Welcome to our Transparency Report
A message from our Managing Director
Our strategy during 2021 has concentrated towards what we considered to be the most important pillars namely, maintaining the health, safety, and wellbeing of our people, advancing our digital and technological capabilities both internally as well as externally helping our clients, strengthening our bundle of innovative services offered to our clients and maintaining the highest standards of quality in everything we do.
Christos Vasiliou, Managing Director
I am very pleased to present to you our 2021 Transparency Report. The report contains insightful information about our strategy, our performance, our corporate governance and quality control systems for 2021.
KPMG has been operating in Cyprus since 1948 and currently employs an average of 846 professionals working from 6 offices across the island. It is a member of KPMG International Limited, a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG operates in 145 countries and territories and has approximately 236.000 people working in member firms around the world.
KPMG in Cyprus is a leading professional services organization on the island which has contributed significantly to government revenues during the year to December 2021. This amounted to €19 million, including income tax, special contribution for defense, PAYE, VAT, GHS and social insurance contributions.
Last year was yet another challenging year for the professional services sector. The prolongation of the pandemic and the inevitable restrictive measures that were applied by the government, some of which are still in force, continued to slow down the rate of growth of the economy. This has not left our Firm unaffected. We experienced a slowdown of 4,9% in our operations. The Audit function has shown a slowdown of 9%, while Tax & Legal has contracted by 6,5%. Our Advisory Function has shown a healthy growth of 8,4%.
Our strategy during 2021 has concentrated towards what we considered to be the most important pillars namely, maintaining the health, safety, and wellbeing of our people, advancing our digital and technological capabilities both internally as well as externally helping our clients, strengthening our bundle of innovative services offered to our clients and maintaining the highest standards of quality in everything we do. We have also invested and will continue doing so, in our ESG capabilities starting from transitioning our Organisation by committing to become carbon neutral by 2030 and continue assisting our clients in their ESG journey. The response from our clients is extremely encouraging indeed. Clients look to KPMG for a consistent standard of service based on high-order professional capabilities, industry insight, local knowledge and expertise. We have invested considerable resources into making the above strategy happen and we feel happy that we have managed to achieve those goals. This journey will never stop. We will continue investing in the above strategic priorities.
During FY21, we announced the admission of five new Partners, two in Audit, two in Advisory and one in Tax & Legal. I wish to welcome them all and wish them every success during their journey with us.
Two of our Advisory partners have opted for a career in the Banking Sector. I wish both of them every success in their new ventures.
In 2021, as in every year, we continued our commitment to quality and integrity by setting very high standards. We managed to adapt our Firm’s model in line with the changed economic model of our country.
We have also committed resources in our Corporate Social Responsibility activities and offered to our society and to those in need, became even more active in the COVID-19 period to assist in combatting the effects of the pandemic. Amongst our CSR activities, KPMG in Cyprus is offering pro-bono Advisory Services to the Cyprus Cancer Research Institute. Based on the partnership, the scope of the services relates to the overall design of the Institute’s operating model.
All the above could not be achieved without the help of our greatest asset, our people, to whom we are so grateful. Despite the social distancing, they have all been working so hard, contributing positively to our deliverables. Transparency and accountability have been and shall continue to be framing the way we deliver our work.
Our strategy is fully aligned with our Global Firm’s strategic priorities, tailor-made to the needs of the market in Cyprus.
All our partners are fully engaged in maintaining KPMG as the Clear Choice for our clients, our people and the society in general.
How we’ve performed
Audit quality continues to be our number one priority and upholding it during a period of unprecedented disruption has been an absolute focus of the past year.
A quality audit requires a high degree of sophisticated cooperation – with clients, with stakeholders and within the audit team. Traditionally, this has been coordinated through a lot of face-to-face contact. COVID-19 upended all this, forcing a rapid period of adaptation.
Maintaining the crucial ‘softer’ elements of the audit procedure has also required special attention. To have a high-quality audit we know we need to understand an organization, apply high levels of professional skepticism and build trust and rapport. Pre-pandemic that understanding was built from being physically present. Forced remote interactions have necessitated working differently, being alert to broader issues within the organization and being diligent about the questions asked. This year our people grappled with some of the most complex audits we have encountered, due to the extraordinary circumstance of some of our clients. Disruption to revenue, supply lines, rapid changes to business models, assumptions around asset values, increased uncertainty – all have played into the complexity.
It’s well established, of course, that disruption accelerates evolution. So, the stimulating thing now is being able to consider what the new normal looks like. Some of this has already been baked in. Our three-hub working model (Office, Client, Home), for example, will be our way of working well after the pandemic emergency recedes. We have embraced this model, utilizing technology to facilitate collaboration and enable us to react quickly and minimize the disruptions that COVID-19 restrictions had imposed.
The desired culture and behavior are also key in driving audit quality. By raising employee engagement and embedding an ethical and collaborative culture through our globally aligned “Everyone a Leader” framework, we articulate what high performance looks like at KPMG and outline the critical competencies all our people need to demonstrate in order to drive enhanced performance individually and collectively.
