Women and Wealth
l
Bathing in Success
l
Aim for the Stars
l
Culture is Key
l
Risky Business l M&A Value at Highest Level Since 2007
Bridging the credit gap SMEs are essential to a thriving and vibrant economy. Simon Featherstone, Global CEO of Bibby Financial Services, tells us how to small businesses can use the various types of finance available in order to stay competitive in the global marketplace.
A Perfect Hideaway The Kipi Suites hotel, in the heart of Greece’s stunning and remote Zagori region, offers a welcome respite from the strains of modern life.
February 2015
www.corp-vis.com
Editor’s Note Welcome to our second issue of Corporate Vision. Company culture is a vital part of running a successful business. And this month, we’ve taken a detailed look at how you can make it work for you. Prof. Steven Van Belleghem, a thought leader on the transformation of customer relations and the future of marketing, is on hand to show us what a really ambitious company culture looks like (p.16). We ask if, in an age of ever-increasing regulation, are senior managers being discouraged from stepping into the boardroom by the increased risk of personal liability? (p.18). And in the same vein, Monique Melis, Global Head of Regulatory Consulting for Kinetic Partners, warns us of the dangers of failing to prioritise investment in compliance leadership (p.20). Our cover story this month will no doubt be of interest to the SME owners among you, as Simon Featherstone, Global CEO of Bibby Financial Services, tells us how small businesses can take advantage of the entire range of financing options in order to compete on the world stage (p.28). In this month’s Industry Insight we turn our attention to UK specialist bathroom retailer, bathstore’s recent MBO – a deal which we think can tell us a lot about the buyout process (p.12). And in our lifestyle section this month we journey to deepest Greece, and the remote, but luxurious, Kipi Suites, hidden away in the country’s bucolic Zagori region (p.32). We hope you enjoy the issue. Mark Toon, Editor
Contents 6 News
11 Industry Insight Bathing in Success
15 Strategy Aim for the Stars Risky Business Culture is Key
23 Money Women and Wealth
27 SME Bridging the credit gap: Why SMEs need more support
31 Lifestyle A Perfect Hideaway: The Kipi Suites
News
Bogged-Down Multinational Benefit Leaders May Be Missing Opportunities New research shows that global and regional headquarters pension and benefit leaders are under continuous pressure to focus on activities that will add value to their organisation, but are stretched in day-to-day operational tasks. Nearly two-thirds (62%) of global pension and benefit leaders at multinational companies claim that dayto-day operational activities are limiting their ability to add value and hampering their strategic contribution to the company, according to research from global professional services company Towers Watson. Results from the latest Current and Emerging Global Benefit Themes survey shows that three-fourths (75%) of participants also believe there is increasing pressure for them to do more with less, suggesting they need to change the way they do things if they are to create the time to focus on more value-added activities. “Our research shows that global and regional headquarters (HQ) pension and benefit leaders are under continuous pressure to focus on activities that will add value to their organisation, but are stretched in dayto-day operational tasks,” said Brian Makuck, senior consultant in Towers Watson’s International Consulting Group. “To overcome this, leaders need to revisit and review their teams’ activities, and evaluate the impact on the business and what changes can be made to improve efficiency. Global pension and benefit leaders should also consider different resourcing models for HQ activities — such as insourcing, cosourcing and outsourcing — to create space to focus on more valuable opportunities.” According to the research, about seven in 10 (71%) respondents predict a significant increase in their global or regional involvement in pensions and bene-
fits in 2015. The top three focus areas are expected to be global control and oversight of pensions and benefits, financial management of pension and benefit costs and risks, and employee appreciation of pensions and benefits. North American respondents also named Germany, the UK and the US as the top countries to focus on in 2015 for financial and strategic pension and benefit review reasons; the Netherlands owing to pension legislation changes; and Brazil, China and India for more operational reviews. “The respondents overwhelmingly believe that real value-added business opportunities exist from HQ getting more actively involved in pension and benefit management globally, for example, to help bring global perspective to key local decisions,” said Makuck. “The challenge for HQ pension and benefit leadership is to articulate and implement a coherent global pension and benefit strategy and management approach, and support it with enablers such as road maps of priorities, policies, guidance, technology and networking forums for sharing experiences.”
respondents predicting a significant increase in their global or regional involvement in pensions and benefits in 2015...
71%
6 Corporate Vision February 2015
News
Appointments RFA Hires George Ralph as MD.
RFA, technology advisor to investment management clients, has announced that George Ralph has joined the firm as Managing Director of RFA UK. RFA also announced the January opening of two data centres that will be part of the firm’s plan to provide its full portfolio of services to the UK and European asset management community, including RFA Cloud, disaster recovery, and outsourced IT, design, and implementation services. Prior to joining RFA, Ralph founded and grew three separate technology companies. He has over fifteen years’ technical experience in network and server architecture, large scale migrations utilising leading technology and brands such as Microsoft, Linux, VMware, Cisco, and Hosted Infrastructure.
UK: Start-Ups Worse than Biggest Firms for Gender Diversity Though the FTSE corporations are often thought to represent the “Old Boys’ Club”, new study suggests that start-up culture appears to be repeating the diversity mistakes of their predecessors. New businesses are worse for female representation at board level than the FTSE 100 firms, according to research commissioned by approvedindex.co.uk, the UK’s leading business-to-business services market place. The study revealed the number of women on the boards of UK start-up firms is depressingly low and has been on a continuous decrease since 2010. The report highlights that whilst the FTSE 100 and FTSE 250 companies have witnessed incredible growth in female directors (22.8% and 15.6% respectively) start-ups across the UK have a meagre national average of 8.37%. Thus since 2010 the gap between the FTSE 100 companies and start-ups has quadrupled. To add a further blow, it appears that start-ups are making some attempt to change the profile of the stereotypical director through appointing younger faces; 48 is the average board member age. Start-ups are rewarding the young, but continue to exclude the female. Though the FTSE corporations are often thought to represent the ‘Old Boys Club’, these new findings suggest that start-up culture appears to be repeating the diversity mistakes of their predecessors. The findings re-fit the figurative glass ceiling. Have we missed the rise of the Silent Suppressors?
