CFI.co Summer 2016

Capital Finance International

Summer 2016

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AS WORLD ECONOMIES CONVERGE

Larry Page, Google Co-Founder:

REDISCOVERING THE ALPHABET ALSO IN THIS ISSUE // WORLD BANK GROUP’S IFC: LATIN AMERICA AND THE CARIBBEAN // UNCTAD: INVESTMENT POLICIES IMF: CHINA’S SPILL-OVERS // NASDAQ: GENDER EQUALITY IN THE C-SUITE AND BOARDROOM US DEPARTMENT OF STATE: US INVESTMENT CLIMATE STATEMENTS // WORLD BANK GROUP: STRATEGIC INVESTMENT FUNDS

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Summer 2016 Issue

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Summer 2016 Issue

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CHRONOMAT 44

CFI.co | Capital Finance International

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Editor’s Column Over to You, Chancellor Merkel went to see German Chancellor Angela Merkel. The two seemed to have hit it off well. Even raving ragdoll Boris Johnson, named foreign secretary, managed to cause a favourable impression in Brussels where he met his EU peers only days after being named to the cabinet in a surprise appointment.

Be careful what you wish for.

Well, since you asked, we could do with a few good leaders. Perusing the roster of those in charge around the globe, few stand out. Perhaps Chancellor Angela Merkel of Germany is one. Ólafur Ragnar Grímsson surely is another. He’s the fifth president of Iceland and steered his country through its worst-ever recession.

In a few short years, President Grímsson and his government cleared the mess left behind by the country’s irresponsible bankers – now locked up in a nice facility on a remote part of the island, far from the civilisation they almost destroyed. Of course, one cannot not love Iceland. But, alas, it counts for next to nothing in the grand order of things – unless the topic turns to football.

Angela Merkel it is, then. Chancellor Merkel put her class on full display when, amidst the cacophony of indignation following the June 23 Brexit vote, she appealed for calm and chastised those proposing to punish Great Britain for showing its colours. “The United Kingdom,” she said, “is not to be treated harshly. We shall not be nasty to the British. They remain our friends.”

Editor’s Column

For all her shortcomings, Chancellor Merkel has a vision – a thrifty, prosperous, humanitarian, and united Europe – and pursues it even when political convenience dictates otherwise. Contrast this to former Prime Minister David Cameron, now thankfully confined to the backbenches, who lacked any and all vision and only pursued political expediency. It did him in.

It would cause little surprise should Mr Cameron go down in history as one of the most incompetent – or cynical – British prime ministers ever.

Whilst the Brexit vote’s outcome was not particularly visionary – and seems to push Great Britain in the direction of Little England – some degree of sense returned to the political scene with former home secretary Theresa May moving into 10 Downing Street. If anyone is well equipped to lead the UK as it seeks to further detach itself from continental affairs, it must be Mrs May. On her first overseas visit, Mrs May 8

Now that introductions have been made, and tempers have subsided, a path may – in due time – be found to lead to the actual exit negotiations. It is, however, still very early days. The one certainty is that Chancellor Angel Merkel is key to nearly everything that will follow. She has been cast into the role of saving the day. Together with Prime Minister May – possibly a Thatcher 2? – to stop the UK from shooting itself in the proverbial foot.

British voters, usually quite phlegmatic, failed to exercise care in expressing their wishes: they may have pined for less immigration and less social inequality, but opted for a retreat instead – a very unBritish attitude and one that baffles the rest of Europe.

Chancellor Merkel got it right when she reminded all that, whatever happens, the UK remains European and a close friend.

In this issue, CFI.co examines the impact of disruptors on everyday life. Disruption – rocking the boat – keeps business on its toes, ensures innovation prevails, seeks new venues to success, and weeds out the obsolete and inefficient. Without disruptors, markets would wither and economies grind to a standstill – undermining growth and prosperity.

However, as useful as disruption is to business, as toxic it is to politics. Whilst the governing of nations requires vision and a degree of boldness; pragmatics should, ideally, carry the day. Too much harm has been done by those whose grand vision crushed everything before it. Radical change may revive a moribund business; it seldom augurs good times for everyone.

As long as they remain in the pesky fringe, disruptive politicians such as Nigel Farage (now retired), Marine Le Pen, Geert Wilders and other assorted populists and firebrands serve a purpose: they keep mainstream political forces alert and responsive.

The German Chancellor – always sensible, not easily overcome by emotion, and eager to do what is right – will ultimately be the one who determines Britain’s, and indeed Europe’s, fate. Mutti Merkel must reestablish some semblance of order on the playground, issue a few stern warnings, call the bullies’ bluff, and get recalcitrant rascals to recant and tone down. She now has found an ally in Prime Minister May. Both ladies may yet stop the continent from walking – silly or otherwise – off the cliff.

Wim Romeijn Editor, CFI.co CFI.co | Capital Finance International

Reichstag (German Parliament)

Editor’s Column

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> Letters to the Editor

“ “ “ “

Whilst growth in the Eurozone has picked up and the financials look sound, the common currency still shackles its adopters to austerity policies that cause much social harm. Hence, the benefits of the euro are not available to nations such as Greece, Portugal, and Spain which cannot reasonably expect to prosper anytime soon. Even the euro’s staunchest supporters admit that the currency union was badly conceived and implemented. Now committed to a currency that brings few benefits, the Eurozone muddles on against its better judgment. As such, the euro is a recipe for disaster or, more prosaically, a failure foretold.

ADRIANO GONÇALVES (Lisbon, Portugal)

The amount of nonsense spouted at the European Union’s expense is, indeed, tiresome. In fact, most of the disasters, setbacks, and overspending attributed to, and blamed on, the EU and its supposedly hapless civil servants are mere figments of the imagination. Whilst Brussels may have a few issues that require prompt solutions, the outrage directed at the EU is mostly misguided. Consider this: the UK – home to the most vociferous of the EU’s critics – has just wasted some £285 million constructing an airport on St Helena, a remnant of the British Empire lost in the Atlantic, that cannot be used. The project’s designers forgot to take wind shear into account and, as a result, the brand-new facility cannot be used. Had the EU financed such a doomed endeavour, the media would have enjoyed a field day. As it happens, the EU provided funding for an airport on the Portuguese island Madeira. Not only were huge engineering challenges overcome, the airport is also fully functional, adding thousands of jobs to the local economy and bringing in tens of thousands of tourists annually.

HANS SCHNEIDER (Monchengladbach, Germany)

I enjoyed reading your report on CaixaBank – one of only a handful of Spanish banks that is quietly making a splash. Not only is CaixaBank the largest financial services provider in Spain, the bank has been expanding beyond its home market. What makes CaixaBank rather special is that it moves prudently and carefully avoids rushing into markets. It may move slowly, but is a player to watch. In fact, CaixaBank’s management seems to have learned valuable lessons from their competitors’ mistakes.

ANGELICA SOUZA (Playa de Aro, Spain)

I appreciated your article on Tunisia. It was about time someone had a closer look at this country.

Tunisia has managed to get its house in order, institute rule by consensus, and implement progressive policies that are advanced even by European standards.

As such, Tunisia is one of only two North African countries that are stable and manage to increase livings standards, albeit still slowly. The other one is, of course, Morocco.

MEHDI CHAFIK (Rabat, Morocco)

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London: Palace of Westminster

Summer 2016 Issue

“ “ “

Amazing how such a simple thing as a credit bureau can offer an outsized contribution to a nation’s development. The arrival of Dun & Bradstreet in Tanzania has transformed the country’s financial market by adding a level of added security and facilitating the provision of credit to small and medium-sized enterprises. It goes to show that grand policies and wholesale reforms are often not needed when aiming for accelerated development. As usual, success depends on attention to detail. Credit reporting is such a detail: often overlooked, but essential to any economy that wishes to attain sustained growth.

BRAYSON NDASSA (Dar es Salaam, Tanzania)

Conspiracy theories are usually lost on me. The Twin Towers crumbled because two kerosene-laden planes flew into them.

End of. Yet, the documentaries of Adam Curtis – always revelatory in nature – form the exception. This filmmaker has an uncanny knack for shedding light on the backside of societal developments. By doing so, Mr Curtis shows that there are forces at work of which the general populace has little knowledge.

These forces shape our nations and our times. Most of them promote good causes, albeit often in rather unidimensional ways that end up causing considerable harm. More worryingly, Mr Curtis’ films clearly show that our democracies are, in fact, steered by these forces. In other words: we are but playthings, invited to have our say every few years, whilst the powers-that-be go about their business – unperturbed.

FRANK RUTHERFORD (Torquay, UK)

Helen Mirren: you’ve got to love her!

WILLIAM POSTMA (Estepona, Spain)

I enjoyed your coverage of Canada and its return to its natural status as humanitarian superpower. Once more, we may now expect Ottawa to act independently from Washington and plot a course that promotes peace and humanitarian values. We have sorely missed Canada during the Harper years when it retreated from the world stage.

Canada, a land of opportunity for millions uprooted by violence and poverty, has been called the world’s largest social experiment: its diverse people all gather beneath the maple leaf without having to renounce their heritage.

In fact, nobody cares: just be yourself and you may proudly call yourself a Canadian.

HUBERT METCALF (Saskatoon (SK), Canada)

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Editor Wim Romeijn Assistant Editor Sarah Worthington Executive Editor George Kingsley Contributing Editor Darren Parkin Features Editor Penny Hitchin Production Editor Jackie Chapman

Editorial Tony Lennox Kate Stanton Hal Williams Emelia Beeson John Marinus Ellen Langford Naomi Majid Steve Dyson Columnists Otaviano Canuto Evan Harvey Ross Jackson Tor Svensson Distribution Manager Len Collingwood Subscriptions Maggie Arts Commercial Director William Adam Director, Operations Marten Mark

> COVER STORIES Otaviano Canuto, IMF: China’s Spill-Overs (14 – 15)

US Department of State: US Investment Climate Statements (24 – 26)

NASDAQ: Gender Equality in the C-Suite and Boardroom (28 – 29)

Cover Story: Disruption - Its Use and Abuse (34 – 41)

World Bank Group: Strategic Investment Funds (136 – 137)

Publisher Mark Harrison

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford Hertfordshire WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

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IFC: Latin America and the Caribbean (174 – 176)

UNCTAD: Investment Policies (222 – 224)

CFI.co | Capital Finance International

Summer 2016 Issue

FULL CONTENTS 14 – 41

As World Economies Converge

Otaviano Canuto

Nouriel Roubini

Mohamed A El-Erian

Tor Svensson

Ann Low

Evan Harvey

Robert J Schiller

Ross Jackson

42 – 53

Summer 2016 Special: Ten Disruptors - Beyond the Hype

54 – 87

Europe

Virgin Management

Nestlé

3 Step IT

Delta Group

Kate Stanton

Penny Hitchin

Steve Dyson

Gan Direct Insurance

The Access Bank UK

Tony Lennox

Charlie King

Simon Smith

Darren Parkin

88 – 115

CFI.co Awards

Rewarding Global Excellence

116 – 137

Africa

Assupol

National Bank of Commerce

Tradex

UNCDF

PwC

Shiekan Insurance & Reinsurance Co

World Bank Group

138 – 157

Middle East

ASTAD

Image Nation

Jordan Dubai Islamic Bank

Petroleum Development Oman

DEWA

OECD

158 – 169

Editor’s Heroes Ten Men and Women Who are Making a Real Difference

170 – 197

Latin America

Credicorp Capital

IFC

Banco do Brasil

Bankaool

Vantrust Capital

BAC Credomatic

ENGIE Energía Perú

Unity

UN’s Principles for Sustainable Insurance

198 – 207

North America

Home Trust Company

Naomi Majid

208 – 225

Asia Pacific

Bangkok Insurance

Azizi Bank

Avant Garde Innovations

IFC

Century Insurance (PNG) Ltd

UNCTAD

226

Hail to the Maintainers CFI.co | Capital Finance International

13

> Otaviano Canuto, IMF:

China’s Spill-Overs on Latin America and the Caribbean

T

he Chinese economy is rebalancing while softening its growth pace. China’s spill-overs on the global economy have materialised through trade, commodity prices, and financial channels. The global reach of the effects from China’s transition have recently been illustrated in risk scenarios simulated for Latin American and Caribbean economies.

The weight of the Chinese economy in the global economy rose as the country is its way to become the world’s second largest economy at market exchange rates and first in terms of purchasing power parity. As noted by the IMF, approximately one third of global growth during 2000-15 took place in China while its exports increased from 3% to 9% as a share of world exports (see chart 1) More recently, China’s economic growth has morphed from one led by public investment and exports of manufactures towards one where consumption and services are the main drivers.

The new pattern entails lowering the GDP growth rates to levels that are more balanced and sustainable, based on rising purchasing power of its population and less dependent on huge trade deficits elsewhere in the global economy.

CFI.co Columnist

China’s transition may, however, face bumps.

First of all, some complex and time-consuming

“China’s transition may, however, face bumps.

First of all, some complex and timeconsuming structural reforms will need to be implemented.” structural reforms will need to be implemented.

The provision of public services must be widened in order to convince households to raise their propensity to consume. The business environment will have to be reconfigured as a necessary step to move up the sophistication ladder in value chains and overcoming so-called middle income traps. The existing universe of state-owned enterprise will also need to be reformed.

Furthermore, there is the legacy of corporate debt and excess capacity in formerly leading sectors that resulted as a consequence of policies implemented to avoid a hard landing in the aftermath of the global financial crisis.

This legacy has been at the origin of occasional financial market jitters. Fears of a disorderly

Chart 1: China’s Role in the Global Economy. Source: IMF, Regional Economic Outlook – Asia and Pacific, April 2016, p.48.

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financial unravelling and abrupt exchange rate depreciations have been behind episodes of capital outflows and loss of foreign reserves, even if a more benign scenario has prevailed in recent months.

SPILL-OVERS In hindsight, one now understands the core role played by China’s growth-cum-structural-change in the upswing and – over the last five years – downswing phases of the cycle during which developing and emerging market countries went from “switching over as global locomotives” to “getting lost in the transition.” Notwithstanding idiosyncratic country-specific factors and policies underpinning the growth performance in those economies, they have all been impacted by the evolution of China’s economy – including the growth resilience exhibited after the global financial crisis, despite the cost of rising financial and capacity imbalances. The recent rebalancing of the Chinese economy has naturally also brought spill-overs.

There are three channels through which those spill-overs from China to the rest of the world have operated. First, there is trade as a direct channel. A faster-than-expected slowdown in imports and exports has reflected not only a deceleration in investment and manufacturing activities, but also a movement of densification of domestic value chains to the detriment of

Summer 2016 Issue

Difference with respect to baseline in percentage points (annual averages 2016–2018)

Estimated Impact on GDP Growth

(Percent change)

0.1 2016

2017

0.0

-0.1 -0.2 -0.3 -0.4 Chart 2: China Slowdown and Global Risk Aversion Shocks - Impacts on Latin America and the Caribbean.

Sources: (left) IADB, 2016 Latin American and Caribbean Macroeconomic Report, 2016, p.11; (right) IMF, Regional Economic Outlook: Western Hemisphere, April 2016, Box 2.2.

“No wonder there is so much attention and hope for smoothness in China’s current economic rebalancing. After all, what happens in China does not stay in China.” imports of intermediates or export-related inputs.

China’s foreign trade was a key factor behind the world trade slowdown last year.

Second, there are spill-overs through commodity prices. The growth slowdown and rebalancing of the Chinese economy has been a major factor affecting the demand, and thus the prices, of commodities. This is matched by developments on the supply side following technological innovations and new capacities that emerged during the upswing phase of the super-cycle.

LATIN AMERICA AND THE CARIBBEAN Spill-overs from China, as it undergoes its growthslowdown-cum-rebalancing, are illustrated in recent simulations of the impact on Latin America and the Caribbean as reported last month by the International Monetary Fund and the Inter-American Development Bank.

The IMF’s Regional Economic Outlook for the

Such shock would affect the region not only through direct trade linkages, but also as a result of commodity prices being pulled downwards, with substantial declines in the case of minerals and fuels and smaller corrections in world food prices. As one would expect from the diversity of exposure to commodity prices in the region, effects would tend to be highly heterogeneous notwithstanding their overall significance.

The IMF’s risk scenario also includes the effects of a rise in global risk aversion following the simulated financial turmoil in China, leading to a re-pricing of sovereign debt in the region. The overall results of both simulated stress factors are depicted on the right side of chart 2:

“Based on model simulations, the cyclical slowdown in China could reduce growth in Latin America and the Caribbean by about ¼ percentage point in 2016 relative to the [IMF’s] World Economic Outlook baseline. In addition, an increase in sovereign risk premiums triggered CFI.co | Capital Finance International

by higher global risk aversion would cut growth by another ¼ percentage point. The overall impact declines in 2017 but is still negative (total of about 0.2 percentage point).”

The latest annual macroeconomic report of the Inter-American Development Bank also features risk scenarios for the region that include the impact of a shock to China’s economic growth (of approximately 3% of GDP) and a global asset price shock (measured as a 10% fall in equity prices). The combined effect of both shocks would be something close to 1.4% per annum for 2015-2017 (chart 2, left side). As illustrated in the IMF simulation, the impacts would be heterogeneous among countries but broadly significant.

China’s economic rise has also entailed increasing repercussions of its development in the rest of the world, including Latin America and the Caribbean. No wonder there is so much attention and hope for smoothness in China’s current economic rebalancing. After all, what happens in China does not stay in China. i ABOUT THE AUTHOR Otaviano Canuto is the executive director at the board of the International Monetary Fund (IMF) for Brazil, Cabo Verde, Dominican Republic, Ecuador, Guyana, Haiti, Nicaragua, Panama, Suriname, Timor Leste, and Trinidad and Tobago.

The views expressed here are his own and do not necessarily reflect those of the IMF or any of the governments he represents.

Follow Otaviano Canuto on Twitter: @ocanuto 15

CFI.co Columnist

Third, there are the direct and indirect spillovers through financial channels. As bouts of uncertainty about the smoothness of China’s growth slowdown and policy changes often spark global risk aversion episodes, financial spill-overs extend way beyond those economies that have developed deeper financial links with China. Interestingly, while the “taper tantrum” derived from US monetary policy signals in the summer of 2013, the turbulences in emerging markets’ exchange rates and capital flows in January 2014 could be traced to financial events in China. This has also been the case in August 2015 and January this year.

Western Hemisphere developed a risk scenario for Latin American and Caribbean economies associated with a sudden bout of financial market turmoil in China. The simulation is based hypothetically on a wide set of the latter’s financial and real estate assets losing value, corporate risk premiums increasing, a new wave of capital outflows being triggered, the Renmimbi depreciating by about 15%, and falling investment and output. The supposed impact on the Chinese economy is a move of China’s growth 2 percentage points down relative to the IMF’s baseline in 2016 and 2017.

> Nouriel Roubini:

The Global Growth Funk

T

he International Monetary Fund and others have recently revised downward their forecasts for global growth – yet again. Little wonder: The world economy has few bright spots – and many that are dimming rapidly.

Among advanced economies, the United States has just experienced two quarters of growth averaging 1%. Further monetary easing has boosted a cyclical recovery in the Eurozone, though potential growth in most countries remains well below 1%.

In Japan, Abenomics is running out of steam, 16

with the economy slowing since mid-2015 and now close to recession. In the United Kingdom, uncertainty surrounding the June referendum on continued European Union membership is leading firms to keep hiring and capital spending on hold. And other advanced economies – such as Canada, Australia, Norway – face headwinds from low commodity prices.

Things are not much better in most emerging economies. Among the five BRICS countries, two (Brazil and Russia) are in recession, one (South Africa) is barely growing, another (China) is experiencing a sharp structural slowdown, and India is doing well only because – in the words of CFI.co | Capital Finance International

its central bank governor, Raghuram Rajan – in the kingdom of the blind, the one-eyed man is king. Many other emerging markets have slowed since 2013 as well, owing to weak external conditions, economic fragility (stemming from loose monetary, fiscal, and credit policies in the good years), and, often, a move away from market-oriented reforms and toward variants of state capitalism.

Worse, potential growth has also fallen in both advanced and emerging economies. For starters, high levels of private and public debt are constraining spending – especially growthenhancing capital spending, which fell (as a

Summer 2016 Issue

share of GDP) after the global financial crisis and has not recovered to pre-crisis levels. That falloff in investment implies slower productivity growth, while aging populations in developed countries – and now in an increasing number of emerging markets (for example, China, Russia, and Korea) – reduce the labour input in production.

The rise in income and wealth inequality exacerbates the global saving glut (which is the counterpart of the global investment slump). As income is redistributed from labour to capital, it flows from those who have a higher marginal propensity to spend (low- and middle-income households) to those who have a higher marginal propensity to save (high-income households and corporations).

Moreover, a protracted cyclical slump can lead to lower trend growth.

Economists call this “hysteresis”: Long-term unemployment erodes workers’ skills and human capital; and, because innovation is embedded in new capital goods, low investment leads to permanently lower productivity growth.

Finally, with so many factors dragging down potential growth, structural reforms are needed to boost potential growth. But such reforms are occurring at suboptimal rates in both advanced and emerging economies, because all of the costs and dislocations are frontloaded, while the benefits occur over the medium and long term. This gives opponents of reform a political advantage.

Meanwhile, actual growth remains below the diminished potential. A painful deleveraging process implies that private and public spending need to fall, and that savings must rise, to reduce high deficits and debts. This process started in the US after the housing bust, then spread to Europe, and is now ongoing in emerging markets that spent the last decade on a borrowing binge.

“Among advanced economies, the United States has just experienced two quarters of growth averaging 1%.

Further monetary easing has boosted a cyclical recovery in the Eurozone, though potential growth in most countries remains well below 1%.”

At the same time, the policy mix has not been ideal. With most advanced economies pivoting too quickly to fiscal retrenchment, the burden of reviving growth was placed almost entirely on unconventional monetary policies, which have diminishing returns (if not counter-productive effects).

Asymmetric adjustment between debtor and creditor economies has also undermined growth. The former, having overspent and under-saved, had to spend less and save more when markets

CFI.co | Capital Finance International

forced them to do so, whereas the latter were not forced to spend more and save less. This exacerbated the global savings glut and global investment slump.

Finally, hysteresis further weakened actual growth. A cyclical slump reduced potential growth, and the reduction in potential growth prospects led to further cyclical weakness, as spending declines when expectations are revised downward.

There are no politically easy solutions to the global economy’s current quandary.

Unsustainably high debt should be reduced in a rapid and orderly fashion, to avoid a long and protracted (often a decade or longer) deleveraging process.

But orderly debt-reduction mechanisms are not available for sovereign countries and are politically difficult to implement within countries for households, firms, and financial institutions.

Likewise, structural and marketoriented reforms are necessary to boost potential growth. But, given the timing of costs and benefits, such measures are especially unpopular if an economy is already in a slump.

It will be no less difficult to leave behind unconventional monetary policies, as the US Federal Reserve recently suggested by signalling that it will normalise policy interest rates more slowly than expected. Meanwhile, fiscal policy – especially productive public investment that boosts both the demand and supply sides – remains hostage to high debts and misguided austerity, even in countries with the financial capacity to undertake a slower consolidation.

Thus, for the time being, we are likely to remain in what the IMF calls the “new mediocre,” Larry Summers calls “secular stagnation,” and the Chinese call the “new normal.” But make no mistake: There is nothing normal or healthy about economic performance that is increasing inequality and, in many countries, leading to a populist backlash – both on the right and the left – against trade, globalization, migration, technological innovation, and marketoriented policies. i ABOUT THE AUTHOR Nouriel Roubini is Chairman of Roubini Global Economics and Professor of Economics at the Stern School of Business, NYU.

Copyright: Project Syndicate, 2016. www.project-syndicate.org 17

> Mohamed A El-Erian:

Saudi Arabia’s Bold Vision for Economic Diversification

S

audi Arabia has captured the world’s attention with the announcement of an ambitious agenda, called Vision 2030, aimed at overhauling the structure of its economy. The plan would reduce historical high dependence on oil by transforming how the kingdom generates income, as well as how it spends and manages its vast resources. It is supported by detailed action plans, the initial implementation of which has already involved headline-grabbing institutional changes in a country long known for caution and gradualism.

Whilst the immediate catalyst for economic restructuring is the impact of the sharp fall in 18

international oil prices, the rationale for these reforms has been evident for much longer. With oil sales generating the bulk of government revenues, and with the public sector being the predominant employer, Saudi officials have long worried that the Kingdom’s lack of economic diversity could place at risk its long-term financial security.

a near-doubling in US production, to almost ten million barrels per day, in just four years – the Saudi-led OPEC oil cartel has less influence on market prices. In addition, certain members of OPEC, again led by Saudi Arabia, are now less willing to try to moderate fluctuations in the price of oil, as they correctly recognize that “swing producers” risk durable losses in market share.

The more than halving of oil prices in the last 18 months has been accompanied by a major change in how the oil market functions. With growth in non-traditional sources of energy – particularly the “shale revolution,” which drove

That’s why Vision 2030 is so important. Seeking to regain better control over its economic and financial destiny, the kingdom has designed an ambitious economic restructuring plan, spearheaded by its energetic new deputy crown

CFI.co | Capital Finance International

Summer 2016 Issue

massive public investment program, and diverting spending on arms away from foreign purchases.

Third, the kingdom seeks to diversify its national wealth and, in the process, increase current investment income. For example, the plan would raise funds via the IPO of a small part (up to 5%) of Saudi-Aramco, the giant oil conglomerate, and invest the proceeds in a broader range of assets around the world.

This bold economic vision is not without risks.

Economic transitions are inherently tricky, especially one of this scale and scope. Early successes are often needed to solidify the overwhelming buy-in of key constituencies, particularly those that naturally may be resistant to change at first (especially change that eliminates some of the traditional financial entitlements in moving from a familiar, albeit less secure, present toward what is now an unfamiliar future).

The action plans underpinning the implementation of Vision 2030 inevitably involve progressing on multiple fronts simultaneously and in a carefully coordinated and monitored fashion. Requiring invigorated administrative and operational resources, it comes at a time when the kingdom is not only dealing with lower oil earnings and drawing down its large reserves, but also is increasingly asserting its regional role, including in Syria and Yemen.

Against this background, it is encouraging that the announcement of Vision 2030 has been followed rapidly by the implementation of some initial and notable steps. Sustaining this momentum in a manner that maintains consistent communication with key domestic stakeholders will likely prove critical in determining the plan’s success. How the Saudis proceed on this important economic restructuring is being closely watched by the other five members of the Gulf Cooperation Council – and by many other countries as well.

Riyadh, Saudi Arabia: The Al Faisaliah Tower

“The plan would reduce historical high dependence on oil by transforming how the kingdom generates income, as well as how it spends and manages its vast resources.”

prince, Mohammed bin Salman Al Saud. In simplified terms, Vision 2030 focuses on three major areas, together with efforts to protect the most vulnerable segments of the population.

The attention attracted by Vision 2030 is not surprising. The plan, after all, is about a lot more than fundamental economic reforms. If Saudi Arabia succeeds in transforming its economy, including reforming institutions and restructuring economic incentives, other countries that face similar challenges, in the region and beyond, will be inspired to follow suit. i

First, the plan seeks to enhance the generation of non-oil revenues, by raising fees and tariffs on public services, gradually expanding the tax base (including through the introduction of a value added tax), and raising more income from a growing number of visitors to the Kingdom.

ABOUT THE AUTHOR Mohamed A El-Erian, chief economic adviser at Allianz, is chairman of US President Barack Obama’s Global Development Council and author of the forthcoming book The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Second, the authorities want to reduce spending by lowering subsidies, rationalising the country’s

Copyright: Project Syndicate, 2016. www.project-syndicate.org

CFI.co | Capital Finance International

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> Robert J Schiller:

Fighting the Next Global Financial Crisis

W

hat do people mean when they criticise generals for fighting the last war? It’s not that generals ever think they will face the same weapon systems and the same battlefields. They certainly know better. The error, to the extent that the generals make it, must operate at a slightly more subtle level. Generals are sometimes slow to get around to developing plans and ordnance for those new weapon systems and battlefields.

And just as important, they sometimes assume that the public psychology, and the narratives 20

that influence the morale that is so important in achieving victory, is the same as in the last war.

That is also true for regulators whose job is to prevent financial crises. For the same reasons, they may be slow to change in response to new situations. They tend to be slow to adapt to changing public psychology. The need for regulation depends on public perceptions of the last crisis, and, as George Akerlof and I argued in Animal Spirits, these perceptions depend heavily on changing popular narratives.

CFI.co | Capital Finance International

The latest progress reports from the Financial Stability Board (FSB) in Basel outline definite improvements in stability-enhancing financial regulations in 24 of the world’s largest economies. Their “Dashboard” tabulates progress in 14 different regulatory areas. For example, the FSB gives high marks for all 24 countries in implementing the Basel III riskbased capital requirements.

But the situation is not altogether reassuring.

These risk-based capital requirements may

Summer 2016 Issue

not be high enough, as Anat Admati and Martin Hellwig argued in their influential book The Bankers New Clothes. And there has been much less progress in a dozen other regulatory areas that the FSB tabulates.

banks. Moreover, trusted authorities had seemed to say again and again that such events were historically remote and could not happen again. In the 2008 angry zeitgeist, the public reaction to a relatively minor event took on stunning proportions.

Consider, for example, regulations regarding money market funds, which, according to the FSB, only a few countries have developed since 2008.

Money market funds are an alternative to banks for storing one’s money, offering somewhat higher interest rates, but without the insurance that protects bank deposits in many countries. As with bank deposits, investors can take their money out at any time. And, like bank deposits, the funds are potentially subject to a run if a large number of people try to withdraw their money at the same time.

It took almost six years after the crisis for the US Securities and Exchange Commission to reduce money market funds’ vulnerability, by requiring in 2014 a “floating NAV” (net asset value), which means that prime money market funds no longer promise to pay out a dollar for a dollar’s nominal value. They will pay out whatever the depositor’s share in the accounts is. This does not insure the funds’ investors against losses. Yet this plausibly will help prevent runs because it means sudden withdrawals by some won’t damage the accounts of others who did not withdraw.

On September 16, 2008, a few days after the run on the US bank Washington Mutual began and the day after the Lehman Brothers bankruptcy was announced, a major United States money market fund, Reserve Primary Fund, which had invested in Lehman debt, was in serious trouble. With assets totalling less than it owed to investors, the fund seemed to be on the verge of a run. As panic rose among the public, the federal government, fearing a major run on other money market funds, guaranteed all such funds for one year, starting September 19, 2008.

“The need for regulation depends on public perceptions of the last crisis.”

The reason why this run was so alarming as to require unprecedented government support stems from the narratives underlying it. In fact, the Reserve Primary Fund did not lose everything. It merely “broke the buck,” meaning that it couldn’t pay one dollar for a dollar on the books; but it could still pay $0.97. So why a crisis? After all, bank depositors regularly lose more when unexpected inflation erodes their savings’ real purchasing power (only the nominal value of those deposits is insured). But the narratives don’t focus on that. The loss of real value due to inflation hasn’t been a prominent theme of the public narrative in the US for decades, because sustained price stability has caused people to forget about it.

But they hadn’t forgotten about the Great Depression of the 1930s, even though most people alive today weren’t alive then.

In 2008, the Great Depression narrative was being recycled everywhere, with all its colourful stories of financial panic and angry crowds forming around closed CFI.co | Capital Finance International

The international regulatory framework has changed for the better since 2008, but no such changes can anticipate all the kinds of change in narratives that underlie public animal spirits. Regulators could have imposed a floating NAV decades ago; they didn’t because they didn’t foresee a narrative that would make money market funds unstable. Regulatory authorities could not have been expected to predict the sudden public attention to the newly discovered risk of runs on nonbank financial companies.

As long as we have an economic system that produces growth by rewarding inspired actors and investors, we will face the risk that adverse talk and stories can suddenly and temporarily overwhelm the inspiration. Regulators must counter the risks implied by structures that are intrinsically destabilizing, as the money market funds were. But the most urgent regulations will always be time- and context-specific, because narratives change. And how these narratives resonate with the public may once again reveal chinks in our financial armour. i

ABOUT THE AUTHOR Robert J Shiller, a 2013 Nobel laureate in Economics and professor of Economics at Yale University, is co-author, with George Akerlof, of Phishing for Phools: The Economics of Manipulation and Deception.

Copyright: Project Syndicate, 2016. www.project-syndicate.org 21

> Tor Svensson:

On Recalcitrant & Tone Deaf Germans & Dutch & How a Continent Dances to Their Tune CFI.co Columnist

N

ovel initiatives and multiple, often country-specific, policies to effectively encourage economic growth are urgently called for. The International Monetary Fund (IMF) continues to downgrade the already much reduced growth expectations for growth, all the while drawing attention to the risks ahead.

In the developed world, the cure-all is an expansionary monetary policy – coupled with austerity. This curious mix is akin to driving with one foot on the accelerator and the other firmly planted on the brake pedal. The result has been increased inequality. This, in turn, is one 22

of the main causes of the economic stagnation currently experienced. The Eurozone has some sixteen million people without jobs and countless others who have given up on paid work altogether and are no longer included in the statistics.

Europe also battles problems associated with the ageing of its population. Austerity does not help drive up birth rates. Germany in particular has a problem with its dependency ratio – the proportion of economically inactive people (e.g. pensioners) relative to tax-paying workers. The European Commission projects that Germany’s population will shrink from 81.3 million in 2013 to 70.8 million by 2060. A similar scenario is CFI.co | Capital Finance International

found along Europe’s Mediterranean fringe with the difference that austerity has cut deep into the very fabric of society.

According to the IMF, global growth is limited to 3.1% in 2016. However, this growth is not distributed evenly: most emerging markets are no longer buoyant and can no longer expect to outperform the median. For now, Asia continues to shine, but Africa is falling back quickly, suffering from markedly smaller investment flows and lower commodity prices. Still, Africa has yet to cash in its demographic dividend.

Meanwhile, Brazil has turned into a basket case

Summer 2016 Issue

and saw its sovereign debt reduced to junk status.

Poor governance remains the national bane.

Frontier markets such as Nigeria and Turkey are slowing down as well. If you know where to look some bright lights may be observed. Turn to Albania and smile. The slump in oil prices has put a damper on growth in the Middle East. However, that region is making significant progress in the diversification of its economies.

Economic growth is driven predominantly by population growth and increased productivity.

Employment levels matter too as they attest to an economy’s ability to leverage the power of labour to boost output. Europe’s high unemployment level dampens growth. Productivity is increased via capital expenditure and technological progress. In Southern Europe, productivity lags due to low rates of capital formation, amongst others. Policies not entirely business-friendly also play their part.

The UK’s economic and job growth has until recently persistently outperformed that of the Eurozone. However, much of that prowess may be ascribed to a swelling population and a willingness of creditors to keep funding everlarger deficits. However, GDP measured per capita shows a slightly less rosy picture. The UK has by now barely recovered from the 2008 crisis and incomes have flat lined even as the economy recovered.

With an unemployment rate of only 5%, the UK seems to offer convincing proof that lowering payroll and corporate taxes, and cutting red tape, boost job creation. Deregulation helps too, never mind that a significant number of the new jobs created barely afford a living wage.

Brussels: European Parliament

The incoming government of Prime Minister Theresa May is meanwhile busy stealing the Labour Party’s thunder by declaring a Britain for All policy – whatever that means. With Labour led by a born-again Maoist of sorts, the country lacks a loyal opposition to point out that the Tories’ push for more social equality sounds hollow if not preposterous.

It is often forgotten that people experience economic policy on a strictly per capita basis.