This year we also ramped up our deployment of the KPMG Clara workflow, a key pillar of the Global Audit Quality transformation that will enable our audit teams to enhance audit quality and consistency across our entire client portfolio. The KPMG Clara workflow is an exciting tool for our Audit practice, because it facilitates doing far more with the data we are now able to accumulate and process, all in the one place. It takes our technology to a new level, creates consistency, clarity and more intuitive ways to further improve our audit quality.
An additional headwind we have had to contend with has been the global skills shortage in audit. This will require careful attention from our sector. With the right initiatives we are optimistic that the pipeline of talent into our field can be improved.
On the opportunities side, the work of auditors is becoming simultaneously both more important and more complex. If there is a defining client trend right now, it is around ESG. Clients around the globe are being forced not just to grapple with ESG concerns, but to elevate them as first-order issues in just about any given context. As Boards adapt to this new reality, so too must auditors. The already sophisticated work of audit will need to become further nuanced as the intricate web of ESG opportunities and challenges takes centre stage.
It has been a transformative year and we recognize the importance of continued efforts to strengthen quality to meet the increasingly complex issues our clients face and the rising expectations of all stakeholders. We recognize the essential role we play in building confidence in our capital markets and we continue to take meaningful steps towards this with steadfast commitment to our core values.
Sylvia A. Loizides, Board Member, Head of Audit
* average staff numbers for Year 2021
Still experiencing the global shock of COVID-19, our firm continued to be impacted by the new circumstances in 2021. Our teams adjusted to working from home conditions and continued to re-adjust client management and relationships on new grounds, taking into consideration the necessities of the current times. The uncertainty triggered by COVID-19 on market conditions continued to bring about a slight reduction of tax revenue for the business.
Given the new circumstances, the tax practice, locally and internationally, continued to focus on identifying measures that would enable means of coping with the pandemic and the unavoidable impact on businesses especially when starting to experience the long-term effect of the pandemic on business demands. In 2021, our agile team of professionals has relentlessly focused on the servicing of clients while working from home, adjusting processes and timeframes to ensure the undisrupted course of our clients’ businesses.
As a result, the forecasted change in international rules continued to be slower for 2021 and though work in the international spectrum was shifted to 2021 from a 2020 rollover, the market is still to reach the pre-pandemic era.
In this respect and considering the challenges of 2021 as those continued from 2020 and the long-term impact of the pandemic in the economy and fiscal policy that has now started to be more evident, we need to continue reflecting on the transformation of our business more imminently than ever. Our work reimagining client tax processes and enhancing compliance ability needs to not only continue but also speed-up; the practicalities of social distancing will need to be tailored in to eliminate possible impact on business.
The need to seek out diversified skills needs to be intensified in order to transition into more integrated operations and grow. We need to continue our quest to recruit and invest in different sets of capabilities, diversify the services offered and provide more integrated solutions to our clients.
Our recruitment effort will continue to seek diversified mindsets with innovative ideas whilst taking into account people’s needs as regards to tax compliance, tax reporting and regulation. The tax function will keep driving towards a multi-disciplinary approach in response to market demand.
Keeping up with the spirit of our times calling from transparency and flexibility, we will continue to act responsibly and with integrity towards our clients and society maintaining our level of quality in relation to tax, thereby enhancing the trust placed in the quality of our services.
Our commitment to leadership is granted. In 2022 we plan to continue working towards making our tax services a CLEAR CHOICE for our clients, the society and our people, our most valuable asset.
George Markides, Board Member, Head of Tax
* average staff numbers for Year 2021
2021 has been another challenging but also an interesting year, amid the continuation of the COVID-19 virus worldwide.
Following the outburst of COVID-19 in March 2020 which slowed down the advisory market activity during that year, we observed that the market tried to return to normality. As a result, our Advisory business has shown a growth of c. 8,4% to (net fees) €10,86m in 2021 compared to €10m in 2020. Our Advisory Function consisted of an average of 175 professionals and 8 partners at the end of 2021, as opposed to an average of 154 professionals and 8 partners at the end of 2020. As from 1 January 2021, the Firm has appointed two new advisory partners in the functions of Risk and Management Consulting. In addition, two partners left the Firm seeking a career in the banking industry.
Over the past year we stayed close to our clients, collaborating and assisting them to overcome the difficulties that COVID-19 has created to them and the economy. We provided them with solutions related to digital transformation, restructurings, M&As, regulatory assistance and many more.
We have invested considerable time and resources in understanding our clients’ needs and we have managed to develop tailor-made solutions for them to address these needs effectively and in a cost-efficient manner. Our clients have appreciated our efforts demonstrating their endorsement. And this means a lot to us; it means that they trust our consistent focus on valuable outcomes. They trust that our approach delivers results which impact their businesses.