In all the focus on the ‘25 by 2025’ objectives set for the FTSE 100 firms, how have the bad practices of new businesses gone completely under the radar?
“We are confident that George will play an important role in RFA’s legacy of providing industry-leading service and technology guidance to our clients,” said Richard Fleischman, CEO of RFA. “His history of strategic management and business acumen make him an important addition to our leadership team.”
New Singapore Operation, Leaders at Berkshire Hathaway.
Berkshire Hathaway Specialty Insurance (BHSI) has announced that it has received its non-life insurance license in Singapore, and named Marc Breuil as Regional President, Marcus Portbury as Head of Third Party Lines, and Peter McKenna as Head of Energy and Construction Casualty, in Asia. “We are pleased to bring the stability and capacity of BHSI to serve the commercial insurance needs of customers in Singapore,” said Peter Eastwood, President of BHSI. “With Marc, Marcus and Peter spearheading our entry into the local insurance market, we are pairing substantial expertise and local knowledge with our strong balance sheet from day one.”
Trilby Rajna, of Approved Index said: “It seems that despite start-up firms being heralded as the pioneers for innovation and technological advances, the inherent culture is far from progressive. Emerging entrepreneurs do not have the excuse of a history of bad cultural practices to latch on to. They should know better.”
Under Breuil’s leadership as Regional President, BHSI is introducing a full range of commercial insurance products in Singapore, including commercial property, casualty, energy & construction, marine, and financial lines.
Amy Catlow, Director of Publishing at Approved Index and MVF Global said: “As a woman on the board of a leading tech company I feel the importance of my position as a role model for all women who are seeking to work in the industry. It’s a shame many of these new start-ups have not made a mixed board essential to their plans, as it’s crucial that the next generation of business leaders are advocates for diversity.”
Swiss Re Corporate Solutions has named Marc Davis as Country Manager UK & Ireland. Davis will be based in London and drive the company’s growth strategy in those markets.
national average of female directors in start-ups across the UK...
8.37%
February 2015 Corporate Vision 7
Swiss Re Names UK & Ireland Country Manager.
Tony Buckle, Head of Europe, Middle East and Africa (EMEA) for Swiss Re Corporate Solutions, said: “Bringing on board an executive with Marc’s experience demonstrates our strong commitment to the UK and Irish markets. Our strategy is to bring our products and services closer to local clients and brokers. Marc’s knowledge and reputation will serve us well to strengthen our presence in the UK and Ireland.” With nearly 30 years of experience in the insurance industry, Davis has worked in a number of leadership roles in customer relationship, account management and sales, dealing with global accounts as well as with UK retail clients.
News
Dealmakers Crave Sleep and Time Off, Study Finds Most US and UK M&A analysts are getting just three to five hours of sleep a night, and between two and four days off a month So who are the luckiest M&A bankers that get the most shut-eye and rest?
as a corporate advisor to mid-market companies and family offices.
Those in Asia Pacific, according to specialist M&A data room provider ansarada.
“If attention to detail is the key to success, then getting more than five hours sleep a night and an occasional day off makes an enormous difference,” says Mr Rees. “M&A transactions are similar to a marathon and not a sprint. Sleep will assist with coping with high pressure environments over a long period of time.”
Sydney-based ansarada surveyed 51 analysts and 44 associates, vice presidents and directors working in the M&A departments of investment banks in the UK, US and Asia Pacific. ansarada found most M&A analysts in Asia Pacific get between five and seven hours of sleep a night with some even getting more than seven hours. These analysts are also getting as many as four days off a month. Most US and UK M&A analysts are getting just three to five hours of sleep a night. The US and UK analysts are getting between two and four days off a month. The majority of Asia Pacific M&A associates, vice presidents and directors get between five and seven hours of sleep a night. Some are getting more than seven hours. In contrast, their counterparts in the US and UK survive on no more than seven hours of sleep. ansarada asked the M&A bankers what was the most important factor in ensuring success in their role. Attention to detail, replied M&A analysts, associates, vice presidents and directors. “Junior bankers in Asia Pacific must be the envy of their peers in the US and the UK,” said James Rees, a former Credit Suisse M&A banker who now works
ansarada also asked associates, vice presidents and directors why they work in M&A. Many said the job pays well. A similar number see their job in M&A as a stepping-stone to a different career. Similarly, most M&A analysts view their job as a stepping stone to work outside the M&A industry. ansarada also asked what the M&A bankers would do if they weren’t working in M&A. A number of M&A analysts said if they weren’t working in investment banking they would be management consultants. One M&A analyst though, perhaps jokingly, has ambitions to be a guidebook writer. Another a fly fisherman. Associates, vice presidents and directors said if they weren’t in M&A they would be lawyers or working in corporate development and strategy. Some expressed interest in starting a company. One says, perhaps in jest, they would be a dolphin trainer. Another a Formula One motor racing driver. Racing cars for a living may be the ultimate fantasy but the best M&A market since the collapse of Lehman Brothers is giving many M&A bankers the ride of their lives.