Who cares that the economy is buoyant if CFI.co | Capital Finance International

According to the Organisation for Economic Cooperation and development (OECD), the fifteen-member Eurozone also fails to deliver solid per capita growth. The zone does, however, boast the world’s largest current account surplus (by far), effectively gobbling up assets as fast it can. With growth projected at 1.7% only, loose monetary policies – though insufficient – remain necessary. Monetary policies alone cannot do the job and work best when combined with an easing of fiscal pressures and increased public spending on infrastructure, innovation, and research and development.

A loosening of the exchequer’s purse strings is called for. Try telling that to the Germans. Nein will be thy answer. Even the IMF now admits that cuts in expenditure may not always be the right way out of a hole. Spillover effects from higher unemployment and under-investment may, in fact, reduce growth rates over the longer term.

Moreover, austerity applied to competitivelychallenged countries is a recipe for prolonged doom – see Spain, Portugal, and Greece.

In the EU’s unfettered market, northern powerhouses such as Germany and The Netherlands continue to improve their already formidable competitiveness vis-à-vis fellow Eurozone member states, condemning the others to under-performance for years, if not decades, to come. Strengthened by access to cheap capital from European Central bank, the Germans and Dutch are now busy mopping up, attracting the best engineers and brightest minds Europe has to offer and barrelling ahead without looking back. The weakened euro adds a further boost to the economic prowess of both countries.

The economic landscape is heavily stacked in Northwest Europe’s favour. Contrast that to the OECD’s conclusion that “monetary policy should remain accommodative… Countries with fiscal space should use fiscal stimulus to support aggregate demand, especially through infrastructure investment. Reforms of tax and spending policies, such as lowering taxes on labour and prioritising growth and equityfriendly spending, will increase jobs and living standards.”

Nein. Nee. And now go figure it out yourself, please. i ABOUT THE AUTHOR Tor Svensson is the Chairman of Capital Finance International.

23

CFI.co Columnist

“Countries with fiscal space should use fiscal stimulus to support aggregate demand, especially through infrastructure investment.”

Basically broke but still standing, the UK’s current account has ballooned to proportions never seen before. Outside the financial services sector, the country’s economy lacks competitiveness. It is noteworthy that amongst EU member states, the UK is the only country that did not manage to increase its intra-union trade volumes. Now one of the world’s largest debtor nations alongside luminaries such as Spain and the United States, the UK saw its current account deficit dip ever deeper into the red to almost 6% of GDP. Needing to feed its voracious capital account, the UK has become dependent on foreign investors’ willingness to keep stalling their excess cash in the country. The willingness may be affected by the UK’s departure from the European Union.

no job pays a living wage? The conservatives have an ideological issue with providing and/or funding basic services that are urgently required.

They are not usually enamoured of school and hospital building programmes or state funding for affordable housing. They’d much rather give their peers a tax break. One can, of course, put cynicism aside and hope that Mrs May is a somewhat less evangelical conservative and actually backs up her lofty sounding words with substance.

> Ann Low, US Department of State:

US Investment Climate Statements Windows on the World

U

S embassies produce annual twentypage long investment climate statements describing the conditions Americans will encounter when they invest abroad. Each Investment Climate Statement contains eighteen sections and points of contact to help prospective investors (see table below).

However, the reports may also be used by foreign governments to identify areas that are ripe for policy improvements and by foreign businesses to assess market conditions. The reports are published on the Internet for easy, free access and global impact. This article describes key sections of the 2016 Investment Climate Statements, which will be published in early July.

The reports are comparable across topics and countries, and in many cases provide information that is not available elsewhere. Investment Climate Statements are written to help American investors make informed decisions and to educate US government officials about foreign markets.

In 2015, 174 US embassies or posts produced Investment Climate Statements describing investment conditions in over 180 economies.

The statements are expected to cover a similar range of countries in 2016. The United States, like the other 33 members of the Organisation for

24

CFI.co | Capital Finance International

Economic Cooperation and Development (OECD), believes that an open, transparent, and predictable investment regime leads to the most efficient allocation of resources and is the best policy to promote economic growth.

Investment Climate Statements, therefore, focus heavily on national treatment. We ask embassies to report whether there are laws or practices that discriminate against foreigners – such as limits on the percentage of foreign ownership, or restrictions on access to sectors of the economy – whether the court system discriminates against foreigners, and whether there are any restrictions on foreign investors converting or repatriating funds.

Summer 2016 Issue

internationally reported economic statistics and those published by a host government, Investment Climate Statements explain the discrepancies.

Along with providing information on the major elements of investment climates globally, each year the questions are refined in order to keep the reports fresh and to focus on areas of particular policy importance. Input for questions is obtained from American businesses, academia, and international organisations. For example, in 2014 the section on intellectual property rights was greatly expanded and has been made into a more robust section and a standard part of all our reports.

In 2015, questions on performance requirements were updated and questions on data storage added. In 2016, a section on business registration was added and a refinement was implemented on questions regarding state-owned enterprises (SOEs), sovereign wealth funds (SWFs), responsible business conduct (RBC), and Labour.

Improving the process and incentives for business registration is a US and global priority, embodied in United Nations Sustainable Development Goal 8.3, which is to reduce informality. An estimated 1.8 billion people, representing 60% of the global work force, are employed in the extra-legal or informal economy. They cannot open business bank accounts to grow their businesses. They do not enjoy labour protection, and do not pay taxes.

Since complex and opaque governmental processes contribute to informality, foreign governments are asked: with which agencies, at a minimum, must a business typically register in their country? How long does the process take, and does the country allow simplified business creation without a notary?

According to the Global Enterprise Registration portal (GER.co), 62 economies globally do not have their business registration processes online, and only five (Denmark, Estonia, Oman, New Zealand, and Switzerland) allow users to complete the entire business registration process online through a simultaneous registration process via a single window. Business registration has been simplified in many countries to no longer require a notary, which reduces costs and allows more of the process to be completed online.

The reports contain points of contact in foreign governments so investors can report problems, such as corruption or intellectual property violations, and contact points at the US embassy, so American investors can keep their government informed about the investment conditions they encounter.

Investment Climate Statements are among the first reports with global coverage published annually that include year-end data. Embassies’ requests to foreign governments for year-end data remind governments that timely publication of economic data is essential to well-functioning capital markets.

When there is a significant difference between

Since many countries provide special services to micro, small, and medium-sized enterprises (MSMEs), governments are also asked how they define MSMEs, whether they are granted special services or preferences, and whether those are available to foreign-owned MSMEs. Over the past decade, cross-border trade and investment by state-owned enterprises (SOEs) has surged. According to the OECD, whereas in 2005, there were only three SOEs in the Fortune Global 50 list of the largest companies in the world, in 2013, there were eleven.

This came about mostly from the growth of emerging market economies, where SOEs are often dominant economic actors and have sought to CFI.co | Capital Finance International

INVESTMENT CLIMATE STATEMENTS – U.S. DEPARTMENT OF STATE: TABLE OF CONTENTS 1. Openness To, and Restrictions Upon, Foreign Investment 2. Conversion and Transfer Policies 3. Expropriation and Compensation 4. Dispute Settlement 5. Performance Requirements and Investment Incentives 6. Protection of Property Rights 7. Transparency of the Regulatory System 8. Efficient Capital Markets and Portfolio Investment 9. Competition from State-Owned Enterprises 10. Responsible Business Conduct 11. Political Violence 12. Corruption 13. Bilateral Investment Agreements 14. OPIC and Other Investment Insurance Programs 15. Labor 16. Foreign Trade Zones/Free Ports/Trade Facilitation 17. Foreign Direct Investment and Foreign Portfolio Investment Statistics 18. Contact Point at Post for Public Inquiries expand abroad. For example, in 2001, China launched its Go Global Strategy, which significantly increased foreign investment by its SOEs. The 2016 Investment Climate Statements report on whether SOEs are granted preferential treatment in terms of access to financing, land, raw materials, or opportunities for government procurement. The question is asked whether they are subject to the same tax burden and rebate policies as the private sector, and details are requested on the corporate governance practices of SOEs. In 2015, the OECD published revised Guidelines for Corporate Governance of State-Owned Enterprises that provide updated global best practices. They recommend that governments define and explain their rationales for state-ownership and that SOEs use internationally recognised accounting standards and publish transparent annual financial statements. They also recommend that SOEs voluntarily pursue responsible business conduct, such as protecting the environment and supporting an inclusive workforce. US embassies ask countries whether they are familiar with the OECD Guidelines and whether, and how, they apply the guidelines to their SOEs. Sovereign wealth funds control around $7 trillion of assets, largely created through investing natural resource revenues and trade surpluses. After Norway with about $870 billion in assets, Abu Dhabi, China and Saudi Arabia manage in the region of $770 billion, $745 billion and $670 billion respectively, according to data from the Sovereign Wealth Fund Institute.

Countries are asked what portion of each sovereign wealth fund is invested domestically 25

WHAT USERS SAY ABOUT THE U.S. INVESTMENT CLIMATE STATEMENTS Investment Climate Statements are the Economic Bureau’s flagship reports representing thousands of hours of original research by U.S. embassies worldwide, and a phenomenal resource for global investors.

- Charles H. Rivkin Assistant Secretary of State, Economic Bureau, U.S. Department of State U.S. embassies do a great job of anticipating the key issues our companies care about, from “performance requirements” and discrimination in key countries like China and India to rule-of-law challenges in smaller nations. We at the U.S. Council for International Business encourage our member companies to make full use of these outstanding reports from the State Department.

- Ambasador (Ret.) Shaun Donnelly Vice President, Investment and Financial Services, United States Council for International Business Whenever questions arise about State-Owned Enterprises (SOEs) in countries that are not on my everyday radar I reference the ICS. They give me a good first impression of potential challenges anywhere.

- Lars Erik Fredriksson Investment Director at the Ministry of Enterprise and Innovation Sweden and Chair of the OECD Working Party on SOEs. and whether the fund generally adopts a passive role as a portfolio investor or an active role in the management of the companies or assets in which it invests.

Responsible business conduct is the way businesses and governments ensure that investors, both foreign and domestic, contribute positively to a country’s economic growth and environmental and social priorities. While there is no universally agreed definition of responsible business conduct, the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights are useful resources.

Awareness is raised of responsible business conduct through the Investment Climate Statements. US embassies ask what measures governments have taken to encourage responsible business conduct. Has the government put in place corporate governance, accounting, and executive compensation standards to protect shareholders?

In relation to human rights, labour rights, consumer protection, environmental protection, and other laws/regulations intended to protect individuals from adverse business impacts, does the government effectively and fairly enforce laws?

This information helps US businesses understand governments’ expectations and potential costs involved in meeting those. In countries where responsible business conduct is not a priority, investors may be concerned about potential reputational risks. The labour section of the Investment Climate Statements directly addresses this issue by asking whether there are gaps in compliance law or practice with international labour standards that may pose a reputational risk to investors.

This year’s labour section also focuses on whether employers in any sector tend to use temporary or contract labour for jobs that are not temporary in nature, and whether labour laws are waived in order 26

The U.S. State Department’s Investment Climate Statements have become the “go to” place for international investors that want to consider expanding their supply chains overseas. Each year the reports are more insightful – a must read for any investor.

- Prof. Theodore Moran Peterson Institute for International Economics These reports are an invaluable resource for companies exploring new markets and investment opportunities abroad. Smart governments review them carefully to understand where they need to improve in order to compete for Foreign Direct Investment (FDI) dollars.

- David D. Nelson Global Government Affairs and Policy, GE Investment Climate Statements are highly informative on the latest FDI trends and policies in individual countries worldwide. They provide important input into UNCTAD’s Investment Policy Reviews and Investment Guides.

- James Zhan Director of Investment and Enterprise and Chief Editor of the World Investment Report, United Nations Conference on Trade and Development

to attract or retain investment, including in special economic zones.

Each year the State Department attempts to improve the reports and it appreciates feedback, including suggestions for questions for the following year’s report. Some particularly insightful Investment Climate Statements published in 2016 are those for: Russia, Bahrain, Sierra Leone, and Kenya. The reports can be read online and may be downloaded from the State Department’s website at www.state.gov i

References availabe online at www.cfi.co ABOUT THE AUTHOR Ann Low is the Deputy Director of the Office of Investment Affairs at the U.S. Department of State.

Ann and her team spent 2013-2016 improving the State Department’s annual Investment Climate Statements (ICS), with expert advice from: Professor Brad Parks and students at the College of William and Mary, as part of the State Department’s Diplomacy Lab; virtual interns at the Wharton School, University of Pennsylvania, and colleagues at the State Department, the Organization for Economic Cooperation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD) and many businesses.

Placing the 2016 ICS on an interactive Internet viewer is the culmination of that effort.

Ann represented the United States on UNCTAD’s Investment Committee and served as Vice-Chair of the OECD Working Party on State Ownership and Privatization Practices, where she led the U.S. delegation negotiating the 2015 OECD Guidelines for Corporate Governance of State-Owned Enterprises. Ann invented the Global Enterprise Registration portal, (www.GER.co), which has links to all business registration websites in the world and rates each website’s user-friendliness.

GER.co contributes to achievement of the United Nations’ Sustainable Development Goal (SDG) 8.3 CFI.co | Capital Finance International

(reducing informality) and SDG 16.6 (developing effective, accountable and transparent institutions at all levels), by inspiring governments to put business registration processes online and to make those processes clear and simple.

Ann has represented the U.S. at: UNCTAD; the International Trade Center; the United Nation’s Economic and Social Council (ECOSOC); the UN Development Program (UNDP) and the UN Children’s Fund (UNICEF). She served as Director of Public Affairs at Asia Pacific Economic Cooperation (APEC) in Singapore, represented the U.S. on the Budget and Management Committee for APEC, and spearheaded implementation of the Framework for Integration of Women in APEC. Ann graduated from Georgetown University’s School of Foreign Service and has a Masters of Management degree from Northwestern University’s Kellogg School of Management. She has served as a visiting Diplomat and adjunct Professor at Columbia University.

Esprit de Service FRANCE

Esprit de Service FRANCE

> Evan Harvey, Nasdaq:

Gender Equality in the C-Suite and Boardroom - A Report from the Nordics The Nasdaq Stockholm exchange hosted a knowledge summit on the dynamics of gender and inclusion in the workplace, specifically at the topmost level of the organisational chart. The all-day programme, titled Gender Equality in the C-Suite and Boardroom: Navigating Institutional Investor Demand and Business Capability, attracted nearly one hundred attendees.

P

articipants came from large Swedish pension funds and smaller sustainability investment firms; from board members and the search firms that fill board seats; and from the business, research, and academic communities.

CFI.co Columnist

The event posited a provocative question: What will it take to achieve 50-50 parity? Most companies (in the Nordics and elsewhere) start with a 50-50 gender mix in entry level positions. But the statistics reveal startling drop-offs soon thereafter. Female participation in middle and senior management roles is disproportionately low — and these trends are not adequately explained by the life and family choices that many professional women feel compelled to make. If one looks at the c-suite and boardrooms, the trend is even more disconcerting — and more global.

Lauri Rosendahl

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“There have been many studies that illustrate the real and lasting bottom-line value of a gender-diverse workplace.

Gender diversity often produces gains in productivity, talent recruitment and retention, and sourcing innovation.”

Lauri Rosendahl, president of Nasdaq Nordics, led the event with a stirring keynote that laid out the issue for businesses: Nasdaq

believes

in

a

fair,

transparent,

Sarah McPhee

CFI.co | Capital Finance International

and accessible market, so we also support businesses and cultures that aspire to the same standards. There have been many studies that illustrate the real and lasting bottom-line value of a gender-diverse workplace. Gender diversity often produces gains in productivity, talent recruitment and retention, and sourcing innovation. And this trend exists at all levels of the organization, including senior management and boards.

Other addresses followed, each attempting (in its own way) to explain why the numbers are so disproportional and point towards a potential solution.

• Romanian Secretary of State Sorana Baciu talked about her own rise through the government ranks and the curious importance of social outrage – in her case, over a tragic fire in a poorly regulated music venue – to drive public

Summer 2016 Issue

Unconscious Bias Panel

Turning towards the gender dynamics in the US, North Carolina state treasurer Janet Cowell discussed navigating the tension between directing long-term investment dollars ($90bn and counting) towards long-term-worthy companies without taking a stand on the values that those companies may espouse.

It is difficult, she conceded, to focus on “long-termism” without explicitly targeting diversity, environmental, or even governance performance. And this from a state where the very definition of gender (via debate over transgender access to public restrooms) is politically charged.

Thorendahl argued, diversity outperformance creates market outperformance. i ABOUT THE AUTHOR Evan Harvey is the Director of Corporate Responsibility for Nasdaq. He also serves on the Board of Directors for the UNGC US Network and chairs the Sustainability Working Group at the World Federation of Exchanges.

Other panel discussions focused on specific research – such as the recent Gender Folklore in the Workplace paper from State Street – and specific tactics, including recruitment and retention, mentorship and training, and monitoring and addressing unconscious bias.

CFI.co Columnist

engagement and government intervention.

• Sarah McPhee talked about her tenure as the CEO of Storebrand, a large and very traditional financial services company based in Norway.

Despite leading the company, McPhee still encountered patches of outright discrimination.

She stated her belief that quotas are a useful tool to bring short-term parity, but perhaps not the best methodology over the long-term.

Norway itself has a 40% male-female diversity quota requirement from public company board participation.

• RobecoSAM CEO Michael Baldinger touted his new gender equality impact equities fund, which provides investors with “exposure to a concentrated, high conviction portfolio of global companies that are leaders in promoting gender diversity and equality.” This strategy directly addresses societal inequity, but success is measured against the balance of the MSCI World Index.

• Mats Andersson, CEO of the Fourth Swedish National Pension Fund (AP4), recalled a career full of provocation and engagement: from orchestrating decarbonization efforts and emissions disclosure to expanding the fund managers’ definition of fiduciary duty.

The final word was delivered by Anders Thorendal, chief investment officer from the Church of Sweden. Investors need not choose between sustainable practices, such as diversity mandates, and competitive returns. In fact, CFI.co | Capital Finance International

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> Ross Jackson:

On Monetary Myths and Realities CFI.co Columnist

T

he focus in recent years on austerity as a solution to the EU’s economic crisis has not only failed, but raises some fundamental questions about the degree to which mainstream economists and politicians really understand how the monetary system works.

MONETARY MYTHS If I should summarise the general understanding of monetary issues among the vast majority of people—including most economists and politicians—then the following four points capture the essence of their underlying assumptions – assumptions, by the way, that are totally wrong: 30

• The role of the banking system is to bring together on the one side, savers (persons who spent less than they earn plus corporate profits), and on the other side potential borrowers of funds. Banks function as intermediaries somewhat like stock brokers, bringing buyers and sellers together. They can lend out the money that depositors make available, restricted only by the amount of liquidity available (to avoid bank runs), which must be at least 10 % (or some similar ratio, depending on the country) of deposits in the form of bank reserves at the National Bank. This is the so-called “fractional banking” model.

• The national accounts of a country are like the CFI.co | Capital Finance International

accounts of any household or corporation. You can only spend the money you have. The goal should be a balanced budget. New expenses must be financed. Running a budget deficit creates a debt that is a drag on the economy and may cause a financial crisis if it gets too large.

• It is the responsibility of the government, in cooperation with the National Bank, to create the money that is needed and thus to control the money supply.

• Quantitative easing (the purchase of private banking assets by the National Bank) will enable the private banks to increase their loans to the business community and thus get the economy moving once again.

Summer 2016 Issue

REALITY The correct understanding of these issues is as follows: Banks do not use existing customer deposits when they make new loans. When a new loan is made, a new deposit is made simultaneously.

The new deposit represents an increase in the money supply (more on this below). Money is thus created out of nothing. Aside from coins and bills created by governments (less than 5% of the total), money is created by private banks (assuming a balanced budget; see point 2 below) and is largely data entries in a computer.

However, a deeper analysis is required for a full understanding of what is going on, because banks actually create two kinds of money with considerably different effects on the economy. We could call them GDP money and speculative money respectively.

GDP money is money lent to the real economy for real investment in new production facilities that create new jobs and increase the GDP, whereas speculative money finances the purchase of already existing assets such as property, stocks, foreign exchange, bonds, etc. Basically, speculative money facilitates a change in ownership of existing assets but contributes nothing to the real economy.

Furthermore, speculative money typically accounts for more than 90% of all bank lending and has a tendency to increase inequality as the wealthiest citizens get the major benefits. Note that the money supply is thus a very nebulous concept and not much use in economic models unless we split it up into these two components.

This is classic Keynesian economics. Note that deficit spending goes almost 100% into the real economy since governments only rarely purchase existing assets. Note also that national accounts are fundamentally different from household and corporate accounts.

Unlike a corporation or a person, a government that issues its own currency can never be insolvent and can always pay back any debt nominated in its own currency. There is no theoretical upper limit on how large domestic CFI.co | Capital Finance International

The real issue concerning the size of the debt is whether the deficit is creating undesired inflation or not. But as long as there is unemployment and excess industrial capacity, the deficit will not be inflationary. However, it will be so when the economy approaches full capacity.

Conversely, when a country runs a budget surplus (the policy of austerity), it reduces the money supply, destroys jobs, and contracts the economy. Historically in the USA, every single depression was preceded by a budget surplus that contracted the economy. This was true in 1819, 1837, 1857, 1873, 1893 and 1929.

There were no exceptions.

It is the private banks – not the government – that create money (when the budget is balanced). The National Bank does try to control the money supply indirectly through interest rate policy. However, this is difficult in practice, especially now with interest rates close to zero. Furthermore, they cannot determine where the new money goes. In fact, it goes mostly into speculation, as mentioned above.

Quantitative easing in the USA, which was practiced extensively after the 2008 financial crisis, did not lead to the expected increase in private bank lending that the theoreticians at the Federal Reserve had hoped for. From the banking sector’s point of view, quantitative easing, also known as open market operations in former times, is simply an asset swap.

Basically, the banks swapped higher interest government bonds for increased bank reserves and lower interest government bonds. The reserves-to-deposits ratio exploded due to all the liquidity but lending increased only marginally. This experiment provides solid evidence for the fact that bank lending is not a simple function of liquidity as claimed in fractional banking theory.

Note that the above explanations are for a country whose debt is denominated in its own unique currency, i.e. which it can issue itself.

When a country borrows a foreign currency to finance its deficit, it is a very different matter.

To repay the foreign loans, the country must earn foreign currency by means of a surplus on its balance of trade. This can become mission impossible, even after currency devaluation, when the level of foreign loans gets too high.

This is the case in many developing countries today.

SPECIAL CASE: EUROZONE Then there is the Eurozone, which is a special case. The individual member states have 31

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“This is classic Keynesian economics. Note that deficit spending goes almost 100% into the real economy since governments only rarely purchase existing assets.”

The government of a country that issues its own currency is not revenue constrained. The government can spend as much as it wishes without regard to the budget deficit. It does not have to finance expenses. Deficit spending actually creates new money, which circulates throughout the economy, creates jobs, helps expand the economy, and eventually returns to the national bank in the form of increased bank reserves and increased government bond holdings in the private sector.

debt can be relative to GDP (foreign loans are a different matter).

very limited control over their economies.

It is the net deficit/surplus of all Eurozone members together that determines whether jobs are created or destroyed. While an individual member government may engage in deficit spending such as infrastructure improvements, there is no guarantee that the member’s economy will benefit as in the case of a country with its unique currency. What is for sure, however, is that the deficit has to be financed by foreign loans – the euro is in effect a foreign currency for member states because the member state cannot issue its own unique currency.

Thus a trade surplus is required in order to repay the foreign loans. Nor can the member state devalue its own currency because it doesn’t have one. There is thus a very high risk, in fact an inevitable risk, that counties with a higher rate of inflation are going to be trapped in a downward spiral with no chance of recovery, aside from a very painful internal devaluation of lower wages, cuts in welfare, etc. over a period of several years – the wellknown austerity path of which Greece is the prime example.

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The Eurozone structure thus neutralises all the advantages of having a unique currency and provides no economic benefits. It may provide a degree of prestige to certain political leaders who hope it will eventually be the back door to a coming United States of Europe on a par with the USA. However, there is no indication that European citizens want to be part of such an entity. Quite the contrary. In effect, the currency zone structure forces each member state to act like it was in a straightjacket – only able to spend the money it has, thus giving up the prime advantage of being a sovereign country, namely to have your own unique currency with all the extra flexibility in economic policy that follows.

I have stated this before, and will state it again. The euro was a major mistake that could never work with member states of such different traditions of discipline on inflation.

There will always be inflationary differences in practice, and those differences will invariably lead to extreme competitive pressures and an unresolvable crisis with the choice between unacceptable austerity or leaving the Eurozone.

The only long term solution to the Eurozone crisis, in my opinion, is to have each member state decide either to join a new United States of Europe with a single government and a single currency, or to revert back to its national currency.

The situation in my own country, Denmark, is quite bizarre. Denmark has all the advantages of having its own currency, but has voluntarily decided to act as if it were part of the dysfunctional Eurozone. The result is a totally unnecessary high level of unemployment and unnecessary cuts in the welfare state as if we 32

couldn’t run a deficit without inflation and even let the Danish kroner float freely if need be. This is not just my isolated opinion. Nobel Prize winner Paul Krugman has made the same point1. The result is a self-inflicted masochistic policy accepted by a broad segment of the political spectrum that does not understand monetary matters.

REIGNING IN SPECULATION Mainstream economists do not recognize the difference between GDP money and speculative money, treating the money supply as an amorphous quantity as described abstractly in 1950’s textbooks on fractional banking which never existed in practice. One of the few exceptions I know of is British economist Richard A Werner, who got it right in his book2.

Nor do mainstream economists normally include the speculative financial sector or monetary policy in their models. One result of this is that they miss the connection between increasing inequalities worldwide and bank lending policies that are biased towards the purely speculative use of money. One of the key types of speculation are naked derivatives (options, futures, interest rate swaps, credit default swaps, etc.) which are basically bets between financial speculators (primarily the largest commercial banks and hedge funds) that make no contribution to the real economy because neither party has an underlying interest to protect, while posing a substantial threat to, the real economy when things unwind as they did with Lehman Brothers with their 40% gearing – which means that a 2.5% shift in asset prices can wipe you out. The volume of these “bets” is now several times larger than the world GDP and is an accident waiting to happen.

It is actually quite simple to deal with this if we really want to. Transaction costs on financial speculations are one obvious solution. It has been discussed for years, is tricky in practice, and is close to implementation in several EU member states. A second approach is to introduce much higher taxes on speculative profits than on real economy investment profits. A third approach is to outlaw naked derivatives. A fourth approach, which offers a more permanent long term solution and encompasses the other three approaches, is to introduce 100 % reserve banking.

THE CHICAGO PLAN This is the name the American’s use to describe 100 % reserve banking, and hence the explanation for the title of the excellent 2012 paper on the subject by two IMF economists3.

The following is taken from their description of The Chicago Plan in their abstract:

“It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for CFI.co | Capital Finance International

deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit, and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the US economy.

We find support for all four of Fisher’s claims.

Furthermore, output gains approach 10%, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.”

Any country can implement this excellent monetary reform that, in addition to the above-mentioned advantages, can eliminate destabilising speculative lending, reduce inequalities, and create very large interest rate savings for the state, allowing substantial cuts in income taxes and/or increased welfare for citizens such as education and healthcare. Nobel Prize winning economists Milton Friedman and James Tobin along with many other lesser known economists have recommended 100 % reserve banking.

Technically speaking there are a few variations on how to implement 100 % reserve banking in practice. One simple way is for a new stateowned Public Bank to take over all deposits from the private banks in return for an equally large treasury credit on the liability side of the banks’ balance sheets. The treasury credit can then be used to shrink the bank sector’s balance sheet by taking over all speculative loans (including mortgage loans) and reducing the treasury credit by the same amount.

The undesired speculative loans can then be liquidated by Public Bank in an orderly fashion. This will leave the private banking sector with only loans to the real economy based on money it actually has in the form of bank equity plus any time deposits that citizens and corporations may wish to lend to the banks at interest (no state guarantee on these). Thus a bank would in the end correspond to the idealised description in the 1950’s text books as an intermediary between savers and real economy borrowers, and become the picture of a bank that most people think it is now. i Footnotes 1 Danmark skulle aldrig have knyttet sig til euroen (Denmark should never have bound itself to the euro) by Paul Krugman in Dagbladet Information, January 10, 2014.

2 New Paradigm in Macroeconomics by Richard A Werner (Palgrave MacMillan, 2005).

3 The Chicago Plan Revisited by Jaromir Benes and Michael Kumhof, IMF working paper WP/12/202 (August 2012).

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Disruption:

Its Use and

Abuse

By Wim Romeijn

Well into the 1990s, the mediascape of The Netherlands had but a single player of note – daily newspaper De Telegraaf ruled and did so without the benefit of any real competition. At its height, De Telegraaf sold almost three times as many copies as the runner-up.

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he paper’s deep pockets – a veritable war chest at one point containing close to €600m in ready cash – meant De Telegraaf could spend lavishly on its newsroom, maintain a worldwide network of staff correspondents and globe-trotting reporters, and acquire whatever media outlet it fancied. Money was no object and simply did not enter the equation.

Hugely profitable and well-protected against hostile takeover, De Telegraaf ran one of Europe’s largest and most modern printing plants whose presses produced up to 360,000 broadsheets or tabloids per hour, fed with paper imported from Canada by the shipload. Three of the country’s six national newspapers rolled off De Telegraaf’s presses. The business employed well over 6,000 people who enjoyed perks and benefits unheard of elsewhere in the industry.

This comfortable existence was rudely disturbed in 1998 by news arriving from – of all places – 34

Stockholm. Here, the tabloid Metro – an upstart free paper cobbled together on the cheap and distributed amongst commuters in the Swedish capital – announced the company’s intention to replicate its formula in The Netherlands.

ASLEEP AT THE WHEEL The announcement instantly caused mayhem at the Basisweg in Amsterdam. Caught napping, the management of De Telegraaf initially had great trouble grasping the completely alien concept of a free newspaper: How can news possibly be free?

How can money be made? What has the world come to?

Once the shockwaves had subsided, management responded in grand style to the disruptive Swedes: De Telegraaf promptly set up its own free tabloid and unveiled plans to invade the miscreants’ home market. There’s nothing quite like beating disruptors at their own game.

While that went well, the newspaper was finally

bumped off its lofty perch by the Internet to which it arrived late, underestimating its disruptive powers. In 2012, De Telegraaf bought Metro from its publishers. A year earlier, the company had exited the Swedish market. Money, or the lack thereof, now is an issue and, as many others, De Telegraaf let go of its corporate frills, fighting for survival in a much disrupted world.

DISRUPTOR PAR EXCELLENCE: THE WASHING MACHINE For all its transformative power, the impact of the Internet – while huge – pales in comparison to the societal changes wrought by the humble washing machine. In his bestselling book 23 Things They Don’t Tell You About Capitalism, Cambridge economist Joon Chang shows how the washing machine, and the electric iron and vacuum cleaner, reduce the time it takes to complete multiple domestic chores from hours to minutes.

These appliances set women free and allowed half of the demographic to join the workforce. The contraceptive pill, and before that the wartime need for labour, drove women out of the home

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Summer 2016 Issue

and into the broader economy – upsetting market dynamics in the process and boosting household incomes.

Dr Chang argues that, so far, only more advanced economies fully benefit from these profound changes. Household appliances have yet to impact many pioneer and emerging economies.

Billions of people still wash and iron their clothes by hand. Swedish statistician Hans Rosling calculated that the turning point is reached when disposable household income crosses the $40 per week threshold. It is at this point that families are able to afford a washing machine. Mr Rosling estimates that only about two billion of the world’s more than seven billion inhabitants own the appliances needed to free up time for life’s more lucrative pursuits.

With the Internet claiming centre stage and hosting the latest generation of disruptors, it is often overlooked that many people still lack the basic requirements for latching on to progress: piped water and electricity. In India alone, about 400 million people are off the grid. In a recent report, the World Health Organization (WHO) concluded that fully 39% of the world’s population – or some 2.6 billion people mostly in Asia and Sub-Saharan Africa – has no access to improved public sanitation, defined as a facility that separates humans from contact with faecal matter and provides water free from outside contamination.

Whilst more widely available than clean water, electricity only reaches 83% of the world population, leaving around 1.2 billion people in the dark and without ways to join the modern world. Though unlikely candidates for a megadisruptor status, the World Bank and the United Nations are fully committed to get the entire world hooked up to water pipes and power grids, recognising the unsurpassed transformative qualities of both basic services.

DISRUPTION DEFINED Disruptors build on foundations laid down by previous disruptions: e.g. washing machine are no good without piped water and electrical power.

This also gets to the heart of the new global craze surrounding disruptors. In economic sense, the term has been around for only two decades and is applied rather narrowly. It first appeared in the Harvard Business Review as a warning to established companies that, though well-run and performing at peak efficiency, could see their business models undermined or wiped out almost overnight by newcomers thinking outside the box and reinventing the proverbial wheel.

Today, Mr Christensen cautions against the tendency to broadly apply his concept. He even refuses to brand ride-hailing service Uber disruptive, though it threatens to make taxi drivers redundant. In a follow-up to the original 1995 article, Mr Christensen last year dismissed Uber as a disruptor. In order to qualify for the epithet, a start-up needs to create a market where none existed or gain a foothold in the low-end, underserved segment of an existing market – and work its way up.

An example of the latter cited by Mr Christensen is the market for photocopiers. Xerox, the king of that particular hill, used to exclusively focus on high-end customers by keeping prices inflated and, thus, repressing demand from small-scale users. Photocopiers remained the preserve of governments and large corporations. The advent of the personal photocopier, according to Mr Christensen a textbook example of a disruptive event, added a new segment to an existing market. From this foothold, disruptors were able to claw their way up the food chain and knock Xerox off its throne. ÜBER-DISRUPTIVE? Uber did none of that. While hugely innovative, the company – now valued at close to $50bn – does not serve the lower end of an existing market.

Uber’s rides are by no means inferior to existing taxis. Uber also did not create new customers; it merely offered existing riders an improved and much more convenient alternative. Hence, Uber does not qualify as a true disruptor when the term is applied in the sense meant by its creator.

Disruption, as Mr Christensen sees it, often takes time; it is rarely an event that turns the world upside down. Correctly identifying disruptors is, while surprisingly tricky, of crucial importance to market incumbents – the corporates that dominate their industry through efficiency and by virtue of a competitively priced superior product. Since true disruptors start with a tiny foothold in an existing market – or create one from scratch – they are often overlooked or dismissed as irrelevant. Mr Christensen argues that successful disruptors maintain a twin focus on the product or service and the business model that will move it from the fringe to the mainstream.

Netflix is a prime example of what Mr Christensen means. Founded in 1997, the movie rental service boasted a catalogue significantly larger than Blockbuster, established in 1985, could offer its millions of customers via a network of over 9,000 brick-and-mortar retail stores. By contrast, Netflix existed only on the Internet and dispatched its movies via snail-mail. As such, it could not match the instant gratification offered by Blockbuster.

Languishing in a decidedly esoteric segment of the market – mostly the preserve of movie buffs willing to have their patience tried – Netflix served its niche well without affecting Blockbuster in the least.

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Predictably, Clay Christensen, the article’s author, went on to become a management guru dispensing wisdom to the corporate world on how to deal with change, sudden or otherwise. Since first appropriating the word to describe a business upset, Mr Christensen has seen disruption turned into a catch-all buzzword applied to anything novel and anybody innovative. Its meaning has been watered-down as disruption is bandied about

rather recklessly to denote originality, however faint.

However, as soon as streaming technology came of age and more households gained access to broadband Internet, Netflix broke out of its niche and never looked back. The company tore into Blockbuster with an almost savage vengeance, offering all-you-can-watch deals on a vast catalogue at rock-bottom prices. Had Netflix targeted its competitor’s core business from the start, instead of sneaking up on it, the company would have been crushed by the incumbent’s might. As it happened, Blockbuster simply didn’t see the assault coming; when it did, the battle was already over.