Our Advisory professionals work across all industries of the Cyprus economy and sectors and help clients boost their profitability, transformation, technology, risk, growth, structure and operations.
We continued winning valuable, challenging work that allowed us to demonstrate the depth of our talent and the quality of our work, assisting our clients to overcome the challenges they face. For the Government of Cyprus we have delivered a range of projects focusing on technology and service transformation and the implementation of IPSAS 41, the respective IFRS 9 framework applicable to public sector; we have also assisted in managing and delivering challenging transformative projects in several industries including healthcare, banking, payment services, telecommunications, etc. For our Banking and Financial Services clients, we have delivered end to end digital transformation projects by assisting in the management and delivery of digital transformation programs, data-driven strategies, customer experience strategies and even the development and implementation of digital solutions. For the particular industry, we are providing deep knowledge in assisting our clients prepare, manage and sell (or buy) loan portfolios (both performing and non-performing). In addition, we are assisting on several regulatory compliance and risk management issues.
We have also helped clients in the telecommunications and utilities sectors, the retail sector and many more and offered value for money services which enabled clients to either meet their regulatory requirements or boost their efficiency. At the core of our client portfolio though, always lie our Small and Medium Enterprises (SME) clients, the backbone of our economy that is now facing numerous challenges. We assist our SME clients to re-define their business models by re-thinking their service and client portfolio, leveraging technology and new human capital management models, as well as optimising their operations.
Our Deal Advisory department handled several M&A and Valuations work and facilitated clients in their expansion plans both in Cyprus and abroad.
Our clients often tell us that we work differently. That begins with the way we look at their organisations and approach their problems. We strive to connect and understand our clients and become one with their internal teams. Our professionals are trained to empathise with them, view their environment through their eyes and think deeply about their challenges, not just about the solution we want to deliver. To achieve this, we apply a multidisciplinary and connected approach to delivering engagements, comprising the right combination of expertise to work on the right solution. For us, this is our standardised approach of a more connected and collaborative business. Our clients tell us that this is a different way of working, that resonates both with their employees and their management.
Our clients are extremely important to us. But our people are our most valuable asset. Our business is attracting great talent at all times and this year we welcomed more than 55 new Advisory hires. We are proud to employ highly-skilled and results-oriented professionals possessing experience from leading Advisory firms worldwide. In the year to come, we will focus on attracting even more talent and accelerating our growth, guided by our winning strategy. We will also continue to invest in technology and innovation on a scale which gives us a competitive advantage and renders our Advisory practice the first choice of employment.
Looking to the future, we will remain focused on both anticipating and responding to the disruption we see all around us. This means running our business in an agile way, embracing change and continue to invest in talent and technology. All of this will be underpinned by a relentless focus on quality, integrity and trust.
Christos Vasiliou, Managing Director & Head of Advisory
* staff numbers as of 31st December 2021
A message from our Chairman
We do have an impact on our society and we want that to be positive! Our vision is to be the choice for clients, our people and the society in general.
We are a strong team, we have sound support and values. This is a strong base for responding to challenges!
Michael Antoniades, Chairman
We are entering the dynamics of the post COVID-19 period and the socioeconomical impact of the Russian - Ukraine situation.
The inflationary increases in prices that we have been observing globally, mainly relating to transportation costs of goods and energy and the scarcity of resources in main economic industry lines, are observable results of the economic impact of COVID-19 and are further escalated by the Russian - Ukraine situation. In addition, the latter resulted in the sanctions that we have been observing recently restricting further the economic activity and negatively affecting the capital markets globally. Until the time comes, when supply will resume the levels to the pre-COVID period, that will naturally push for an adjustment in prices, the traders and ultimately consumers are called to pay for such price increases and adjust to the revised levels and constraints of economic activity. This is an additional stress test imposed on our clients, on our communities and to the economies world-wide.
We have always targeted a holistic approach on all of our projects by investing appropriate time to understand the needs of our clients, then develop a plan to address those effectively and finally execute delivery in a cost-efficient manner. The general message coming from clients so far is a thank you to the KPMG family. We have always been aiming professionalism by following our values.
This becomes particularly more important now that our clients are faced with such an additional economic stressing. We need to be a step ahead of developments, maintaining the level of comfort and support that our clients have been used to and expect from us. KPMG has not been inactive. We are being provided with tools to help us to be effective in this respect.
Sometimes we get tired and we want a break, we want to reenergise and we definitely want back normality. That is why our wellbeing is so important. Again, KPMG has been proactive. Our HR team has launched a number of initiatives supporting both mental and physical health, including the employment of a fulltime occupational psychologist and the promotion of the concept of physical exercise as well as the establishment of a gym and a running club.
KPMG in Cyprus is one of the largest firms and one of the largest employers on the island. We do have an impact on our society and we want that to be positive! Our vision is to be the choice for clients, our people and the society in general.
We are a strong team, we have sound support and values. This is a strong base for responding to challenges.
The impact we’ve made
Cyprus offices 6