8 Corporate Vision February 2015
News
M&A Value at Highest Level Since 2007 “Perfect storm” for dealmaking led to 10,330 transactions representing US$1.9tn in disclosed deal value through November, PwC finds. A wave of corporate mega deal activity drove a significant uptick in M&A value in 2014, according to PwC US. As businesses aim to meet their growth ambitions and increase market share, PwC expects there will be more attractive opportunities for dealmakers to acquire, combine and align with strategic partners in 2015. Currently, M&A value is at the highest level in recent history and continues to increase. Through November 2014, there were 10,330 transactions representing US$1.9tn in disclosed deal value – the highest recorded annual deal value since 2007, according to data compiled by Thomson Reuters and analysed by PwC. The top ten deals of 2014 were predominantly from the media, telecom and pharmaceutical industries and have driven 32% of M&A value to date. This year also saw a surge in overall deal value (93%) when compared with the same period in 2013, which recorded 9,895 deals worth a total of US$1tn. “Corporate acquirers are going on the offense to solidify their leadership positions and build on core capabilities,” said Martyn Curragh, Advisory principal and PwC’s US Deals leader. “A perfect storm of rising equity markets, a stable US economy and easy access to favourable financings are supporting the current robust deal environment, particularly corporates’ growing appetite for transformational deals. We expect the current M&A momentum to continue in 2015, but with a more balanced mix of large and middle market deals as businesses turn their focus to executing strategic transactions to capture full value.” Transformational deals continue to drive growth in both domestic and cross border deal activity. US inbound investments have increased threefold in the last year from US$118bn in 2013 to US$379bn yearto-date, signalling the strength and confidence in the US economy. According to PwC, constrained market conditions overseas and a strong US economy have created a unique time for investors, helping to drive higher valuations and transaction multiples. Low interest rates and rising equity markets have also given corporates the confidence to unlock their cash vaults and execute strategic deals. Corporate-led transactions drove 82% of volume and 89% of M&A value in 2014. Corporates also led the majority of mega deal activity with 27 deals greater than US$10bn, approximately 47% of overall deal value in 2014. “During the recession, businesses focused on fine tuning existing operations with smaller tuck-in deals to protect their revenue base. But as confidence continues to increase in the US and globally, businesses have become much more willing to
execute on larger, strategic deals to grow their bottom lines – while understanding that bigger bets come with more risk and complexity,” added Curragh. According to PwC, dealmakers are investing in more thorough pre-deal readiness assessments to ensure they can preserve value and be more resilient in the face of potential threats or barriers to growth, including market volatility, regulatory changes, or even a cybersecurity breach. An uptick in shareholder activism has also driven a number of deals in 2014. As assets under management in activist funds have increased, so have the number of activist campaigns and the size of the companies being targeted. According to PwC, companies can minimise the impact of these events by having a clearly defined deal strategy, deep understanding of their portfolio, and an effective shareholder engagement plan. Private equity transactions accounted for 18% of volume with 1,852 deals, and 11% of value at US$213bn, a slight increase when compared with the growth in corporate deal activity. However, with greater competition for platform deals, and a challenging market for public to private deals, private equity buyers are undertaking “buy and build” strategies to achieve growth. “With a hyper competitive market for quality assets, private equity firms are continuing to explore their options to exit current investments through various means, including the IPO market,” said Andrew Cristinzio, PwC’s US private equity leader. Current capital market conditions are providing a favourable environment for newly listed public entities. US IPO activity reached record levels in 2014 with the increase largely driven by private equity exit activity. According to PwC’s Q4 IPO Watch, financial sponsors backed 61% of IPO volume and 71% of value. PwC expects private equity firms will to continue to take advantage of the public markets as a channel to exit portfolio investments. “Private equity players are also exploring opportunities to acquire newly divested corporate assets which have the potential for value creation as a standalone entity,” continued Cristinzio. Divestitures represented some of the largest deals of the year with the top five divestitures amounting to approximately US$88bn in deal value. According to PwC, there were 18 spin-off IPOs in 2014, a 38% increase over the 13 spin-off IPOs in 2013. Divestiture activity continues to be a core part of corporate deal
February 2015 Corporate Vision 9
strategy, but sellers have more options for their assets with the current favourable market conditions. “The capital markets have been very receptive to divested assets, corporate restructurings, and spin-offs that have strong long term prospects,” said Curragh. “And as businesses continue to reshape and optimise their portfolios to address the impacts of globalisation, changing demographics, and digital disruption, we expect there will be no shortage of favourable assets that come to market in the next year or so.” Industry Insights According to PwC, joint ventures and business alliances are becoming more prevalent as businesses seek to extend their capabilities into adjacent or entirely different industries and to capture innovative technologies even faster. The impact of digital disruption and innovation has fuelled continued convergence across industries like technology, healthcare and pharma. PwC expects the following industries to continue to present more opportunity for M&A activity in 2015. Healthcare – Dynamics in the US healthcare system have caused a shift in risk from payers to providers, fundamentally changing how care is paid for and delivered. To meet new expectations of care delivery and the number of people and services covered, payers and providers will continue to create new alliances and partnerships to integrate and consolidate the entire continuum of care. PwC expects joint-ventures, open collaboration platforms and non-traditional partnerships will push healthcare organisations to embark on new competitive strategies in 2015 and years to come. Technology – Innovations in cloud, social and mobile are putting tremendous disruptive pressure on incumbent large and medium cap technology companies, many of which led the previous consolidation wave. As a result, there has been a trend in fragmentation consisting of divestitures, spin-offs and go-private transactions which PwC expects will be the dominant theme in technology deals in 2015. PwC also expects continued consolidation in the semiconductor segment and an increase in growth oriented deals from more nimble leaders and recently public new entrants. Key areas to watch include security, data analytics and enterprise cloud.
increase in spin-off IPOs in 2014...
38%
Industry Insight 12 Bathing in Success In June, specialist UK bathroom retailer bathstore was sold by a private equity house as part of a management buyout. We take a look at the finer points of this major deal.
Industry Insight: Bathing in Success
Bathing in Success In June, specialist UK bathroom retailer bathstore was sold by a private equity house as part of a management buyout. We take a look at the finer points of this major deal.
bathstore, which was originally started in the early 1990s by Patrick Riley and Nico de Beer, is the UK’s leading specialist bathroom retailer. The company was formed with the idea of bringing quality, design led bathrooms – formerly a niche area – into a wider retail arena, with an ethos of focusing on the home owner, rather than on the trade buyer. The company published one catalogue that contained all its products for the complete bathroom, with real retail prices. The company prides itself on the quality of its products, working with some of the top European designers to create its bathrooms, and many of its ranges are exclusive to bathstore. The company then works directly with global manufacturers in order to make them affordable. One of the company’s selling points is its innovative “Service by Design”, which helps its customers to transform their initial ideas into their ideal bathroom. The free service can be accessed either instore or by using bathstore’s online design planner.