KYD: KNOW YOUR DISRUPTOR Mr Christensen’s original theory of disruption holds that whenever a newcomer faces off an incumbent head-on, established companies will leverage both in-house knowledge and capital to improve products or services and accelerate innovation in order to defend their turf. Incumbents will either drive the pesky start-up out of business or acquire it. That is precisely what Microsoft has done time and again to fend off competitors such as Netscape, Stac Electronics, and more recently Skype Technologies – crush them or buy them, whichever one is most convenient.

The correct application of Mr Christensen’s still evolving theory of disruption is of paramount importance to corporate leaders who must grapple with change and gauge the relevance – or not – of new entrants to their markets. Applying the concept loosely only muddles the waters and does little to help incumbents defend market share – or assist innovators in finding sustainable business models.

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The mantra – repeated in boardrooms the world over – of “disrupt or be disrupted” is rather unhelpful and may lead corporations to replace profitable lines of business with unproven new ones just for the sake of disruption. It is what last year’s Fortune Global Forum in San Francisco preached – Winning in the Disruptive Century. The forum’s organisers recognise that they pushed the envelope on Clay Christensen’s concept, but say they did so with good reason: businesses operate in a world subject to fast and profound change; a new industrial revolution – powered by big data, artificial intelligence, and robotics – is being unleashed; and the distance between winners and laggards is increasing with the average lifespan of enterprises shrinking. In business economics, a new winner-takes-all reality is now prevalent.

At the event – touted as the American counterpart of the World Economic Forum in Davos – it transpired, rather unsurprisingly, that US corporates are now in the business of disrupting.

IBM CEO Ginni Rometty assured all present that her company has been a disruptor for over a century and fully intends to remain a trendsetter and innovator. Siemens CEO Joe Kaeser boasted that his company had replaced half of its product line over the last decade in order to keep its leading edge, while JP Morgan CEO Jamie Dimon delivered a rather passionate plea for more risk36

taking: “Don’t be so depressed. We’ve all become risk experts afraid of our own shadow. Move on.

The world is going to be fine.”

The forum’s participants, including a full roster of US corporate bigwigs, agreed that all companies are now in the technology business – regardless of the products or services offered. Cisco chairperson John Chambers warned that nobody should underestimate the Internet of Things and predicted that within under a decade well over 500 billion smart devices will be online – twenty times more than the number currently projected.

The consensus in San Francisco was that, whilst technology will drive the future, success is reserved for those corporations that invest in people – the weakest link. How to disrupt the workplace, it turns out, is the larger challenge as people usually do not willingly embrace change – or, indeed, adapt easily to it.

DISRUPTION RULES In his 2014 book The Road to Reinvention, venture capitalist, jazz musician, and writer Josh Linkner takes a decidedly brave-new-world view of a future shaped by fickle consumers, friction-free markets, political upheaval, and mind-boggling technological advances that arrive with “dizzying speed” and are of “exponential complexity.” Mr Linkner essentially advises everybody to panic in the face of change too dense for human comprehension. As such, Mr Linkner is not quite unlike Lance Corporal Jack Jones – the out-of-step butcher of Dad’s Army – who frequently appeals to all present “Don’t Panic! DON’T PANIC!” and does so at the most inopportune moments – such as when holding a live bomb.

Meanwhile, Forbes Magazine, always eager to join the chorus, started reporting extensively on the coming of Big Bang Disruption – innovation that is not merely disruptive, but devastatingly so. It’s Corporal Jones dropping the bomb while prancing about panic-stricken. For those wishing to make a career out of upsetting corporate apple carts, the University of California now offers a graduate degree in Disruption.

OR DOES IT? For all the hoo-ha, there is in fact little truly new under the sun. Since history became secular – sometime in the eighteenth century – the idea gained currency that today’s events may be explained by yesterday’s. Historicism allows for the tabulation of a neat course of successive events and, as such, provides a handy narrative of progress – the hallmark of the eighteenth century. The following century saw evolution – an understanding of the place of man in the grand order of things – burst onto the scene while the twentieth century – after violent mishaps – brought steady growth and innovation.

The current era places disruption centre stage from where it may not be dislodged on pain of being branded fogyish or – even worse – a luddite. Yet for all its futuristic appeal, disruption CFI.co | Capital Finance International

Summer 2016 Issue

NOT SINCE THE INVENTION OF THE WHEEL… As disruptions go, few had a more lasting impact than the wheel. Humble and ubiquitous, once set in motion, the wheel sped up human development like nothing has since.

During the Bronze Age, 5,500 years or so ago, somewhere in the vastness between Mesopotamia and the Eurasian steppes, a potter – in all likelihood – came up with the idea of using a disc to spin a lump of clay around as it got shaped to perfection. This early disruptor, unsung and anonymous, unleashed a veritable revolution.

Alas, he (or she?) did not live to see that.

It took some three centuries for the wheel to move from the pottery barn out into the fields.

The first images of wheeled carts appeared in Poland. The Ljubljana Marshes Wheel, dated to 3150 BCE and found in Slovenia in 2002, was used for transport and is the oldest such wheel recovered.

What makes the wheel such a disruptive force is that its invention and subsequent evolution is entirely man-made. Nature lacks wheels: only dung beetles and bacterial flagella come close.

Contrast that to birds serving as inspiration for aeroplanes, or forked sticks being perfected as pitch forks.

It took mankind a few centuries to figure out how to keep the wheel upright, rolling, and loadis atavistic, responding as it does to fears concerning financial turmoil, apocalyptic visions of environmental collapse, and other cataclysmic events predicted by the hurried perusal of incomplete and rather disputable evidence.

Disruption lacks vocal critics. It is now universally hailed as a power for good. However, innovation does not necessarily equate to progress – or vice versa. Disruption may bring the world improved gadgets that talk to each other over the Internet of Things; this digital wizardry does not automatically signify a betterment of the quality of life.

DISRUPTION AS SALVATION Whilst contemporary businesspeople may consider anything before the present era of disruption to belong to the Dark Ages, philosophers are less sure of that. Innovation may indeed constitute nothing more than progress without the benefits

Compared to conveyance by beasts of burden, the first wheeled carts must have seemed rather unwieldy, if not wildly impractical. In fact, well into the sixth century camels remained the primary form of transportation in Mesopotamia.

After the decline and fall of the Roman Empire, which had been powered to a large extent by oxdriven carts, the wheel fell out of favour and was to languish for a few centuries in near-obscurity.

Nevertheless, hitch an animal to a wheeled axle and a logistics business is born. The rest, as they say, is history: iron axle fittings, rims, grease, ball bearings, spokes, tyres, brakes, steering – it all leads to the neighbour’s Lamborghini or – rather more prosaically – the UPS van.

However, as a disruptive force, nothing comes close to the wheel. Still, even that resourceful Mesopotamian potter built on discoveries made earlier as did the Greeks who sometime in the 5th century BCE – when Xenophanes of the Enlightenment applied and a phenomenon beyond the purview of critical thought. Disruptive innovation, as it is now understood, takes this the idea a few steps further still and generates hope for salvation from the horrible fate it describes: disrupt or be doomed.

Electrical cars are welcomed as an innovative disruptor that will presumably help save the world from carbon-induced global warming. Indeed, the electrical car generates hope for ultimate salvation. To criticise it – or the premise of global warming – is a one-way ticket to the ostracised fringes of society or, put more succinctly: the looney bin. In many Western countries, greening the earth has replaced orthodox religion to provide a framework for a collective belief system with nature elevated to the status of deity to whom are offered all spoils. The truly pious drive a Prius.

Innovation lost its negative connotations only in 1939 when Austrian/American economist and political scientist Joseph Schumpeter used the concept to describe new products coming onto the marketplace. Three years later, Mr Schumpeter took a cue from Karl Marx1 and floated the concept of creative destruction (schöpferische Zerstörung, aka Schumpeter’s Gale). In Grundrisse: Outlines of the Critique of Political Economy, the unfinished precursor to Das Kapital, Karl Marx argued that the violent destruction of capital [means of production] is a condition of its self-preservation.

was trekking the land dispensing philosophical observations – produced the wheelbarrow which increased the output of a labourer by a factor of three or four.

Inventions, disruptive or otherwise, seldom occur in a vacuum. As such, the story of disruption lends credence to the maxim posited by Søren Kierkegaard – the first of the existentialist philosophers – who stated that life must be lived forward, but can only be understood backward.

Disruptors – inventors on steroids – build on the findings and accomplishments of those who came before. In order to do just that, the aspiring disruptor needs to understand the past and deploy this knowledge as a framework from which to break free.

The creative potter lived at a time when loads were shifted on sledges and logs. Understanding the principle, he/she pushed the envelope and added a new dimension to a well-known phenomenon: things placed atop round objects are considerably easier to move.

Thus, there is – quite literally – nothing truly new under the sun: whilst things change, and do so all the time and with ever-increasing speed, all – essentially – remains the same. And that is a rather comforting thought in these disruptive times.

Joseph Schumpeter codified an economic dimension to the paradoxical Hindu god Shiva who represents both destroyer and creator. In fact, long before Mr Schumpeter wrote Capitalism, Socialism, and Democracy (1942), philosophers such as Arthur Schopenhauer and Friedrich Nietzsche2 had been pondering and expounding on the usefulness of creative destruction.

INGRAINED DISRUPTION Schumpeter’s particular insight was that capitalism, by its very nature, cannot be stationary.

Rather, it entails a process of continuous change: “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates.”

From this Schumpeter deduced that start-up businesses represent the “disruptive force” that sustains economic growth, even as it destroys the value of established companies that may have enjoyed a degree of monopoly power derived from “previous technological, organisational, regulatory, and economic paradigms.” Following a now largely disproved Marxist line of thought, Joseph Schumpeter was none too optimistic about the sustainability of the process, musing that it could eventually undermine the very premise of capitalism since it contained the seed of destruction.

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Throughout most of history, innovation and disruption were neither pursued nor appreciated.

George Washington warned, reportedly from his deathbed, against innovation in politics; the American Founding Fathers, Federalists most of them, were quite unapologetic in their enmity of innovation, while Edmund Burke, the British statesman philosopher, considered the French revolution a “revolt of innovation” and was famously indisposed to embrace the newfangled.

bearing. As usual, a second disruptor was needed to get things moving along. The invention of the wheel-axle combination represented a stroke of genius. However, it also posed a technological challenge. While the principle may look simple – an aspect all lasting disruptions share – it requires a skilled artisan to precisely centre the holes in opposite wheels and have the axle fit snugly, but not so tightly as to cause friction.

Examples abound of the creative destruction described by Mr Schumpeter: the 8-track was replaced by the cassette tape, which in turn got superseded by the compact disc that made way for the MP3, now being substituted for online streaming. Or, take Polaroid which allowed for instant photographs and, in its time, was seen as quite disruptive. However, the company failed to identify the advent of digital cameras as an existential threat and was duly obliterated by new entrants.

Disruption, thus, is the hallmark of free enterprise, and lies at the basis of the dog-eat-dog reality of competition. To welcome disruption as a new force in business is to deny that it existed all along, albeit perhaps by a different name.

Disruptive innovation, another of the buzzwords gaining corporate traction and essentially the same thing on steroids, represents nothing more than a disruptive practice with a faux conscience – offering salvation where none is actually called for.

What Clay Christensen says is that while Polaroid was a disruptive company for creating a new market where none had existed before – instant pictures – its later corporate executioners merely provided added convenience and superior quality at a lower price. While they bankrupted Polaroid by doing so, these newcomers did not create a new market nor gained a foothold at the lower end of an existing market. As such, they were not disruptors in the classic academic sense of the concept.

In a sign of the times, business schools and corporations feel an irrepressible urge to reinvent, or repackage, the proverbial wheel. Whilst there is ample value in Mr Christensen thorough analysis of disruptive businesses – their growth trajectories, failing rates, and marketing strategies – it is a fallacy to consider disruption a holy grail to be pursued at all cost.

DITCH ACADEMIA Then again, why tune in to the loudhailers propagating moderation from academia’s ivory towers? As a buzzword, business stratagem, next big thing, or whatnot, disruption has much going for it. Disruptors and their tales offer a contemporary twist on the “sketches of men of progress” that were in vogue at the turn of the nineteenth century – it’s progress in action: exhilarating, dangerous, and – why not? – sexy.

Indeed, Mr Christensen has been chastised both for his narrow interpretation of disruption, and – paradoxically and perhaps more importantly – for allowing his advocacy of creative destruction to run wild and take over the corporate world. Fellow scholars have tried – and repeatedly failed – to discredit Mr Christensen’s academic research, writing it off as empirical at best.

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A fund manager who in the 1990s tried to apply the principles of disruption theory in order to build a stock portfolio ended up significantly underperforming the broader market. When in 2000 the first dotcom bubble burst, the fund lost more than NASDAQ did – and that is saying something: between March 2000 and October 2002, the tech-heavy index saw nearly 78% of its value evaporate.

DISRUPTIVE CRAZE To licensed cabbies who are being pushed out of the market by Uber drivers, the ride-hailing company seems pretty disruptive as it undermines their very livelihood. The same applies to Kodak and Polaroid whose business model were fatally disrupted by digital photography. However, the elevation of disruption to a corporate creed is unnecessary and may even be unhelpful: any company worth its salt has disruption as a silent partner. Disruptive processes and technology are inherent in free markets driven by competition – they bring consumers ever-improving products and services at ever-decreasing prices.

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The Internet of Things and other exciting novelties indeed add wonderful new dimensions to life, making previously dreary tasks more pleasurable, doing away with mind-numbingly repetitive work, and providing multiple layers of convenience – besides all sorts of things few people can fathom today. Revolutionary as all this is, the brave new world of technology unfolding at present is but a continuation – in the purest tradition of historicism – of the one now being left behind.

As such, disruption, let alone disruptive innovation, brings nothing out of the ordinary – it merely (and excitingly) – represents the inexorable and accelerating march of human progress. It is wise to keep questioning the true value of the advances as they take place and refrain from unquestioningly celebrating all forms of disruption as amazing breakthroughs that improve the quality of life. As with everything, some disruptions are meaningful and helpful – others are perhaps a little bit less so. i Footnotes From the Communist Manifesto (1948) by Karl Marx and Friedrich Engels: “Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. [...]

It is enough to mention the commercial crises that by their periodical return put the existence of the whole of bourgeois society on trial, each time more threateningly. In these crises, a great part not only of existing production, but also of previously created productive forces, are periodically destroyed.”

2 In The Birth of Tragedy (From the Spirit of Music, 1872), Nietzsche considers, at length, the “creative destruction of modernity” through the eyes of Dionysus, the extravagant character from Greek mythology who represents ecstasy, madness, drunkenness, and other irrational pursuits and whom Nietzsche saw as both “destructively creative” and “creatively destructive.”

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Summer 2016 Issue

> Disruption in Politics:

Be Careful What You Wish For

By Wim Romeijn

Political disruptors have, once again, become fashionable – and popular. They always do when societies grow tired of business as usual and politicians that fail to inspire. In Europe, the Middle East, the Americas – in fact all over the world – people are clamouring for change without worrying too much about its direction. It is enough for a politician to promise a break from established convention to stand out and get elected.

T

he Arab Spring may have fizzled out, though its underlying causes remain largely unaddressed, elsewhere voters are eager to push for a departure from the old: Trump makes waves in the United States promising to Make America Great Again without telling how; Marine Le Pen in France wants to pull her country out of the European Union and, preferably reverse immigration; Geert Wilders in The Netherlands peddles an even more radical line than Mrs Le Pen’s; while in South Africa dissatisfaction is brewing against President Zuma and his cronies who have pillaged the nation. The Economic Freedom Fighters (EFF) of Julius Malema is already the third largest party in both houses of the South African parliament, propagating a revolutionary socialist agenda that would have caused even Lenin to blush.

Meanwhile in the United Kingdom, political disruptors captured the votes and carried the day, only to scurry off the stage, abandon their supporters, and leave an unholy mess behind.

In twin acts of supreme political cowardice – or cynical self-interest – both Boris Johnson and Nigel Farage, the enfants terribles responsible for the Brexit vote of June 23, refused to follow up on their slim victory, recognising that they had no clue as to what to do next.

Now that Humpty Dumpty was pushed off the wall, all the king’s men have mounted their horses for a quick departure from the scene of the crime.

Nobody is left to put Humpty Dumpty together again.

And that is the problem with political disruptors

continental Europe for suffering a momentary lapse of reason, political disruptors are faring increasingly well too.” in a nutshell: Most know what it is they do not want, yet precious few of them propose realistic solutions to concrete societal issues. However, Mrs Leadsom, a one time contender for the leadership of the Conservative (Tory) Party in the UK, is in a class all her own: she dwells in a veritable world of fancy in which others are invariably evil and must be made to bow to her will. At last Boris Johnson, the larger-than-life former mayor of London and the figurehead of the Brexit campaign, was not wholly detached from real life and could – in his lucid moments – produce original thought based on a semblance of reason.

Outside the UK, now pitied in continental Europe for suffering a momentary lapse of reason, political disruptors are faring increasingly well too. Donald Trump is shaking up public life in the United States with a xenophobic macho platform. Appealing to latent base feelings, Mr Trump merrily proposes building border walls, expelling millions of nonwhite aliens, and nuking any foreign nation that happens to be caught in his crosshairs.

The man is, as such, a walking time bomb.

Though his chances of actually winning the US presidency seem comfortingly slim, Mr Trump’s mere appearance on the scene pushes the entire political stage to the right, forcing less radical contenders – essentially everybody else – to cater to the concerns of voters hell-bent on doing away with reason.

In early July, French newspaper Le Figaro cautioned its readers against emulating the British. It is perhaps best, the paper suggested, to take a cue from the Spanish who ultimately shied away from the populist route and decided to keep a moderate

government in power. Amongst the countries that, so far, have managed to withstand the Siren call of demagoguery, Germany stands tall. Governed by mostly non-grandstanding politicians who seek to do right rather than to disrupt, Germany has become Europe’s anchor to which a number of lesser and more agitated powers remain tethered.

Pushing the political envelope may indeed please voters hankering after change but disruptors usually only push a single issue – say, immigration – which is then reduced to a simplistic yes/no proposition denuded of any detail or subtlety. Such a perfunctory treatment of societal questions that are often highly complex and multifaceted does not bode particularly well for the future.

Not to put too fine a point on it, most political disruptors have caused much violence throughout history. Arguably, Mao, Stalin, and Hitler were the greatest disruptors of the last century. In the course of ushering in their brave new worlds, they jointly killed an estimated eighty million people who, presumably, stood in the way of modernity and had to be cleared from its path.

For all its accomplishments, the French Revolution was a rather bloody affair as were the colonial conquests that preceded it: the populations of entire continents were almost wiped out in the name of progress, enlightenment, and a holy book.

All very disruptive, and deadly.

Disruption in politics is nothing like its counterpart in business that keeps corporations on their toes and provides consumers with goods and services that not only competitively priced but also of superior quality and convenience.

Whilst there is something to be said for the voters’ inclination towards the new, untried, and untested – a bit of adventurism does seem healthy to public life – revolutions seldom achieve the intended result and cause, more often than not, untold suffering in the peoples affected by them.

Be careful what you wish for should, perhaps, be emblazoned in bold capitals on all ballot papers – not unlike the warnings on packs of cigarettes. i 39

Cover Story

Nobody, that is, but Andrea Leadsom, as elegant looking as conniving. Mrs Leadsom fancies herself a Thatcher 2.0 – a well-spoken lady of iron – and quite capable of successfully extracting the UK from the European Union. In yet another sign of the impoverished times, it took all of two days for the British press to unravel Mrs Leadsom’s curriculum vitae – a bloated collection of misleading statements, outright lies, doubtful accomplishments, and wishful thinking.

“Outside the UK, now pitied in

> Larry Page:

Anything Imagined Is Doable

By Wim Romeijn

S

ince 2001, when the company’s name first became a verb and byword, the world googles its way to whatever query needs an immediate answer. Defined by the Miriam-Webster dictionary as a way to obtain any information on the World Wide Web, more than 120 billion search queries are googled every month.

That number is still growing and will continue to do so since still only about 1.2 billion of the world’s 7 billion people use the ubiquitous search engine which, at last count, had indexed some 60 trillion web pages. Most belong to dormant sites that languish in near total obscurity yet are only a mouse click or two away from anyone. Rival services such as Microsoft’s Bing and Yahoo! come nowhere close to the volume of queries processed

by Google. For all its social media savvy, Facebook’s attempt to reinvent the Internet and become its preferred portal foundered ignominiously and was quietly shelved alongside other failed attempts to rule the web.

Leveraging their search algorithms and the vast amount of traffic they generate, Google cofounders Larry Page and Sergey Brin have become media barons who make the late William Randolph Hearst look like a small-time operator. Convinced that information should flow unimpeded from generator to user and be accessible to all free of charge, Google has found a way to appropriate nearly everything not firmly bolted to copyright law.

Cover Story

Google began as a research project by two PhD student of Stanford University who, in 1996, moved away from the rather simplistic approach then used by web-based search engines. At the time, pages were ranked according to the number of times the search term appeared in their text.

Larry Page and Russian-born Sergey Brin – both all brawn and brain – decided they could do much better and started looking at how websites related to each other in order to determine importance and relevance. Ultimately, this new approach resulted in the PageRank algorithm, a now highly complex theorem that became a science in its own right and keeps academics busy the world over.

MATHEMATICS It was Larry Page, a nerdy kid from East Lansing in Michigan, who as a student distilled the mathematical properties of the still novel world wide web and discovered its many uses in guiding traffic flows across vast networks. Just as Bill Gates foresaw that software would prove more important to computing than the actual hardware, Larry Page found that mathematics provided the key to the seamless dissemination of information, creating order in what otherwise would remain a chaotic jungle of disjointed data.

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“Anything you can imagine probably is doable. You just have to imagine it and work on it.”

After publishing their dissertation, The Anatomy of a Large-Scale Hypertextual Web Search Engine, Larry Page and Sergey Brin set up shop in the garage of a friend’s suburban home in Menlo Park, California. With servers cobbled together from cheap computer parts, nascent Google was soon processing around 10,000 queries per day via a database containing around 75 million indexed web links.

Things started moving fast. Never one to think small, Larry Page soon realised that his and Sergey Brin’s search engine actually represented a revolution not unlike the one unleashed by Johannes Gutenberg’s invention of the printing press in 1440. This momentous realisation – only one in a string of epiphanies – gave Google its corporate mission: to organise all of the world’s information and make it universally available for free.

Promptly, both Larry Page and Sergey Brin – the latter with an extrovert nature and a mind wired for strategic thinking – embarked on a quest – deemed quixotic at first – to empower individuals by leveraging the unseen power of mathematics to pry open the vaults of knowledge and democratise access to data up to then locked away in the ivory towers of academia or the imposing halls of libraries.

BOLD Mindful of the maxim that success favours the bold, Larry Page – very much in the driver’s seat with Sergey Brin in a supporting role – adopted a Think Big attitude from day one. As Google began its meteoric rise to dominance, he soon developed a unique management style which put engineers in charge of the company with a mandate to speed up things. Entire days were spent debating and tinkering around in order to shave microsecond off server response times and keep the competition trailing.

Mr Page decided not to become a bureaucrat: he refused to interfere with staff and their pursuits.

However esoteric, Google employees were – and are – encouraged to explore ideas and hunches.

However, before long the company had become too large a corporate entity to be managed by an engineer. After taking advice from Steve Jobs at Apple and Andrew Grove at chipmaker Intel, Mr Page decided to cave in to investor demand that he entrust his creation to a professional manager.

In August 2001, with Google barely three years old, Novell CEO Eric Schmidt was hired to lead the company and oversee its rapid expansion.

Mr Page carved himself a managerial niche as president of Products but remained, in the eyes of the world and – perhaps more importantly – of Google employees, the boss with a final say over new hires and overall direction. However, he did at no time misuse his power to stop the new CEO from expertly reshaping Google into the corporate behemoth is soon was to become.

Whilst managing Google, Larry Page displayed a marked disdain for project managers and other non-technical supervisors. Since he only hired the most brilliant of engineers, any supervision was deemed a potential impediment to the full deployment of their programming expertise.

What’s more, Mr Page suspected Google’s project managers to surreptitiously downplay and starve grandiose initiatives he had launched such as the monumental quest to scan all the books ever printed anywhere in the world and make their contents available online.

Rebelling against the management culture that had taken hold of his company, Larry Page in 2001 pushed for a thorough shakeup that would see all Google engineers report directly to a single VP of engineering, in the process eliminating various hierarchical layers and reaffirming the supremacy of programmers.

BIDING HIS TIME The plan did not fly – at least not for long.

Pushing ahead against the express wishes of Eric Schmidt, then still only chairman of the board, human resources director Stacey Sullivan, and his personal coach Bill Campbell, Larry Page sent word that all project managers were to start looking for new jobs.

Even the engineers were not thrilled by their enhanced stature within the company. During the presentation of his plans, Larry Page was repeatedly shouted down by disgruntled and hurt staff members who called his ideas unprofessional and ridiculous. However, the publically announced layoffs did not materialise and the discredited project managers soon found a home elsewhere in the now vastly expanded organisation.

In the end, Larry Page – beaten but not quite defeated – conceded that he and Sergey Brin needed adult supervision. Eric Schmidt was duly made CEO while Larry Page went the way of Apple founder Steve Jobs who in 1983 also had to bow out as CEO due to pressure from concerned investors. And just as Steve Jobs returned triumphantly to lead his creation in 1997, Larry Page was determined to bide his time and stage a comeback at just the right moment, full of ambition and resolve.

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Summer 2016 Issue

As a young boy growing up in suburbia, Larry Page became fascinated with the tragic life story of Nikola Tesla, the Serbian-born inventor who arrived near penniless in New York City and went on to design alternating current (AC) electricity generators. Working for Thomas Edison, speaking eight languages, and blessed with a photographic memory, Nikola Tesla suggested to his employer that the electrical motors and generators the great American inventor had designed offered ample room for improvement. Promised a $50,000 bonus if he could put his bravado into practice, Nikola Tesla set to work, delivered as promised, and was rewarded with a $10 raise.

Mr Tesla quit his job in disgust, formed his own company, and chased investors. Whilst a brilliant inventor and visionary, he was less capable at playing the corporate game, committing suicide almost destitute in a New York City hotel room in 1943.

Nikola Tesla is Larry Page’s hero. Amongst the lessons he drew from Tesla’s predicament is the realisation that bright ideas are not enough: they need to be properly commercialised. He also never forgot to watch out for the Thomas Edisons of this world: people who will hijack ideas and cash in at the inventor’s expense.

It made Larry Page into a blunt man, lacking in social grace. Famously, he once told an assembly of Google marketing employees that they owed their job to the ability to lie. Though by no means a tyrant, Mr Page has little time for emotions, preferring to base his social interactions on the strength of argument instead. Complex problems are reduced to binary (yes/no) propositions from which the best one is chosen – regardless of any collateral damage. This enabled Larry Page to keep an unusual clarity of focus which ultimately made Google into the massive global business it is today.

Slowly stepping back from day-to-day management as his confidence in Eric Schmidt increased allowed Larry Page to concentrate on megalomaniacal projects such as Google Street, Maps, and Books that aimed to follow the company’s original premise to deliver all information available anywhere to all who care to look for it. Uploading seamless pictures of all the streets in the world and scanning all the books ever published were typical Larry Page: big, bold, and hugely ambitious. From the earliest day, both Larry Page and Sergey Brin had decided that Google was to be much more than just a search engine.

In fact, they aimed for world domination whilst adhering to their Don’t Be Evil mantra.

well isolated from the rest of the company. Mr Schmidt did not take much interest considering Android Larry’s little plaything. The money involved was minimal and did not noticeably impact Google’s huge stockpile of ready cash.

While Mr Page tinkered with Android, he was overtaken by Apple’s launch of the iPhone. All of a sudden, Android seemed but a cheap Apple knockoff – an also-ran lacking in originality. In a stroke of genius, Android was made available free-of-charge to phone makers trying to compete with Apple. It worked and already by 2010, Android had become a resounding success, overtaking Apple in market share and finding its way into countless devices, supporting a vast universe of applications.

Android became Larry Page’s second successful attempt at world domination: while Google became the go-to search engine, Android turned into the preferred mobile operating system. By now, the company had become so large that it was unable to escape from the malaise nearly all big corporations suffer from: rule by committee. The times that a group of three engineers could knock together a new world class product have definitely gone; now, engineering teams of up to forty people work on perfecting existing services rather than introducing new ones. Product development had become all about meetings with the actual programming following as an afterthought. To make matters worse, a newcomer had arrived on the scene, promising to shake up the search experience and, indeed, the way in which the Internet is used – Facebook.

The appearance of Mark Zuckerberg’s social network reminded Larry Page of the way Google used to go about its business: bold and decisive.

During a meeting with product developers plugging a minor alteration to existing software, Mr Page is reported to have exploded in controlled anger – lowering his voice to a whisper: “This is not what we do. We build products that leverage technology to solve huge problems for hundreds of millions of people. Look at Android. Look at Gmail. Look at Google Maps. Look at Google Search. That’s what we do. We build products you can’t live without.”

A few months later, Eric Schmidt made way at the top for Larry Page who in early 2011 was reinstated as CEO with Mr Schmidt being

honourably side lined as executive chairman in an amicable corporate coup. Determined to get his company back on track, Mr Page struck out in different directions: he bought Motorola for its patents, launched Google+ to bring the fight to Facebook, unified all Google products under a single corporate look-and-feel, went into hardware with Chromebook laptops, introduced Google Glass, and started pulling fibre optic cable in a number of US cities to offer residents free highspeed Internet connections.

Mr Page also appealed to senior management to stop the infighting and start collaborating – changing the way the company had conducted its business in one fell swoop. Thus far, Google had thrived in an abrasive atmosphere where unwelcome ideas were regularly branded stupid, evil, or worse.

THE FATHER OF ALL DISRUPTORS Mr Page – a disruptor par excellence – is determined to return Google to its fold – the pursuit of world domination by not being evil. In August 2015, Mr Page let go of Google’s reins for a second time, appointing Sundar Pichai as CEO in order to free up time for more interesting pursuits. In a surprise corporate restructuring, Google formed and became part of the umbrella company Alphabet.

Google is now well on track to absorb nearly all of the world’s advertising budgets. The company already receives more marketing dollars than all print magazines and newspapers combined. And, there is still room to grow with vast swaths of the emerging world being brought online.

Mr Page must now find new ways to shape Google’s future as his company, in turn, shapes the world and how it interacts. There is never a shortage of ideas in Larry page’s mind. There is no shortage of cash either with which to mould his thoughts into tangible realities: self-driving cars, vertical conveyor belts into space, artificial intelligence, and working on solutions to stop the ageing process and cheat death.

In 2012, Larry Page told a group of investors: “Anything you can imagine probably is doable.

You just have to imagine it and work on it.” He keeps doing just that. i 41

Cover Story

OWNING A MINT Owning a veritable mint being run by a competent CEO, Mr Page discovered that he could do whatever he fancied – the possibilities were, and are still, endless. In 2005, struck by the notion that mobile would be the future of computing, Mr Page had his company buy Android – a small startup developing a lean operating system for use on handheld devices. He failed to inform CEO Eric Schmidt of the $50m purchase and kept Android

Larry Page

> Summer 2016 Special:

Ten Disruptors Beyond the Hype

C

FI.co’s list of inductees in the (impromptu) Disruptor Hall of Fame gives rise to the notion that anything entrepreneurial worth mentioning takes place online.

Most of the profiled disruptors work their magic in the virtual world, pulling it ever closer to the real economy – the one made up of actual things. Hence, the Internet of Things is becoming a tangible reality with robotics and 3D-printing leading the way.

In our list, a few big names are conspicuous by their absence. Elon Musk and his multiple disruptive endeavours have been reported on ad nauseam.

Yes, the guy is probably a visionary, and quite brilliant too; but he’s also media savvy and, frankly, rude. Mr Musk is the sort of entrepreneur everybody seems to mindlessly adore – no questions asked.

As such, he may be the corporate twin of Boris Johnson – also a smooth talker and proficient boat-rocker – who considers himself a gift to mankind much as Mr Musk does.

Our disruptors talk less and do, arguably, more. Some are delivering technologies that will actually make a difference and touch nearly everybody’s life. Doron Myersdorf of the Israeli company StoreDot is developing a battery made of non-toxic synthesised organic material that can power a smartphone or tablet an entire day on a one-minute charge.

StoreDot’s FlashBattery, nothing short of revolutionary, barely degrades over time and is guaranteed to maintain its storage capacity for at least three years, accepting five times as many recharging cycles as current Li-Ion technology. FlashBatteries may easily be adapted to power electric vehicles such as those Mr Musk keeps promising to produce for the masses.

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Just imagine what FlashBattery means: no more iPhones starved for power, electric cars that can be charged in less time than it takes to fill a tank with petrol, and laptops that stay alive for the full duration of even the longest of intercontinental flights. As a disruptive enterprise, StoreDot is about to put Li-Ion battery manufacturers out of business.

Disruption does not always come with such a built-in wow-factor. Uber, the ride-hailing app, upsets cabbies wherever it appears.

Likewise, Airbnb, the room rental app, has the hospitality sector concerned. Whilst both are equally disruptive, their economic value is questionable. These apps have precipitated yet another race to the bottom, driving trained professionals – licensed taxi drivers and highly-trained hotel operators – out of the market, to be replaced by wellmeaning amateurs.

Rather than furthering the democratisation of the professions, Uber, Airbnb, and countless other apps lower standards and depress wages. As such, these disruptions take a cue from the business model of Walmart which may pay pitiful wages but also relentlessly drives down the prices of its merchandise. The choice then becomes one between higher earnings and a lower cost of living.

Usually, people fare much better when wage levels are maintained or increase as productivity improves. Since the advent of the Internet in its many disruptive incarnations, the link between compensation and labour productivity has been broken. Whilst Uber, Airbnb, and the countless other online conveniences significantly enhance the quality of life for most, that added comfort carries a price tag often hidden from view. Just saying: there is more to disruption than meets the eye. i

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Summer 2016 Issue

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> BEN SILBERMANN Modest Creator of the First Global Noticeboard Ben Silbermann tapped into the primal huntergatherer instinct when he first experimented with an online pinboard product. Together with Paul Sciarra and Evan Sharp, Mr Silbermann created a virtual scrapbooking site that allowed people to collect images and creative ideas online.

Eventually named Pinterest, the site was launched officially in 2009 with assistance from multiple venture capitalists who could see its far-reaching potential. Its user-friendly formula proved irresistible, and incredible exponential growth has seen it outstrip the growth rates of Facebook and Twitter with no sign of slowing down.

By 2015, Pinterest had chalked up 176 million registered users, (85% of whom are women), and was valued at $11 billion. More of a disrupter than an innovator in the competitive and fastmoving world of tech, Pinterest has essentially created a new market – disrupting both retail and social media.

After all, its photo and idea-sharing site is a global marketer’s dream – especially since it rolled out a buy button, facilitating a seamless purchase gateway via PayPal. Buyable pins essentially took a complex system for fulfilling transactions for a multitude of separate sellers, and built a simple and secure experience for the thousands of pinners – both large and small – who had been clamouring (pining?) for a product to do just that.

In doing this, Pinterest became one of several new and emerging channels posing far-reaching implications for the future of banking. For global commerce, its new commercial clout represents a radical shift from both in-store purchases and existing e-commerce transactions on branded websites.

Maybe it is his wholesome Iowa background, he was raised in Des Moines by his two ophthalmologist parents, but Mr Silbermann seems remarkably sanguine about the hugely successful global platform he has created. By all accounts, he is the antitype of the brash tech dude. In fact, he’s not really a tekkie at all – more of a visionary.

