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 * Sustainability Statements & Audit

 

Sustainability Accounting

Human Capital Management (HCM) Technology to Drive Financial Outperformance and
Provide relevant Sustainability Reports to Investors

Organize and automate transversal interactions for processing internal accounts
to align ESG reports with the financial report provided to investors:

 * Employee Engagement (EE) accounts,
 * Potentially Recoverable Losses (PRL) accounts and
 * Incentivized Pay Leverage Effect (IPLE) accounts.

Without these human capital accounts remunerated by the variable part of the
payroll as a driving force for internal financial performance, no bank or credit
risk counterparty can demonstrate how Sustainability Can Drive Financial
Outperformance.

The legal framework for providing alignment accounts for sustainability
statements with financial reports has long been known with internal control
laws; It has been strengthened since the last financial crisis by other laws and
practical sound rules to take into account the context of 100% Liquidity
Coverage Ratio (LCR) in which SME and large accounts operate since January 2019
for the WCR and investment financing:

 * SOX Section 902 (Corporate Responsibility for Financial Report) to be taken
   into account with Sections 404 (Operational Risk Control), 302 (Financial
   Reports and Internal Controls), 409 (Feedback in Real Time) and 802 (Criminal
   Requirements for Falsification of Documents),
 * SEC Response to Climate & ESG Risk and Opportunities (May 28, 2021) and
 * European directive amending accounting directive (directive 2014 / 95 / EU
   and modifications in progress),
 * AMF response to the European public consultation on the review of the
   extra-financial directive, June 12, 2020.
 * NASDAQ ESG-REPORTING-GUIDE (support Resource for Companies, 2019),
 * Value Reporting Foundation (IIRC and SASB, 2021),
 * Laws in force in the context of 100% LCR and requirements of
 * BCBS Sept. 2008, Principles for Sound Liquidity Risk Management and
   Supervision,
 * BCBS Oct. 2017, Basel III liquidity monitoring tools,
 * BCBS Dec. 2017 (Basel III: Finalising Post-Crisis Reforms) and
 * BCBS June 2019, Overview of Pillar 2 Supervisory Review Practices and
   Approach.

Employee Engagement (EE), Potentially Recoverable Losses (PRL) and Incentivized
Pay Leverage Effect (IPLE) are linked ESG Metrics of Social and Corporate
Governance (G) vectors. Because the accounts to be provided measure the means,
they condition the reality and enforcement of the environmental program
[Emissions (E1), Emissions Intensity (E2), Energy Usage (E3), Energy Intensity
(E4), Energy Mix (E5), Water Usage (E6), Environmental Operations (E7), Climate
Oversight / Board (E8), Climate Oversight / Management (E9) and Climate Risk
Mitigation (E10)].

Challenge to cross the decisive milestone of January 1, 2022

HCM Accounting Tech is essential to comply with the requirement of an
extra-financial statement or non-GAAP integrating an economic model covering 
the entire scope of the company (Main risks, policies applied and due diligence
procedures, results of policies and performance indicators) is a requirement of
a link between management accounting and financial accounting, i.e. the
production of internal financial performance accounts justifying to stakeholders
(employees, shareholders and investors) how the company mobilizes its capital,
including human capital (total paid workforce) for its internal performance
earnings plan associated with the statement of sustainability and what are the
results obtained at each reporting date

We are coming to this phase of "Basel III Finalising post-crisis reforms" (BCBS,
December 2017) while the management of many banks and companies is still in the
initial phase (Pillar 1) in which sustainability was perceived only as the
declared will of an organization to last over time and to adapt its development
to external conditions. January 1, 2022 is the date of entry into force of the
single Standard Approach (SA) of sensitivity to operational risk imposed on all
BANKS which affects their COUNTERPARTIES CREDIT RISK (CCR) given the context of
100% LCR in which all companies operate for WCR and investment financing [Large
accounts and SMEs, listed and unlisted: Insurance companies, Industries and
Services, including local authorities].

Compliance with expectations of all Banking Supervisors:

HR-focused cross-cutting management accounting FinTech whose methodological
patent for the accounting approach was filed in the USA 14 years earlier and
which was built, popularized and used to support the evolution of global
regulations after the subprime mortgage crisis, is therefore the only IT for the
level of requirement described below by section 2.3, Risk appetite of BCBS, June
2019, “Overview of Pillar 2 supervisory review practices and approaches”:

"Futhermore,



This requirement must be taken into account with the details on Sustainability
Alignment Data to be provided by Internal Control (BCBS, June 2019, Corrective
actions section”).