£15m cash. Endless LLP is an independent UK based private equity house, specialising in the provision of financial investment and hands-on operational expertise to businesses facing challenges or finding themselves in special situations. With a flexible approach to funding and market leading speed of investment, the firm has invested in excess of £240m in over 35 acquisitions since its establishment in 2005. Since the acquisition in 2012, bathstore’s business has grown its sales by 30%, and boosted EBITDA by £5m. In June 2014, bathstore was sold as part of a management buyout led by Chief Executive Gary Favell and backed by Warren Stephens, a private equity and banking tycoon from Arkansas. Speaking about the buyout in June, during which Endless was advised by Rothschild and Walker Morris, James Woolley, Portfolio Director at Endless, said: “Bathstore is undoubtedly the UK’s leading expert bathroom retailer. Over the last two years we have supported the management team in delivering their vision of providing its customers with a full service solution, offering lower price point entry, price transparency, and enhancing its product range. The excellent exit we have achieved is down to the hard work and dedication of the management team at Bathstore and we wish them every success in the future.”
In 2003, bathstore was acquired by Wolseley Plc, the global building materials company. The business became established as the UK’s clear number 1 speciality bathroom retailer through a period of rapid expansion and brand development under the leadership of executive chairman Nick Nearchou. By the end of 2007, the company had more than 170 showrooms throughout the UK.
“Endless’ support has been invaluable in helping us deliver the improvement in business performance,” said Bathstore chief executive, Gary Favell, the former chief executive of furniture retailer MFI. “With their support we have re-established bathstore as the market leading brand in the sector. With our new partner we will continue bathstore’s growth into the future.”
In May 2012, bathstore was acquired by Endless LLP from Wolseley Plc as a non-core asset acquisition for
Major transactions can often be fraught with challenges, with people issues, integration – including
12 Corporate Vision February 2015
organisational, employment and communication issues – financial due diligence and the challenge of getting sound strategic advice during the screening process among the common problems encountered during mergers and acquisitions. However, the bathstore buyout was a smooth process which was free of any pitfalls, says Claire Bayliss, Chief Marketing Officer. She attributes this to the hard work of the company’s management team. “We were focused on the end game,” she says. The deal was fairly routine, Bayliss continues, with the transaction being turned around in a matter of weeks. “We turned the business around in a short space of time,” she says, adding that this is testament to the strength of the management team. It is clear that bathstore is a people-oriented business, and the MBO was so successful and problem-free because of the innate understanding between the parties involved, says Bayliss. “There’s a chemistry between the partnerships involved,” she says. “It’s all about the people.” Looking toward the future, Bayliss says the deal will see bathstore continue to do what it does best: delivering high quality products at affordable prices, with a strong focus on customer service. “It’s all about continuation,” she says. “The deal will help us to continue the journey.”
Since the acquisition in 2012, bathstore’s business has grown its sales by...
30%
Industry Insight: Bathing in Success
“
Bathstore is undoubtedly the UK’s leading expert bathroom retailer.
”
February 2015 Corporate Vision 13
Strategy 16 Aim for the Stars Prof. Steven Van Belleghem, thought leader on the transformation of customer relations and the future of marketing, shows us what a really ambitious company culture looks like.
18 Risky Business Are senior managers being discouraged from stepping into the boardroom by the increased risk of personal liability?
20 Culture is Key ‌yet financial services executives fail to prioritise investment in compliance leadership, says Monique Melis, Global Head of Regulatory Consulting for Kinetic Partners.
Strategy: “Aim for the stars”: What a really ambitious company culture looks like
Aim for the Stars Prof. Steven Van Belleghem, thought leader on the transformation of customer relations and the future of marketing, shows us what a really ambitious company culture looks like.
Everyone has ambition. In fact, if you speak to entrepreneurs “ambitious” is one of the adjectives used most frequently to describe themselves. Clearly some people are more ambitious than others, and every business has its own plans, goals and dreams – but my view on what ambition should be was completely turned on its head when I was recently introduced to the world of Elon Musk. In September 2014 I had the privilege to visit SpaceX, together with a group of Flemish managers and entrepreneurs. After selling PayPal in 2002, Elon Musk founded two new companies: Tesla, the innovative electric car company where he can be found two days a week, and SpaceX, where he spends the other five. SpaceX has redefined the word ‘ambition’ for me. As we met the team at their headquarters in California, quite matter-of-factly, the people at SpaceX told us about their ambition: to colonise Mars in the not too distant future. They are very clear that they are not just looking for a scientific showcase, or for one man to simply parade around on Mars without any follow-up – their plan is the actual colonisation of Mars, with the first people brave enough to embark on the six-month journey will get a one-way ticket. Some people will undoubtedly say their plan is unrealistic while others will be even more cynical. At this stage there is no saying whether or not their ambition will ever be realised, but what I can say with absolute certainty that I have never known a company where ambition is so stamped into the very DNA of all the staff working there. It really inspired me and the rest our group. Coming away from such a remarkable visit caused us all to take a look at ourselves and our businesses. Are we ambitious enough? Do our colleagues and countrymen still have the guts to dream big?
Quite simply, I think there are not enough people with extreme ambitions. This is a pity really, because ambition is what inspires your colleagues, peers and can even push the market forward as a whole. The people who harbour big ambitions are often the people who will combine innovative thinking with drive and determination to create whole new product categories altogether. When it comes to setting your ambitions, just take a moment to ask yourself: what is it that you truly dream of? What are those far-reaching ambitions that perhaps you’re reluctant to voice out loud? You might have a clear vision of what it is you want to do and how you want to get there, but without sharing them it is difficult to get other to come along and support you on the journey. Expressing those dreams, plans or desires can have such a beneficial effect on a company and its culture that it is a real shame to keep them quiet. If I could share one lesson we learned from our visit to SpaceX it would be to encourage people with extreme ambitions whenever they cross our path. If we want our companies to survive the coming decades of globalisation and digitisation, we must avoid cynicism in all its manifestations and close ranks behind the ambitious managers and entrepreneurs who are innovating and pushing forwards. Ambition may be the single most defining aspect of the corporate culture of your business, so stretch your ambitions and voice your dreams so everyone on your team can act upon them. You’ve got my full support! //About the author// Prof. Steven Van Belleghem is author of The Conversation Company and The Conversation Manager (Kogan Page). Follow him on twitter @StevenVBe or visit: www.stevenvanbelleghem.com
16 Corporate Vision February 2015
Strategy: “Aim for the stars�: What a really ambitious company culture looks like
February 2015 Corporate Vision 17
Strategy: Risky Business
Risky Business Are senior managers being discouraged from stepping into the boardroom by the increased risk of personal liability?