He graduated from Yale in 2003 with a degree in Political Science and worked briefly for Google’s online advertising team. He switched to developing iPhone apps with college friend Paul Sciarra. However, their start-up failed. The pair then teamed up with Evan Sharp, and the rest is scrapbook history.

It may feel like it, but Pinterest is not a social network; it’s not another twist on Instagram, 44

Facebook, or Twitter. Rather, it is a discovery engine. “There wasn’t a great way to collect the things you love online. From that idea came Pinterest which over the years has evolved from a site for collecting to a visual discovery engine,” Mr Silbermann has said in several interviews.

Like social media businesses, Pinterest uses big data to maximise its potential. The algorithms that make it fun and successful – suggesting new pins based on previous likes, show big data at its best. In 2015, Silbermann’s team took this to the next level with a new visual search feature; CFI.co | Capital Finance International

a tool enabling users to select a portion of an image and use it to search for similar images.

Also in 2015, Pinterest built a framework called Copytune to help create strong user-friendly hooks that work across numerous languages, to boost its number of active users.

Quietly, Pinterest – the global noticeboard – is disrupting Amazon, Facebook, and even Google.

It leaves the likes of competitor Etsy far behind.

Mr Silbermann may not be loud, but he must certainly be proud.

Summer 2016 Issue

> ALEXANDER KARP Somewhat Deviant Ray Kroc, the man responsible for putting a McDonalds restaurant on almost every street corner in the world, once said that the two most important requirements for major success were being in the right place at the right time and, secondly, doing something about it.

Stanford University in the last decades of the 20th century was the right place and time for a phalanx of fresh-faced college students who were to go on to become a new breed of entrepreneur.

The young nerds who inhabited the university’s halls of residence at that time surfed the waves of technological advance, used their wits, and set about changing the world by, more or less, ignoring conventional best-practice business models.

Alexander Karp shared his college digs with Peter Thiel with whom he founded, in 2004, the software firm Palantir, one of Silicon Valley’s biggest success stories. Palantir today is the number one player in the world of data mining and analysis. Peter Thiel also founded PayPal, and was the first outside investor in Facebook.

As law students at Stanford, they lived among ordinary geeks who devoured DC Comics and sword-and-sorcery computer games. Indeed, the very name Palantir comes from the Lord of the Rings trilogy – a shiny globe through which one can see everyone’s secrets.

Based in Palo Alto, California, the business of which Mr Karp remains CEO, is worth an estimated $20 billion. Thanks to an early grant from the CIA, Palantir began to develop data-mining software which revolutionised counter-espionage. Today, the company lists among its clients not only the CIA and other US government agencies, but police, armed forces, major banks, corporations, and a number of philanthropic groups who get special rates.

Palantir software has aided in the tracking down and elimination of Osama bin Laden. It also helped Hershey’s sell more chocolate bars.

Clayton Christensen, author of The Innovator’s Dilemma, says the two principles of good management, taught in business schools, are that one should always listen to and respond to one’s best customers’ needs; and that one should always focus resources on areas which will bring the best return. These fundamental principles, suggests Mr Christensen, sow the seeds of decline in many well-run successful businesses. So-called disruptive companies, such as Palantir, do not play by business school rules – which is why they succeed.

The 47-year-old Alexander Karp is an example of the counterintuitive business brain that has undermined long-established companies in the field. While his rivals have picked up corporate barnacles which have slowed their innovation processes, Palantir, and start-ups like it, are unorthodox risk-takers, moving quickly to grab market share because they simply don’t operate in the same way.

Mr Karp – who, thanks to numerous death threats is these days constantly shadowed by a secret service minder – still thinks of himself as a philosopher rather than a business tycoon.

The notion of the company floating has investors salivating – but Mr Karp has so far resisted that CFI.co | Capital Finance International

move, insisting that going public would blunt Palantir’s competitive edge.

For a man whose software has allowed government and business to dredge through the murky depths of the data ocean, Mr Karp remains a hippy at heart. He believes that Palantir can rewrite the book on personal privacy. He says that he didn’t develop the software to “allow the government to know when I smoke a joint”.

“We have to find places that we protect away from government,” he says, “so that we can all be the unique and interesting and, in my case, somewhat deviant people we’d like to be.”

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> CLAY GUILLORY Printing a Dream House Titan Robotics is based in an anonymous unit just off an interstate in Colorado Springs, tucked behind the Spruce Lodge motel and next door to Boogers, an auto-repair shop. Around 150 years ago, the town was on the frontier of the Old West; the last stage for wagon trains before they tackled the daunting Rocky Mountains.

Appropriately, Colorado Springs today is on the frontier of the next big technological leap – 3D printing. The process has been in development for most of the last decade – with mixed results.

First-generation 3D printers were capable of producing plastic widgets of varying quality and durability – expensively. College lecturers turning out conventional industrial modelling graduates were hardly quaking in their boots.

Clay Guillory, an unassuming and unlikely entrepreneur, and CEO of Titan Robotics, might make them rethink. The Colorado-born graduate of Lafayette University, Louisiana, spends every waking hour, and much of his sleeping time, dreaming about the limitless possibilities of 3D printing – and he’s bringing those dreams to reality.

“It’s generally when I’m sleeping when the best ideas come to my mind,” says the 26-year-old who set up the company in 2014. “So I wake up at four in the morning with a solution to a problem I’ve had all day.”

In a very short time, the business has become a world-leader in the development of largeformat 3D printers. The key is Titan’s ability to print large pieces as a whole, overcoming the weakness of having to glue parts together, which bedevils users of smaller 3D units. Titan Robotics recently unveiled its latest Atlas machine, which retails around the $28,000 mark, at a major conference in Florida, using the occasion to print a copy of a whole dinosaur bone.

“We got tired of seeing low quality 3D printers that break down and fail after a short amount of time,” he says: “Our printers will undoubtedly last a lifetime.”

The company is currently developing a new generation of printers which can cope with materials other than plastics. Titan, for example, is working on a concrete printer. “You can basically put together an entire house with one machine,” says Mr Guillory.

Despite being named among the USA’s top 50 disruptors Mr Guillory is still very much a hometown boy. He was pictured in May this year on Titan’s Facebook page proudly displaying the award he won as Young Entrepreneur of the Year 46

at the local Pikes Peak SME business event. His father Byron, who gave up his job in insurance to work alongside his son, posted a message which read: “Amazed at the continued growth of Titan.

So proud of you!”

The technology being developed by Mr Guillory is already making inroads into traditional industries as diverse as healthcare, agriculture, and automotive design, and manufacturing.

Clay Guillory describes himself as a mechanical engineer by day, and a mechanical engineer by night. He spends all of his free time designing, building, and refining large format 3D printers.

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Mr Guillory started Titan Robotics in his garage where he can still usually be found after work.

He made headlines last year when, in his spare time, he designed and printed a prosthetic hand for an eight-year-old boy whose mother had contacted him through a charity – a task Clay Guillory happily performed free of charge.

Mr Guillory says his purpose as an engineer is to improve the lives of others. But like many other so-called disruptors who are rewriting the rules of industry, he seems to be having fun. At the moment, for instance, he’s helping a local Colorado school print a whole Tyrannosaurus Rex.

Summer 2016 Issue

> BRIAN CHESKY The Reason You Don’t Need to Find a Room at the Inn Brian Chesky, CEO of AirBnB, is a champion of the global sharing economy. Proving that there’s no place like someone else’s home, AirBnB – a website for people to list, find, and rent lodging – has more than two million listings across 191 countries. Its micro-let phenomenon disrupted the standard tourism and hospitality industry, and bagged Mr Chesky a spot on Time’s 100 most influential people list and Forbes’ America’s richest entrepreneurs under 40.

In 2015, the AirBnB chief announced that his firm was official sponsor of the 2016 Olympic Games in Rio de Janeiro, Brazil. And following the April 2016 announcement of the dramatic rise in the tax-free threshold linked to the UK Government’s Rent-a-Room Scheme, AirBnB is being hailed as a saviour of the moribund UK property market.

But it has not always been so rosy. Mr Chesky grew up in Niskayun, New York, and graduated from Rhode Island School of Design (RISD) with a degree in industrial design in 2004.

Here, he met Joe Gebbia, who later became a co-founder of AirBnB. In October 2007, the pair were living in San Francisco, unemployed, broke, and staring at their rent due date. Inspiration born out of desperation struck when Mr Chesky spotted an international design conference coming to the city. “On the event page it showed all of the nearby hotels were completely sold out,” he recalls.

With three inflatable mattresses dragged from a wardrobe, the pair quickly set up airbedandbreakfast.com and successfully let their space – complete with a continental breakfast of untoasted Pop-Tarts. They then spent four months working on a roommate search tool before realising roommates.com had already built this service.

In 2008, Harvard graduate Nathan Blecharczyk became the third co-founder of AirBnB, and the trio impressed their way onto a seed-funding programme run by YCombinator.

AirBnB opened several offices in Europe during its first year and, in 2011, Mr Chesky responded to a complaint about tenant vandalism – announcing a 24-hour hotline, additional staff support, and a guarantee for theft or vandalism.

By March 2015, Airbnb was valued at £13.9 billion. But applause has been far from universal, as the company has fallen foul of city laws including New York’s 2011 law against illegal hotels. In 2014, Berlin authorities followed Munich and Hamburg’s example and cracked down on unregistered vacation rentals to stem

the tide of property owners preferring to rent to tourists at £543 per week instead of to regular tenants for much less.

Meanwhile, new start-ups are riding the waves created by the AirBnB model. Hospitality management website Hostmaker manages AirBnB micro-lets for homeowners – many haven’t yet sold their old property and need to enable viewings and also mitigate their property’s downtime. Others are simply going on holiday, and want to offset their travel expenses.

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The emergence of Hostmaker, and the naming of Brian Chesky as ambassador of Global Entrepreneurship in 2015 by US President Barack Obama, point to a continued rise in fortunes for the unusual and innovative company.

Experts say that AirBnB’s success is testament to its unrelenting focus on user experience. Brian Chesky et al have certainly managed to alter the landscape of short-term rental accommodation, in a way that meets market demand. It’s fun, friendly and cheaper than the alternative – what’s not to like?

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> DANIEL EK Cometh the Hour, Cometh the Geek When Swedish entrepreneur and digital hotshot Daniel Ek was 14, he was building web pages for friends using self-taught programming knowhow. And if everything you read on the Internet is true, he charged around £3,500 per job – which isn’t bad for a tween. He even had to recruit a workforce – his classmates. They were able to work on school computers after Daniel Ek persuaded his art and computer teachers of the artistic value of Photoshop. Ek channelled the profits into buying new video games and computer equipment.

Two years later, aged 16, he approached Google who turned him away, citing his lack of a degree as a problem. Fast forward a few years to 2006, and Mr Ek – still missing a degree – was busy selling the rights to his online advertising company Advertigo for over £1.5million. And since every 23-year-old millionaire needs a purpose; he then came up with a visionary plan to create a fully licensed streaming-music service. Together with Martin Lorentzon, Daniel Ek launched Spotify in 2008. It is now a global brand.

Not only did Spotify disrupt the music industry, it also disrupted the online piracy plaguing the music industry. Spotify doesn’t sell music; it sells access to it. To get his service up and running, Mr Ek had to hound the record labels for some time before they agreed to sell him the rights to their songs – in return for a cut of the revenue.

Spotify makes its money from advertising and subscription fees; premium users pay around £7 per month to avoid the ad-breaks that punctuate the free service. Today, Spotify’s estimated worth flutters somewhere between £3 to £6 billion with some experts believing it has outstripped the value of the entire US music industry.

Naturally, like any new business model, Spotify spawned competitors. In 2011, Google launched Google Music, a similar two-tier subscription service. Apple launched iTunes Radio in 2013 – a free music streaming service – in US and Australia, but in January 2016, announced that, apart from its Beats 1 station, all iTunes radio stations would only be accessible by Apple Music subscribers.

Yet, the Spotify phenomenon shows no sign of slowing. In March 2016, it proudly announced its thirty millionth paying subscriber – having gained ten million in just under one year. Its free user base is around twice this number.

Softly-spoken, Daniel Ek is famous for his quasireligious belief in Spotify – and its role as a force for good in the music industry. But it turns out that for the artists themselves, Spotify is a bit Marmite.

Some appreciate the exposure while others resent the miniscule trickle of money from their record 48

labels. Others can’t handle the fact that any of the music is free. Several top artists, including Taylor Swift and Adele have publicly boycotted the service because it refuses to limit access to free users.

Daniel Ek, a keen guitarist, is genuinely passionate CFI.co | Capital Finance International

about music, He has said that Spotify’s strength stems from doing one thing, and doing it really well. The company’s only focus is making sure the end-user has the best possible music streaming experience. Going fast forward, the tech guru anticipates increased personalised interaction and greater responsiveness from the service.

Summer 2016 Issue

> DORON MEYERSDORF A Breakthrough from Israel It’s no surprise that an educational institution which mixes mysticism with mechanics is situated in California. Sofia University – in Palo Alto, not the Bulgarian capital – teaches transpersonal psychology, among other things, and it is where a young Israeli student called Doron Myersdorf learned to think outside the box.

Today, he is the CEO of StoreDot, a new and rapidly growing nanotechnology company, based north of Tel Aviv, whose mission is to “charge the world.” It may also be on course to change it.

The company he founded in 2012 has just gone into the production of the ground-breaking FlashBattery, which can charge a smartphone in just 60 seconds – instead of the usual two hours.

The same secret technology, which employs new molecules to enable the faster movement of ions, is being used to accelerate the charging of electric vehicles. That, say industry experts, will revolutionise the electric car market.

Mr Myersdorf has already raised $66 million dollars over the past two years to fund the development of his battery. Among the early investors is Roman Abramovich, the Russian billionaire and owner of Chelsea FC. StoreDot is also working on ways to prolong battery life, giving electric vehicles crucial extra range.

Like so many other young innovators with roots in California, he doesn’t just want to make money – although that seems to be his destiny. “We have a vision,” Mr Myersdorf says: “We want to make a difference in the world.”

Israeli start-ups face hurdles which do not exist elsewhere in the advanced world. There is growing unease in Israel at Palestinian campaigning amongst European and US organisations. While still a long way from achieving outright sanctions against Israel, some hearts and minds are being won. “Israel is a major hub of innovation,” says Mr Myersdorf: “You don’t boycott Israel; it doesn’t make any sense.”

And it wouldn’t make sense to turn one’s back on StoreDot’s advances in the development of nanodots; tiny crystals with special properties. Nanodots are already common in modern technology, being used in screen displays, transistors, and lasers.

described as delivering computer programming to one’s organs.

Most nanodots are made out of cadmium and zinc, both extremely toxic. StoreDot has developed a way to create nanodots by using organic materials – cheaper, faster, and without the toxic threat. Mr Myersdorf believes that organic nanodots can be used in a variety of areas, including the efficient delivery of drugs to specific areas of the body –

Mr Myersdorf and his small team of fellow graduates from universities in the USA and Israel are racing to be the first to market with their lowcost and eco-friendly technology. “Their structure enables very fast charging,” he says. “It means that drivers of electric cars will be able to refuel like any conventional car, but without the fumes.”

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Engineers at BMW, for instance, believe that advances like those created by StoreDot will mean that within a decade most of their cars will be electric. StoreDot is believed to be in advanced talks with a number of automobile manufacturers, and Mr Myersdorf is confident that his batteries will be built in to new electric vehicles by 2020.

StoreDot’s motto is “Inspired by Nature” – and maybe a pinch of mysticism and mechanics.

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> JEFF BEZOS Transforming Retail into a Loss-Leader Best known as the founding father of Internet behemoth Amazon, Jeff Bezos is more than a onemulti-global-success-trick pony. A divisive figure – mainly due to reports of staff mistreatment and claims he has destabilised the publishing industry leaving booksellers, writers, and other retailers struggling more than ever – he is without doubt a disruptor.

The online giant now sells practically anything one might think of – new and used electronics equipment, beauty products, fashion, sports gear, cars – and plenty you might not, such as nappies and cat food. It has also branched out into TV and film production and fresh groceries and now, Mr Bezos wants to win an Oscar too.

He doesn’t appear to be a man who balks at a challenge. Having set up space company Blue Origin, Mr Bezos declared its number one opponent as “gravity” and envisions people living and working in space. He also bought the Washington Post in 2013, a time when print journalism had ceased to be the moneyspinning, opinion-forming medium it once was.

Mr Bezos apparently formulated a business plan for Amazon during a drive from New York to Seattle in 1994. His vision was for it to become the most customer-centric company on the planet.

Having thrown his spanner into the works of the publishing industry, he then set about redefining – or for some people removing – one of the fundamental appeals of the book via the Kindle, a digital e-reader which could potentially do away with physical books altogether. In a clear sign that books made from dead trees are not quite done yet, Amazon recently opened its first brick and mortar bookstore in Seattle.

The company also unveiled plans for additional retail locations in California and New York.

It’s not just his products which disrupt. Mr Bezos’ approach to business is not the most orthodox – yet he continues to be popular with investors. He is quoted as saying of Amazon: “We are going to be unprofitable for a long time.

And that is our strategy.”

Still, it is a strategy that has apparently amassed him a fortune of around £40 billion. Meanwhile, he pays himself a modest salary of £57,000 per annum.

But who said disruptive had to mean for the common good? Reports say Mr Bezos was initially attracted to online retail by the fact that in the US businesses don’t have to charge sales tax in states where they lack a physical 50

presence. Europe had a similar loophole which has now been closed. Despite the vast amounts of money sloshing around, Amazon paid all of £11.9million in UK taxes last year on sales of £5.6billion. Retail sales to UK customers are recorded in Luxembourg.

Mr Bezos clearly thrives on power and being in control. Rather than use existing software, for example, he has his companies design their own. This led to Amazon Web Services (a massive financial success) and Arc, which the Washington Post now uses. He’s a notorious micromanager and his flagship business has CFI.co | Capital Finance International

been described as “a soulless, dystopian workplace where no fun is had and no laughter heard,” something he has denied. In 2014, Mr Bezos was declared the World’s Worst Boss by the International Trade Union Confederation.

For those who are alarmed by reports of employee mistreatment at Amazon, there may be worse to come. Two years ago, Mr Bezos announced plans to develop drones that can take over from humans to deliver packages and perform other tasks. Under Mr Bezos’ vision, many of us may have to move to space just in order to get a job.

Summer 2016 Issue

> SCOTT ECKERT Robots to the Rescue Daniel H Wilson, the writer of humorous fiction like How to Survive a Robot Uprising and Robopocalypse says, tongue-in-cheek: “Someday mankind must face and destroy the robot menace”.

However, before that can happen, mankind must create a robot worthy of such dread. Until very recently, robots have remained firmly within the ambit of science fiction. Robots in the real world are mainly confined to repetitive automotive assembly line work, though some can mow a lawn or vacuum a room – to varying degrees of success.

Scott Eckert’s vision of a robotic future sticks pretty close to the script. Robots, he says, will do the dirty, dull and dangerous jobs in society in the future, echoing the predictions of such prophets as Nickola Tesla, the Serbian/American inventor of the early 20th century. He estimated that: “In the 21st century the robot will take the place which slave labour occupied in ancient civilisation.”

Mr Eckert is yet another alumnus of Stanford University who is changing the world. The president and CEO of Rethink Robotics – one of the first companies on CNBC’s top 50 disruptor businesses of 2013 – isn’t too concerned about robots challenging for mankind’s place at the top of the food chain just yet.

He is busy making Tesla’s prophecy come true.

Rethink Robotics was founded in 2008 with the aim of taking the science in a new direction. The company’s first robot, Baxter, is a two-handed machine which “works right out of the box.”

Traditionally, industrial robots have needed complicated programming to perform simple tasks. Baxter is different in that it actually learns tasks and can work safely alongside humans. It can also perform multiple tasks.

Unlike the large and expensive assembly-line robots, Baxter can be adapted for use in relatively small manufacturing organisations. This is the point at which Baxter, and Rethink Robotics, have come into conflict with traditional trade unions who fear low-grade jobs will be lost.

Mr Eckert is frequently interviewed on television, and he struggles to contain his frustration with the inevitable won’t-this-take-our-jobs? question.

Far from taking manufacturing roles away from human beings, says Mr Eckert, Baxter is doing away with the need for businesses to outsource jobs overseas. Human beings can be released to do more interesting work, he insists.

Mr Eckert is aware that robotics will disrupt traditional business thinking: “Disruption needs

to create totally new industries,” he says, “such as how the advent of the smartphone catalysed a whole industry around developing mobile apps.

At Rethink Robotics, we have created a platform that will allow developers to create totally new applications for robots. The possibilities are limitless.”

Economic analysts predict that the robotics industry will grow at a rate of 12% annually over the next few years as small and mediumsized firms begin to adapt the robot to their manufacturing processes.

Scott Eckert says that these are a new class of robots: “They’re simple, easy to use, inexpensive, CFI.co | Capital Finance International

and can do a broad set of manufacturing tasks – and that is going to bring a much, much bigger market.”

It’s already happening, he says. Baxter and Rethink Robotics’ latest model Sawyer are already working alongside human beings in factories across the USA. “People give them names, they put the company t-shirt on them.

[The robot] becomes part of the team,” he says.

“Robots become successful when they’re no longer seen as just robots.”

Mr Eckert and Rethink Robotics have their eyes fixed on the future – but sooner or later they might have to face that “robot menace” question.

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> JAN KOUM He Won’t Stop “We want to know as little about our users as possible,” Jan Koum claims. Mr Koum is cofounder of instant messaging app WhatsApp. It seems an unlikely way to run a tech company, given that so many companies make money using or selling consumers’ personal information – often so other businesses can target their advertising accordingly.

But advertising is another thing Mr Koum wants to play no part in the popular service he cofounded with Brian Acton. Born in Ukraine, Mr Koum was not subject to commercial marketing as a child and doesn’t see why anyone else should be.

His first ever tweet was a quote by the character Tyler Durden from the film Fight Club positing: “[Advertising] has us chasing cars and clothes, working jobs we hate so we can buy sh*t we don’t need.” “[At WhatsApp], we don’t know your name or your gender,” he has said. “We’re not advertisementdriven so we don’t need personal databases.”

Mr Koum also has a strong position on holding other information from users, such as messages themselves.

He links this to his childhood in the Ukraine: “Everything you did was eavesdropped on, recorded, and snitched on. When we were kids, I had friends get into trouble for telling anecdotes about communist leaders. [In America] you have democracy and freedom of speech. Our goal is to protect that. We don’t save any messages on our servers, we don’t store your chat history.”

Mr Koum emigrated to the US with his mother at 16. He taught himself about computers by buying manuals from a store and returning them once read. He barely managed to finish high school.

For a time, he and his mum lived on food stamps.

Mr Koum got a job at Yahoo! while at San Jose University but soon dropped out of school and spent the next nine years at the tech giant.

In 2014, WhatsApp was sold to Facebook for $19bn just four years after its launch; Mr Koum’s own share is thought to have been around $7bn.

Yet even with his billions in the bank, Jan Koum says his motivation is in building great products rather than accumulating wealth.

The idea for what became WhatsApp began as a status update for phones. It soon evolved to become a messaging app, with the ethos “No ads, No games, No gimmicks.” So far, they’ve been able to stay true to that ideology.

users. Now it has surpassed the one billion mark – nearly one out of every seven people on Earth use the app regularly.

Two years ago, as Facebook bought the company, WhatsApp had around 450 million monthly active

Still, Mr Koum has no plans to slow down.

Remembering the difficulties he experienced as a

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teenager in trying to contact the friends and family he’d left behind in Ukraine, his aim is for everyone to be able to stay in touch around the world. “We won’t stop,” he says, “until every single person on the planet has an affordable and reliable way to communicate with their friends and loved ones.”

Summer 2016 Issue

> TRAVIS KALANICK Uber or Bust Whether you’re the old-fashioned type that likes to hail a cab by the roadside or rich enough to have your own driver, it’s likely you’re aware of Uber. The company has entered the global consciousness and become a popular culture reference – in some conversations it even acts as a verb.

Uber has disrupted the traditional business model of minicab and taxi cab, relying as it does upon regular people using their own vehicles to basically offer lifts for payment, operating in more than 60 countries and 404 cities worldwide.

Set up by web entrepreneurs Travis Kalanick and Garrett Camp, Uber was originally pushed

by Mr Camp, with Mr Kalanick less keen. Once on board, though, Mr Kalanick was ready to fight for Uber’s right to exist. He has been quite aggressive in insisting the business model is legal. Thailand’s Department of Land Transport begs to disagree and declared Uber illegal in 2014. Uber remains the subject of protests and legal action around the world.

Unsurprisingly, Barry Kornegold, president of the San Francisco Cab Drivers Association, is not a fan. “I think of them as robber barons,” he said.

“They started off by operating illegally, without following any of the regulations and unfairly competing. And that’s how they became big – they had enough money to ignore all the rules.”

Unlike many regular cab companies, Uber uses a surge-pricing model so customers pay more at times when demand goes up – in bad weather for example – or during public transportation strikes.

Uber has even sent its own people out to get rides with rival services Lyft and Gett, then either cancelled or used the opportunity to persuade drivers to work for them instead.

Yet by many, Uber is seen as good for its employees. Mr Kalanick certainly believes – or says he believes – so: “There is a core independence and dignity you get when you control your own time,” he said.

But business models such as Uber’s rely heavily on those whose services they offer, yet are accused of giving little in return. Uber drivers have none of the benefits many traditional cab drivers enjoy such as pensions, sick pay, healthinsurance (particularly important in countries without a national health service), or union rights.

Drivers provide their own vehicles, licences, and have no guaranteed hours or pay per week.

This may work for owners and customers, but for workers it feels like a race to the bottom. And with price-slashing a common tactic for Uber – Hailo,

a similar London-based app, withdrew from North America unable to compete) – the company may end up as an unrestrained monopoly after it is done crushing the opposition.

Time Magazine called Uber “probably the fastest-growing start-up in history.” Mr Kalanick meanwhile claims he has no intention of slowing down, or at least not until every city on earth has an Uber presence.

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Of course, as a disruptor, Mr Kalanick has also made sure Uber does not stop expanding its offering: in France, Uber is even available for helicopter rides while in San Francisco, slightly less excitingly, an UberEATS driver promises to deliver takeaway food within ten minutes. The 39-year-old Mr Kalanick does not himself seem to envisage a limit to what Uber can deliver, or how: “If something is moving from one place to another in a city, it’s our jam.”

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> Europe:

Brexit - Much Ado About Nothing?

By Wim Romeijn

After tearing the country and his party apart, leaving it with no government, no opposition, and – essentially – no future other than a long retreat into relative obscurity, Boris Johnson turned his back and walked away. Others may now clear the unholy mess he left behind. The flamboyant former mayor of London, and figurehead of the Brexit campaign, couldn’t make the transition from showman to statesman. His notoriously ill-guided wit and intelligence – the man is, au fond, a ballistic missile gone rogue – did not survive the backstabbing fest otherwise known as the Tory leadership contest.

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Summer 2016 Issue

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ord Heseltine, a former deputy prime minister and one of the few upstanding Tory politicians left, dismissed Mr Johnson and called him a contemptible wimp: “He is like a general who led his army to the sound of guns and abandoned the field at the first sight of them.”

Mr Johnson made his own exit after fellow Leave campaigner Michael Gove turned on him – the latest twist in a saga of political backbiting that has turned the Tory Party into a fight club. Helped by his wife’s carefully planned email indiscretion – Mrs Gove does fancy a stint at Number 10 – the power-hungry justice secretary withdrew his support for Mr Johnson in the Tory leadership race, an act of treason not unlike the “et tu, Brute?” episode suffered by Prime Minister David Cameron when Boris chose ambition over friendship and joined the Brexit fray – not so much out of conviction as with a view to self-preservation. Undeniably, UK political life, such as it is, does contain elements of poetic justice.

Meanwhile on the left, things look no better.

Embattled Labour leader Jeremy Corbyn, rather hapless in the best of times, managed to mention Israel and ISIS in the same sentence, offending everybody in the process – a feat that requires an unusual degree of ineptness. Why, when a constitutional crisis is brewing, Mr Corbyn would even go there – to the Middle East – shall remain shrouded in mystery.

Clinging to his position with increasing desperation, yet failing to lead Labour in any meaningful way, Mr Corbyn has manoeuvred his party into the political doldrums where it now is stuck. A spent force, Mr Corbyn’s Labour Party has effectively handed the country to the squabbling Tories on the proverbial silver platter.

Looking at Great Britain from the other side of The Channel, European leaders expressed both dismay and disbelief – and a bit of anger too – at the sorry spectacle unfolding before their eyes. Dutch Prime Minister Mark Rutte, arguably Britain’s closest and most loyal ally on the continent and a close personal friend of the Camerons, lamented the sight: “England has collapsed politically, monetarily, constitutionally, and economically.” Mr Rutte urged fellow EU leaders to ease up on the pressure and allow the UK time to recompose itself.

Just before he left the stage, Boris Johnson assured the nation via his weekly column in the Daily Telegraph that the UK would be able to secure unfettered access to the EU market while restricting the free flow of labour. The publication of the column coincided with Prime Minister Cameron’s last supper in Brussels where Boris’

“Clinging to his position with increasing desperation, yet failing to lead Labour in any meaningful way, Mr Corbyn has manoeuvred his party into the political doldrums where it now is stuck.” phantasmagorical received.

scribblings

were

not

well

In the Belgian capital, the prime minister attended the twice-annual EU summit for just a single evening, before being sent on his way, rather unceremoniously, as the remaining 27 leaders celebrated a conclave to determine their response.

At the request of German Chancellor Angela Merkel, a special Boris Clause was inserted at the last moment into the final statement warning the British that the European Union will not ever allow its four basic freedoms – the freedom of goods, services, labour, and people to move freely throughout the union – to be split up. Seldom was a political fact stated so bluntly.

During supper the evening before, Mr Cameron had rather unwisely complained that the EU’s reluctance to allow Britain to place limits on intraunion migration caused him to lose the referendum.

In other words: It is all your fault. That did not go down well with the Chablis served.

FACT DENIAL Although a member for 43 years, the UK seems not to understand the fact that the European Union cannot and will not tinker with the foundation it was built on. Granting a single member state an exemption from adhering to the four basic freedoms would instantly bring down the EU’s entire edifice; other countries would immediately demand similar exceptions. The union would simply cease to exist.

All member states realise this fact of life1 and none has ever suggested tinkering with the four freedoms – save for the United Kingdom which considers itself exceptional to such a degree that all others are expected to bow before it. This, of course, is not how diplomacy works and the British should know that. Then again, with only twenty or so skilled negotiators to call upon, the Foreign Office seems to lack both the expertise and experience to operate within the confines of diplomatic reality. As both teams gear up for the coming Brexit negotiations, the EU is set to field no less than 600 veteran diplomats for the exercise.

However, even with a rudderless and fractured United Kingdom and a continent beset by indignation, the world will keep spinning. To cite the bard, in the end it may well prove much ado about nothing. British voters have expressed their anger and a good few of them already now regret (Bregret) their outburst. The referendum, merely consultative, needs to have its outcome ratified by act of parliament. Curiously enough, fully threequarter of its 650 members are opposed to the UK’s exit from the European Union.

With the exception of Michael Gove, who seems blinded by ambition, most Leave leaders seem rather clueless on what to do next, now that they actually won the contest. Nobody is in a hurry to seal the deal by invoking Article 50 of the Treaty of Lisbon that sets the ground rules of the exit procedure. Whilst European leaders publically urge the UK to depart at the earliest opportunity, most of their aides admit that no-one really wants to see the British pack up and go.

It is altogether not inconceivable that the whole Brexit push will eventually run out of steam, leaving things pretty much unchanged. Nigel Farage, whose UK Independence Party cashed in on the general discontent and caused Prime Minister Cameron to call for the referendum in a last-ditch attempt to hang on to power, already can see the writing on the wall. However, the victorious Mr Farage now stands virtually alone in appealing for immediate departure. He has, in fact, now abandoned the scene altogether, retiring from public life – no doubt to down a pint or two at his favourite pub in relative obscurity.

As the devolved Scottish parliament mulls rejecting a Brexit, a legally iffy proposition, and the British parliament has no stomach for an exit either, the leavers are insisting that the will of the 52% of Brexit voters – hardly an overwhelming majority – be acted upon, if not promptly then at least fully. However, as things stand it looks highly unlikely that these voters will get their way, all the way: Brexit will most likely be watered down to the point of near irrelevance – i.e. the Norway Option whereby the UK will continue to abide by – and enjoy – the EU’s four freedoms, pay its fair share to Brussels, implement EU legislation, whilst being notionally independent.

Rather than wishful thinking, this constitutes but a reality check for a nation that worked itself into a corner. i 1

After Swiss voters demanded curbs be placed on EU immigration, Switzerland was told by the European Union to refrain from broaching the issue, less it desires to scrap the treaties that allow the country unrestricted access to the common market. Predictably and wisely, the government in Basel kept quiet.

“As the devolved Scottish parliament mulls rejecting a Brexit, a legally iffy proposition, and the British parliament has no stomach for an exit either, the chips are down for the leavers.”

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Summer 2016 Issue

> Virgin Management:

Ensuring Top Performance of Brand and Business

Sir Richard Branson. Photo by Owen Billcliffe.

V

irgin Management sits at the centre of the Virgin Group, founded by the Britain’s most celebrated serial entrepreneur, Sir Richard Branson.

Established 46 years ago, and starting out as a discount record mail-order business, the Virgin Group today comprises some sixty businesses, employing over 71,000 people and generating annual revenue in excess of £17bn.

The Virgin Group’s geographical footprint encompasses over thirty countries with a brand recognition that often exceeds 95%.

The Virgin Group operates across five core sectors: travel and leisure, telecoms and media, music and entertainment, health and wellness, and financial services. The Virgin Group also supports a range of global leadership initiatives, incubated by Sir Richard Branson and Virgin Unite. The range of collaborations includes The Elders, Ocean Unite, Carbon War Room, The B Team, and The Branson Centres for Entrepreneurship.

Whilst the Group has seen a small number of its start-ups fail to take off – Virgin Cola struggled to

“The Virgin brand itself is peerless; no other brand in the world operates across such a diverse range of categories.” flourish in the fizzy drinks sector – most of Virgin’s diverse businesses become instant success stories.

The Virgin brand itself is peerless; no other brand in the world operates across such a diverse range of categories, from trains, planes, banks and health clubs, to communications, hotels, retail and spacecraft, to name but a few of the Group’s interests. Having already created 9 businesses that have each surpassed the billion dollar value mark, the Group is not about to slow down anytime soon: Virgin Cruises and Virgin Sport were only recently added to the already expansive network of corporate interests.

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This puts the Virgin brand in that most rarefied of marketing categories: a brand that can be applied to almost any venture as consumers willingly accept it as a hallmark of quality.

Known globally for its unconventional and disruptive approach to business and customer experience, the Virgin brand regularly partners with investors to explore new avenues and create a positive impact on market segments in need of a shakeup. Whilst the Virgin Group is admired for its – carefully calculated – risktaking, Sir Richard Branson receives praise for his willingness to push the corporate envelope.

Virgin Management is charged with supporting the Branson family’s entrepreneurial zest and nourishing the Virgin brand, ensuring its endurance as a universally recognised sign of premier quality with an added touch of daring.

As a purpose-driven business, Virgin has tasked itself to “change business for good”, a purpose which is articulated in a number of exciting ways by each business in the context of their own category. i 57

> Nestlé - Best Corporate Governance, Switzerland:

Holistic Corporate Governance

By David P Frick, Head of Corporate Governance and Compliance, Secretary to the Board of Directors of Nestlé S.A.

