
    Wayne Spiteri is an Accountant by Profession, with extensive knowledge of the Maltese and International Banking and Asset Management Industry. Over the past 15 years he has held various senior positions with leading International Financial Institutions in Malta and in the UK.
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication)

    The financial industry carries out billions of transactions on a daily basis creating a platform for possible problems such as fraudulent transactions, criminal activity, additional fees and frustrating delays. According to the financial services sector analysis of PwC’s 2014 Global Economic Crime Survey, 45% of financial intermediaries face some kind of criminal activity by clients using their services. This leads to one of the highest costs for financial institutions: regulatory services. Besides the costs, financial institutions are also inefficient. Centralisation in most institutions increases their vulnerability to criminal activity attacks, system failures while making it more difficult to change. Blockchain technology, however, promises to address these problems. 

    Blockchain technology started off in 1991, with the utilisation of a cryptographically secured chain of blocks. Haber and Stornetta, continued to pursue this idea using Merkle trees to pull different documents into one block. Nonetheless, blockchain technology only gained momentum in 2008, when the first Bitcoin white paper was published. Before Bitcoin, BitTorrent and other services  came alongwe were rather used to centralized platforms. The centralised entity stored all the required data for any sort of transaction and people interacted solely with this entity to access that information. Banks are the best example of centralisation in the case of financial transactions, but blockchain arrived to disrupt it all. The idea is to be able to have a globally distributed ledger running on millions of devices, with a further process of recording any movement and transaction. Should one consider any financial asset, such as money, bonds, contracts and equities, these can be moved and stored securely via an established trust within the network itself as well as cryptographic algorithms. Financial institutions are investing in blockchain solutions, taking the opportunity to reduce friction and costs.
    The enthusiasm for blockchain from big banks and financial institutions is gaining momentum. JPMorgan have recently announced their creation of the JPM Coin, a digital token using blockchain technology enabling instantaneous transfer of payments between institutional accounts. This is just one of many examples that show the potential of blockchain as an evolutionary technology in the financial-services sector.  According to International Data Corporation (IDC), worldwide investment in blockchain solutions is forecast to reach $11.7 billion in 2022. This same report notes that the financial services sector leads the way with $552 million.
    While there is no denying the numbers are low, the rate of adoption is far from slow and senior executives in financial services are taking blockchain seriously.  Most of us want to know and understand if we are coming close to the end of banking as we know it. This can only be seen and evaluated within a few, once more institutions are willing to be join this new technology. Blockchain is ultimately not a threat as long as people are willing to adapt to any potential disruption.
    Denise De Gaetano is a data science, and business consultant with almost 12 years of experience working within various industries. Her skills and expertise have helped with the transformation of data investments into actionable business results through the visioning and implementation of Big Data, Web Presence, Content Publishing, and Enterprise Search solutions. She was also involved in business strategies providing a superior engagement experience through a combination of business acumen, intellectual curiosity, a collaborative work style, and strong partnerships with award-winning vendors.
  • 2 Aug 2019 12:00 | Anonymous
    The Accountant – Sustainability. Summer 2019 (MIA Publication) 
    Just a couple of months ago, my wife Liane gave birth to our second son, Giorgio. If my life was hectic before his birth, juggling all my responsibilities from now on is a daily challenge that I face head on. I must admit, this is only possible thanks to my wife’s unconditional dedication to the wellbeing of our family. A typical day usually starts with a quick breakfast and dropping my son Matteo off at preschool, following which I go into a marathon of meetings, emails and phone calls until the evening, which is then taken up by football training. 
    And now more than ever, I do my best to get home in time for dinner with my wife and kids. As expected, I am exhausted by the end the day, but I also close my eyes excited to start the next one, because living a full life is my top priority.

    Not everyone’s definition of a full life may be the same because we all have different priorities. In fact, I’ve been asked why I don’t slow down, as it looks like I have more than enough on my plate. But I believe that a balanced combination of family time, work and hobbies is key to finding happiness – especially because none of my passions are negotiable.
    For instance, football is a staple in my life. At the age of five, my parents enrolled me at the Sliema Wanderers football nursery and that’s where I spent most of my football career. After having represented Sliema in all age groups at youth level, I then moved to achieve my childhood dream of playing for the senior team. I played for Sliema in Premier Division for a good six years with more than 120 caps to my name. I was also a regular with the National Team up until Under 21 level – a true honour to represent my country! With work becoming more demanding, I then took the decision to take a step back and move on from Sliema and play in the first division. That’s where I represented clubs including Vittoriosa Stars, Gzira United and Senglea Athletic. These years were memorable and very successful as each ended with a promotion to the premier division. I have now recently joined Qrendi FC, determined and hoping to achieve the same result.
    I believe very strongly that there is no better way to get an education than the school of life – and if I am honest, I learned many of my lessons out on the football pitch. Sport taught me a lot about discipline, loyalty, integrity, teamwork, perseverance and self-care. And although it is primarily a physical activity, sport requires a great deal of strategic thinking and can be quite emotional too.
    After 25 years of playing football, I approach life in much the same way as I approach the pitch. The principles and values that I learned in football are the same values I seek to instill through my leadership at NM Group and the same values that I strive to pass on to my kids. This is what I’ve learnt so far:
    One thing you definitely learn in sport is self-discipline. The rigours of football demand that the player looks after their physique with strict training programmes and healthy diets. Growing up, honouring training commitments sometimes leads to missing social events, especially when you add the academic demands that come with school and university. This was one of my first lessons while learning to prioritise my workload and ensure that between my commitments, I was able to make time to see my family and friends.
    Team-based sports will teach you a lot about loyalty, respect and how to work with others – this sometimes means swallowing your pride and ensuring that your effort is dedicated to the team’s success, and not purely your own. This can apply very easily to the work environment where working as a team is essential for swift and efficient task completion. Thanks to the strong team we have at NM, we have been able to grow from a small accounting practice into a full-service corporate firm specialising in accounting, corporate, legal and business advisory.
    Learning to win and lose
    Learning to win takes perseverance, patience and skill. Honing your skill to the point where your execution is flawless is crucial – and you don’t get to that point without failing a few times. Accepting failure is also a key part of success. One of the biggest losses I have had to face was a critical injury in 2016, which put my football career on pause for several months. The recovery process was not only tough physically, but it also took a toll on my confidence and well-being. Whether you’re practicing free kicks, learning how to manage a team, or finding the best way to help your children sleep through the night, success takes time. 
    Life is full of ups and downs. When the going gets tough, perseverance is vital. 28 years ago, my brother Pippo passed away at the tender age of six months due to multiple heart conditions. This tragedy saw my parents launch an accountancy practice that has today evolved into the NM Group. Just last year, we launched Fondazzjoni Pippo as the social wing of the NM Group. Named after Pippo, the foundation works to unite the business community through CSR initiatives with the aim of helping people in need, while raising awareness about the many issues and struggles faced by the local community. With this, we want to encourage others to appreciate what they have in life and lend a helping hand to the less fortunate.
    Each day brings new challenges and maintaining the perfect balance daily is tricky – but not unrealistic. While my passion for sports led me to football, a hobby can take any form, be it the arts, sports, cooking or volunteer work. No matter how busy your schedule is, any discipline you decide to pursue will bring valuable lessons that will shape your life in a way that works for you and those around you.
    By day Beppe Muscat is the CEO of NM Group and the Founder of Fondazzjoni Pippo, but after work hours, Beppe is a semiprofessional footballer, husband and father of two. With only 24 hours in a day, Beppe explains how he balances family, work and his passion for football.
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