The aftermath of the financial crisis led to an understandable focus on the behaviours of those whose conduct can precipitate systemic risks in our financial system and economy: senior managers within banks, building societies and PRA-designated investment firms. Managers have often claimed that additional protections and structures risk forcing significant parts of our banking sector away from the City of London. The issue of remuneration has been highly visible with the EU cap on bankers’ bonuses, greater pressure for disclosure, claw back, deferred entitlement and a binding vote on remuneration policy (applicable beyond the banks) but perhaps remuneration should not be the most important driver of change. There has been less focus on whether the greater potential liability (or at least greater focussed lens through which it is examined) will discourage persons to take on senior positions in financial institutions and enter the board room. Sir David Walker published his final recommendations on the governance of banks in 2009, during what were the darkest days of the economic downturn. There was broad acceptance that, because banks,
building societies and other financial institutions pose greater systemic risk with an ability to cause harm to businesses and consumers across society they are different to the general cohort of companies and require some special treatment. Therefore, it would be appropriate for the behavioural framework for the banks and other financial institutions to be subject to certain stricter modes governance. The Senior Managers Regime for Banks The UK financial services regulators are seeking to improve individual responsibility and accountability in the banking sector. This is a laudable objective and all should benefit from: • an improved approval regime for those whose behaviour and decisions have the potential to cause serious harm (essentially enhanced due diligence on suitability); and • new rules on remuneration to strengthen the alignment between long-term risk and reward in the banking sector. The Parliamentary Commission for Banking Standards reported in the summer of 2013 under the title “Changing Banking for Good” which then led to the Financial Services (Banking Reform) Act 2013. New offences were created, including an offence of making decisions causing a financial institution to fail. Provision was made for new rules from the financial services regulators which are intended to emphasise the manner in which senior managers of banks must exercise their statutory duties. One objective is to
18 Corporate Vision February 2015
make it easier for individuals to be held to account by companies, shareholders and regulators. Actions to hold directors to account are notoriously difficult to bring and, at least in the banking sector, the risk of such claims against directors should increase, thereby focusing the mind of the individuals concerned. Four elements: Senior Managers Regime, Certification Regime, Conduct Rules and Remuneration A new Senior Managers Regime is proposed which will clarify the lines of responsibility at the top of banks, enhance the regulators’ ability to hold senior individuals in banks to account and require banks to regularly vet their senior managers for fitness and propriety. An enhanced due diligence Certification Regime requires firms to report to the PRA on the fitness and propriety of staff in positions where the decisions they make could pose significant harm. New Conduct Rules set out the high-level principles of behavior for bank employees. Finally, in relation to Remuneration there is an objective of more effective alignment between risk and reward over the longer term (i.e. a number of years reflective of a business cycle) by requiring firms to defer payment of bonuses for a minimum of five to seven years depending on seniority, with a phased approach to vesting and an enhanced claw back regime under rules which came into force on 1 January 2015.
Strategy: Risky Business
What might the “fit and proper test” mean? The Senior Managers Regime seems to be mandating many behaviors which would normally be considered part of good HR practice, prudent due diligence and risk management. It is somewhat surprising that it is even considered necessary. Such a review should form a key item on the agenda of our financial services regulators, every nominations committee, every audit and risk committee and, indeed, every board. It is absolutely necessary to appraise on a regular basis the effectiveness of the team under each senior manager. The new “fit and proper” test only reflects what should have been done at all times in all businesses and, certainly, in banks at all times since we were hit by the violent economic headwinds of the financial crisis. The material difference seems to be that the relevant authorised persons must regularly submit a verified return to the PRA confirming that this is the case, essentially confirming to the regulators that appropriate development and performance appraisal has been carried out. There is a risk that regulated entities, their senior managers and the regulators themselves may draw too much comfort from this process and place insufficient focus on the substance. The reporting should provide the regulations with greater information to ask further, informed and insightful, questions. If this does not happen, the new regime will have failed. A more far-reaching regime Even whilst the Senior Manager Regime is bedding in HM Treasury is consulting on whether it should be widened in scope to capture UK branches of overseas firms. However, it is notable that senior managers in UK branches of overseas firms would not be caught by the new criminal offence relating to a decision causing a financial institution to fail contained. Insufficient evidence of discouragement Whilst rumblings have been heard, there is as yet no substantive evidence of banks, building societies and other PRA-designated investment firms facing difficulties in the filling of senior management positions. There is a powerful argument that these changes represent little substantive change to the responsibilities of those directors and might, indeed, assist all by placing the duties in a sharper focus. Whilst comments have been made suggesting that greater regulations/prescription will drive away talent from the UK, there is insufficient evidence as to date of this to form any clear conclusion. Banks still seem able to fill senior management posts. The challenges faced by small building societies and other investment firms are more a factor of size and the need for capital adequacy and liquidity. The sector will continue to consolidate and, if as a conclusion, risk appetite is tempered and attitudes are more sustainable, that cannot be a bad thing for our economy. //About the authors// Edward Craft is Corporate Partner at Wedlake Bell LLP, the mid-market law firm with a practice focused on corporate governance in businesses. Shveta Nehra is an Associate at Wedlake Bell LLP, advising on a wide range of international public and private transactions, including both debt and equity structures.
February 2015 Corporate Vision 19
Strategy: Culture is Key
Culture is Key …yet financial services executives fail to prioritise investment in compliance leadership, says Monique Melis, Global Head of Regulatory Consulting for Kinetic Partners.
