The pandemic has definitely made us divert the biggest part of our efforts into managing the situation and maintaining, as always, the health and safety of our people. Despite the challenges, all our partners are fully engaged in maintaining KPMG as the Clear Choice for our clients, our people and the society in general.
Christos Vasiliou, Managing Director
I am very pleased to present to you our 2020 Transparency Report. The report contains insightful information about our strategy, our performance, our corporate governance and quality control systems for 2020.
KPMG has been operating in Cyprus since 1948 and currently employs an average of 882 professionals working from 6 offices across the island. It is a member of KPMG International Limited, a global organisation of independent professional services firms providing Audit, Tax and Advisory services. KPMG operates in 146 countries and territories and has approximately 227.000 people working in member firms around the world.
KPMG in Cyprus is a leading professional services organisation on the island which has contributed significantly to government revenues during the year to December 2020. This amounted to €19 million, including income tax, special contribution for defense, PAYE, VAT, GHS and social insurance contributions.
Last year was an unprecedented year. The outburst of the pandemic has overturned the positive outlook envisaged at the beginning of 2020. The crisis has definitely made us divert the biggest part of our efforts to managing the situation and maintaining, as always, the health and safety of our people, as a priority over how we could implement our longer-term strategy. The prolongation of the pandemic and the inevitable restrictive measures that were applied by the government, some of which are still in force, have caused a contraction in the economy with an adverse effect on the professional services sector.
Our Firm has operated for 9 months of the year under COVID-19 restrictions. This resulted in a slowdown in our operations by 2,3% during 2020. The Audit function has shown a growth of 2,1%, while Tax & Legal and Advisory have contracted by 7,8% and 9,3%, respectively.
The challenges faced by our profession and especially the audit function are quite tough. These relate to the increased regulation, the increased public scrutiny in our audits, as well as the need to adopt more rigorous risk management procedures.
These challenges require significant investment in recruiting, training and reskilling the right people, our biggest asset, investing in infrastructure and technology, as well as setting up the right policies and procedures. KPMG continued investing in the above during 2020.
In 2020, 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, and became even more active in the post COVID-19 period to assist in combatting the effects of the pandemic.
We have also sought to expand our portfolio of service offerings in line with our strategic priorities. These were broadened to include tailor-made services to our clients during the COVID-19 period. Clients look to KPMG for a consistent standard of service based on high-order professional capabilities, industry insight, local knowledge and expertise.
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.
In a changing and increasingly complicated world, our role has never been more important. Audit is the foundation of the KPMG brand and has been the backbone of our business throughout our 70+ years of existence.
All of our actions are guided by our Values. They drive our daily behaviours, guide our decisions and shape our culture. Integrity remains a core Value — we do what is right, in the right way, at the right time.
We embody our Values of integrity and excellence in our commitment to audit quality. We aim to live up to the high standards we set for ourselves, while continually building upon our sound quality foundations, in terms of how we manage both our Firm and our audit engagements.
COVID-19 is pushing us to think differently about how we engage our people, companies we audit, stakeholders and society. The increased economic uncertainty and risk due to the pandemic will undoubtably have significant financial reporting implications in all the world’s markets.
Now, therefore, more than ever, we need to be able to articulate clearly what audit quality means to us, as well as being able to demonstrate how we safeguard the quality of the service we provide. Our approach to audit quality relies on people with questioning minds demonstrating professional scepticism, enabled by the power of industry-leading technology to create greater consistency in performance and to strengthen monitoring. Together, these drivers allow us to respond with agility, and engage meaningfully, with all stakeholders.
At KPMG, we realise that extraordinary times require extraordinary solutions to complex challenges. We understand our responsibility to deliver quality audits that contribute to the integrity of financial reporting and are fundamental to the successful working of markets, giving investors the confidence and trust to make key decisions.
We will continue to respond to and embrace this challenge as we focus on recovery and resilience in this new reality.
Our vision to lead the way in audit quality remains clear. We are taking action, we are investing and we are determined to make it happen.
Sylvia A. Loizides, Board Member, Head of Audit
* average staff numbers for Year 2020
Back in 2019, 2020 was forecasted to be rigorous; due to the fast pace of changes taking place in the international tax framework, we were all prepared for a very difficult, speed-race 2020. Although 2020 started with good auspices, the COVID-19 pandemic caused global turmoil. Inevitably, our business did not remain unaffected. Our teams had to adjust to working from home conditions and client management and relationships needed to be re-adjusted on new grounds, taking into consideration the necessities of the current times. The global shock in international business, as a result of lockdowns and travel restrictions impacted our business, with the first couple of months spent reconnoitering the new circumstances. As a result, market conditions, in conjunction with COVID-19 business implications, brought about a slight reduction of tax revenue for the business.