H

olistic Corporate Governance requires a good dialogue with shareholders, but also engagement with other stakeholders taking into account their material interests. Nestlé engages with society on the basis of specific commitments and reports on them in its annual report integrating financial and non-financial aspects of its performance. This allows the company to demonstrate the creation of shared value in very tangible ways.

Over recent years, Nestlé has demonstrated that shareholder dialogue in a highly diversified shareholder structure – Nestlé has approximately 58

150,000 registered shareholders – is both possible and beneficial. Approximately one third of Nestlé’s shareholders come from Switzerland, one third from the United States and the United Kingdom, and one third from the rest of the world.

The company is trying to meet the governance expectations of all these shareholder groups.

Through shareholder meetings, surveys, chairman’s roundtables and engagement calls, bilateral investor meetings, and engagement with investors at press conferences, road shows, and investor conferences the company regularly solicits input from investors on governance topics. Insights are incorporated into the board’s CFI.co | Capital Finance International

governance documentation and practices.

However, good corporate governance is not an end in itself. It helps Nestlé focus on the long term and ensure the availability of capital for sustainable growth. Holistic, or board-centric, governance should include all responsibilities of the board relating to governance, risk management and compliance, and the sustainability and strategic direction of the business. Under Swiss law these are “inalienable” obligations of the board which cannot be delegated to shareholders.

Nestlé has recently created a Nomination and Sustainability Committee of the board that

Summer 2016 Issue

prepares the full board’s discussion of such non-financial responsibilities. Similar to the Audit Committee’s responsibilities for financial reporting, compliance, and risk management, the board’s Nomination and Sustainability Committee oversees non-financial reporting, safety and health, the company’s environmental footprint, and other aspects of corporate and social responsibility relevant to that particular company.

At Nestlé such concepts are based on its strategy of “Creating Shared Value” which is enshrined in the purpose clause of its articles of association. Accordingly, Nestlé shall, in pursuing its business purpose, aim for longterm and sustainable value creation. The company recognises that it can only create long-term value for its shareholders, if it also creates value for society.

The Sustainability Committee will, therefore, monitor how material non-financial issues affect financial performance and how the company’s long-term strategy relates to its ability to create shared value. It will regularly review the company’s ownership profile and the priorities of each group. And it will identify other stakeholders relevant to the company and their material interests.

Nestlé’s annual report needs to be responsive not just to shareholders, but also to other stakeholders such as employees, suppliers, customers, communities, regulators, and, arguably, future generations affected by the company’s activities. This is aligned with the aim of an integrated report as defined by the International Integrated Reporting Council (IIRC). Such a report is meant to be a concise communication about how an organisation’s strategy, governance, performance, and prospects – in the context of its external environment – lead to the creation of value in the short, medium, and long term.

Photo: Nestlé S.A. AGM

“The company exceeded its 2015 objective by reducing energy consumption per tonne of product by 29% since 2005.”

Holistic governance, a dedicated sustainability committee, and integrated reporting can be valuable additions to the shareholder dialogue that has been the focus of governance efforts over recent years. They can help address vulnerabilities to short term pressures. And they can bring back the purpose of governance from a compliance exercise to a value adding effort to secure a company’s license to operate, ensure its sustainable long-term growth, and align its interests with all its stakeholders.

The CFI.co 2016 award for Best Corporate Governance in Switzerland is a welcome recognition of our efforts in this regard.

CHANGING CONCEPTS OF MATERIALITY The range of topics considered relevant and material by different audiences is widening.

The accounting and legal construct of materiality has traditionally been considered of most interest to investors. However, there is CFI.co | Capital Finance International

increasing interest amongst investors in how operations are affected by ESG (environmental, social, and governance) factors. In addition, societal stakeholders also have views on what they consider to be material information about the activities of companies.

Establishing what is material is an important process for a company. For example, Nestlé has a comprehensive approach to materiality and conducts an assessment every two years for its Creating Shared Value Report which is published in the annual report package.

For this assessment Nestlé consults with critical external stakeholders in “stakeholder convenings” as well as with senior managers inside the company. This process establishes the key topics and ranks them on a matrix to show stakeholder concern and impact on Nestlé.

Conducting such a materiality analysis is a key component of many reporting frameworks – e.g. the Global Reporting Initiative (GRI), the Integrated Reporting Framework (IIRC), or the Sustainability Standards Accounting Board (SASB). This analysis also informs the company’s reporting and is used as an internal tool.

The materiality analysis tends to focus on medium to longer term themes. Nestlé focuses on bringing nutrition and health solutions to consumers around the world where over and under nutrition is a major issue; water because water is the lynchpin of food security and water scarcity can be a problem; and rural development because the overall well-being of farmers and communities is essential to the company’s business.

Nestlé has developed 39 external commitments which it reports on. The company believes that increasingly investors are looking at both financial and social performance and how this is integrated into corporate governance, strategy, and operations.

Over the past five years, there has been an increasing external interest in ESG issues with governments and regulators requiring or encouraging companies to disclose sustainability information in their annual reports. There has also been a large increase in frameworks seeking the reporting of social information. So, for example, in the 2015 report Nestlé not only reported according to G4 but also to the UN Guiding Principles Reporting Framework. There are also important indices such as Dow Jones, FTSE4Good, and ATNI which require such ESG information.

All these efforts help Nestlé demonstrate the “Creation of Shared Value” and to progress on its continuous journey towards integrated reporting.

ENVIRONMENTAL PERFORMANCE One specific example of this is environmental 59

s as a consultant body EO, and regularly r Governance. It also Share capital by investor type, long-term evolution (a) atters. mmittee ensures our e Governance is built performance.

Nestlé embeds the principle ofOur Annual Report includes both our financial 100% lity and oversees the sustainable development in its activities, brands,and nonfinancial commitments. It gives insights iples and values set and products by aiming to make the right choices planning of the Board, for our management in a world where water is increasingly scarce,into how material issues affect our financial 80% natural resources self-evaluation.

It d also provides our are constrained, biodiversityperformance and how our long-term strategy is declining, and climate change may intensify ely wide net is cast The company looks to continuerelates to our ability to create value. We recognize these challenges. ppropriate oversight. living up to the expectations of its employees,

60%

iate toneconsumers, at the and external stakeholders with respectthat this is central to our business model and Institutions 79% Committee our responsibility and practices.gives us our license to operate. For our company to itssets environmental nt and long-term Over the past decade Nestlé has marked a 40% es andplanning preparesand the audit ancial significant number of achievements in energy,to be successful over the long term and create ation.

In 2015, we water, direct greenhouse gases (GHG) emissions, rsight and compliance; value for shareholders, we must also create value and on waste.

20% Swiss ‘say pay’ law both erformance goals; and for society.

Private Shareholders 21% Our proposals wereexceeded adopted The company its 2015 objective by tion, evaluation and reducing energy consumption per tonne of product 0% f our shareholders.

Our by 29% (instead of 25%) since 2005. It has also versees our economic, surpassed the 2015 objective by reducing direct explains our compensation 1999 2003 2007 2011 2015 sustainability.

GHG emissions per tonne of product by 42.7% It is submitted annually to versus 2005,an resulting in an absolute reduction Chart 1: Share capital by investor type, long-term evolution. overnance is not (a) Percentage derived from total number of registered shares.

Share capital by geography of 14%.

Percentage derived from distribution total number of registered shares.

Registered shares represent 57.6% of the total share capital. Statistics are r shareholders.

Registered shares represent 57.6% of the total share capital. to create market rounded, as at 31.12.2015.

Statistics are rounded, as at 31.12.2015. ee oversees internal continues and to improve efficiency and us on theNestlé long term. productivity, saving energy, switching to cleaner al reporting, compliance and and using sustainably-managed renewable pted bestfuels, practices in d paid special to the company has P Switzerland 35.21% energy attention sources. Moreover, ntense withtargets for 2020 to further set new ambitious P United States 26.80% his year.dialogue reduce GHG emissions per tonne of product from adshows, investor P United Kingdom 5.78% manufacturing operations by 35% versus 2010.

P Germany 4.79% rveys, analyst and with science requirements to This is consistent P Belgium 4.47% limit global warming to less than 2°C. 5 man’s Roundtables and P Luxembourg 3.06%55 Over the with last decade, tively engage theNestlé also reduced its waste P Japan 2.46% for disposal generated at factories by 62% through P Canada 2.33% ther stakeholders to and energy recovery. With recycling, composting, P China 2.02% 22% of factories ng-term growth. achieving zero waste for disposal, P France 1.84% the company surpassed its 2015 goal (10% of orporate Governance P Others 4.05% factories) and is now working towards zero waste for disposal by 2020.

Continuous improvement of environmental performance in all en the Chairman categories enabled us to achieve our public commitments With its factories withdrawing 41.2% less water Chart 2: Share capital distribution by geography. s a consultant body per tonne of product than they did ten years ago, , and regularly Nestlé has met its 2015 objective and has now set a new overnance.

It ambitious also target: by 2020, Nestlé commits Achievement to reduce direct water withdrawals per tonne of Share capital by investor type, long-term evolution (a) Commitment ers. product in every product category to achieve an overall reduction mittee ensures our of 35% versus 2010.

100% and oversees Nestlé’s the achievements have been recognised by major rating agencies that advise investors. For nning of the Board, example, the company marked an industry-leading score It of 99 out of 100 in the environmental80% -evaluation. dimension of the 2015 Dow Jones Sustainability -41% wide net Index. is cast The company also topped the Carbon -43% 2015 vs. 2005

Energy consumption (GJ/t)

Water withdrawal (m3/t)

Direct GHG emissions (tCO2/t)

Zero waste for disposal

-29%

-41%

-43%

105 (22%)

-25%

-40%

-35%

71 (15%)

(# of factories in 2015)

100

80

Index

-29%

Disclosure Project’s prestigious Climate A list60% with a 100 A score for actions to address climate mmittee change sets our and reduce GHG emissions. Nestlé achieved this by optimising production lines and40% nd prepares the energy savings, switching to cleaner fuels, and increasing on. In 2015, we the use of sustainably managed sources of renewable energy.

60

40

Institutions

79% -75%

20 2005

2006

2007

Energy consumption

2008

2009 Water withdrawal

2010

2011

2012

Direct GHG emissions

2013

2014

2015

Waste for disposal

20% iss ‘say on pay’ law both Nestlé’s environmental performance is a welcome Private Shareholders 21% proposals were adopted empirical example of the tangible benefits of ur shareholders.

Our doing business on the basis of strong internal0% governance, measurable external commitments, lains ourand compensation 1999 2003 2007 2011 2015 related actions on the ground. This is what makes Nestlé’s efforts Chart 3: Continuous improvement of environmental performance in all categories enabled us to achieve our public commitments. submitted annually tosustainable. i (a) Percentage derived from total number of registered shares. areholders.

Registered represent 57.6% of the total share capital.

60 CFI.co | shares Capital Finance International Statistics are rounded, as at 31.12.2015. oversees internal and

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CLEAR PROCESS

> 3 Step IT:

Incremental Innovation Delivers Value “We believe in innovation” is an oft-repeated platitude: after all, who wouldn’t?

The trick is to make it practical, to deliver it, and to do so continually. And it’s this trick that 3 Step IT seems to have pulled off, and the reason why the company won CFI.co’s award for the most innovative technology leasing solutions.

3

Step IT is a technology leasing company that specialises in financing end-user devices. Originally founded in 1997, the business then was mainly financing personal computers; laptops have grown in importance, and now the portfolio includes smartphones and some Internet of Things devices. The proposition 3 Step IT offers, and it defines them uniquely, is a comprehensive approach to financing IT over an optimal lifecycle.

“It’s for the customer to decide on what’s optimal,” explains Carmen Ene, the 3 Step IT CEO. Usually it’s three or four years of use, and then escalating costs of repair and failure overtake the diminishing returns from reduced depreciation. “The difference in our approach is that we’re set up to enable the renewal to take place on time, and as a routine event.” When customers renew technology as planned, their IT department delivers a more reliable service and reduces the total costs of acquiring and supporting each device.

This perspective lead 3 Step IT to complement financing with asset management. Originally a basic system that reported new deliveries and planned expiry dates, it has evolved into

62

“Even so innovation needs a focus. ‘Put a team together and ask them to innovate, and you’re asking for trouble. They won’t know where to begin. So our focus is external, on doing things the customer will notice’.” a comprehensive service: new assets are automatically recorded in the system; it shows what they are used for and can help find lost devices. It’s been steadily improved in many small steps.

“There’s a lure, even a fascination, with disruption; but by its nature, disruptive change is rare, and to seek it can often be a distraction.”

So Mrs Ene’s focus is on small improvements that offer the promise of steady progress.

“We’re impatient for change and a culture that encourages effort on smaller projects is more likely to consistently reward the investment of time and resources than working on a few mega projects. The right cheap experiments can offer more than big ideas.”

CFI.co | Capital Finance International

These small projects can also be low risk.

In a suck-it-and-see trial, if it doesn’t work, there’s no harm done. And when it does work, it delivers a quick win. Especially in a highly regulated industry, it may be easier to work through compliance issues on small projects and experiments, to be able to get started.

Even so innovation needs a focus. “Put a team together and ask them to innovate, and you’re asking for trouble. They won’t know where to begin. So our focus is external, on doing things the customer will notice”. Clearly that drives competitive differentiation, and 3 Step IT has found process and efficiency improvements follow on, as a consequence.

EVER-SMOOTHER EQUIPMENT RENEWAL With the asset management system as a foundation, 3 Step IT is now extending its service with a focus on the moment of replacement. Technology financing has always offered budget planning and management as a benefit to the IT department, so investment plans are not disrupted by a cash crisis. Even so, for the end user, the replacement disruption can be immense. Their new 3ChooseIT service is designed to make the moment of replacement a source of end user joy.

Summer 2016 Issue

The 3 Step IT: Head office features a host of different spaces: rooms for extended group discussions, drop-in spaces for quick meetings or phone calls, and quiet spaces for work that requires focused concentration. Employees work wherever they want, in a space that suits their current task. The approach is designed to encourage creativity.

As before, the client is advised of impending replacement. Now the end user is invited to choose their preferred PC, laptop, or smartphone from an approved range. Users’ collective selections are summarised, ordered, installed at agreed times, and then added to the lease.

Disruption is minimised, and the IT service level goes up a notch.

But on its own this only goes so far: the exhortation to improve the customer satisfaction score gives scope to do so many things it’s impossible to know where to start; and the unguided choice is unlikely to be the best place.

a free format rant, probably the most powerful question to include is a variant of: What’s the one thing you would improve? This question gives customers the opportunity to advise you with an independent view of process delivery.

KEEPING THE CUSTOMER FOCUS Most companies measure customer satisfaction in some way. It’s clearly a good thing to do: it gives an independent measure of how well you’re doing, though in isolation whatever your satisfaction score you don’t know how good or bad it is.

The challenge in measuring customer satisfaction with a financing service is that, once the asset is delivered, nothing much happens for a long time. Ask a customer in the middle of a lease how satisfied they are, and if the response is honest it’s probably puzzled. Satisfied with what? With a monthly invoice… As Mrs Ene observes: “We’ve always measured customer satisfaction, but we’ve found it hard to make it actionable, so now we’re developing a new approach.”

“Rather than survey customers annually, we’ll target the survey to new installations, to a midlease change, and to the end of lease renewal.

Short surveys, tailored to explore the event that just happened. Then we can see how we live up to our brand, and if we do things the way the sales person said it would happen.”

Even so, by continually measuring customer satisfaction, you get trend information. You still don’t know whether your score is good or bad, relative to your competition, though you will know if your efforts to meet customer needs are getting better, or worse. Then you can share the information internally to thank the team and encourage them to re-double their efforts.

Customers can help to provide guidance when you take a step beyond simply measuring customer satisfaction and ask a supplementary question at the same time. Ask customers how you could improve their experience and they will tell you, especially if you time the survey to happen after an event in the life of the asset. While your survey process may also give them the opportunity for CFI.co | Capital Finance International

3 Step IT demonstrates encouragement is not enough: innovation needs some rules. Their first rule has been an external focus on improvements the customer will notice. Now they are adding a second rule: to use customer feedback systematically for suggestions and priorities. As Mrs Ene says: “There are so many ways one can improve a financing service, we need to ask our customers where to begin. That way we should continue to innovate to make a difference our customers will notice.” i 63

> CFI.co Meets the Leadership of 3 Step IT:

Jarkko Veijalainen & Carmen Ene

Chairman: Jarkko Veijalainen

J

arkko Veijalainen has an energetic, enthusiastic personality. Larger than life, with an infectious sense of humour, it’s impossible not to like him on first acquaintance. While he plays hard, when it comes to business he’s deadly serious: his energy and enthusiasm find expression in a competitive and ambitious focus. “To an extent,” he says, “3 Step IT reflects my style: we work hard, we compete vigorously, and we try to keep the fun in business too.”

3 Step IT makes it easy to lease, manage, and renew IT assets. Their asset management service puts customers in control of the equipment life cycle, so the end of lease process is never a surprise. Removing this wellknown source of lease dissatisfaction helps to build trust, and customers become repeat users of their service.

Mr Veijalainen is clearly proud of the company he founded in 1997. From its base in Finland, it has expanded to serve nearly 4,000 customers in eleven countries. Its profitable growth earned him a Finnish Entrepreneur of the Year award. Today, 360 employees manage some 1.6 million assets worth over €1 billion.

Last year their remarketing facilities handled 64

CEO: Carmen Ene

320,000 devices – a mix of PCs, laptops, tablets and smartphones.

3 Step IT’s refurbishing centres resell reconditioned devices to an extensive network of buyers. As such, the company is a circular economy case study, exploiting the lessor’s advantage: they own the asset, so collection for reuse happens naturally. They built a network of traders and resellers to handle reconditioned units. The network is mostly based in countries with technology recycling regulation, so reused equipment should finally become a productive source of raw materials, rather than end up on a polluting dump.

As 3 Step IT matured, Mr Veijalainen stepped back from day-to-day management to take a more strategic view of the opportunities and challenges facing 3 Step IT as its chairman. Last year Carmen Ene was appointed as CEO. Born in Romania, she cut her business teeth there, being involved in founding one of the first Romanian IT companies in 1990. Initially run by a staff of five from a hotel room, it was soon noticed and acquired by IBM. A successful 20-year IBM career in financing and services followed and her impressive credentials in international IT and a clear vision of how to pursue market leadership made her the obvious choice.

CFI.co | Capital Finance International

“She has experience, a genuine international perspective, and a determination to carry business boldly forward. Carmen does not see challenges; she only sees opportunities.” Mr Veijalainen’s summary shows there is personal chemistry as well as business logic in common.

“Jarkko and I share a similar competitive energy,” she says, and Mr Veijalainen sees that she adds discipline, learned from her IBM career. “She talks frankly to the company’s board of directors and her analytical approach is helpful.”

“We have made a virtue of necessity,” says Mrs Ene. “The necessity is sustainability. We live in revolutionary times for technology. Everyone has multiple devices; our mission is to see these devices are used in a more sustainable way. This shaped our approach to financing, and helps us to become our customers’ trusted advisors.” Now Mrs Ene sees expansion coming through partnerships: “Extending our ecosystem is key. If our approach delivers a better experience to customers who trust us, then it makes sense to work with other lessors.

They can use our expertise to strengthen their service and realize their assets’ full residual value.” Mrs Ene is impatient to make rapid progress; it’s an exciting moment for the company. i

Summer 2016 Issue

CFI.co | Capital Finance International

65

> Delta Group:

Helping the World Save on Energy

D

elta, founded in 1971 and headquartered in Taiwan, is a global leader in power and thermal management solutions and a world-class provider of industrial automation, building automation, telecom power, networking, EV charging, data centre infrastructure, renewable energy, and display technologies. Delta’s worldwide group revenues have grown at a compounded annual growth rate 66

of 31.8% since 1971 to $7.6 billion in 2015.

Delta has 153 sales offices, 61 R&D centres, and 40 manufacturing facilities worldwide.

In the Europe, Middle East & Africa (EMEA) region, Delta’s human capital currently totals 2,700 people in 37 sales offices, 11 R&D centers and 2 manufacturing sites. Delta EMEA’s first office was established in 1987 in Switzerland and has been growing significantly CFI.co | Capital Finance International

ever since, both organically and through M&As. Delta has successfully built a business development network with channel partners in over 66 countries across the EMEA region. In 2003, it acquired Switzerland-based ASCOM Energy Systems, a specialist in power systems with more than 100 years of history, and in 2015 it acquired Norway-based Eltek, a global leader in energy conversion for the telecom, data center and industrial sectors.

Summer 2016 Issue

Delta’s M50A PV inverters: featuring energy efficiency of up to 98.6%, used in Namibia’s largest solar PV power plant.

Delta is devoted to its corporate mission – “to provide innovative, clean, and energy-efficient solutions for a better tomorrow,” by delivering technologies boasting industry-leading energy efficiency capable of realising significant energy savings and higher productivity for our customers. From 2010 to 2015, Delta’s products saved 17.3 billion kWh of electricity for its customers, equivalent to a reduction of 9.2 million tons of CO2 emissions. By 2014, the electricity intensity of Delta’s major plants decreased by 50% compared to 2009.

The company’s goal is to contribute to the mitigation of global warming by empowering the low-carbon economy.

With a long-term focus on innovation, Delta commonly invests 6% of its global revenues into R&D in order to improve the energy conversion efficiency of its products. Most of Delta’s power supply products have an energy efficiency exceeding 90% with telecom power equipment featuring the world’s highest efficiency of up to 97.5%; solar PV inverters with industry-leading efficiency of up to 98.8%; and server power supply with up to 96% efficiency (world’s first 80 Plus Titanium).

“Delta has successfully built a business development network with channel partners in over 66 countries across the EMEA region.”

LEVERAGING CORE COMPETENCIES By leveraging its core competences in power electronics and energy conversion efficiency, Delta integrates its diverse portfolio of technologies in both hardware and software to realise systems and solutions for its customers worldwide. In recent years, Delta has delivered more than three hundred success cases around the world in a wide range of fields, including automated factories, green data centres, smart green buildings (22 constructed over the past decade and some donated to academic institutions), telecom power systems, smart monitoring and displays, EV charging networks, and renewable energy power plants. These projects realise, on average, 20% to 40% energy savings as well as meaningful OPEX reductions.

Remarkable examples of these green solutions are: CFI.co | Capital Finance International

EV Charging Solutions to support Norway’s fastgrowing green mobility: Norway is one of the world’s largest markets for electric vehicles (EV) and in the past few years, Delta has been supporting the country with its highly capable EV charging solutions. Delta’s ultra-fast 150kW DC EV Charger is capable of charging up to four cars simultaneously as it supports CCS-200A, CHAdeMO-125A, Type2-63A as well as Type232A standards, meaning practically all EVs.

Delta’s 150kW DC Ultra-fast EV Chargers, capable of enduring harsh climate conditions, are currently being deployed as part of a country-wide EV charging network in Norway.

Delta Contributes to the Construction of the Largest Solar Power Plant in Namibia: In 2015, Delta provided its M50A series photovoltaic (PV) inverters, featuring industry-leading efficiency of up to 98.6%, to the Obmuru Solar Photovoltaic Park, the largest solar power plant in Namibia with 4.5MW capacity. The project is expected to generate a total of 13.5 million kWh hours of clean electricity annually, equivalent to a reduction of 6,750 tons of carbon emissions and to approximately 1% of the annual electricity generation in the country. Delta’s M50A inverters are characterised by a robust and reliable design with a IP65-rated casing made of high quality aluminium, thus, making them an ideal choice for the rugged environment of Namibia.

Net-zero energy green building in Fremont, California, USA: As a long-term advocate of green buildings, Delta completed the construction of its 67

President: Jackie Chang

headquarters building for the Americas region, a state-of-the-art green building designed to meet LEED Platinum and net zero standards.

It incorporates many of Delta’s own leading technologies such as building automation and power conversion to achieve an elite level of sustainability. Through Delta’s solar photovoltaic (PV) power system, over 1,000,000 kWh of electricity are expected to be generated annually. The building also boasts a geothermal heating and cooling system that reduces HVAC (heating, ventilation, and air conditioning) energy consumption by 60% compared to traditional systems. Other key energy-saving solutions by Delta include building automation systems, smart LED lighting, variable frequency drives, elevator power regeneration systems, InfraSuite Datacentre Infrastructure, and an energy monitoring system.

Paris UN Climate Change Conference (COP21), held in Paris, France. At this influential worldclass stage, the company shared its experience in constructing green buildings with an international audience.

Corporate Social Responsibility Delta is also focused in building its worldclass Corporate Social Responsibility (CSR) capabilities, not only to maximise shareholder value, but also to realise meaningful contributions to society and the environment.

Facing the crisis of global warming, Delta has voluntarily reduced its corporate carbon emissions with concrete actions as mentioned above, and has committed to a new goal of further reducing its overall electricity intensity (major plants, data centres, and office buildings) by an additional 30% by 2020.

Throughout its history, Delta has received many global awards and recognition for its business achievements, innovation, and dedication to corporate social responsibility. Since 2011, Delta has been selected as a member of Dow Jones Sustainability™ World Index (DJSI World) for five consecutive years. In 2014, Delta was ranked by CDP (formerly the Carbon Disclosure Project) on the highest A-level of the Climate Performance Leadership Index (CPLI), and is the only one from nearly 2,000 listed companies in Greater China that makes it onto CPLI list.

In 2015, Delta actively participated in the

For Delta, corporate sustainability is an ongoing

68

The Delta21@COP21 green buildings exhibition fully showcased Delta’s concrete results in energy saving and green buildings and highlighted its corporate endeavours to reduce the energy consumption of buildings and to provide environmental education. During the many official forums at COP21, Delta called on countries to value the benefits of energy efficiency and to further reduce carbon emissions. The opportunity allowed Delta to share its experience with UN members and opinion leaders in the environmental sector, and enhance its corporate standing.

CFI.co | Capital Finance International

road. The company will continue to carry out its corporate commitment and provide smarter and more environment-friendly lifestyles for future generations.

MEET THE PRESIDENT Jackie Chang was appointed president and general manager of Delta’s EMEA and Russia operations in January 2010. Mr Chang joined Delta in 1992 as a sales representative and relocated to Delta UK as the regional manager in 1996. In 2004, Mr Chang was promoted to general manager responsible for EMEA operations and based in the Netherlands.

Mr Chang strives for change while maintaining work group unity and actively creating innovative business models. Mr Chang is accustomed to working in a variety of different cultures.

In addition to creating business on the European continent, Mr Chang has made significant contributions to Taiwan’s diplomatic relations. From 2001 to 2002, he served as the president of the Scottish Taiwanese Chamber of Commerce. From 2003 to 2005, he actively participated in the Overseas Compatriot Affairs Commission as the United Kingdom’s overseas consultant. In this way, Mr Chang has helped to create a tight-knit network of foreign diplomatic relations for Taiwan.

Mr Chang graduated from Taiwan National Central University and was awarded an Outstanding Alumni Award in 2011. i

Summer 2016 Issue

> Elon Musk: How the Billionaire CEO of SpaceX and Tesla Is Shaping Our Future

Languishing on the Crossroads

By Kate Stanton

E

lon Musk recently announced his third divorce from his second wife. It’s like this: he was married first to Justine Musk, with whom he had six sons. After their divorce, he married the actor Talulah Riley before divorcing and then remarrying her. Now they are about to divorce again.

This personal information may not seem important when considering the Billionaire CEO of SpaceX and Tesla Shaping our Future – the subtitle of this Ashlee Vance biography. But it does, perhaps, make a fitting personal backdrop for a man as intense and focused as Mr Musk appears to be, favouring ambition over emotion.

Ms Vance’s book apes him in this regard, concentrating mainly on his business ventures, barely even pausing for his and (his first) wife’s loss of their eldest son to sudden infant death syndrome at just ten weeks old.

Yet the book is thoroughly researched in terms of his creative journey, recalling conversations and depicting images of his and his brother Kimbal’s sacrifices and struggles on the way from pulling all-nighters in a dingy San Francisco office to being ousted from boards of companies the two had helped found, such as Zip2 and PayPal. In many ways he is portrayed sympathetically, even heroically, as brilliant man driven to protect the planet and the plight of its people. With SpaceX, Mr Musk wants mankind to become an interplanetary species setting up home on Mars; and with Tesla to provide electric cars as a mainstream alternative to fossil fuel powered vehicles. The third-generation Tesla is due in 2017 priced just $35,000.

There is also the cartoonish, childlike side to him.

He plans to invent and produce a submarine-car, inspired by the vehicle in the film The Spy Who Loved Me. It is testament to his drive, capability, and self-belief that Mr Musk has been able to steer such innovation in his many fields of interest. But as with all great businesses, movements, and revolutions there have been thousands of others crucial to his success along the way.

Whether Mr Musk should be fully credited with the progress his companies have made is arguable.

Undoubtedly, he has been instrumental in bringing people, ideas, and funding together, but no success story is created in a vacuum.

Indeed, not all are convinced by Mr Musk as saviour

of the world. Economist Tyler Cowen and writer Vaclav Smil are among his detractors, according to Vance.

His first wife Justine complained he treated her like staff. “If you were my employee, I’d fire you,” he allegedly replied.

He has been described by some as not so much a genius as an attention-seeker, a boy playing with expensive toys and screaming at anyone who doesn’t deliver. Others feel he doesn’t acknowledge the input of his teams. One former employee says he treats his workers like litter, and has a complete lack of loyalty or human connection.

With gaps in equality growing worldwide and many people unable to adequately feed themselves on a day-to-day basis, many question whether Mr Musk is trying to solve the right problems. Life on Mars?

Perhaps a better world on Earth should be sought first. i Virgin Books, ISBN 978-0-7535-5564-4

CFI.co | Capital Finance International

69

> Sir Richard Jolly:

Development with a Human Face

By Penny Hitchin

I

n May 2012, a distinguished group of international economists and social scientists published Be Outraged: There Are Alternatives, an impassioned critique of austerity economics. The authors argued that austerity is bad economics, bad arithmetic, and ignores the lessons of history.

secured a position as a research officer in Applied Economics at Cambridge University.

In 1969, he was appointed a fellow at the then recently opened Institute of Development Studies (IDS) at Sussex University. Thus began a connection that was to last nearly half a century.

In the heady days of the late 1960s, IDS was not a typical research institute: it tried to put its egalitarian philosophy into practice.

One of the outraged academics was Sir Richard Jolly. Now in his eighties, the economist has been a leading figure in international development since the 1970s, notably within the United Nations. Sir Richard Jolly is credited with introducing the concept of human development to the organisation. He is still going strong and full of energy, ideas, and enthusiasm for redistributing wealth and making the world a better place.

In 2015, the UN introduced the sustainable development goals (SDGs), replacing the millennium development goals (MDGs) and setting out the world’s most pressing issues. Sir Richard says of the new goals: “The SDGs are universal, which is a major advance. Instead of the north speaking to the south, we’re now really recognising that all countries need to take action for all peoples. The SDGs are integrating sustainability and climate change. That is a fundamental and important shift from the MDGs.” Sir Richard has a detailed first-hand understanding of the development agenda. A former assistant secretary-general holding senior positions at the UN Children’s Fund (UNICEF) and the UN Development Programme (UNDP), he was the architect of the widely celebrated Human Development Report as well as the author of some twenty books spanning everything from the UN’s history to the resilient successes of UN ideas.

An underlying theme in his work has been putting people first. His philosophy of development may be characterised by replacing the neoliberal paradigm with one centred on human development. He says that while the economy is important, it constitutes merely a means to an end.

Economic development can sometimes lead to greater inequality and fewer opportunities for people to live well. Investment in health and education matters not only because they make the workforce more productive but because a healthy life and the pursuit of knowledge are part of what it means to live well as human beings. Poverty is not just a matter of income: it is also a lack of voice, access to knowledge and healthcare, and dignified employment.

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Sir Richard Jolly

Sir Richard believes human development needs to prioritise the concern for people and their wellbeing at all levels – individual, organisational, or governmental.

THE MAKING OF AN ARCHITECT Sir Richard Jolly grew up in Hove, a coastal town in south east England. His parents were both involved in local community service and keen members of the local Presbyterian Church.

Sir Richard says he absorbed a sense of service during his childhood. He was one of around 16,000 young Britons evacuated to North America for the duration of the Second World War, returning home in May 1945.

In 1954, he went to Cambridge University to study Economics and was active in college Christian societies. He read widely and became a pacifist. Faced with call-up for national service, he registered as a conscientious objector. The court allowed him to do voluntary work in Kenya instead.

This African experience changed his views. The Christian missions he encountered were run by evangelical fundamentalists. Seeing them at work in a totally different cultural environment led Sir Richard to question his faith. Before long, he turned away from religion. However, the two years in Kenya left him fascinated by development and committed to the fight against inequality. In 1959, Sir Richard abandoned his plan to attend Harvard Business School, opting instead to study development at Yale University where he was awarded a doctorate.

In 1963, he was back in Africa working as a research fellow at the East Africa Institute of Social Research. He became an adviser to the Government of Zambia on human resources management. The following year, Sir Richard CFI.co | Capital Finance International

For example, IDS had an internal income tax that required that confiscated half of anyone’s earnings from consultancy work. Decisions on how this money should be used were made by popular vote every year. Porters, kitchen staff, and secretaries were all entitled to participate in the process. The IDS fund was used to give staff secretaries as well as academics the opportunity to work overseas, experiencing first-hand how Third World institutions operate.

Sir Richard Jolly was director of IDS from 1972 to 1981. From this perch he became involved with multilateral organisations. From 1982 to 1995, he was UNICEF deputy executive director with responsibilities for programmes in over 130 countries, supporting the child survival revolution and strategies of “structural adjustment with a human face” which eventually led to the concept of human development. At UNICEF, Sir Richard was also directly involved in efforts to ensure the needs of children and women were no longer ignored in economic adjustment policies.

KNIGHTHOOD From 1996 to 2000, Sir Richard became special adviser to the administrator of the United Nations Development Programme and principal coordinator of the widely-acclaimed Human Development Report. He was made a Knight of the Order of St Michael and St George for his contributions to international development.

Sir Richard has written and co-authored many publications. Whimsically, his first published paper was an empirical study investigating the route taken by Hannibal more than 2,000 years ago. In 218 BC, the Carthaginian general – along with 38,000 infantrymen, 8,000 cavalrymen, and 38 elephants – crossed the Alps between Gaul and Rome during the Second Punic War to lay siege to Rome – a plan met with initial success but that ultimately failed and left him stranded in Southern Italy.

Sir Richard was one of a group of nine friends who, accompanied by an elephant dismissed from circus duties, successfully retraced Hannibal’s transalpine trek in 1959. i

Summer 2016 Issue

> CFI.co Meets the Chairman and CEO of GTT:

3 Questions to Philippe Berterottière

G

TT (Gaztransport & Technigaz) pursues a twin strategy of loyalty and new business and its innovation capability is the key that opens the doors to new markets. Chairman and CEO Philippe Berterottière fills us in on the details: HOW MUCH OF A CONTRIBUTION DOES GTT EXPERTISE MAKE TO CORPORATE GROWTH? GTT has demonstrated its ability to grow by reaching out to conquer new markets beyond those of the traditional core business of LNG carriers.

The company’s strategy is built on extending its containment solutions to onshore, offshore, and multi-gas transportation applications. For example, GTT has successfully adapted its technologies to icebreaking LNG carriers and very large ethane carriers. GTT is also developing solutions for using LNG as a ship propulsion fuel, and for smallcapacity LNG carriers, a rapid growth markets which will be driven by the need for coastal and river LNG transportation and by the development of the market for LNG as a fuel. GTT’s technologies offer significantly higher levels of efficiency and safety at lower cost than competitor technologies.