Global reference book published in UK on March 1, 2021:

 

  Following the 2020 World Finance Conference and the 2020 SIBR Conferences of
OSAKA, SEOUL and SIDNEY, join us with experts and scholars from 54 selected
universities around the world, book published in UK on March 1, 2021,
coordinated by the Harvard University (USA), the Center for Financial Stability
(USA) and the Accounting Department of the University of San Francisco (USA) who
worked with Dr Pascal Lélé, (a “seasoned leader in the FinTech industry”, CEO
and founder of HCM Accounting Academy, USA), to take the decisive step in the
accounting treatment of internal data of non-GAAP metrics that are lacking to
generate, on the basis of the risk appetite threshold, the economic capital (EC)
aligning the sustainability statements with the financial report provided to the
investor (Relevant sustainable development report for investors).



What is the amount of losses suffered by your company since this clarification
is known and what is the expected amount for the next 3 years?

 * “Gross loss is a loss before recoveries of any type. Net loss is defined as
   the loss after taking into account the impact of recoveries” (Minimum capital
   requirements for operational risk, Section 6, BCBS, Dec. 2017).

Priority of the work of HCM accounting Academy (Knowledge and Technology
Development) over all others:

We have been working on these Sustainability Accounting Processes for many years
and patented the accounting methodology in 2003-2005. Following our publications
of 2009-2010 following the subprime crisis (Peter Lang Publishing, Bern,
Switzerland) and our publications 2013, 2014 and 2016 in the USA in ISACA
Journal with a group of US academics (Georgia and New Jersey) and EU (Cambridge,
Frankfurt and Malta), we published with the accounting department of the
University of San Francisco in March 2021 in chapter 06 of the book reported
above, case studies of the impact on bank treasury, industries and services. On
the macroeconomic level, the book also publishes the impact study on the public
treasury of 36 countries, in particular the United States, Canada, the UK and
the countries of the European Union.

According to NASDAQ, for some time, more and more researchers and academics are
interested in this niche: "a body of academic research (Eccles and Serafeim,
Harvard; Todd Cort, Yale) that points to macroeconomic benefits as well. have
been able to convincingly integrate a great deal of underlying academic research
in order to make a grand case— “ESG and Financial Performance: Aggregated
Evidence from More than 2000 Empirical Studies” (2015) and “From the Stockholder
to the Stakeholder: How Sustainability Can Drive Financial Outperformance
”(2015). A number of firms (ISS, PIMCO, JP Morgan, among many others) now fund a
team of analysts devoted exclusively to ESG research” (NASDAQ
ESG-REPORTING-GUIDE, 2019).

University research work smashing a door open for a long time:

We already know the deadlock that this form of university research usually ends
up with:

 * "Putting business fields side by side, i.e., a business disciplines silo, as
   is normally the case in MBA programs, is not enough to create the transversal
   interaction dynamic needed for firms to achieve expected financial
   performance goals” taking into account the sustainability requirements within
   the limit of the operational risk appetite threshold [International Symposia
   in Economic Theory and Econometrics, BRUNO S. SERGI, (Harvard University) and
   WILLIAM A. BARNETT, US Center for Financial Stability), March 2021].

Three PhDs including one in social psychology of organizations were necessary
for the founder of HCM accounting academy to solve the problem of HR-Finance
taking into account the intersection of technology, risk management and ESG to
promote integration of ESG in business, both for companies, therefore employees
and investors.

Without waiting any longer download the Guide below to cross the milestone of
January 1, 2022:

 DOWNLOAD 

 







HCM's forward-looking accounting calculations take over from the history of
published financial statements (income statements for the last 3 to 5 years) to
meet the regulatory requirement of a strategy of profitability of remuneration,
supporting figures to proof.