Given the new circumstances, the tax practice, locally and internationally focused on identifying measures that would enable short-term and long-term means of coping with the pandemic and the unavoidable impact on businesses. In 2020, our agile team of professionals has relentlessly focused on the servicing of clients while working from home, adjusting processes and timeframes in order to ensure the undisrupted course of our clients’ businesses.
As a result, the forecasted change in international rules for 2020 was slower. In this respect, most work in the international spectrum was shifted to 2021. Taking into account the challenges of 2020 and the long-term impact of the pandemic in the economy and fiscal policy, the need to consider the transformation of our business is more imminent than ever. We need to ensure that we are ready to tackle the hurdles of tomorrow by reimagining client tax processes and enhancing compliance ability whilst at the same time, evening out the practicalities of social distancing.
As forecasted last year as well, diversified skills should be sought whilst leaning towards a more integrated mode of operating, especially now with the new conditions of working remotely. In order to effectively face the challenges ahead, we need to adjust into new modes of operating whilst striving to grow, recruit and invest in different sets of capabilities, aiming to diversify the services offered and provide more integrated solutions to our clients.
As always, we will continue looking into attracting diversified minds, thinking outside the box and engaging in a productive dialogue, whilst taking into account the needs of the future business professional 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.
In the light of the new challenges that call for greater transparency whilst maintaining flexible, we do not forget our responsibility towards the society, and this means not just our clients. We will continue to act with integrity in relation to tax, thereby enhancing the trust placed in the quality of our services.
Our commitment to leadership is granted. In 2021 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 2020
What an unprecedented year 2020 has been!
The outburst of COVID-19 in March 2020 has overturned the positive market outlook envisaged at the beginning of the year. The prolongation of the pandemic and the inevitable prolonged restrictive measures that were applied and are still in application, meant that the advisory market activity has slowed down. The main result of this was that some advisory projects were delayed or postponed for later, resulting in reduced activity both in terms of number of transactions, as well as in the value of transactions. As a result, our Advisory business has experienced a contraction of 9,3%, from €11 million in 2019 to €10 million. Our unit consisted of an average of 154 professionals and 8 partners at the end of 2020, as opposed to an average of 151 professionals and 8 partners at the end of 2019. As from 1 January 2021, the Firm has appointed two new advisory partners in the departments of Financial Risk Management and Management Consulting.
Over the past year we stayed close to our clients, collaborating and assisting them overcome the difficulties that COVID-19 has created to them and the economy. We provided them with solutions related to cash management and liquidity assistance, digital transformation, restructurings, COVID-19 recovery 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 obsessive 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; we have also assisted in managing and delivering challenging transformative projects, including for the healthcare industry. 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 manage their non-performing loan portfolios and their risk and regulatory compliance requirements.
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. This has become even more relevant during the pandemic.
Our Deal Advisory department handled several acquisitions 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 problem, 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 35 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
* average staff numbers for Year 2020
We have used our knowledge, experience and networking and have been doing our best to assist the turnaround of our communities into the post COVID-19 period. Our clients have been seeking our support for taking major decisions for their future and we have been there for them.
Michael Antoniades, Chairman
The dynamics of COVID-19 have been long and powerful!
The COVID-19 restrictions and social distancing measures are still among us and are affecting our lives, our economy and our wellbeing. However, the KPMG family has not been inactive. We have used our knowledge, experience and networking and have been doing our best to assist the turnaround of our communities into the post COVID-19 period. Our clients have been seeking our support for taking major decisions for their future. We have been there for them.
The situation of our economy is tough, with decreasing foreign investment and stretching of our national income. Having turned around the economy after the 2013 haircut of deposits sends a very strong message. We are fighters, we have experience in managing challenging situations and we will do our utmost to recover again! The geographical location of Cyprus is unique for connecting the East to the West and whatever happens, this cannot be changed!
The implementation of new rules and regulations globally challenges the way that certain international business has been traditionally performed. Naturally, the type of operations of foreign corporations that will be able to conduct business in Cyprus is directly affected by such changes.
We strongly emphasise the necessity of maintaining substance in Cyprus. Our island offers a unique opportunity for multinational corporations seeking a location for the establishment of a regional office in the area. In addition, it provides a relatively simple but structured entrance to the EU.
Nevertheless, we cannot be successful without an efficient team and in this respect, I am grateful to our people. Despite the social distancing challenges, we have been working hard, contributing positively to our deliverables. Transparency and accountability have been and shall continue to be framing the way we deliver our work.
We target 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.
Adopting to international developments implies new opportunities as well. Compliance is a major initiative deployed and KPMG in Cyprus is well-positioned to evaluate, develop solutions and support our clients to adapt to the requirements of today. We are 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!
The message I am trying to send is clear and positive. We are giving a challenging fight but we are strong and I am confident that we will make it!
Cyprus offices 6