HOW IMPORTANT IS INNOVATION TO GTT IN THE WIDER BUSINESS SENSE? It is essential that GTT offers advanced technologies that deliver the right response to the operational requirements of our customers. Our commitment to innovation has allowed us to add significantly to our portfolio of patents, and helped us to maintain a very strong position in the LNG shipbuilding industry. The majority of our research efforts are focused on continually improving the performance of our existing systems. We are particularly involved in developing new solutions that reduce the LNG boil-off rate during transportation, thereby offering considerable savings to ship owners. All our achievements in innovation rely, to a very great extent, on our constant interaction with all professionals of the LNG industry.

WHILE A WELL-ESTABLISHED PROVIDER OF TECHNOLOGY, GTT IS ALSO WORKING ON INTRODUCING NEW SERVICES. WHY? GTT wants to provide shipyards, ship owners, and charterers with value that extends beyond the LNG tank. So our range of services is designed to make a broader contribution to optimising LNG industry operations. Let me give you an example: GTT offers an innovative monitoring system that helps ship owners gain more effective control over the effects of LNG sloshing in the carrier tanks. The company has also developed a 24/7 emergency support service specifically for ship owners and their crews. And we are continuously expanding our range of training programs to support LNG industry growth. i

GTT Chairman and CEO: Philippe Berterottière

CFI.co | Capital Finance International

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> GTT:

High-Tech Containment & Storage Systems for LNG For over 50 years, GTT has been developing technological expertise in the liquefied gas industry, in particular liquefied natural gas (LNG), and building trusting relationships and lasting partnerships with all its players: shipyards, ship-owners, gas companies, terminal operators, and classification societies.

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n engineering company specialised in containment systems for the transport and storage of liquefied gas, GTT licenses access to its technologies to major shipyards around the world.

The group also provides engineering services, consultancy, training, support, maintenance assistance, and technical studies at all stages of the liquefied gas chain.

GTT is strongly focused on innovation. Thanks to the knowhow of its experienced team of engineers and its continuing efforts in research and development, the company offers its customers new solutions to meet their demands for operational efficiency and safety and to keep pace with changes in international maritime regulations. As part of its close support for its customers, GTT also continuously develops its range of high value added services.

The company is also expanding its offering into new and promising markets, providing custom technological and engineering solutions for small and mid-scale vessels, as well as new applications for the LNG market, such as the use of LNG as a propulsion fuel.

“The group also provides engineering services, consultancy, training, support, maintenance assistance, and technical studies at all stages of the liquefied gas chain.”

The SloShield system constantly monitors these vibrations of each tank’s structure and insulates the impacts. SloShield allows the crew to visualise in real time the sloshing activity indicators and their evolution in time through a user-friendly interface, directly located at the bridge.

TURNKEY & SAFE SERVICE One accelerometer per tank is fitted on the double hull in the passage way for easy access.

No instrumentation is performed inside the tank, preserving the cargo containment integrity. The acquisition system is located outside the ATEX area.

SloShield Sloshing is usually managed by crews based on poor indicators (banging noises) and habits/ beliefs with uneven results. Sloshing has also a direct impact on BOG and still is a challenging factor for some key operations such as partial filling and emergency departure.

SloShield got approval in principle from ABS. The hardware is adapted for use in the marine environment and installation complies with explosive atmospheres requirements. The installation is straightforward and can be executed in safe conditions at new-build, dry dock, and at sea. The system has already been successfully installed on board four LNGCs for three different owners in dry-dock and at sea. Cryometrics has teamed up with field experienced, flexible and reactive Cryovision to offer maximum flexibility for the installation. The maintenance service for hardware and software is included as well as workshops with crew and periodical data review

by Sloshing experts.

With SloShield, designed by GTT top-tier engineers and based on GTT’s long lasting experience in LNG and deep understanding of liquid motions criticality, sloshing can now be quantified at tank-level in real-time. In fact, sloshing impacts induce vibrations of the tank structure which feature a recognisable “signature”.

LNG ADVISOR Boil-Off Gas (BOG) is the second largest cost for an LNG charterer, representing one third of the total shipping costs. Monitoring and managing BOG is therefore a key issue for the LNG shipping industry. With its unrivalled experience in the LNG industry and unique knowledge of

CRYOMETRICS Established in 2015 as GTT 100% affiliate, Cryometrics provides high value added services aimed at optimising the operational performance of LNG carriers (LNGCs), vessels carrying other liquefied gases as well as LNG fuelled vessels.

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Ferry (c) GTT

CFI.co | Capital Finance International

LNG Cargo (c) Samsung Heavy Industries

LNG-specific issues, GTT and Cryometrics have developed LNG Advisor, the first BOG monitoring and management service specifically designed for LNGCs. A user-friendly interface will provide support to the crews directly at the bridge. Thanks to a dedicated online data portal, onshore teams will get the right reporting to understand, benchmark, and challenge shipping performance. A full minute-by-minute picture of LNGC performance and will see what you could not see before, such as transient phenomena. Your teams will rapidly detect any abnormal situation and react faster thanks to a near real-time reporting on a large number of KPIs. i

Summer 2016 Issue

> Russia’s Aviation Industry:

Ready for Take-Off

By Steve Dyson

T

here were some impressive claims amid the recent hype surrounding the MC-21, Russia’s new medium-range passenger jet.

The Siberian-made airliner is said to weigh 15% less, consume 15% less fuel, cost 20% less to operate, and could be 35% cheaper to buy than the Boeing 737 and Airbus 320, which currently dominate the market for short to medium-haul airliners.

But there were other factors that neither the Russian government nor Irkut – the MC-21’s manufacturer – dwelled on during a showy unveiling of the airliner in early June. Most significantly, the MC-21 isn’t flying passengers yet, as it is still undergoing tests and technical refinements. That is despite a reported 100 billion roubles spend on the project since its pre-design phase in 2009.

The long-awaited newcomer was supposed to start replacing Russia’s aging fleets of Tupolev Tu-154 and Tu-204/214 aircraft last year, but this will not happen until at least 2018. Some experts reckon certain Russian airlines cannot wait that long and might be forced to buy jets elsewhere.

One of the MC-21’s biggest problems is trade barriers – mainly western sanctions imposed over Moscow’s controversial role in the Ukraine – which have starved the local suppliers of critical parts.

The Russian-made plane still depends on US and European technology in areas such as avionics, landing gear, hydraulics, power systems, and engines.

It is no wonder that Dmitry Medvedev, Russia’s prime minister, was mobilised to explain the importance of competing with the world’s top aircraft makers: “This is a huge victory for our aviation industry, our scientists, designers, engineers, and workers. I’m sure this is going to be a good machine, reliable, and efficient. I am absolutely certain that the airliner will be the pride of Russian civil aviation.”

Such sentiments are understandable. The MC21 will be Russia’s first serious medium-range passenger aircraft developed in the 21st century, proof of the country’s commitment to revive industrial capabilities and become less reliant on western imports.

Irkut – a subsidiary of the state-controlled United CFI.co | Capital Finance International

Aircraft Corporation – will build two variants of the twin-engine airliner: the MC-21-300 with between 160 and 211 seats, and the MC-21-200 with between 130 and 165 seats, both flying routes of up to 4,000 miles.

Despite high costs, delays, and production challenges, Russia hopes to sell up to one thousand MC-21 airliners over the next twenty years, and already has received 175 orders. This includes 45 MC-21 troop transporters for Russia’s military, with a revamped version as a reconnaissance aircraft also in the works.

Vladimir Volkov, Irkut’s vice-president, told the media: “It is not made of metal, but of composite materials. That allows us to give the plane a special shape. As a result, it is much lighter and stronger which represents a great step in the development of our aviation industry.”

What Mr Volkov didn’t say is that the East Siberian factory where the MC-21 will be produced was previously making Sukhoi fighters and Yakovlev trainers. Observers say it is only currently able to assemble around 72 airliners a year – little more than the monthly outputs of 737s and A320s. i 73

> Gan Direct Insurance:

Sustained Growth At Gan Direct Insurance in Cyprus, the corporate focus is not just trained on providing protection against unforeseen events. The company cares deeply about doing the right thing: at every touch-point, it works hard to make a positive impact on everyone; all stakeholders – customers, partners, and the wider community.

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or over 22 years, focusing on customers has helped establish Gan Direct as one of the largest insurance companies in Cyprus. Protecting people and the things they value most is at the core of its business. Gan Direct advises its customers, honestly and openly, on all matters relating to insurance; offering comprehensive, value-formoney solutions for motor, property, and health coverage.

CORPORATE PHILOSOPHY Gan Direct employs a multifaceted business strategy that allows it to outperform the competition in terms of service and profitability.

This is achieved through structured organic growth, prudent underwriting, careful investment, disciplined pricing, efficient operations, and a superior technological infrastructure.

Gan Direct recognises that its business matters: from day one the main focus has been to deliver consistently excellent insurance cover at competitive prices. This combination of price and product is the hallmark of the company.

However, there is more to Gan Direct than that.

It is often said that an insurance company is only as good as its claims processes. Gan Direct understands the importance of a customerfocused claims service. Indeed, one of the company’s main strengths is handling claims efficiently and fairly. Customers count on Gan Direct to be there when required.

Essentially, Gan Direct accomplishes all the important things by hiring and retaining people who are motivated and caring. Going forward, Gan Direct understands that if it is to continuously prosper and grow, the company must nurture an ever-evolving work environment where people trust the competence of their colleagues and have the freedom to share ideas openly.

Gan Direct embraces a culture of innovation, welcoming challenges and questioning, as well as creative and conceptual thinking, which, continuously evolves but, retains all the key elements firmly in place. Management believes 74

“Gan Direct recognises that its business matters: from day one the main focus has been to deliver consistently excellent insurance cover at competitive prices. This combination of price and product is the hallmark of the company.” that it has created such a workplace, which, as it continues to evolve, retains all the key elements firmly in place.

SOCIAL RESPONSIBILITY As a business, Gan Direct is focused on insurance. However, the company also seeks to create a better future — in one way or another – and across a range of socially relevant fields.

It is important that in conducting its business, Gan Direct considers the possibilities, assesses the impacts, and makes the right decisions, thus promoting the understanding for a better world.

With this in mind, Gan Direct has identified key areas where it can make the biggest contributions to the overall objectives: Sustainability Since the company was established over 22 years ago, it has consciously sought opportunities to help preserve and protect the environment.

Gan Direct remains alert to new ways of making positive impacts in this area.

Sustainability is about conducting business in such a way that things go further. Reducing waste in all areas – energy, consumables, resources – makes sense. Recycling is a must.

Wherever possible, Gan Direct purchases reusable products, rather than disposable items.

It also goes without saying that it is better to repair something instead of simply replacing it.

Gan Direct is particularly pleased with the way its efforts to reduce paper usage have gone. With the growth of communication technologies, the CFI.co | Capital Finance International

company will continue its efforts to reduce paper usage and office consumables even more.

Ethical Conduct Ethics is one of the values Gan Direct holds dear.

Together with transparency, corporate ethics are a reflection of inner principles – the way a company values its customers, colleagues, and the wider society.

At Gan Direct, employees are expected to embody ethical behaviours that go beyond legal compliance, and to commit to them. The company monitors and assesses all professional standards, because they help it ensure that all insurance activities are completed in accordance with corporate guidelines put in place to protect both customers and business partners.

Community Support Throughout its 22-year history, Gan Direct has diligently worked to be a good corporate citizen.

It is something that it is proud of and constitutes a lasting commitment. Gan Direct understands the importance of giving back to communities in the broadest sense and promote local environmental, social and economic initiatives.

Community support is as much about the company’s people as it is about the company itself. Over the years, Gan Direct employees have supported a range of organisations and events, including those that help children, women and families in need, provide aid for education, assist the disadvantaged and sick, and provide guidance and education regarding social issues.

People in the Workplace Gan Direct truly believes that its people are the most precious resource – its greatest asset in providing the excellent service customers are accustomed to enjoy and expect. That’s why Gan Direct has always sought people who want to contribute to its success and to the betterment of the environment in which work is performed.

In today’s parlance, this means embracing diversity — the blending of different backgrounds, experiences, and perspectives within a team for the common good. Diversity

Summer 2016 Issue

affords fairness and protection to all, regardless of gender, race, religion, ethnicity, or sexual orientation. Gan Direct sees diversity as the perfect combination of traits that will help it overcome challenges and achieve business goals.

For Gan Direct, inclusion is illustrated in a collaborative workplace that values open participation from individuals of differing ideas, perspectives, and demographics — because management realises that these will positively impact business.

Diversity and inclusion are essential elements in Gan Direct’s efforts to develop and innovate; not the least because in a few years’ time, established perspectives will have been replaced by expectations of diversity and inclusion — but, as a matter of principle, not just because it has been written into law.

The leadership at Gan Direct understands the challenges ahead regarding workforce expectations, and strives to generate an inclusive culture that leverages everyone’s uniqueness and lifts employee engagement and empowerment to greater heights.

Growth and Innovation Constantly exploring new models for growth and innovation, one of Gan Direct’s key differentiators is that the company has always followed a different path from its competition. Gan Direct remains committed to accelerating growth through the implementation of new ideas, emerging technologies, and innovative business models.

Gan Direct understands that there is no offthe-shelf solution, and that it has to steer its own path through the opportunities that arise – developing new business and operating strategies, and perhaps new partnerships – in order that the company may continue to out-compete and outinnovate.

Gan Direct has always recognised the need to be customer-centric rather than productcentric. Very early on management realised that it wants customers to come to us to help them manage the risks they have to face rather than come to us for a specific product. That’s why Gan Direct diversified its portfolio, developed more customer services, and invested heavily in digital technology.

Realistically, Gan Direct sees further expansion of its product offerings, the addition of more value-adding services, and enhanced digital technology as three of the greatest opportunities for fostering corporate growth over the next few years. i CFI.co | Capital Finance International

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> The Access Bank UK:

Continued Growth and Success

Find out how we can meet your Trade Finance needs: +44 (0)333 222 4516

www.theaccess info@theaccessbankukltd.co.uk The Access Bank UK Limited is a wholly-owned subsidiary of Access Bank Plc, a Nigerian Stock Exchange listed company. The bank was established to provide customers in the UK and in Africa with a broad range of business and personal banking services. These include trade finance, treasury services, business, and personal banking together with private banking and wealth management. The Access Bank UK is driven by its passion for delivering excellent service, a motivation it is proud to have inherited from the parent company, Access Bank Plc – one of the leading banks in Nigeria.

The Access Bank UK Limited is Registered in England and Wales. Registration Number: 6365062. Registered Office: 4 Royal Court, Gadbrook Way, Gadbro The Access Bank UK Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regula PRA & FCA Registration Number 478415.

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he bank’s objective is to grow the international business of the Access Bank Group through excellence in customer service and innovative solutions in trade finance, commercial banking, and asset management.

The Access Bank UK has a strong base in the UK and abroad which allows it to stay in touch with customers wherever they are in the world.

The head office is located in the heart of the City of London and overlooks the Bank of England and the operations division is near Manchester.

The bank also has an office in Lagos, Nigeria, in the pleasant surroundings of the Osborne Estate in the Ikoyi area and in Dubai’s prestigious International Financial Centre, which enables The Access Bank UK to assist with trade and investment requirements between UAE and SubSaharan Africa.

The bank is licensed and regulated by the UK’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) and is therefore in a strong position to support opportunities in OECD markets for Access Bank Group customers.

The role as Access Bank Group’s OECD operational hub supports the flow of investment into markets in Nigeria, Sub-Saharan and West Africa. The bank is also authorised by the Dubai Financial Services Authority (DFSA) and the Dubai International Financial Centre (DIFC) to run the Dubai operation.

The Access Bank UK takes the time to build long-term relationships and work closely with customers to understand their goals in order to create a strategy designed to meet their needs. The bank provides constant support and development opportunities for employees, which reflect in their dedication and professionalism.

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“The Access Bank UK takes the time to build long-term relationships and work closely with customers to understand their goals in order to create a strategy designed to meet their needs.”

The bank is led by a team of accomplished individuals determined to deliver superior financial solutions for businesses and individuals.

Staff are highly experienced and many have spent time working in the Sub-Saharan, West African, and international marketplaces.

Like its parent, The Access Bank UK is committed to developing a sustainable business model for the environment in which it operates.

This is reflected in a moderate appetite for risk, a passion for customer service, and a commitment to building long-term relationships by working in partnership with customers.

The bank plays a key role in the group’s vision to be the world’s most respected African bank.

As such, The Access Bank UK refuses to chase unsustainable yields as a route to growth. Instead, the bank focuses on building its business through the strength of customer relationships.

These strong foundations have provided the skills, ability, and experience to understand the CFI.co | Capital Finance International

marketplace and tailor services to meet clients’ individual needs. The bank is proud to have had this recognised externally by a number of prestigious awards dating back to 2009. Most recently as an award winner in the category for Best Trade Bank in Africa from Trade & Forfaiting Review in 2015. The bank is now delighted to have been awarded Best Africa Trade Finance Bank 2016 by CFI.co.

The bank has recently published its Report and Financial Statements for the year ended December 31, 2015. This shows that 2015 was not only the bank’s most profitable year, it was also the most successful in terms of growth and business development. The bank’s operating income rose by 31% year-on-year to £19.7m and the pre-tax profit rose by 71% to £8.6m.

The Trade Finance and Commercial Banking businesses put in another strong performance and generated respectively £13.63m and £4.19m revenue for the year. The Asset Management and Private Banking business grew revenues to £1.16m, which represents a year-onyear increase of 167% and resulted in a profit of £235k in 2015. The bank also established an office in Dubai to better serve its growing base of customers operating via the UAE and MENA region.

THE CEO EXPLAINS The Access Bank UK’s Chief Executive Officer and Managing Director Jamie Simmonds commented: “In 2015, our diversified revenue streams and growing customer base delivered better than ever income, profit, and return on equity. We continued investing in our operational performance and we enhanced our brand across the international marketplace. From every perspective, our success reflects that now well-

Summer 2016 Issue

proven efficacy of our service orientated, customer focused, medium risk appetite business model.”

“Our Trade Finance business put in another strong performance in 2015 and generated £13.63m revenue for the year. What is particularly encouraging is that the different elements of the business all contributed to our increasingly diverse base of revenue streams. During the year we built on our role as a confirming bank for Access Bank Plc and increased our correspondent activities with other Access Bank Group businesses and with third party banks.”

“Similarly, we broadened our customer base in the petroleum products sector providing support for oil export activities from Nigeria and Sub-Saharan Africa and also for import activities for finished petroleum products into the region.”

“From the earliest days of The Access Bank UK we were always very clear as to what we wanted to achieve and how we would go about delivering it. Our focus on building strong relationships with customers, on service and on moderate risk remains the essence of our culture. Such a business model has served us well through one of the most turbulent periods in global economic history and we are confident that it will remain a solid foundation for us in the years ahead.”

“Our markets in Nigeria and across SubSaharan and West Africa have been impacted significantly by the continued downward pressure on oil and commodity prices and the slowing of trade finance volumes across many of the region’s other import and export sectors.

However, although those market conditions will undoubtedly affect our business, we have established strong customer relationships and a diversified base of income streams that will enable us to continue developing during 2016 and the years ahead.”

ABOUT THE CEO Jamie Simmonds was appointed the founding chief executive officer/managing director of The Access Bank UK Limited in January 2008.

He is an alumnus of the Harvard Business School Executive Management Programme. Mr Simmonds is also an associate of the Chartered Institute of Bankers, a certified financial adviser, and a member of the Association of Foreign Bankers.

He has enjoyed a career spanning 39 years in financial services, holding a series of directorships for National Westminster, Coutts, Royal Bank of Scotland, Gerrards, and Close Brothers. He has a proven track record in the start-up and turnaround of financial service businesses, delivering sustainable benefits for all stakeholders. He has extensive knowledge of both corporate, retail, and private banking services. i

CEO: Jamie Simmonds

CFI.co | Capital Finance International

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> Book Review:

The Gates of Europe: A History of Ukraine

Languishing on the Crossroads

By Tony Lennox

T

he Asian steppes, which run from the far edge of Siberia in the east to the fringe of Europe in the west, has felt the tread of many warlike boots and hoofs over the centuries. The plains form a broad highway along which, down the ages, have swarmed hordes of invaders from the east, eager to plunder the riches of Europe.

The Slavs who populated the lands which now bear the name Ukraine, have lived under many harsh yokes. Freedom and self-determination flowered off and on briefly, only to be crushed repeatedly by the powerful – not just from the east, but from every point of the compass.

Goths, Huns, Vikings, Mongols, Poles, Russians, Turks – they’ve all, from time to time, been drawn to Ukraine’s wide open grasslands, to subject the docile Slavs and exploit their fertile, grainbearing pastures.

Serhii Plokhy, the son of Ukrainian parents, is a respected Harvard academic who, these days, examines the tragic events in his motherland from the comfort of a home in Arlington, Massachusetts. His account of the fall of the Soviet Union in his acclaimed book The Last Empire: The Final Days of the Soviet Union1, takes issue with the generally held belief that the United States won the Cold War. Mr Plokhy claims it was Ukraine that brought down communism.

His latest work, The Gates of Europe: A History of Ukraine2, is equally thought-provoking. It plots the history of a people who have suffered miserably for being at the crossroads of too many conflicts, and tries to use history as a prism through which to examine the present, and suggest routes to the future.

Mr Plokhy’s book explains the roots of the language and culture of Ukraine, and its relationship with its bigger neighbour, Russia.

It examines a people’s ability to survive brutal times while maintaining a belief in nationhood, against the odds. He brings us from a chaotic past to a depressingly similar present.

FOUNDATION STONE Ukraine’s capital city, Kiev, was arguably the foundation upon which Russia was built.

“The Slavs who populated the lands which now bear the name Ukraine, have lived under many harsh yokes.”

Varangians, the Viking warriors who headed east instead of west, sailed up the Dnieper and established a fortress on the site in the 10th century. The subsequent history of Russia and Ukraine is as tangled and knotty as a piece of Norse serpentine art. Ukrainians have never felt culturally inferior to their Russian brothers. It is equally true that the Russians have historically celebrated a sometimes one-sided cultural bond with Ukraine.

The crisis in Ukraine began in November 2013 when citizens took to the streets in protest over President Yanukovych’s refusal to sign what was seen in Moscow as a provocative Association Agreement with the European Union. President Yanukovych preferred instead to strengthen ties with Russia, and though he banned public protests, clashes with police in the country’s cities continued.

When snipers opened fire on crowds in Kiev’s snow-covered Independence Square, the Maidan, on February 20, scores of protesters were killed, but the demonstrators held their ground. The president fled and his palace was overrun.

Russia’s response was swift, annexing the Crimea to “defend ethic Russians.” Meanwhile, proRussian groups in eastern Ukraine took control of municipal buildings in cities across the region. Over the summer of 2014, skirmishes continued as the new Ukrainian president, Petro Poroshenko, vowed to crush the rebel separatists.

Then, in July, came the shooting down of Malaysian Airlines flight MH17 over eastern Ukraine, killing 298 civilians. Russia and Ukraine promptly blamed each other, and hostilities were stepped up. NATO spy satellites picked up the outline of Russian tanks and troops massing on

Ukraine’s northern border. The watching world feared the worst, but a ceasefire was stitched together at the last minute, though it was almost immediately violated.

SHUTTLE DIPLOMACY With trigger fingers itching on all sides, Russia’s economy began to suffer. Western sanctions, imposed after the annexation of Crimea, were starting to bite, oil prices were collapsing on the world markets, and the rouble tumbled. At the height of the crisis, in February 2015 when many observers warned that the conflict might develop into a new European war, German Chancellor Angela Merkel and French President Francois Hollande flew to Kiev and then on to Moscow on a high-profile peace mission.

While they talked to Ukrainian president Petro Poroshenko, and then met with Vladimir Putin, the United States was making bellicose noises.

President Obama dropped heavy hints that he could supply arms to the beleaguered Ukrainians, while former NATO General Secretary Anders Rasmussen suggested Europe should move to a state of preparedness. “This is not about Ukraine,” said Rasmussen. “Putin wants to restore Russia to its former position as a great power.” He warned that President Putin might stir up trouble in one of the Baltic states to test NATO solidarity.

Commentators, watching the frantic shuttle diplomacy of Merkel and Hollande, hinted that Europe may have bitten off more than it could chew with Ukraine. The idea of extending the EU’s influence – and eventually, maybe, its boundaries – by courting the fledgling Ukrainian democracy seemed like a good one at the time.

Now, with Putin baring his teeth, the best Europe could do was to support sanctions against Moscow.

Rasmussen, as he warned of Russian aggression, also concluded that European nations’ military defences were in a lamentable state two decades after the end of the Cold War. While Russia had increased defence spending by 80% in that time, most European NATO members had allowed military investment to shrink to pitiful levels.

Belgium, he singled out as an example, spent just four per cent of its defence budget on actual

“Is there a hope that the country can survive and blossom into an affluent, stable nation, while sitting precariously on that fence between East and West?”

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CFI.co | Capital Finance International

Summer 2016 Issue

Political and economic corruption must be tackled first, say observers. Stories of lavish political lifestyles and undeclared villas on the French Riviera are rife in Ukraine. Ridding the country of these embedded practices was one of the key demands of the 2013 Maidan protesters.

While there are signs that anti-corruption initiatives are taking shape in Ukraine, it is still a major issue for a population that has suffered economically and socially through the devaluation of the currency and the cost of the proxy war with Russia.

TABOO REMOVED Yulia Andrusiv, an academy fellow at Chatham House, which provides a forum for expert opinion on Ukraine, sees confronting corruption as essential for the political future of the country.

She makes the point that, as in much of Eastern Europe, the political pendulum tends to swing between liberal and illiberal spectrums. If the current government fails to tackle corruption, she says, illiberal forces may regain ground.

Citizens who risked their lives to topple the Yanukovych regime and defended against Russian aggression are not likely to look the other way if the politicians fail to change. The violence in Ukraine has removed a social taboo, says Ms Andrusiv. Unless the political elites show a renewed commitment to the anti-corruption agenda, the outcome could be destructive.

To date, the Ukraine crisis has claimed nearly 9,000 lives. The Gates of Europe is a useful guide to understanding the country’s current distress through an examination of its history.

As its author says, the conflict with Russia is a tragic case of history repeating itself. But there are glimmers of hope in the gloom.

“Only the dead or the stupid do not change their views,” said Leonid Kravchuk, the first president of independent Ukraine who governed from 1991 to 1994. Like many former Soviets, Mr Kravchuk was an expert at avoiding conflict and well-practiced, as he puts it, in “stepping between the raindrops.” Some of that cunning and caution may now be needed more than ever as all parties seek a lasting solution to the Ukraine question.

hardware – the rest went mainly in pensions for its old soldiers.

A LORD WEIGHS IN David Owen, now Lord Owen, a former British Foreign Secretary, lays the blame for the outbreak of hostilities in Ukraine squarely at the door of the European Union and its “foolish” attempts to promote the Association Agreement with Kiev. Lord Owen also believes there may be a pragmatic response available to the West over the annexation of Crimea. He points out that Nikita Khrushchev, when he assumed power in the Soviet Union in 1953, surprised everyone,

including the Crimeans themselves, when he gave the peninsula as “a gift” to Ukraine. Russia has used the Crimean naval ports, the country’s only southern access to the sea, unhindered for two centuries. Lord Owen proposes a lease-back solution, similar to the US base in Guantanamo Bay, Cuba. NATO, he insists, must not try to expand and encircle Russia.

But, as with all such questions, emotion is often the most difficult ingredient to control.

In May this year, an ethnic Tatar called Susana Jamaladinova sang the Ukrainian entry which won the Eurovision Song Contest. The song is called 1944 and recalls the forced removal of Tatar peoples from the Crimea by Stalin in World War Two, and is clearly a rebuke to President Putin for his annexation of the peninsula. i Footnotes The Last Empire: The Final Days of the Soviet Union by Serhii Plokhy – Basic Books (2014) – ISBN 978-0-4650-5696-5.

2 The Gates of Europe: A History of Ukraine – by Serhii Plokhy – Penguin Books (2015) – ISBN 978-0-2411-8808-8.

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Can Ukraine ever find its true, independent identity? Is there a hope that the country can survive and blossom into an affluent, stable nation, while sitting precariously on that fence between East and West?

CFI.co | Capital Finance International

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> Luxury Living:

London’s Savile Row The Secret to Success

By Charlie King

A social media personality, British television presenter Charlie King has a direct line to over 420,000 people who signed on to his Twitter feed. Mr King has worked at ITV News and London Live TV. He also made numerous appearances on ITV Daytime, ITV2, and ITVBE promoting a healthy lifestyle. Mr King is an up and coming fitness model and graced the cover of fitness and health periodicals. He debuted on television as a participant in the British hit television reality show TOWIE – The Only Way Is Essex. CFI.co asked Mr King to visit Saville Row and find out how the world’s rich and powerful – and those wanting to attain that status – get dressed.

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s a red carpet host and presenter I have had the privilege to attend many noteworthy events over the years. As such, I met a great many impeccably well-dressed people. This made me wonder: how and where does one acquire this absolutely spot-on look. In the pursuit of the gentleman’s style, there is no denying that the classic dinner suit wins every time. It is timeless, classic, and has the remarkable ability to bring out another dimension to a man’s persona.

I have always wanted to discover what it is really like – and, even more importantly, how it feels – to wear something especially selected and tailored to fit one’s physique. Invited to assume the official role of red carpet host for this year’s LGBT Awards in London’s Grand Connaught Rooms, I knew that the moment had arrived to find answers to my questions: I needed to embark on a pursuit of the suit.

Hosted by Mel B of Spice Girl and X-Factor fame, actor and singer Duncan James, and yours truly, the LGBT Awards event was expected to generate considerable interest of the London press corps; its members unfailingly attentive to even the tiniest of wardrobe malfunctions, mismatches, or faux pas. We just had to look the part.

The LGBT Awards celebrate individuals, organisations, and charities who are proactively working towards inclusion and acceptance when it comes to diversity and equality. With headline sponsors RBS and the awards voted for by the public, there has been surge of interest in the event. Each year, the LGBT Awards Night grows in both scope and reach as it becomes better known. With people flying in from the US, Australia, and elsewhere just to see and be seen, the LGBT Awards have become one of the 80

“Chester Barrie’s ethos is quality over quantity. However, the company also wants Savile Row to be accessible and offer an all-in unique experience.” biggest nights on London’s already well-stocked awards calendar.

This year’s event saw the largest attendance yet. The press build-up to the evening was also significantly bigger than in previous years. TV appearances, radio interviews, and social media campaigns were carefully choreographed and scheduled to highlight the importance of the award – concrete proof progress is being made when it comes to equality and inclusion.

This year’s ceremony was streamed live on social media with appearances from Queen guitarist Brian May, actor Sir Ian Mckellen, comedian Alan Carr, amongst many other stars and personalities.

So, for me to feel confident and deliver the best content to camera, I just knew that looks and the resulting presence had to be, well, picture perfect. I called a stylist friend for advice on what to wear. His answer was simplicity itself: “Charlie you want classic, sophisticated, mature and classy. You want Savile Row.” CFI.co | Capital Finance International

That was an eye opener of sorts. Not for a single moment had I thought the answer was to be on, of all places, Savile Row. However, I soon found myself, and my persona, entrusted to the professionals of Chester Barrie – founded in 1935 by English tailor Simon Akerman and located at No 19 Savile Row. Chester Barrie was the first tailoring house to bring ready-to-wear clothing to The Row – at the time, an act not entirely devoid of subversive dimensions. Number 19 acts as Chester Barrie’s flagship establishment for the brand, showing the clothes and accessories at their level best and serving an international clientele.

Chester Barrie flourished as an independent business for over forty years, establishing a solid reputation echoed far beyond British shores. In 1978, the company became part of the Austin Reed Group which continued to develop the brand and took it into licensing. In 2000, it was sold on again and passed through a number of hands before the fashion and retail specialists of Prominent Europe took over the business in 2007 with a view to reinvigorating the Chester Barrie brand.

Savile Row, legendary, fashionable and very chique, maintains an air of understated confidence. An immaculate street, Savile Row is lined with shops featuring marble marquees, immaculate display windows, and a whiff of brass polish, rendering an unperturbed look.

This is not a place that subjects itself to the vagaries of passing fads or momentary fashion statements.

Savile Row shops offer a wide range of attire delivered with a personal service and touch like no other. It is where the discerning gentleman heads to when serious about wishing to look

Summer 2016 Issue

and feel smart. All revolves around the fabric and how it makes you feel. Suffice to say that I felt incredible in my Savile Row suit.

of the elite. A good suit makes a powerful statement: it has a firm place in the male wardrobe and speaks for itself.

On meeting senior creative director and buyer Christopher Modoo – architect of what some have called the Chester Barrie Revolution – my anxieties instantly evaporated: I was in good hands. Taken downstairs to where fittings take place, I was asked what look I aspired to.

On finding out a little more on Chester Barrie, I asked Mr Modoo how the Savile Row suit compares to the designer labels available on any high street. He didn’t skip a beat and promptly replied that a Savile Row suit is in a league of its own: it is about the individual wearing the suit and how it fits the body properly.

That was a rather simple question to answer: as a red carpet host, it is critically important to look good but to do so while not stealing the show. A stylish understatement was called for.

Of course, it is more about who I’m interviewing than about me. All the same, I wanted to feel good, handsome, and – quite possibly – part

Any man may visit a department store and purchase an Italian designer suit. However, that won’t even come close to a suit procured on Savile Row where the cutting is still done by hand, although to average measurements rather than to a pattern designed for the individual customer.

CFI.co | Capital Finance International

Chester Barrie’s ethos is quality over quantity.

However, the company also wants Savile Row to be accessible and offer an all-in unique experience. The expertise of finely honed skills and unsurpassed excellence in customer service are the two main pillars that sustain the street. Savile Row’s enduring success entails less tangible elements as well: tailors know that their trade is about making the person wearing the suit feel comfortable and self-assured: “We want you to feel alive in the suit,” says Mr Modoo.

Saville Row offers a living testimony to London’s unique position at the very apex of the world’s metropolis. Simply put, there no other city quite like it. Renowned and celebrated for its many traditions, rich history, and air of selfconfidence, London is the preferred destination 81

of the rich and famous and all those aspiring to reach that rarefied status. Hence, it is no wonder Savile Row became a global institution with clients flying into the city from far and wide to visit its shops. In an analogy of the parable involving Mohammed and a mountain, some gentlemen pressed for time, have tailors flown to far-off places to take measurements in-situ.

Even though elite and seen as producing attire destined for the über-wealthy, tailors such as Chester Barrie also sport a range priced more reasonably. For example, the establishment’s high street suit collection Chester...by Chester Barrie starts at a mere £350. A more exclusive range is priced from £1,500. Regardless of price, Chester Barrie’s house style is standard in all the firm’s ranges: a suit that shapes the body – structured and three-dimensional. A Savile Row suit flatters the gentleman and his body with broad shoulders and narrower at the hips.

Chester Barrie currently have multiple concessions in selected House of Fraser department stores where the company offers its ready-to-wear tailoring in addition to its madeto-measure service. As such Chester Barrie has taken its brand outside of London with facilities in Belfast, Cheltenham, Glasgow, Guildford, Manchester, and Norwich besides a presence at 82

an expanding number of distinguished retailers elsewhere.

possibly be. As such, I couldn’t wait for the LGBT Awards night to come.

Savile Row has built its formidable reputation by dressing certain types of quintessentially middle-aged gentlemen. Over the years, patrons included Sir Winston Churchill, Cary Grant, and Frank Sinatra who were attracted by the brand’s classic tailoring, exquisite fabrics, and fine attention to detail. Over the last few years, attention has shifted to the younger gentleman.

Mr Modoo is convinced that the classic suit isn’t going anywhere: even though most men do not wear a suit every day, that doesn’t imply they lack the knowledge of how to wear one should the occasion call for one.