Examples of the value-added accounts of your human capital that you will achieve
by analyzing your historical data can be found in the Introductory Webcast
featured above with the Department of Accounting at the University of San
Francisco.
The global network of conferences and universities that contribute to the
popularization of the certification program in human capital management
accounting through this single portal of university-industry interaction are
below. Click on the link to access the published works:

- World Finance Conference, Malta, SEPTEMBER, 4th -6th 2020

- Modern Research in Management, Economics and Accounting (MEA, Berlin 2020)

- Society of Interdisciplinary Business & Economics Research (Osaka, Japan 2020)

- Academy of Management (AOM, Lyon, France)

- Society of Interdisciplinary Business & Economics Research (Seoul, South Korea
2020)

- Ihrm2020 : 16th International Human Resource Management Conference





The HCM Accounting (HCMA) certificate is offered as part of internal continuing
education (PSP-focused company training, financial performance problem-solving
process) and Executive Education (ExEd) to complement initial skills:

Nowhere have the corporate leadership training programs (including MBA, EMBA and
other management diplomas) as well as the qualification programs for financial
auditors and Chartered Accountants so far included courses in data processing of
the added value of human capital.

The HCMA program educational goal is to align Financial Audit skills and the
Employers' internal team concerns to take advantage of the requirement to report
on the Value Added of their “Human Capital” (Total Paid Workforce):

• All listed companies have been required since 2010 to report on the Human
Capital Added Value or management of their "human capital".

• This requirement has been extended to SMEs and local authorities since January
2019 considering the context of 100% Liquidity Coverage Ratio (LCR) Reporting in
which all companies operate for WCR and investments financing.

The COVID-19 deficit to be absorbed fell within this context governed by laws
and regulations updated since January 2019. This includes, within SOX Act, the
SEC guidance of April 4, 2018, UK and Canada (Ontario) laws of 2018 on
remuneration in force from January 2019 and the EU directive that all member
states had to transpose before June 10, 2019. This also includes provisions of
the Labor Code for COLLECTIVE PERFORMANCE or COLLECTIVE BARGAINING.

Employer-Driven Financial Performance with HRM is a cross-cutting collective
interaction of the Internal Team which must run as an Organizational Team
regardless of the Total Workforce.

The HCM accounting skills acquired at the end of the training both by the
internal team and by the external auditors provide assurance that the board of
directors will receive financial and governance reports that are accurate,
reliable and comply with the laws and regulations governing the context of 100%
Liquidity Coverage ratio (LCR) reporting.

Corporate governance refers to the way a company direct and controls its
institutional systems, ethics and accounts. It focuses on promoting transparency
and fairness within establishments and organizations by monitoring performance
and ensuring accountability.

The liquidity coverage ratio (LCR) refers to the proportion of highly liquid
assets held by financial institutions, to ensure their ongoing ability to meet
short-term obligations.

 

The LCR is directly dependent on the time lags between incoming and outgoing
cash flows, especially from companies that cannot finance themselves directly on
the financial markets.

Besides given the impact of operational risk on liquidity risk and other risks,
including market risk, the LCR relies on the capacity of the banks' internal
teams and their risk counterparties, i.e., insurance, industries and services,
including local authorities, to leverage their HR assets to take advantage of
these assets. This is done in order to process the data of socio-economic
indicators, within the reach of all employees to mitigate operating losses or
operational risk losses. This is the collective performance process generating
EC from which the free cash flow needed for high quality liquid assets (HQLA)
from banks is derived. The Financial Stability Institute recalled that in
October 2017, per Basel III liquidity monitoring tools, regarding a bank’s
liquid assets:

• “All assets in the stock should be unencumbered. Unencumbered means free of
legal, regulatory, contractual or other restrictions on the ability of the bank
to liquidate, sell, transfer, or assign the asset. An asset in the stock should
not be pledged (either explicitly or implicitly) to secure, collateralize or
credit-enhance any transaction, nor be designated to cover operational costs
(such as rents and salaries). '' (BCBS, 2017).

At the end of the HCMA training, the external auditors have the capacity to
ensure that the board of directors receives accurate and reliable financial
reporting and governance reporting information.

1. The external auditors advice and support as usually, the leadership of the
CFO to coordinate internal team operations to plan, program and monitor the
performance of sales and services, the results of which are presented for GAAP
reporting in the form of financial statements.

2. What is new is that now they have the ability to advice and support HRM
leadership to coordinate internal team operations to plan, schedule and monitor
the collection and processing of cross-cutting financial performance data. The
results are to be presented in the form of non-GAAP accounts supplementing the
usual governance reports to adapt them to the provisions of the laws governing
remuneration within the framework of a 100% LCR, given the aggravating effect of
the COVID-19 deficit.