Company culture is the most important factor cited in avoiding regulatory problems, according to Kinetic Partners’ survey of almost 300 financial services professionals. More than half (53%) of financial services senior executives said culture was the most important factor to get right in order to avoid regulatory problems. Ensuring governance is a priority amongst board members – selected by 30% of c-suite respondents – was the second-most cited. According to Kinetic Partners’ 2015 Global Regulatory Outlook (GRO) report, fewer than one in ten (9%) of senior managers polled put their faith in risk monitoring and compliance as the key factor to keep their firms out of trouble. Monique Melis, Global Head of Regulatory Consulting for Kinetic Partners in London explains: “The message is clearly getting through to firms that compliance policies and procedures aren’t enough to satisfy the regulators. They are looking for evidence of a change in the culture of the organisations, which is blamed for the financial crisis. The guidance from the FCA in the UK and the new Senior Bankers Regime both point to a desire to see fundamental overhaul in the way companies do business. That is going to be a long haul, and it’s being seen more and more as a generational challenge.”
Despite this, no senior executives, and only 5% of others, considered finding staff with the right regulatory skills to be the most significant element for averting major issues. Furthermore, when it came to recruiting compliance staff, technical knowledge of regulations was considered the most desirable trait by 44% of all those surveyed (and 45% in the c-suite). This is in comparison to 26% who cited practical experience in trading or operational roles and only 18% who prioritised leadership and management skills. Melis continues: “Recent cases in the past six years have shown us that problems do not only arise from deficiencies in the compliance department. Often, it is the failure of a firm’s leadership to set clear expectations for the culture and related behaviours throughout the business that can have a more significant impact. If companies want to foster a compliance culture and develop a true voice for governance in the board room, they need to invest in people who bring with them not just the technical knowledge of the regulations, but the skills to change attitudes and behaviours at every level of the business. Some firms have begun investing in such skills, but we are still early in the ‘early adoption’ phase of this approach. That is what the regulators expect, and it’s increasingly what investors and other stakeholders are looking for.” The survey also found that companies may be leaving themselves exposed through a failure to invest in technological skills. According to the survey, just 6% of those surveyed believe that compliance system and software expertise are the most important skillsets
20 Corporate Vision February 2015
when recruiting compliance staff. That is in spite of many regulators, such as the FCA, increasing investment in market surveillance systems and their growing expectations on firms, in terms of market monitoring obligations. Melis concludes: “The FCA, in common with other regulators, has put significant resources into sophisticated surveillance technology, and it expects firms to have done the same. There is now a much greater emphasis on firms to be proactive in mitigating conduct risk, by setting the appropriate tone from the top and investing in the right tools. To get the most from that investment and ensure their systems are effective, firms should be checking that they do actually have the appropriate skills in-house.”
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The message is clearly getting through to firms that compliance policies and procedures aren’t enough to satisfy the regulators.
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Strategy: Culture is Key
percentage who considered technical knowledge of regulations as the most desirable trait ...
44% February 2015 Corporate Vision 21
Money
24 Women and Wealth A new Wells Fargo Survey shows that affluent women are showing greater confidence in the stock market and their investing skills as their financial worth grows.
Money: Women and Wealth
Women and Wealth A new Wells Fargo Survey shows that affluent women are showing greater confidence in the stock market and their investing skills as their financial worth grows. making has stayed the same and 6% became less involved.
A strong majority (93%) of affluent women “enjoy making and accumulating money” and more than half (53%) believe that money helps buy happiness, according to a new Wells Fargo survey of affluent women. Women have a strong sense of pride in earning money with 85% of them saying they feel proud about their earning power. Versta Research conducted the survey of 1,872 women, ages 40-79 with at least $250,000 in household investable assets, to examine their perspectives on wealth, investing, work and retirement. Affluent women are taking the lead in managing the daily finances with 82% percent managing the household budget and purchase decisions, 79% managing the household cash flow and 75% paying the bills. But only 46% of these women are taking primary responsibility for choosing and managing investment accounts, and this rate falls to 34% among married women. Affluent women in their 40s buck this trend, with more than half (56%) choosing and managing investment accounts. As their wealth has increased, 43% of affluent women say they have become more competent at handling investments, while 53% stayed the same and 4% became less competent. Along similar lines, a minority of these women (36%) say they have become more involved in financial decision making, while a majority (58%) say their involvement in financial decision
“I don’t think I’ve seen a study where women so overwhelming express joy at earning money and pride in their capacity to do so. And, they credit the stock market for increasing their wealth. However, we see fewer women managing their investments, although that is changing. The good news is more younger women in the workplace are taking on the role of investing for their households. If you are making money and you think the market is helping your money to grow, then it makes sense to be more directly involved in investment decisions,” says Karen Wimbish, director of Retail Retirement at Wells Fargo. Wealth and the Stock Market While a majority of affluent women (94%) feel they’ve worked hard to create their wealth, 68% acknowledge
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It is interesting to see that affluent women credit their wealth to the stock market even though most say that no one taught them how to invest in the market.
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24 Corporate Vision February 2015
that most of their wealth has been generated by investments and growth in the stock market. More than three-quarters (78%) feel the stock market is the best way to grow savings over the long term. In fact, nearly two-thirds (64%) of affluent women say it’s more exciting to watch assets grow through good investments in the stock market versus watching it grow by earning and saving them (36%). Given the stock market’s growth over the last five years, 37% of affluent women say they are “more eager to put money into the market right now,” while 23% are “more reluctant to put money in the stock market now” and 40% admit they “don’t pay much attention to the stock market.” Interestingly, almost three-quarters (73%) disagree that the stock market is too risky for them while 27% agree. But this is tempered with the more than half of women (54%) worried about losing money in the stock market. The Role of Work Work is an instrumental part of life for affluent women. In fact, three-quarters of affluent working women say having a job or career is important to them even if they don’t need the money. Two-thirds feel they are fairly compensated at work today. Yet, 59% of affluent working women don’t think women will achieve pay equality in the workplace in the next 10 years. Sixty-two percent believe that women can “have it all” when it comes to balancing their career and family. However, only 38% say “having it all” is their goal (of whom 81% feel they are succeeding at it). Two-thirds (65%) of affluent women believe fathers should be more proactive about staying home to help raise
Money: Women and Wealth
children. Even if “having it all” is not the goal of many affluent working women, 58% say they are struggling with work-life balance. If given the opportunity for a big promotion at work that offered a significant step up from their current role and level of responsibilities, two-thirds (66%) of affluent women would accept it (of which 31% would be “excited, eager, and ready for it” and 35% would “accept it, but with reservations”) and 34% would decline it. Of those who would “accept it, but with reservations,” 53% worry about managing work-life balance, 30% worry about whether they are ready and have the skills to succeed, 16% are not sure if their current career path is what they really want and 23% cite other reasons. Bequeathing the Financial Knowledge While generally most affluent women would agree their parents did a good job teaching them about managing and saving money when they were growing up, more than two-thirds say no one ever taught them how to invest in the stock market. Nearly all affluent women (98%) say it’s important for women to feel confident about investing, but fewer (71%) actually do. One in five (21%) say one of their biggest financial regrets is not learning more about money and finance. While nearly one-third (30%) think that men are more interested in finances and investing, a majority (89%) don’t think men are better at it and half of affluent women think that men are overconfident when it comes to investing. “It is interesting to see that affluent women credit their wealth to the stock market even though most say that no one taught them how to invest in the market,” saysWimbish. “These are successful women that
should have the confidence and interest in making investment decisions for their future.”