When it comes to spending on big ticket items in economically uncertain times, purveyors of highend luxuries feel the pinch more than others do as even the rich roll back extravagant spending.

Tailoring is a trade which may perhaps not be booming; it definitely holds its own when it comes to testing times.

I have to be honest: until recently, I didn’t possess that knowledge. I didn’t think Savile Row was accessible to me. It is quite amazing how being in trusted hands makes one more comfortable to experiment with looks. I found myself eager to experiment with different fabrics, colours, patterns, and – inevitably – bow ties. Being measured accurately for the first time also made me realise that previously the suit wore me as opposed to me wearing the suit. After my fitting, and gaining a wealth of new knowledge, I felt surprisingly and wholly confident that I was all set to look the best I CFI.co | Capital Finance International

The plain truth is there will always be a demand for quality. Likewise, there will always be someone willing to invest in any product or service offering an exceptional feel-good factor – especially if it helps them reach for personal heights not otherwise attained.

Where Savile Row stands secure and proud is that the levels of service and experience on the street are peerless. In fact, Savile Row enjoys such a name, that it has become a tourist draw: even those not in the market for a suit, visit the street just to gawk at the display windows of the famous and celebrated tailors. An institute of Britishness as few others, Savile Row has stood the test of many unsettling times to show and prove that the power of the suit resides not just in the person wearing it, but in the indefatigable Row that stands behind it – unwavering and dedicated to perfection. i

Summer 2016 Issue

Award2016

Asset

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His core set of values - total knowledge and absolute expertise, best products and maximum reliability - accompany him in everyday life. With this, he is not just a perfect ambassador but also a genuine partner of International Capital Management AG, the independent asset management company from the Principality of Liechtenstein. ICM is licensed and regulated by the Liechtenstein Financial Market Authority (FMA) and is a member of the Liechtenstein Association of Independent Asset Managers. Being an owner-managed public limited company, ICM is not accountable to any third-party shareholders and is therefore not subject to any sales pressures in the selection of its investment products. Investment approaches are always subjected to precise risk analysis and are then selected according to aspects of purely sustainable development only. The CFI.co jury committee recognises that the versatile portfolio management approach implemented by International Capital Management AG – aimed at detecting long-term trends and revenues from monetary fluctuations – indeed represents a recipe for sustainable success. It therefore awards the Central European Prize – the CFI.co Award - to ICM AG as having the best interdisciplinary investment process in 2016. www.i-c-m.li

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CFI.co | Capital Finance International

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> Simon Smith, FxPro:

The Road to Brexit in Forex

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he UK’s vote to leave the European Union will define and shape the outlook for the economy, politics, and the UK’s relationship with the rest of the world in coming years. The impact on politics has been monumental with the most sweeping changes of the political landscape ever seen in such a short period of time. The impact on the economy will be less dramatic, but more sustained and will no doubt change over time. In terms of the UK’s relationship with the rest of the world, that could take several years to fully reveal itself. But how will this affect currency markets in general – which are, after all, the most visible form of a country’s financial standing on the world stage – and the forex industry in particular.

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To answer that question, we have to take a step back. The more recent comparison for us was the removal of the cap on the Swiss franc back in January 2015. To borrow from the former US Secretary of Defence, Donald Rumsfeld, this was an “unknown unknown”. OK, perhaps not perfectly, it was always a possibility that the Swiss National Bank would stand aside and let the franc appreciate, but the impact was far-reaching. We saw a move in a major currency not seen in the history of floating exchange rates, which took out some brokers; some immediately, others over the months that followed.

As a result of this, clients became choosier as to who they dealt with. More would come through the CFI.co | Capital Finance International

door to kick the tyres and meet the people in what is predominantly an online industry. Regulators in the UK took a particular focus on the safety of client assets. Like the airbag in a car, it’s not truly tested until the worse-case scenario happens and that provides lessons for the regulator to act upon. Banks, who were already pulling back from the prime brokerage model (extending credit and settling trades for brokers and hedge funds) accelerated this move, making it harder for some to pass on market risk.

The Brexit vote was very different, being a “known unknown”. We had ample warning and the result was binary, either in our out, not like a general election. As such, we could plan for both scenarios

Summer 2016 Issue

chose to keep rates steady, but gave a strong indication that policy would be eased in August.

They probably wanted more time to assess the economic impact. The near-term slowdown is almost pretty much assured. Uncertainty affects business and household decisions, especially on larger purchases or investments, and there have been signs, both anecdotal and in surveys, that this has already been happening. On the face of it, this increases the risk that the economy sees a near-term slowdown, but we should escape an all-out recession.

If we look at how this is going to affect exchange rates and the forex industry, then we have to split it into the short and long-term consequences.

Short-term, little will change. We will likely see continued volatility on sterling over the coming months, partly from the changing political landscape, also from the likely softening of the data, and as the implementation of Brexit leads to increased tensions between the UK and the EU. The EU wants a fairly clinical and clean exit. The worst case for them is that the UK managed to gain various concession during negotiations that leaves other member seeking some of the same, or in extremis taking the same path as the UK. This could make for a more volatile period for the currency market, one during which more trading opportunities are created, but also more uncertainty is created for businesses doing transactions overseas.

Looking at the bigger picture, in terms of currencies, sterling’s performance will be determined by the extent to which the UK manages to flourish outside the EU. It remains a fact that no-one knows if this will be the case, even the most hardened Brexiteer cannot know, because forecasting even a single year ahead is a treacherous task. Forecasting several years ahead, in light of the changes that will likely occur, is nigh on impossible.

“The impact on the economy will be less dramatic, but more sustained and will no doubt change over time. In terms of the UK’s relationship with the rest of the world, that could take several years to fully reveal itself.”

and we gave clients ample warning of the volatility that was set to emerge on both outcomes. We also reduced leverage on many instruments (requiring clients to put up a greater margin payment for a given position size), largely to offer more protection to clients from the expected volatility.

The night itself went smoothly, despite the huge move seen on sterling. The internal planning and communication to clients worked, I survived on caffeine and adrenaline through the night and then cycled 30km home at the end of Friday.

As I write this, three weeks later, with a new prime minister in place, the politics should at least start to calm down, making way for a clearer economic picture to emerge. The Bank of England CFI.co | Capital Finance International

For our industry, the focus will fall onto regulation.

In particular, whether the UK will be able to remain under the MiFID umbrella that all EU countries are, together with a handful of non-EU ones (such as Norway). For us, with regulated entities in the UK and Cyprus, it will be how much the rule-book is re-written. For those using the UK as a stepping stone to passporting clients into the rest of the EU, that’s going to be pivotal on whether they choose to stay in the UK or relocate to elsewhere in the EU. But it looks unlikely that the UK will want to shoot itself in the foot on this, so I’m sure they will push hard to retain a regulatory environment under the MiFID umbrella which it currently operates. Like it or not, London remains a leading financial centre and no government is going to want to jeopardise that. By then, if other countries follow the UK, there could be many more currencies to trade.

That’s something to look forward to. i

Simon Smith is the director and head of research of FxPro (UK).

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> Obituary:

Noblesse Oblige - Last of True Monarchs

By Darren Parkin

I

n his early years as a king, back when he wore a younger man’s clothes, Brajraj Khyatriya Birabara Champati Singh Mohapatra, was a picture of youthful and outrageously wealthy hedonism.

He owned almost sixty luxury motorcars, enjoyed hunting wild game and, over weekends, took his friends to the city where they would spend 48 hours drinking the finest whisky, smoking hundreds of cigarettes, and entertaining as many young ladies as their drinking could accommodate.

“I would often visit Calcutta with my friend, the former king of Puri, and stay at the Majestic and Great Eastern hotels there,” he recalled shortly after his 92nd birthday in 2013. “I would drink 86

to my heart’s content and have a jolly good time.

I smoked 999 and State Express 555 brand of cigarettes. If a new car model came to the market, I just had to buy it. I owned cars and jeeps, including a Roadmaster, Chevrolet, and a Packard. We had thirty servants.”

He was an exalted young king of the British Raj, all the privileges a mortal life could possibly bestow, and he unashamedly enjoyed them until it all slowly vanished.

When he took his last breaths a few months ago, he did so on a fragile-looking bamboo bed, surrounded by nothing more lavish than a reusable plastic bottle in which he kept his water for the day. It had been many years since he had tasted CFI.co | Capital Finance International

whisky. Despite years of abusing his lungs and his liver, the wonderfully-named Brajraj Khyatriya Birabara Champati Singh Mohapatra had lived to the fine old age of 95.

Given his past lifestyle – one of an apparently aloof royal enjoying all the trappings he believed were his birth right – the casual observer would be forgiven for thinking that his subjects had good cause to dislike him intently. Quite the opposite, in fact. As with many royals of the Raj, they treated him like a god. But not because they felt any reverence by spiritual obligation, but because they genuinely loved him.

The kingdom of Tigiria is tiny – a 45 square mile verdant and lush paradise in the Cuttack District

Summer 2016 Issue

Brajraj Khyatriya Birabara Champati Singh Mohapatra of Tigiria

of Brajraj and his ancestors whose welcoming and gentle reign attracted many settlers. No accurate census has ever been attempted, but it is believed Tigiria’s population is approaching the quarter of a million mark.

Brajraj’s own reign had barely a moment to flourish.

He ascended to the throne in 1943, but then, after what were remembered as glorious years for the tiny kingdom, he was effectively dethroned as he joined the other 25 heads of state in Odisha by signing the accession for India’s independence.

As the states moved towards national autonomy, the time of their rulers was coming to an end.

Brajraj was a mere 22 years old when he took the throne, and only 26 when independence was gained. He had gone from a privileged life, born with the proverbial silver spoon in his mouth, to suddenly having no official claim to the throne that had been in his ancestral line for centuries.

The experience changed him greatly. As with many former rulers in India, his focus was moved from politics to kinship as a veil of melancholic nostalgia descended over the former Raj states. Despite the nation’s independence and newfound freedom to home rule without the British influence, the people of Tigiria still looked to Brajraj as their leader. And lead he did.

Konark Sun Temple: Chariot Wheel

of the eastern state of Odisha. But Brajraj, being the colourful figure he was, put them proudly on the map. The people were, and indeed still are, deeply proud of him.

Much of this affection stemmed from good governance – something Brajraj himself only had a fleeting dalliance with. Before him, a long line of successful rulers had been taking care of this compact corner of Cuttack since 1246 when his forefathers established their feudal regions. That dynasty came to an end when Brajraj died in his shabby little mud hut on November 30, 2015.

The population of Tigiria is relatively dense, considering the heavy forestation within its borders, and this is directly attributed to the rule

Discarding his old lifestyle, although he remained fond of decent whisky, he set about dedicating his life to helping his former subjects. He sold all of his properties for paltry sums to the government, but with the caveat that each one be put to good use as either a school, a hospital or a shelter for the poor.

A well-educated man, he had a talent for writing, and so began working for various Indian magazines. He was also an alumnus of Raipur’s Rajkumar College where he became a lifetime member of its governing body. This role gave him an honorarium of 50,000 rupees a year. Yet, other than a few petty travelling expenses, he didn’t keep a penny for himself. Instead, he would ride his rickshaw around Tigiria and disperse the money to the needy and vulnerable.

The rickshaw was some contrast to the modes of transport he had been accustomed to, as was CFI.co | Capital Finance International

his new home. Once residing in a vast palace, he had taken to living rough on a small hill where he spent his mornings building a tiny shack, and his afternoons visiting the people. Wherever he went, he would be offered food and supplies, but he rarely took more than a handful of rice.

His infectious warmth and generosity were legendary throughout Tigiria, and very much in keeping with the legacy of his forebears. He was also the tiny state’s nearest thing to any form of punishment. Other than a symbolic building with four pillars, a straw roof and no walls, Tigiria had no known jail. Instead, the most serious form of punishment was rejection by the king. It may come as little surprise to learn that, merely through the fear of not being able to engage with their beloved former king, Tigiria had a crime rate of almost zero.

From the 1960s, right up until last year, he would welcome people up to his modest hut on the hillside, sit them in his best white plastic chairs while he took his seat on the floor or bamboo bed, and grant them hours of his time. His wise counsel was sought far and wide from dignitaries beyond the borders of Odisha, but he would often tell them he was too busy in order to spend more time with his own people.

It was that same mud hut where he had offered guidance and direction to countless folk in which Brajraj Mohapatra, the last king from the days of British India, died peacefully in his sleep.

He had spoken of his imminent passing only days before the end, and, upon his deathbed, made his dying wishes. Surrounded by dozens of his adoring subjects, he asked that the tiny sum of 10 rupees be collected from those who wished to donate in order to pay for a cremation ceremony. Money poured in. Much, much more than was needed for the simple ritual.

Brajraj – or Aaja (meaning grandpa), as he preferred the people to call him – was given a grand funeral pyre on his hillside. Hundreds gathered to pay their respects to a flamboyant and kind-hearted throwback to a bygone age. But it is unlikely that he’ll be forgotten. Particularly as there are now plans to erect a monument to Aaja, or, as he was more formally known, Brajraj Khyatriya Birabara Champati Singh Mohapatra of Tigiria. i 87

ANNOUNCING

AWARDS 2016 SUMMER HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative.

All the winners announced below were nominated by CFI.co audiences and then shortlisted for further consideration by the

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panel. Our research team gathered additional information to help reach a final decision.

In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition.

As world economies converge we are coming across many inspirational individuals

CFI.co | Capital Finance International

and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisation’s performance please visit our award pages at www.cfi.co and nominate.

Summer 2016 Issue

> VIRGIN MANAGEMENT: MOST INNOVATIVE GLOBAL BRAND GROUP UNITED KINGDOM 2016

Virgin Management, innovators par excellence, sits at the heart of the Virgin Group and manages the brand and licensing portfolio.

The company manages numerous business relationships through licensing and investments and is an active supporter of the not-for-profit work undertaken by the Virgin Unite foundation.

Due to the diverse nature of the Bransons’ interests and the quest for detecting, setting trends, rocking boats and making a positive impact in people’s lives, Virgin Management is committed to developing businesses that disrupt the status quo. They do this in a smart, fun and spirited manner that makes for fulfilled employees, smiling customers and happy shareholders plus

community stakeholders.

The Virgin brand has become a global hallmark of quality and, indeed, fun.

Some sixty different businesses serve more than sixty million customers, generating in excess of $24 billion in annual revenue. Virgin is also recognised for looking after its 71,500 employees in 35 countries, ensuring the employee experience translates into higher than industry-average engagement levels which in turn positively impacts customer experience as well as other key HR metrics.

Virgin Management not only oversees the Virgin Group; it also liaises with private investors interested in furthering the brand’s goal of pushing the boundary in the

travel and leisure, telecoms and media, music and entertainment, health and wellness, and financial services sectors. In tune with Sir Richard Branson’s vision, Virgin Management actively pursues new business ventures that are both sustainable and likely to leave a positive legacy.

The CFI.co judging panel commends the company on its exceptional foresight, boldness and why not? – fearlessness. The Virgin Group is, indeed, in the business of breaking new ground wherever a niche may be found, striving to change business for good.

Virgin Management is hereby declared winner of the 2016 Most Innovative Global Brand Group United Kingdom Award.

> NESTLÉ: BEST CORPORATE GOVERNANCE SWITZERLAND 2016

In recent years, Nestlé, the leading Nutrition, Health and Wellness company, has leveraged its considerable influence within the FMCG (fast-moving consumer goods) global value chain to become a model of corporate governance.

Nestlé believes that to be successful over the long-term it needs to create value for their shareholders and for society – what is called Creating Shared Value (CSV). On the basis of best in class corporate governance and compliance, Nestlé focuses its efforts in five key areas: nutrition, water, rural development,

environmental sustainability and their people.

Implementation is carried out and monitored in conjunction with over a hundred nongovernmental organisations worldwide.

In Switzerland, Nestlé has strived to improve nutritional education through a number of initiatives, including sports days and health tips for children. A number of the Nestlé’s Swiss factories are also committed to further improve their environmental performance. Its factory in Henniez, in the Swiss canton of Vaud, has just inaugurated the largest agricultural biogas CFI.co | Capital Finance International

plant in Switzerland, it will use 25,000 tons of agricultural fertilizer from 27 farms in the region every year. The plant will produce 4 million kWh of electricity and 4.5 million kWh of heat by burning this gas in a cogeneration engine.

The CFI.co judging panel commends Nestlé on the implementation of its business strategy and is particularly impressed with the success of its many initiatives in Switzerland and elsewhere. Thus, the judges are pleased to present Nestlé with the 2016 Best Corporate Governance Switzerland Award.

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> DEWA: BEST IN-HOUSE CORPORATE FINANCE TEAM GCC 2016

Considered as one of the bestrun utility companies in the world, the Dubai Electricity and Water Authority (DEWA) serves more than 760,000 households and businesses in the emirate and consistently obtains a customer satisfaction rate of over 94%.

DEWA showcases what a properly managed state-owned entity can achieve.

DEWA reduced transmission losses across its grid to barely 3.3% – less than half the rate considered acceptable in Europe and North America. The company obtains similar worldleading efficiencies with its water distribution network.

DEWA’s operations and processes are

wholly driven by client demand. Bureaucracy is kept to a minimum and procedures have been streamlined. While most services are available to our customers online, those who visit DEWA Customer Service Offices now spend on an average less than 5 minutes to wait and get served.

DEWA’s efficiency is widely recognised and was cited by the World Bank as one of the reasons for Dubai’s ascendancy on the Ease of Doing Business global ranking.

With an eye to meeting the future demand, the utility has embarked on a drive to upgrade and expand capacity, invest in an advanced Smart Grid and promote sustainable

development. The company also has plans for a 5,000 MW solar power facility and recently signed a deal to build a 2,400 MW clean coal power plant. In all, over AED 65 Billion worth of new projects will be undertaken over the next 5 years to achieve Dubai’s vision to become the smart city of the future. The company’s in-house finance team has gained a stellar reputation for securing the best possible deals by leveraging the utility’s sound finances, international rating and excellence in corporate governance.

The CFI.co judging panel has no doubts whatsoever that the Dubai Electricity and Water Authority merits the 2016 Best InHouse Corporate Finance Team - GCC.

> J SAINSBURY: BEST CORPORATE GOVERNANCE UNITED KINGDOM 2016

With a market share of almost 17% of the United Kingdom’s supermarket sector, Sainsbury’s is one of Britain’s leading grocery retailers. The supermarket pillar is, however, only one of the four mainstays of J Sainsbury plc. The group also comprises Sainsbury’s Convenience Stores, Sainsbury’s Groceries Online and Sainsbury’s Bank, started in 1997 as a joint venture with Bank of Scotland.

While the descendants of John James – who in 1869 opened the grocery shop on Drury 90

Lane in London that would eventually turn into a veritable retail empire – still maintain a sizeable stake in the business, the company went public in 1973 and now has the Qatar Investment Authority (QIA) as its single largest shareholder with a 26% participation in the company.

Like few others in its sector, J Sainsbury has expertly navigated the ups and downs of its home market by rolling out novel retail concepts while keeping the triedand-true in place. Sainsbury is no newcomer CFI.co | Capital Finance International

to innovation: the firm was one of the first to embrace then then-revolutionary concept of self-service shopping. In fact, its long-standing “quality foods at fair prices” has remained central to the Sainsbury brand throughout the company’s existence – delivered in different, yet recognisable ways, as consumer tastes and demands changed.

The CFI.co judging panel is happy to present J Sainsbury with the 2016 Best Corporate Governance United Kingdom Award.

Summer 2016 Issue

> BMW: BEST AUTO INNOVATION EXCELLENCE GLOBAL 2016

Time and again, BMW proves itself as one of the front running automotive brands in the world; an association that neither comes easily nor without constant innovation on the brand’s part.

As connected cars become more and more of a focal point within the automotive industry, it seems that every car manufacturer under the sun is now ready to embrace the next step in connectivity. But some brands are always one step ahead of the rest; amidst the haze of competitors vying to offer cutting-edge innovation, BMW has been both a staple and

a pioneer of driver assisted technology since 1980.

Today, most onlookers marvel at the luxurious experience of BMW’s 7 series and the technology that supports it: ConnectedDrive, a series of advanced apps and services to suit the consumer. BMW’s Ko-HAF research initiative is also taking the next step towards highlyautomated driving. The company’s joint venture with Sixt DriveNow, operating over 4,000 vehicles in six countries, allows users to access its car sharing service through revolutionary

BMW and MINI credit cards.

The rate of ground-breaking can only accelerate further under BMW’s Virtual Innovation Agency; an initiative developed in order to promote public solutions and ideas into viable start-ups.

As car manufacturers try to find their way within the new era of the automotive industry, BMW has already mapped out the route, and is racing ahead. For this, the CFI.co judging panel offers BMW the 2016 Best Auto Innovation Excellence Global Award.

> BANCO DO BRASIL: BEST ESG MANAGEMENT TEAM BRAZIL 2016

In order to safeguard the interests of all stakeholders, Banco do Brasil maintains an exceptionally comprehensive corporate governance framework that ensures strict adherence to international best practices. The bank is widely recognised as a forerunner in setting up a sustainable business model – incorporating all applicable ESG (environmental, social and governance) criteria. The bank places a premium on transparency, accountability and the careful balancing of the rights of all stakeholders.

In order to ensure full compliance

with the bank’s Code of Corporate Governance and Code of Ethics, a vast array of monitoring tools and processes have been designed and deployed that track and analyse all operations.

Already since 2012, Banco do Brasil has been included in the Dow Jones Sustainability Index (DJSI). At home, the bank is listed on the BM&FBOVESPA Novo Mercado – a segment reserved for companies that meet strict governance criteria – and is included in both Corporate Sustainability Index (ISE) and the Carbon Efficient Index (ICO2).

Banco do Brasil was an early CFI.co | Capital Finance International

adopter of management techniques and styles that emphasise the company’s social and environmental responsibilities. These considerations have been an integral part of the bank’s decision making processes since 2003.

The CFI.co judging panel is particularly pleased to note that Banco do Brasil’s embrace of ESG criteria permeates through the entire organisation and, indeed, sits at the very core of the corporation. The judges are happy to confer the 2016 Best ESG Management Team Brazil Award on Banco do Brasil.

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> FITCH RATINGS: BEST GLOBAL RATING SERVICE 2016

Its operations guided by a robust code of ethics and conduct, Fitch Ratings is well poised to meet increased demand for market analytics and credit data. Founded in 1914, Fitch Ratings has maintained a corporate growth trajectory throughout its history. The smallest of the Big Three credit rating agencies, Fitch Ratings has managed to act as a tie-breaker when its competitors produce like results on any given credit.

Proactively absorbing knowledge on the behaviour of the markets and their many actors and incorporating the resulting data into

its proprietary processes and algorithms, has allowed Fitch Ratings to appropriately reflect the capital market environment at any given time and leverage that expertise to further improve the quality of its ratings.

With over 2,000 experienced professionals working across its network of 30 offices around the world, Fitch Ratings offers near-blanket coverage of financial instruments on a global scale. The company also produces a constantly updated stream of financial news, highlighting credit hotspots and giving solid guidance to professionals seeking not only to

gauge market sentiment but stay well ahead of the event curve.

Fitch Ratings is but one of many pillars that sustain the Fitch Group. As such it dovetails with Fitch Solutions, Fitch Learning and BMI Research to offer comprehensive coverage of all angles to the financial markets.

The CFI.co judging panel wishes to commend Fitch Ratings on the breadth, depth and quality of its product and services suite. The judges hereby extend the 2016 Best Global Rating Service Award to Fitch Ratings.

> ASSUPOL: BEST LIFE ASSURER SOUTHERN AFRICA 2016

Serving South Africans regardless their income bracket, Assupol offers a comprehensive suite of insurance and savings products. The company has been in business since 1913 when it was founded as a burial society for civil servants. Since then, and building on an exceptionally solid reputation, Assupol has turned into a modern financial services provider, greatly expanding the range of its services and broadening the company’s client base to include all South Africans.

Thanks to the excellence of its services and the unfailingly prompt settlement 92

of claims, Assupol, of late, has made significant inroads into the middle and higher income demographic, capturing market share from larger competitors. In fact, Assupol’s size and the resulting corporate nimbleness have allowed the company to improve the way insurance and savings products are brought to market.

Following a proactive approach, Assupol keeps close to its customers. Thanks to a vast network of branches and agents that reaches into the far corners of the country, Assupol maintains short lines of communication which, in turn, offer policyholders an iron-clad CFI.co | Capital Finance International

assurance that the company is never far away in times of need.

Assupol has turned a simple concept – be there to quickly help policyholders where and when needed – into a formula for enduring corporate success. The CFI.co judging panel commends Assupol on its unwavering commitment to help clients navigate and overcome life’s uncertainties. For a second year running, the judges are pleased to grant Assupol the Best Life Assurer Southern Africa Award.

Summer 2016 Issue

> LA POSTE: BEST CUSTOMER SERVICES TEAM FRANCE 2016

Long gone are the days that postal services merely delivered letters and the odd parcel. In today’s fast-paced and highlycompetitive environment, mail is all about speed, convenience and service. Few postal companies have embraced this brave new world better than La Poste – the French mail service operating not just in metropolitan France but also in the country’s five overseas departments and other far-flung possessions.

A much-cherished national institution, La Poste maintains a vast network

of over 17,000 service points throughout the republic. Not satisfied merely moving along with and adapting to changing times, La Poste has become a driver of innovation, if not a disruptor pushing the envelope beyond the boundaries of convention. Sensitive to market demand and mindful of its competition, La Poste has revolutionised its interaction with the public and maximised customer satisfaction.

The approach has paid off handsomely with market research showing that at the end of last year well over 95% of clients expressed

satisfaction with the services received. With streamlined processes, modernised branches and an emphasis on speed and efficiency, the French postal service has become a model for others to follow and the gold standard against which others are measured.

Though no longer a monopoly holder, La Poste has offered ample proof that it can successfully operate in a liberated market and, indeed, lead that market. The CFI.co judging panel is very pleased to grant the 2016 Best Customer Services France Award to La Poste SA.

> CEREDEX VALUE ADVISORS: BEST MID-CAP EQUITY INVESTMENT TEAM UNITED STATES 2016

Successful long-term investment is all about the search for value – hidden or otherwise.

Whilst that may seem a simple enough proposition, the identification of value requires more than a cursory look at any given company’s fundamentals. Lasting value – of the sort that others may not have appreciated – is found by delving deep into corporate processes and how these relate to the broader market.

The required excellence in research – the end-product of expertise, knowledge and experience – is to be found at boutique investment firms. Ceredex Value Advisors is one of only a select few investment companies that maintains a culture of craftsmanship. This is not

a marketing gimmick: the US firm has gained a peerless reputation amongst investors for excellence and did so the old-fashioned way – plenty of legwork, meticulous attention to detail and leveraging the benefits of its vast reservoirs of industry-specific knowledge.

With more than $10bn in assets under management, Ceredex Value Advisors manages individual accounts and acts as an advisor to mutual funds. The firm goes a few steps beyond gathering and processing all relevant information – dividend policies, historic trading levels, etc.

At Ceredex Value Advisors, data is carefully interpreted not by exotic algorithms,

CFI.co | Capital Finance International

but by highly distinguished professionals who apply their experience and instincts – and a touch of boldness – to reach spot-on decisions.

The CFI.co judges are pleased to recognise Ceredex Value Advisors as winner of the 2016 Best Mid-Cap Equity Investment Team United States Award.

RidgeWorth wholly owns three boutiques, including Ceredex Value Advisors LLC and holds a minority ownership in one.

RidgeWorth offers a wide variety of fixed income and equity disciplines, providing investment management services to a growing client base that includes institutional, individual and high net worth investors.

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> BRIDGESTONE FIRESTONE: BEST CSR MANUFACTURER ASIA PACIFIC 2016

The Bridgestone Firestone Group is the world’s largest tyre manufacturer since 2015.

As the company grows, so too does its social responsibility.

The group has been working fervently to achieve its CSR vision through its core mission of “serving society with superior quality”; words famously uttered by Bridgestone’s founder Shojiro Ishibashi.

The company’s two-pronged approach to CSR includes a focus on both management level – through its products and corporate activity – and individual level – through employee activities. However, Bridgestone

Firestone’s larger initiatives surrounding mobility in Asia and the Pacific have been the most impressive: the company’s involvement in the Bangkok Traffic Congestion Elimination Project is often cited as an example.

Bridgestone Firestone’s stance on the development of mobility sees a recyclingorientated society as a necessity. Through establishing the OneTeam environmental programme the company has developed a framework where both leadership and teammates are focused on methods to achieve the company’s environmental goals.

Because of this, Bridgestone

Firestone Americas has moved forward with its vision of achieving a waste-free tyre industry under the Tires4ward programme. With this, the company aims to ensure that for every tyre that it sells in the US, it will repurpose an out-of-use tyre. Since the programme launched in 2012, Bridgestone Firestone has recycled almost 120,000 tyres from communities nationwide.

The CFI.co judging panel commends Bridgestone Firestone on its deep involvement with the development of mobility alongside CSR and offers the company the 2016 Best CSR Manufacturer Asia Pacific Award.

> CENTURY INSURANCE (PNG): BEST REGIONAL INSURANCE COMPANY PAPUA NEW GUINEA 2016

A regional non-life insurance powerhouse, Century Insurance Group (PNG) – with additional locations in Guam and the US Commonwealth of the Northern Mariana Islands (CNMI) – has established a strong foothold in Papua New Guinea where it provides both private and corporate customers with a comprehensive suite of products and services. Expanding its presence in the country since the company’s establishment in 2007, Century Insurance (PNG) has become a fixture in the Papua New Guinea fledging insurance industry.

Thanks to the expertise accumulated in both the CNMI and Guam, Century Insurance 94

(PNG) was able to hit the ground running and claim a top spot amongst domestic insurers.

Mindful of its corporate social responsibilities, Century Insurance (PNG) maintains a number of outreach programmes that allow the company to support development initiatives. Seeking both stability and sustained business growth, the company places a premium on professionalism, technical expertise and excellence in customer service.

Recognising that a properly functioning insurance industry is essential to underwriting economic development, Century Insurance offers a number of products tailored CFI.co | Capital Finance International

to the needs of businesses of any size – from property insurance to the coverage of cargoes ferried between the islands of Melanesia and Micronesia. Private customers may obtain home and vehicle insurance in addition to policies that provide protection against many of life’s eventualities.

The CFI.co judging panel recognises the value of proper insurance services and is pleased to offer Century Insurance (PNG) the 2016 Best Regional Insurance Company Papua New Guinea Award.

Summer 2016 Issue

> VANTRUST CAPITAL: BEST SECURITIES BROKERAGE CHILE 2016

Operating in a mature and sophisticated market, VanTrust Capital has established a solid track record extracting consistently strong returns in a stable, yet highly competitive, environment. With a boutique-style approach that prioritises innovative investment solutions and excellence in the delivery of its services, Van Trust Capital’s focus is trained on three main areas of business: asset management, brokering and the engineering and placement of structured products tailored to precisely fit the requirements of individual investors.

The company maintains dedicated teams of seasoned professionals specialised

in fixed and variable instruments on both the domestic and international markets. The teams provide a constantly updated stream of personalised market data to investors, allowing for informed and timely allocations.

The VanTrust Capital asset management division designed a number of carefully assembled investment funds that ensure a perfect match between long-term return and risk mitigation. Through its financial services boutique, the company also helps highnet-worth individuals preserve and grow their wealth via bespoke portfolio management and the thorough analysis of investor expectations

and global market conditions.

VanTrust Capital occupies a unique position amongst brokerages and asset managers in Chile: the company is sufficiently large to allow for the development of specialisations and the attendant reservoirs of knowledge and expertise, while it remains nimble enough to quickly respond to changing market dynamics and demands. The CFI.co judging panel commends VanTrust Capital on its stellar performance and is pleased to offer the company the 2016 Best Securities Brokerage Chile Award.

> INTERNATIONAL CAPITAL MANAGEMENT AG (ICM):

BEST INTERDISCIPLINARY INVESTMENT PROCESS CENTRAL EUROPE 2016

Reducing chance to the bare minimum and providing constant vigilance to ensure optimum performance, Liechtenstein-based International Capital Management (ICM) consistently succeeds in serving investors with best-in-class products, fine-tuned to fit a wide spectrum of risk-tolerance profiles.

The firm has been an early – and successful – adopter of the risk mitigation strategies first developed and proposed by Professor Harry Markowitz, winner of the 1990 Nobel Memorial Prize in Economic Sciences, in a ground-breaking paper on modern portfolio

management. ICM has taken the Markowitz approach one step further, adding both traditional and bespoke diversification elements to enhance an already formidable risk protection framework.

ICM has established a solid reputation as an asset manager by applying its mastery of financial theory to everyday situations, proving time and again that academic research into the behaviour of markets can be made to pay off. ICM is extremely particular in its selection of products or asset classes considered for investment. As an independent firm, ICM is not CFI.co | Capital Finance International

held back by vested interests other than its ironclad mandate to safeguard the long-term wellbeing of its clients.

After carefully considering both ICM’s offerings and its unique approach to portfolio management, the CFI.co judging panel concludes that the multi-pronged methodology put in place by International Capital Management to detect long-term trends and benefit from momentary swings indeed constitutes a recipe for enduring success. ICM is a worthy winner of the 2016 Best Interdisciplinary Investment Process Central Europe Award.

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> DELTA ELECTRONICS: BEST ESG EXECUTIVE TEAM EMEA 2016

For the fifth consecutive year, Delta Electronics has been included in the ESG benchmark Dow Jones Sustainability Index (DJSI) in recognition of the company’s adherence to the strictest corporate governance and citizenship standards. For three years in a row, Delta Electronics has also been part of DJSI Emerging Markets.

From 2010 to 2015, Delta’s products and solutions helped customers save approximately 17.3 billion kWh in electricity and reduce carbon emissions by 9.2 million tonnes.

At its plants, the company has implemented numerous energy-saving policies and processes that have cut electricity usage in half over the past seven years.

Delta Electronics has managed to transform its business model in such a way that ESG (environmental, social and governance) criteria now sit at the very centre of corporate operations. The company maintains a comprehensive set of regularly updated codes of conduct and a number of processes that ensure compliance at all levels. Particular attention is

afforded to labour and human rights practices and corporate citizenship and philanthropy.

Ground-breaking in its multifaceted approach to ESG and sustainability, Delta actively echoes United Nations initiatives and programmes aimed at fighting climate change.

The CFI.co judging panel recognises Delta Electronics’ pioneering role in readying the global electronic equipment, instrument and component industry for the new times. The judges are pleased to offer Delta Electronics the 2016 Best ESG Executive Team EMEA Award.

> ARAB FINANCIAL SERVICES COMPANY:

BEST PAYMENT PROCESSING SERVICES & SOLUTIONS PROVIDER MIDDLE EAST 2016

Deploying the full power of technology to offer peerless end-to-end payment solutions and ancillary services, Arab Financial Services Company (AFS) has remained for over thirty years the preferred provider of state-of-the-art monetary processing services in the Middle East and North Africa (MENA). The company is collectively owned by forty financial institutions. Its operations are fully regulated by the Central Bank of Bahrain. Besides payment processing, AFS also offers a palette of value-added products and services that aim to facilitate commerce and increase convenience at both 96

ends of any transaction.

More than just a purveyor of processing power, AFS partners with businesses of all sizes to enhance corporate growth and drive success via cost-effective solutions. The company has built an enviable reputation for delivering on its promises.

It does so by continuously updating and upgrading the technological backbone that drives operations. AFS maintains two data centres in Bahrain and the UAE. Both facilities have been designed with built-in redundancies and solid data recovery procedures that ensure CFI.co | Capital Finance International

uninterrupted availability and unsurpassed data integrity.