The urgent need to adapt audit service offerings to the context and needs of
companies:

It is all the more urgent for Chartered Accountants and Financial Auditors to
learn a rigorous codified management accounting approach to provide Economic
Capital accounts linked to the added value of human capital that more and more
companies present to shareholders and stakeholders financial performance reports
based on earnings before interest, taxes, depreciation and amortization
(EBITDA). These are processes that vary according to whether they want to
minimize certain expenses in order to increase shareholder compensation.

An in-depth study by Audit Analytics revealed that 97% of companies in the S&P
500 used non-GAAP financials in 2017, up from 59% in 1996, while the average
number of different non-GAAP metrics used per filing rose from 2.35 to 7.45 over
two decades. That has led to a growing divergence between the earnings
calculated according to generally accepted accounting principles and the
“earnings” touted in press releases and analyst research reports (Drew Bernstein
and al., September 23, 2019).



Expression of the need for advice and financial audit by HRMs:

HRMs are aware that the processing of data on the added value of human capital
impacting the financial performance of the company is their responsibility.
Recent surveys (ABV Group - Willis Towers Watson 2019 and Gartner 2019) have
revealed the intention of HR Managers to meet the challenge of real-time
integration of HR-Finance processes:

• 69% reported that the variable portion of compensation and performance pay is
levers for improving the effectiveness of remuneration and for 91% of HRMs, cost
control remains an imperative.

For HRMs key ERM indicators that drive the HR function include:
• Annual performance review (86%),
• Employee commitment (81%),
• Payroll (76%),
• Training (70%),
• Compensation competitiveness (65%) and
• Cost of absenteeism (60%).

HCMA program gives the technical capacities to both banks and their risk
counterparties (insurance companies, industries and services, including local
authorities) to take over from historical data from published income statements
to provide forward looking management accounts of the added value of human
capital generating economic capital (EC) based on the mitigating of losses
linked to socio-economic indicators,

• These are factors or causes of operational risk within the reach of all
employees to act in order to improve both the economic capital of the company
and the variable salary.

The presentation of separate variable salary financial performance reporting as
now required by laws and regulations (notably SEC guidance and EU directive)
allows any company to take advantage of human capital as a driven force of the
ripple effect in order to avoid the stagnation of turnover and net profits which
are roughly the same from year to year. Unlike the variable salary, the fixed
salary provides a fixed performance that stabilizes at the level of the
historical average taking into account the tolerance standards for dysfunctions
determining the risk appetite threshold.

 



From 2022 under the new standardized approach (SA) for operational risk, the
banks which will not have made their internal team acquire the ability to relay
their historical data through the skills of HCM Accounting to plan and mitigate
operational risk losses will have to prepare to see their operational risk
coverage capital increase considerably in accordance with the following
provisions:

'' The new standardized approach for operational risk determines a bank's
operational risk capital requirements based on two components: (i) a measure of
a bank's income; and (ii) a measure of a bank's historical losses. Conceptually,
it assumes: (i) that operational risk increases at an increasing rate with a
bank’s income; and (ii) banks which have experienced greater operational risk
losses historically are assumed to be more likely to experience operational risk
losses in the future ''. (See Basel Committee on Banking Supervision, High-level
summary of Basel III reforms, December 2017).



   




WHAT WE DO

 * Overview of the leverage effect
 * Financial profit linked to two legal constraints
 * Mitigating investor risk
 * Overview of country laws
 * Our leadership credentials
 * What gaps in your EFPS are filled by connecting your internal team to this
   portal?
 * What doesn't management accounting do?
 * What is the harm when the EFPS has deficiencies in non-linkage to financial
   information?
 * What are the truly unique means that this portal provides you to take the
   EFPS compliance milestone?
 * Area of expertise not to be confused with APMs
 * Interaction features
 * Published supporting book
 * Access the demo
 * Starting point
 * Step 2. Operational interactions
 * Q1 adjusting skills
 * Economic capital (EC) allocation rate
 * Significance of recoverable losses
 * Extra-financial reporting
 * HCM Accounting area of competence


ACCESS TO YOUR COURSES

 * Enroll Now
 * Order a Package to be paid by the Employer
 * New Trainee
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7 THINGS YOU NEED TO KNOW

 * Stakes of human capital added value (HCAV) accounts to be provided
 * Learning objective in university-industry interface
 * Expected impact on cash flow and total employee commitment, whether they work
   on site or remotely
 * Knowledge and know-how support to cross the milestone
 * Impact of HCAV accounts on countries' GDP growth rate
 * Regulations to comply with
 * HCM accounting Lab
 * HCM Academy Background
 * Sector compliance


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