losing their health (55%), losing their mental abilities (52%) and running out of money (29%).
Saving for Retirement Affluent women are well-positioned for retirement. While the financial crisis did not affect the financial well-being for a majority of affluent women (57%), it did impact their savings behavior. More than half (54%) say it made them “more aggressive about saving money.” Only 48% of non-retired affluent women have an annual savings goal, and the median annual goal is $20,000. Non-retirees have saved a median of $600,000 and have a median goal of $1 million. They plan to retire at the average age of 64. While three out of four affluent women agree that they need at least $1 million to “feel wealthy,” 42% feel they would need $2 million or more.
Defining a Successful Retirement In defining a successful retirement, more than half of affluent women feel it is having enough money for their preferred lifestyle (55%), with other top choices including being healthy (23%) or spending time with family and friends (13%). When non-retirees think about their future in retirement, they look forward to spending more time with family (64%), focusing on physical fitness (63%) and becoming more charitable with their time (58%).
“It’s crucial to have a savings goal so you know if you are on track. These women have the means and are disciplined savers, but having a financial plan with an investment strategy can put them on an even better path,” says Wimbish.
While it is hard to imagine what life will be in retirement, half of non-retirees (52%) anticipate their expectations and goals will change once they retire. Fifty-eight percent of retired affluent women say they did not have a realistic picture of what life in retirement would be like until they were in their 60s and beyond. And 43% of retired women say their retirement years are different from what they imagined.
The affluent women surveyed exude confidence about having enough money. Four out of five (82%) non-retirees feel confident they will have enough money to live the kind of retirement they want. Nearly all (95%) of retired affluent women feel they will have enough money in retirement.
“Life in retirement is hard to imagine until you are actually living in it. Having the fortitude to have a financial plan with realistic goals for saving and investing will allow you to recalibrate your retirement dreams when the time comes,” says Wimbish.
Seventy-two percent of non-retirees value their assets and wealth more for the lifestyle and security it will afford them in retirement versus the lifestyle and security it gives them right now (28%). The top three things that scare affluent women about retirement are:
percentage of women proud about their earning power...
February 2015 Corporate Vision 25
85%
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SME
28 Bridging the credit gap: Why SMEs need more support SMEs are essential to a thriving and vibrant economy. Simon Featherstone, Global CEO of Bibby Financial Services, tells us how to small businesses can use the various types of finance available in order to stay competitive in the global marketplace.
SME: Bridging the credit gap: Why SMEs need more support
Bridging the credit gap: Why SMEs need more support SMEs are essential to a thriving and vibrant economy. Simon Featherstone, Global CEO of Bibby Financial Services, tells us how small businesses can use the various types of finance available in order to stay competitive in the global marketplace. The credit gap Unfortunately, despite their importance to our global economy, many entrepreneurs struggle to secure the finance they need to support their business. The value of small and medium-sized businesses to the global economy cannot be underestimated. Today’s biggest global companies, which create a vast amount of jobs and wealth across multiple territories, all had humble beginnings as fledgling start-ups. And many of tomorrow’s biggest brands have not yet been established or are in the early stages of growth.
The International Finance Corporation (IFC) – a member of the World Bank Group - calculates that there are between 200 and 245 million enterprises across the world that either need an overdraft or loan but do not have one, or do have a loan but still find access to finance a constraint to their business. The IFC aptly labels the latter segment the ‘underserved’.
Whilst some multinational corporations will continue trading successfully for generations to come there will be others that will be usurped by budding entrepreneurs who are working hard to bring their ideas to fruition.
Of course the picture varies from country to country, with some financial markets more developed than others. The IFC estimates that around 60 per cent of micro, small and medium-sized businesses in developing economies – such as East Asia, the Middle East and North Africa - cannot access the credit they require, compared to 16 per cent in developed economies.
Some SMEs bring forth entire new industries. Just 20 years ago Google and Facebook didn’t exist; in fact their founders were still at school. And in the meantime Apple, which had seen success in the 1980s, was in a period of decline. Today Facebook generates revenues of $8bn and has over 7,000 staff. Google is now a $60bn revenue company and employer of over 52,000 people across offices in Australia, Brazil, Canada, China, France, Germany, India, Ireland, Israel, Japan, Kenya, and the UK. Apple has almost 100,000 employees and an annual turnover of $170bn SMEs provide new technologies, products and services that meet the needs of our changing world; they ensure established companies continue to adapt and innovate; and they challenge convention. Simply put, SMEs are essential to a thriving and vibrant economy.
Whilst 16 per cent may seem less significant when compared with the equivalent figure in developing nations, it shows that a mature financial market is not the only answer to ensuring every business has the support it requires to operate. In fact, the global economic recession produced a number of innovative new providers in the financial services sector in developed markets, for example crowd funding and peer-to-peer lending. Their arrival has reinvigorated the market and is really challenging the dominance of the established players. Cultural, legal and regulatory barriers play a major part in the battle to support SMEs. This is perhaps best demonstrated by the IFC’s analysis of the role gender
28 Corporate Vision February 2015
SME: Bridging the credit gap: Why SMEs need more support
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Unfortunately, despite their importance to our global economy, many entrepreneurs struggle to secure the finance they need to support their business.
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plays in access to finance. Whilst the number of women-owned businesses is increasing, and accounts for around 30 per cent of enterprises, only 10 per cent can access the finance they require to grow their venture. How can we bridge the gap? Clearly this is a complex issue that will take time to improve. It is further complicated by the growing need for more specialist funding facilities for SMEs seeking to switch on to the power of international trade. The world is a much smaller place now, and business owners are no longer only connected with other businesses and customers in their own town, city or region. Therefore bridging the gap involves more than just the offer of a loan or overdraft to SMEs; it requires a competitive market and a range of tailored solutions. In order to make progress in this area the global financial services industry must work together. There are many initiatives in place by organisations such as the IFC, private sector finance providers and commercial banks, but the opportunity exists to achieve more by working together. Certainly in the invoice finance industry, of which Bibby Financial Services belongs, there is a requirement for a more unified position to better influence policy makers and influence the flow of trade. Currently there are many disparate member organisations rather than one global association. If we can focus on a more unified approach then I am confident we can start to reach the hundreds of millions of businesses that need greater support. Awareness and education also plays a major part in bridging the credit gap in both developed and developing markets. Communicating the different financial products that are available is something the industry must do – ideally in partnership - and it needs to reach a wider audience than just current SME owners. For example, basic commercial acumen and an understanding of how to access finance and support is something that could be included in school curriculums. By working together and focusing on increasing awareness and engagement, we will begin to tackle the cultural, regulatory and legal barriers and ensure more entrepreneurs can realise their ambitions. Doors will be opened for an increasing number of finance providers and more tailored options for businesses, so that options exist outside of commercial banks and standard products such as loans and overdrafts. As the global economy and international trading improves it is imperative that the financial industry focuses on supporting the smallest businesses. Their success is crucial for a healthy economy.
percentage of women-owned businesses...
30% February 2015 Corporate Vision 29
Lifestyle
32 A Perfect Hideaway Set in lush tropical gardens and bordering a secluded white sandy beach, the Sarojin, in idyllic Khao Lak, Thailand, is a supremely peaceful and refined resort.
A Perfect Hideaway
Kipi Suites The Kipi Suites hotel, in the heart of Greece’s stunning and remote Zagori region, offers a welcome respite from the strains of modern life
Lifestyle: A Perfect Hideaway - Kipi Suites, Zagori, Greece
Built, amphitheatrically, in the area of Timfi, Pindos and Mitiskeli, northwestern Greece, the Zagori region comprises a cluster of 48 traditional, stunningly picturesque villages. The region has an area of some 1,000 square kilometres. To the south lies the provincial capital, Ioannina. The southwestern side is formed by Mount Mitsikeli (1,810m), and the Aoos river and Mount Tymfi constitute the northern side. The southeastern side runs along the Varda river to Mount Mavrovouni (2,100m) near Metsovo. It’s a perfect place for those wanting to escape the rat race: the population of the area is about 3,700, which gives a population density of four inhabitants per square kilometre – compared to an average of 73.8 for Greece as a whole. Nestled in Zagori’s magical network of mountains, valleys and rivers is Kipi Suites, an exclusive boutique hotel. Its eight luxurious suites and terraces offer panoramic views of the village, Mitsikeli mountain, Baya river and Milos – one of a network of bridges that links the many traditional villages in the area. The hotel has been developed from two Zagori village houses dating from 1850, with a further three buildings added to blend perfectly with the original property. The traditional exterior facades have been carefully preserved while the interiors add a contemporary air. All materials used for the construction, renovation and maintenance of the Kipi Suites are environmentally friendly and special care has been given to energy and water conservation throughout the hotel.
The hotel takes great pride in its breakfast, and regards it as the most important meal of the day. Start your day with a glass of fresh orange juice and choose from the varied breakfast menu. All breakfast delicacies – including breads, marmalades, yogurt, biscuits, desserts and pies that change daily – are home-made, using fresh local ingredients. Best of all, breakfast is served until midday – so there’s no excuse not to enjoy a well-deserved lie-in. The hotel features an informal restaurant serving light dishes throughout the day including a signature breakfast with many locally-sourced ingredients. The restaurant terrace offers stunning views of the mountains, village and river below while the Kipi Lounge Bar with its comfortable armchairs is perfect for relaxing. Want to get out and about? Zagori is a haven for outdoor activities with its mountains, rivers, gorges, ancient paths and the unsurpassed nature of VikosAoos National Park. Kipi village is the perfect base for exploring this magical area, whether it is trekking (the Zagori area is famous for its old walking trails, some of which start from the Kipi Suites), rafting, mountain biking, rock climbing, paragliding, horse riding, river or lake swimming and much more. Alternatively, wander in the cobbled alleys of the traditional villages of Zagori with its distinctive stone built houses. Take a break for a “tsipouro” brandy in the central square, under the shade of the plane tree. Or visit the various museums of local arts and crafts. Hop between villages via the traditional interconnecting paths and stone bridges. Enjoy the wealth of nature or drive off road to discover the unique beauty of the National Forest of Vikos-Aoos and Valia Calda.
Eight different suites, named after the surrounding villages of Central Zagori await you. All suites have separate entrance, unobstructed views and one or two open fireplaces, while most enjoy a private terrace or balcony. The furniture is custom made and, along with designer fixtures and fittings provide a contemporary, minimalist result. The spacious bathrooms are fully equipped with top quality amenities, towels and bath robes. Most suites feature a Jacuzzi. Relax in the ultra-comfortable king-size beds and enjoy 32’’ HD TVs, Nespresso machines and iPhone docks.
Kipi Suites Email: info@kipisuiteszagori.gr Web: http://www.ariahotels.gr/en/content/kipi/welcome-8 Tel: +30 26530 71995 Address: Ioannina 44010, Epirus, Kipi, Zagori
34 Corporate Vision February 2015
February 2015 Corporate Vision 35