The CFI.co judging panel commends Arab Financial Services Company for its relentless pursuit of operational excellence. The judges recognise that the company provides a service that underpins corporate success in a buoyant and highly dynamic region and does so with considerable panache. The judges are pleased to confer their 2016 Best Payment Processing Services & Solutions Provider Middle East Award on Arab Financial Services Company.

Summer 2016 Issue

> ROLLS-ROYCE: BEST LUXURY HERITAGE UK 2016

Rolls-Royce is a brand synonymous with success; a British symbol of excellence and engineering offered only to the best of the best – from celebrities to CEOs. Designed to be distinguished, every Rolls-Royce is adorned with the famed hood ornament, the Spirit of Ecstasy, the original design of which is still shrouded in mystery today.

To this day, every Spirit of Ecstasy is a unique work of art, each finished and polished by hand. Many of the cars are one-offs.

Customers can sit with Rolls-Royce designers,

craftspeople, and engineers at the company’s headquarters in Goodwood to commission their own bespoke models.

An example of one of the company’s first forays into bespoke car design began with the infamous Phantom IV – one of the rarest Rolls-Royce’s in the world – with only eighteen ever made. This model was designed exclusively for the British monarchy in 1950, with Queen Elizabeth II receiving the very first. Rolls-Royces have been favoured by the royal family ever since.

The company’s status as a British heritage has stood strong for decades, true to a business model which combines the spirit of ingenuity, class, and customer service of its founders: Charles Stewart Rolls, the gentleman enthusiast; Henry Royce, the brilliant engineer; and Claude Johnson, the business genius.

The CFI.co judging panel feel that Rolls-Royce deserves the finest acclaim for its dedication to both quality and its customers for over a century. The judges thus offer Rolls-Royce the 2016 Best Luxury Heritage UK Award.

> NBC BANK: BEST RETAIL BANK TANZANIA 2016

Leading the push towards excellence in financial services, Tanzania’s National Bank of Commerce has repeatedly raised the bar – and set new benchmarks – by introducing novel products and services, adding to its already comprehensive offerings. As a client-centric business, NBC Bank values customer input and has developed a number of processes to obtain feedback. Data thus obtained allows the bank to fine-tune its suite of products and services to meet market demand and increase customer loyalty.

Consistent customer follow-up provides the key to enhancing quality in the

delivery of services. As an added benefit, NBC Bank’s proactive approach to customer relation management fuels the steady growth and broadening of its client base. The bank offers services tailored to meet the requirements of all demographic strata, leveraging its unequalled experience in the local banking industry and its broad geographical footprint.

NBC Bank has put in place a solid and fully scalable technological backbone to support its operations and allow for multichannel access to its services, ensuring smooth and paperless transactions. The bank recently CFI.co | Capital Finance International

dealt a fatal blow to scammers and fraudsters with the introduction of the state-of-the-art Visa Secure smart card that features the EMV chip.

As a result, unauthorised card usage dropped to nearly zero.

The CFI.co judging panel is pleased to recognise NBC Bank for its dedication to maintaining both corporate peak performance and operational excellence. The judges are delighted to offer NBC Bank the 2016 Best Retail Bank Tanzania Award.

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> GRUPO BAC CREDOMATIC: BEST INTERNATIONAL COMMERCIAL BANK CENTRAL AMERICA 2016

A regional financial services powerhouse, Grupo BAC Credomatic maintains a network that blankets the Central American isthmus. The bank traces its origins to the Banco de América Central (BAC) of Managua, Nicaragua, founded in 1952. Venturing into neighbouring markets via acquisitions and organic growth, Grupo BAC Credomatic – now headquartered in Costa Rica – has expanded both its geographic footprint and range of services. The bank also maintains branches in The Bahamas and Cayman Islands and operates a credit card business in Mexico.

As an early adopter of corporate social responsibility (CSR) principles, Grupo BAC Credomatic aims to contribute in meaningful

and tangible ways to the region’s development.

Customer-centric and proactive in its outreach to people and businesses, the bank has established a solid reputation for transparency and excellence in corporate governance. This earned Grupo BAC Credomatic the trust of the wider market which, in turn, has resulted in impressive client retention rates.

The bank offers a full suite of financial services, available to businesses and private customers alike, and is quick to adjust products, processes, and operations in order to promptly meet market demands. With an upto-date and fully scalable IT platform, Grupo BAC Credomatic is able to maintain peak performance in the highly dynamic markets of

Central America.

Pioneering the delivery of its services over multiple channels has allowed the bank to claim significant market share across differing demographic strata. Such a broad base has repeatedly proved invaluable, adding not just stability but empowering corporate growth and profitability. The CFI.co judging panel is happy to note that Grupo BAC Credomatic pursues – and achieves – excellence throughout its organisation and does so while adhering to the highest standards of transparency and ethics. The judges are happy to grant Grupo BAC Credomatic the 2016 Best International Commercial Bank Central America Award.

> TRADEX: MOST SOCIALLY-RESPONSIBLE MANAGEMENT TEAM CENTRAL AFRICA 2016

Since the energy sector of Cameroon was liberalised and deregulated in 2000 with a view to reinvigorate a largely dormant industry, local trading firm Tradex has managed to acquire the pole position, claiming a market share in excess of 50%. Tradex imports and distributes oil and derivatives such as lubricants in Cameroon.

The company also exports its products to the mostly landlocked countries of the Economic Community of Central African States (ECCAS).

Founded in 1999 as a jointventure between the Société Nationale des Hydrocarbures – Cameroon’s national oil and 98

gas company – and local and foreign investors, Tradex has accumulated significant experience and knowhow on the international trade in oil – both crude and refined.

The company has developed a proprietary and highly dynamic trading model that enables it to respond quickly and efficiently to changing market conditions.

From its earliest days, Tradex has been fully committed to furthering national development via a number of CSR (corporate social responsibility) initiatives that aim to support efforts at improving education, CFI.co | Capital Finance International

healthcare and community engagement. By providing reliable and widely available sources of energy via its growing network of service stations, Tradex hopes to encourage entrepreneurship and empower established businesses.

The CFI.co judging panel recognises the importance of energy traders. In Cameroon, Tradex has consistently raised the bar and was able to barrel ahead, providing essential services effectively and dependably. The judges are pleased to declare Tradex winner of the 2016 Most Socially-Responsible Management Team Central Africa Award.

Summer 2016 Issue

> IMAGE NATION ABU DHABI: OUTSTANDING CONTRIBUTION TO REGIONAL MEDIA UAE 2016

A hub of visual media, Image Nation Abu Dhabi has managed to create an industry from scratch – almost singlehandedly. The firm offers talented local media producers opportunities to shine on both the big screen and the small one. Amongst others, Image Nation Abu Dhabi maintains Arab Film Studio where aspiring filmmakers find the tools, guidance and expertise to tell their stories.

Arab Film Studio stands squarely at the centre of Abu Dhabi’s increasingly prominent role as a driver – if not powerhouse

– of the regional film industry. The studio produces not just box office blockbusters, but also much-lauded documentaries and short movies. Additionally, the studio offers a range of internships to aspiring filmmakers, scriptwriters and documentarists who may hone their skills in a professional yet relaxed environment.

Image Nation Abu Dhabi has now become one of the premier media companies in the Arabic-speaking world. Last year, the company became a Pan-Arabic broadcaster with the launch of its Quest Arabiya channel.

The company is not merely in the business of producing premier media content, but squarely aims to develop the regional mediascape by helping form a new generation of producers, writers and other professionals.

The CFI.co judging panel is very pleased to note that Image Nation Abu Dhabi has formulated – and adheres to – a larger mission than just producing hit shows. Indeed, the judges are happy to offer Image Nation Abu Dhabi the 2016 Outstanding Contribution to Regional Media UAE Award.

> SEABURY GROUP: BEST AVIATION M&A ADVISORY TEAM GLOBAL 2016

SEABURY

With an impressive number of airline restructurings under its corporate belt, Seabury Group has become the go-to consultancy for carriers aiming high. In business for 21 years and headquartered in New York, Seabury Group is a global advisory and professional services firm delivering solutions to the aviation, aerospace and defence and transportation industries, amongst others.

The company maintains a network of offices in fifteen countries in order to increase client-consultant proximity and keep tabs on local conditions. Seabury Group has established a solid track record lending its expertise to over 300 clients in more than 50 countries with well in excess of 1,200 engagements. The firm has brokered complex restructuring exercises requiring a broad range of services, ranging from consulting to

investment banking via IT solution.

Seabury Group is unique in having its own investment bank which allows it to offer clients help with both sell-side and buyside transactions, private equity and debt placement and mergers and acquisitions. From its corporate beginnings, Seabury has followed a holistic approach, providing solutions that include all aspects of the business under consideration. As such, the group boasts a human capital division specialised in developing and optimising workforce performance for improved operational results.

Seabury Group has an impressive number of successful large-scale corporate restructurings to its name and was recently engaged to help smooth the privatisation of TAP Portugal which entailed raising a €330m equity capital injection and restructuring over CFI.co | Capital Finance International

€1bn of debt. The solution provided by Seabury Group enabled the airline to ensure both longtime survival and profitability.

Investing heavily in technology, and offering a number of proprietary aviation management smart software solutions, has propelled Seabury Group to the very apex of the airline consultancy sector. The company has now replicated its formula – and success – in the transportation and aerospace and defence industries. The CFI.co judging panel commends Seabury Group – winner of the 2015 Best Aviation M&A Advisory Team Global Award – for its unrelenting dedication to operational excellence and top performance.

The judges are pleased to announce that Seabury Group has now also won the 2016: Best Aviation M&A Advisory Team Global Award.

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> HERBERT SMITH FREEHILLS: BEST CAPITAL MARKETS TEAM AUSTRALIA 2016

Born out of a merger in 2012 between UK Silver Circle member Herbert Smith and Freehills – one of the Big Six law firms in Australia – Herbert Smith Freehills is regarded as one of the most prestigious law firms in the world and is an international leader in corporate litigation.

The Australian division still dominates its home market. Its work in capital markets has been most impressive. The firm has raised more capital and clients via both IPOs and hybrid offerings from 1999–2014 than any other Australian law firm.

Led by Philippa Stone, the only lawyer to have been named the Australian Dealmaker of the Year five times, and Michael Ziegelaar, known for his strong commercial outcomes and personal charisma, the Australian Capital Markets Team is comprised of the country’s highest-rated lawyers.

Well-versed in equity capital markets (ECMs), equity-linked hybrid securities, and debt capital markets (DCMs), the team is responsible for some of the most high-profile deals in recent years.

For instance, the company’s expertise in the structuring of tier 1 and tier 2 regulatory capital securities has led to various contracts with the Commonwealth Bank of Australia (CBA). This February, Herbert Smith Freehills announced yet another deal with CBA to advise on the issue of PERLS VIII capital notes and concurrent PERLS III reinvestment offers to raise approximately A$1.25 billion.

The CFI.co judging panel is pleased to award Herbert Smith Freehills with the 2016 Best Capital Markets Team Australia Award.

> UNITY: BEST SUSTAINABLE INSURANCE SOLUTIONS TEAM CENTRAL AMERICA 2016

An insurance broker with a difference, Unity consistently pursues perfection in matching clients to policies. While the firm and its customers benefit from the standardised procedures implemented and fine-tuned since 1958, Unity offers a comprehensive suite of easily scalable and adaptable products that serve the needs of both private and corporate clients.

As an administrator of risk, Unity has gained a formidable reputation for applying the industry’s global best practices to the local environment. Its reservoir of region-specific 100

expertise accumulated over decades enables Unity to consistently outperform its competition and serve clients with superior products at unmatched price points.

With offices in Panama, Costa Rica, Nicaragua, El Salvador, Guatemala and shortly in Honduras, Unity has an unmatched presence in the region. The firm ascribes its sustained corporate growth in large part to a relentless pursuit of administrative excellence. Unity was an early adopter of corporate governance principles that ensure transparency, efficiency and adherence to a strict code of ethics. All the CFI.co | Capital Finance International

company’s operations comply with the latest ISO norms.

Unity also maintains a number of outreach programmes and initiatives that aim to promote healthy lifestyles. Professionals and corporations benefit from regularly organised seminars on risk mitigation. The CFI.co judging panel is pleased to note that Unity significantly contributes to national development via corporate social responsibility initiatives. The judges are pleased to offer Unity the 2016 Best Sustainable Insurance Solutions Team Central America Award.

Summer 2016 Issue

> GAZTRANSPORT ET TECHNIGAZ: BEST MARITIME TRANSPORT SERVICES FRANCE 2016

THE TRADE EXPERTS

The fleet of purpose-built tankers transporting Liquefied Natural Gas (LNG) around the globe has grown almost exponentially in size over the past two decades. To meet the demand for LNG tankers, larger vessels which are being built can deliver up to 263,000m3 of LNG in tanks incorporating containment systems with cryogenic membranes first designed by GTT – a French engineering company that has pioneered many of the innovations powering today’s LNG value chain.

GTT provides solutions dedicated to offshore and onshore transportation and

storage and to the use of LNG as fuel for vessel propulsion and associated bunkering. For over fifty years, GTT has developed technologies which optimise the thermal performance and safety of membrane tanks that transport or store LNG. Continuous improvements on these technologies have reduced the boil-off rate of cryogenic membrane systems by around 40%.

GTT’s sustained R&D efforts led to the development of new applications for the offshore LNG segment, particularly for floating liquefied natural gas vessels (FLNGs) and floating storage and regasification units

(FSRUs).

GTT also provides a full range of high added value services focused on the operational issues experienced by its customers and partners throughout a vessel’s life cycle. In addition, GTT Training offers training programmes and simulation software to customers and partners.

The CFI.co judging panel congratulates GTT on its high-tech solutions to the challenges faced by LNG shippers. GTT is declared winner of the 2016 Best Maritime Transport Services France Award.

> THE ACCESS BANK UK: BEST AFRICA TRADE FINANCE BANK 2016

Find out how we can meet your Trade Finance needs: +44 (0)333 222 4516 info@theaccessbankukltd.co.uk

www.theaccessbankukltd.co.uk

The Access Bank UK Limited is Registered in England and Wales. Registration Number: 6365062. Registered Office: 4 Royal Court, Gadbrook Way, Gadbrook Park, Northwich, Cheshire, CW9 7UT. The Access Bank UK Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

PRA & FCA Registration Number 478415.

No two trade deals are equal: exchange rates change, transport modes differ and transit times may vary. Rather than offering a one-size-fits-all solution, trade financiers must know their customers and be willing to adjust to changing circumstance.

The Access Bank UK, headquartered in London, is the wholly owned subsidiary of its parent in Nigeria who also have a presence in eight Sub-Saharan countries, and takes pride in understanding its clients’ business. The bank – large enough to service any deal, yet small

enough to remain nimble – does not offer readymade solutions. Instead, The Access Bank UK dovetails its products to fit customer needs.

The bank invests significant effort in attracting, and retaining and training, professional staff who, as a rule, forge close relationships with clients in order to ensure customers always deal with an expert who knows is familiar with his/her business.

The Access Bank UK is known for its in-house development of expertise. Employees are encouraged to pursue a career of lifelong learning CFI.co | Capital Finance International

and may expect to move up the professional ladder. Moreover, The Access Bank UK aims for full service: no shortcuts are taken. Instead, the processing of documents is sped up so that most deals are cemented in under three days.

The CFI.co judging panel noted that the Central Bank of Nigeria has entrusted The Access Bank UK with looking after its reserves.

The bank also works closely with the World Bank on infrastructure projects. The judges have no hesitation in granting The Access Bank UK the 2016 Best Africa Trade Finance Bank Award.

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> MONETA MONEY BANK: BEST BANK IPO EUROPE 2016

A network of 229 branch offices and no less than 620 ATMs ensure that Moneta Money Bank is never far away from its around 1.2 million clients in the Czech Republic. One of the country’s largest financial services providers, the bank debuted on the Prague Stock Exchange in May when its parent company GE Capital took it public and sold 51% of its shares for around $1.5bn.

Opting to price the IPO on the lower end of the expected range ensured that the launch was carried out smoothly. Investors are

confident that Moneta Money Bank – formerly trading as GE Money Bank – represents excellent value. The Czech economy, barrelling ahead at a 4.3% annual clip, and the country’s solid financials, ensure sustained profitability.

Moneta Money Bank will retain the policy of paying out 70% of profits in dividend.

At the current level of both profit and share price, that pushes the annual yield to almost 9%, significantly above the results of Moneta Money Bank’s main competitors.

Last year, the bank’s profits increase by 4.6% for a return on tangible equity of almost 17%. With such numbers, the time was right for GE Capital to take its Czech bank public.

The CFI.co judging panel agrees that Moneta Money Bank is an exceptionally wellrun bank and one of systemic importance to the Czech economy. Its successful entry onto the market merits recognition. Moneta Money Bank is thus granted the 2016 Best Bank IPO Europe Award.

> ENGIE ENERGÍA PERÚ: BEST ESG POWER PRODUCER PERU 2016

ENGIE in Peru is one of the largest power generators of the country with 1,952 MW of installed capacity and 753 MW in construction.

The company, part of the ENGIE Group (formerly GDF SUEZ), is actively engaged in the energy transition, taking the lead in the global move towards more sustainable forms of energy production.

Present in Peru since 1997, ENGIE has invested well over $2.3bn (1997-2018) through its ENGIE Energía Peru subsidiary in which it owns a 61.77% stake. Backed up by one 102

of the world’s largest power generators, ENGIE Energía Perú adheres to a comprehensive set of corporate social responsibility (CSR) policies and maintains a corporate framework that incorporates the latest environmental, social, and governance (ESG) parameters. In fact, ENGIE Energía Perú has consistently been listed in the Top 20 best-run corporations in Peru.

Staff members receive extensive training on how to reduce the environmental impact of corporate operations and processes.

ENGIE Energía Perú also maintains a number of CFI.co | Capital Finance International

programmes and initiatives aimed at increasing transparency and ensuring all stakeholders’ interests are taken into full consideration.

Particular attention is directed at job satisfaction and the personal development of workers.

The CFI.co judging panel took note of the fact that ENGIE Energía Perú embraces the latest in ESG trends and findings. Thus, the company has put itself on a footing that ensures the sustainability of its operations. ENGIE Energía Perú is declared winner of the 2016 Best ESG Power Producer Peru Award.

Summer 2016 Issue

> McOTTLEY CAPITAL: BEST BOUTIQUE INVESTMENT BANK GHANA 2016

As financial markets mature, the need for specialised investor services increases. Such it is in Africa where a decade-long economic upswing has added multiple layers of complexity to the indigenous financial markets. Ghana has attracted plenty of attention from investors wishing to hitch a ride on the country’s buoyant economy, regularly registering 8% or more annual GDP growth.

Helping investors source opportunity, McOttley Capital has the tools and expertise to secure safe and profitable deals. With a focus on primary market research, the firm produces

a stream of valuable data from which analysts extract the nuggets needed to successfully enter the local market.

McOttley Capital assists individuals, corporates, and others to find investment opportunities in Ghana that are fully exposed to the upside whilst providing hedges against adverse eventualities. Using a disciplined and well-diversified approach, McOttley Capital is able to outperform the wider market and deliver on-target results.

Speedy and accurate in the delivery of its services, the firm has experienced

exponential growth since its foundation three years ago. McOttley Capital has also established a solid reputation for adaptability, responding dynamically to market conditions and is able to ride the peaks whilst skirting around the troughs.

The CFI.co judging panel is pleased to note that McOttley Capital has consistently delivered on its promises and possesses the knowledge and skills needed for navigating the local market profitably. The judges are delighted to offer McOttley Capital the 2016 Best Boutique Investment Bank Ghana Award.

> FXPRO GROUP: BEST FX EXECUTION GLOBAL 2016

Known for its professionalism and fair trading practices, FxPro Group has been leading the forex trading industry for over ten years, building its success on the premise that a sensible and straightforward corporate approach ensures return business and thus increases sustainability.

Contrary to most, FxPro does not promise the moon. The brokerage merely suggests that traders may be able to profit from monitoring economic events and market dynamics. By connecting the dots, trades and opportunities can, quite conceivably, arise. It

is this cautious, yet sensible, approach that elevates FxPro a few notches above its peers.

The firm offers its traders all the tools and conveniences that produce impressive flows of data from which informed decisions can be reached. That said, FxPro is reluctant and has indeed refused to pepper its online trading platform with bells and whistles. Binary options and spread betting facilities are absent since these and other exotic instruments usually only add risk while their upside is limited. Casinolike bonuses are also lacking. FxPro wishes

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traders to focus on the business at hand. This calls for a minimum of distractions.

In fact, the novel business model implemented by FxPro Group aims to cement a mutually beneficial relationship between client and broker – based on trust and transparency.

The CFI.co judging panel finds much to praise in the understated way FxPro conducts its business. The judges are pleased to offer FxPro Group the 2016 Best FX Execution Global Award.

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> ASTAD: BEST INFRASTRUCTURE PROJECT MANAGEMENT TEAM GCC 2016

Moving plans from the drawing board into the physical world, Astad Project Management of Qatar, helps shape the future of the country. The company has managed some of Qatar’s most signatory projects and was chosen as a partner in the Lusail light rail project that comprises a network of four lines with 32 stops and a total length of 38.5km.

Since 2002, Astad Project Management – formerly Qatar Petroleum’s Onshore Engineering Department – has helped guide the construction of countless high profile buildings and facilities that underpin

the country’s economy and society. In 2008, and with the help of the Qatar Foundation, the department was split off from Qatar Petroleum to form Astad Project Management as a joint venture.

The Qatar Foundation was set up in 1995 as a public-private initiative to fasttrack the country’s human development by providing support to, and initiating, education and science programmes.

Astad Project Management is currently engaged with the building of the facilities that will host the 2022 FIFA World

Cup Tournament. The firm is managing the construction of the QF Stadium which will co-host the matches. The stadium is slated for completion a full two years ahead of the tournament in 2020.

The CFI.co judges agree that quality project management is essential in a fastmoving society that aims high. Astad Project Management deserves recognition for its valuable contribution to progress in Qatar. The company is declared winner of the 2016 Best Infrastructure Project Management Team GCC Award.

> CREDICORP CAPITAL: BEST MILA CAPITAL MARKETS TEAM 2016

One of the top firms in equity research, Credicorp Capital tracks the performance of regional corporates to find exceptional value for its clients. The company maintains specialised teams that monitor and investigate equities, fixed income instruments and macroeconomic developments throughout the buoyant region.

Credicorp Capital offers a comprehensive array of services available to both issuers and investors. The firm takes the long view and strives to build lasting relationships with its clients as trusted advisors who can be counted upon to offer innovative and 104

tailor-made solutions to any given challenge.

Credicorp has offices in Lima, Santiago de Chile, and Bogotá. The firm is a major player in the Mercado Integrado Latinoamericano (MILA) which integrates the capital markets of Mexico, Peru, Colombia and Chile.

MILA offers both investors and issuers a single point of entry via any of its associated bourses to securities traded throughout the region. The participating exchanges offer brokers a unified trading platform that unlocks the entire region.

Client-focused, professional and CFI.co | Capital Finance International

proactive, Credicorp Capital is dedicated to excellence in the delivery of both service and research. Its analytical reports have become mandatory reading for professionals looking beyond the headlines to find out how markets are moving.

Last year, the CFI.co judging panel recognised Credicorp Capital as a MILA trendsetter and top broker. The judges again wish to congratulate Credicorp Capital for its peerless performance by naming the firm winner of the 2016 Best MILA Capital Markets Team Award.

Summer 2016 Issue

> GILBERT + TOBIN: BEST M&A TEAM AUSTRALIA 2016

In its relatively short lifespan of 28 years the law firm Gilbert + Tobin has climbed to the top in Australia, largely due to the company ethos of deal-making.

In having secured some of the largest mergers and acquisitions in Australia within the past few years, Gilbert + Tobin has proven its formula of success.

Whilst law firms scramble to keep up with Australia’s ever-changing legislation, many find it difficult to comply with corporate regulators. However, thanks to Gilbert + Tobin’s

external and internal focus on teamwork, the firm is able to maintain an excellent relationship with all stakeholders, allowing it to stay a few steps ahead.

Through the company’s unique recruitment efforts, Gilbert + Tobin successfully obtained the talent it needed to become a major player so early on. Mr Gilbert himself is largely responsible for a large portion of the firm’s high profile dealmakers, such as the head of Mergers & Acquisitions, Neil Pathak.

With only 45 people, the firm’s M&A

team has almost half the number of people its closest competitors maintain on staff. However, time and time again, the team has proven it is the quality of team members, not their numbers, which makes all the difference.

Gilbert + Tobin has demonstrated how creating the right team, direction and focus can catapult a firm to success within a short timeperiod. The CFI.co judging panel is delighted to offer Gilbert + Tobin the 2016 Best M&A Team Australia Award.

> IIFL PRIVATE WEALTH: BEST INDEPENDENT WEALTH MANAGEMENT TEAM INDIA 2016

Locked together in unison, wisdom and experience make a powerful combination. IIFL Private Wealth seeks to merge these outstanding traits to produce a range of wealth management solutions that not only stand the test of time, but improve with age. Agile, whilst prudent at the same time, IIFL Private Wealth’s senior advisors share their knowledge with the firm’s growing client base to reach solutions that dovetail with individual requirements and expectations.

IIFL Private Wealth traces its origins to 2008 when a group of professionals from the private banking industry joined forces to help

investors navigate the then turbulent financial times. The founders proved that opportunities abound even as the wider market struggled.

IIFL Private Wealth has a number of advantages that it leverages to obtain aboveaverage results. The firm is employee-owned: IIFL holdings own 54.4% and a strategic partner General Atlantic holds 21.6% and balance 24% by employees, the remainder is owned by its professionals who are thus encouraged to adhere to long-term strategies instead of chasing the next quarter’s results which are usually not indicative of sustained corporate performance.

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By investing heavily in technology and innovative corporate processes aimed at aligning the interests of professionals and clients alike, IIFL Private Wealth has managed to stay well ahead and offer products and solutions that are crafted to consistently ensure the best outcomes.

The CFI.co judging panel commends IIFL Private Wealth on its forward thinking and grants the firm the 2016 Best Independent Wealth Management Team India Award.

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> BANGKOK INSURANCE: BEST INSURANCE SOLUTIONS ADVISORY TEAM THAILAND 2016

In business since 1947 and serving the nation with a comprehensive palette of products and services, Bangkok Insurance is one of Thailand’s premier risk management providers. Customercentric and equipped with world-class technology, the company has established a solid reputation that underwrites its continued expansion.

Known for its integrity and recipient of the Royal Garuda Emblem, Bangkok Insurance has led its industry in innovation. The company was the first to introduce novel services such as an insurance web portal, a teleclaims service,

and the BKI iCare application for smartphones which enhance user experience and convenience.

Moreover, Bangkok Insurance introduced policies tailored to the needs of specific demographic segments to serve the company’s strategic direction in respect of regional business expansion where each region has its own unique challenges.

Bangkok Insurance was an early adaptor of comprehensive corporate governance processes that aim to increase transparency and take into consideration the interests of all stakeholders – investors, policyholders, staff

and the wider community. This has enabled the company to deepen its long-standing commitment to excellence in the delivery of its services.

The CFI.co judging panel is pleased to note that Bangkok Insurance remains true to its heritage whilst continuously adapting to changing market dynamics. The company has also displayed an impressive nimbleness as it navigates shifts in customer demands. The judges are unanimous in their decision to grant Bangkok Insurance, for the second year running, the Best Insurance Solutions Advisory Team Thailand Award.

> AZIZI BANK: BEST SOCIAL IMPACT BANK AFGHANISTAN 2016

More than just a full-service bank, Azizi Bank of Afghanistan is in the business of shaping the country’s fast-growing financial services industry. Azizi Bank does so by offering young Afghan professionals the opportunity to hone their skills in a dynamic environment ruled by international best practices.

Azizi Bank strives to meet and exceed the expectations of all stakeholders – clients, staff members, shareholders, regulators, and the wider society. Azizi Bank management is fully aware that modern and cost-effective financial services are of crucial importance to 106

the accelerated development of Afghanistan’s economy. The bank offers a comprehensive suite of products and services to individual clients as well as businesses and government entities.

Azizi Bank supports a growing number of community initiatives as part of its corporate social responsibility (CSR) policy. The bank helped built the digital library at Kandan University and maintains various programmes aimed at promoting excellence in education.

Set up in 2006, Azizi Bank today employs over 1,200 people. As an employer, the CFI.co | Capital Finance International

bank quietly but effectively encourages women to apply for jobs and plot a professional career as a way to promote gender equality and female empowerment. Currently, women make up 12% of Azizi Bank’s workforce.

The CFI.co judging panel appreciates the consistency with which Azizi Bank positively impacts Afghan society. The bank is aware of its civic responsibilities and takes these seriously indeed. As such, Azizi Bank is a worthy winner of the 2016 Best Social Impact Bank Afghanistan Award.

Summer 2016 Issue

> MACRO SOFTWARE SYSTEMS: BEST BUSINESS IT SERVICES PARTNER GCC 2016

No business can do without technology: it is used to increase efficiencies, reduce operating costs, and – most importantly – interact with clients. Yet not all businesses are leveraging the full power of IT. This is where Macro Software Systems of Oman can help.

The company’s mission is a simple one: to provide world class IT services to its customers.

However, that is often easier said than done. Macrosoft, for short, recognises that technology evolves continuously. The firm allows its clients to stay ahead of the curve by showing how technological progress can add to

the bottom line.

Macrosoft, with offices in Oman, Abu Dhabi, and Tanzania, takes a customercentric approach which allows businesses to receive tailor-made plans that eliminates the guesswork. Great effort is expended at charting the impact IT systems have on dayto-day practices and how investments may be recouped via enhanced performance, a more effective use of existing resources, or increased sales.

Macrosoft partners with leading IT companies such as Oracle, IBM, and F5

to offers clients access to both up-to-date knowledge and the latest technologies. The company also works with innovators such as Kaspersky and NetForensics to bring its clients leading edge software.

The CFI.co judging panel commends Macrosoft on its business-friendly approach to IT. The firm is peerless when it comes to finding practical and profitable IT solutions. As such, Macro Software Systems is a clear winner of the 2016 Best Business IT Services Partner GCC Award.

> KHAN BANK: BEST SME BANK MONGOLIA 2016

Blanketing Mongolia with a network of branch offices, Khan Bank provides the country’s buoyant private sector with premium financial services. In many of Mongolia’s provinces, Khan Bank is the only option for farmers and small business owners looking to obtain financing or other financial services.

Formerly the state-owned Agricultural Bank of Mongolia, Khan Bank was formed in 2000 with help from the World Bank, the European Bank for Reconstruction and Development, and the US Agency for International Development (USAID). The bank

was privatised three years later and has been profitable ever since. Khan Bank remains the largest bank in Mongolia, reaching 80% of the country’s population via a network of over 500 branch offices and employing about 4,000 professionals.

Both the government in Ulaanbaatar and multilateral organisations present in Mongolia consider Khan Bank fundamental to the development of the local economy. Not only is Khan Bank the largest Mongolian bank by assets, loan portfolio, deposits, and earnings; it is also one of the country’s largest taxpayers.

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Over the past decade, Khan Bank has expanded its geographical footprint significantly in a drive to reach the entire population of the vast and sparsely populated country.

The CFI.co judging panel researched Khan Bank last year and presented it with the Best SME Bank Award. Over the past twelve months, the bank has stayed the course and remained true to its commitment to serve the nation. Thus, Khan Bank again receives the Best SME Bank Mongolia Award.

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> KPS CONSULTING: BEST RAPID INNOVATION & TRANSFORMATION MANAGEMENT GERMANY 2016

Whenever the experts of KPS Consulting are called in, business is about to be shaken up and take off. One of Germany’s premier management consultancies, KPS Consulting maintains a global roster of over 600 highly experienced professionals who have what it takes to optimise performance and transform any kind of corporation.

KPS Consulting has developed a proprietary approach – the KPS Rapid Transformation Method– that reduces complexity in order to attain corporate goals faster. This approach streamlines processes

and significantly reduces project lead-times.

The firm’s experts – or transformation architects – are carefully selected to bring deep sector knowledge to any undertaking and boast experience in faultless project execution.

Founded in 2000, KPS Consulting takes on projects and challenges in the retail, consumer, services and manufacturing and processing sectors. The firm offers top-level consulting that spans the entire business spectrum from strategy development to process design, systems technology and beyond. KPS Consulting has gained an enviable reputation for

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designing fully integrated end-to-end processes that span the entire value chain.

The CFI.co judging panel recognises the inestimable value outside management expertise can bring to any business wishing to break out of its niche, add an extra layer of dynamics to its operations, or – simply – reinvent itself to thrive in new or changed markets. Few firms are better suited to help realise these ambitions than KPS Consulting. The judges are pleased to offer KPS Consulting the 2016 Best Rapid Innovation & Transformation Management Germany Award.

> FBS: BEST FX RISK MANAGEMENT BROKER ASIA 2016 & BEST FX BROKER MIDDLE EAST 2016

Deploying a state-of-the-art platform plugged into global markets and financial data stream, FBS leverages the power of technology to offer its close to 2,000,000 traders all the tools and knowledge needed to successfully buy and sell foreign currencies on the Forex market.

Sourced from both its superior service and risk management model – FBS has taken the FX market by storm, showing exponential growth since 2009.

The company engages the services and expertise of around 130,000 local agents who ensure that FBS maintains close proximity to its traders in 120 countries. The firm offers 108

five different account types suit the needs and requirements of all traders – from those making their debut to professionals whose deals move entire Forex markets. For traders looking to limit downside risks and a measure of stability, FBS developed the Micro Account which allows clients to keep close taps on projected profits and micro-manage their investments. A special and unique free service of Deposit Insurance helps clients trade with confidence – and in case of unforeseen losses, the company will return from 30 to 100% of the insured deposit amount back to the client.

Amongst the largest Forex trading CFI.co | Capital Finance International

platforms in Asia and the Middle East, FBS has cornered the market by offering easy access to all its features via multiple channels, including apps that run on portable devices. Another recent addition is the brand new MetaTrader 5 platform with the latest innovations. By emphasising education and risk-awareness via personal approach and seminars, the firm has earned a solid reputation in its industry. In an unusual move, the CFI.co judging panel offers FBS, a repeat winner, a twin honour: the 2016 Best FX Risk Management Broker Asia Award & the 2016 Best FX Broker Middle East Award.

Summer 2016 Issue

> TSB BANKING GROUP: BEST SME BANK UNITED KINGDOM 2016

In retail banking, there are only so many ways in which services may be conveniently delivered to account holders. Whilst innovation is rife throughout the industry, the personal touch and its twin – client proximity – are kept centre stage at TSB.

The Trustee Savings Bank was founded in 1810 on the premise that people of modest means should enjoy access to dependable financial services. Today, a great many corporate reorganisations later, around 600 TSB branch offices line the high streets

of towns and cities throughout the British Isles.

The bank has deftly managed to stay true to its origins.

That said, TSB does offer a different sort of banking: not only does TSB Banking Group maintain a vast branch network; it also allows customers direct access to relationship managers. This is especially helpful to owners of small and medium-sized enterprises (SMEs).

With a geographic footprint stretching from Cornwall to the Shetland Island, TSB maintains extended opening hours,

recognising the obvious-but-oft-forgotten fact the small business owners are usually pressed for time. The bank also offers a number of facilities to start-up companies. Moreover, each branch supports a local charity.

The CFI.co judging panel is truly happy to see that TSB puts its clients centre stage. While the bank offers all the conveniences of online banking, it has not retreated from the high streets of Britain. The judges are pleased to grant TSB Banking Group the 2016 Best SME Bank United Kingdom Award.

> AVANT GARDE INNOVATIONS: BEST ESG ENERGY TECHNOLOGY TEAM INDIA 2016

The business model pursued by Avant Garde Innovations clearly aims to promote inclusiveness. More than just a lofty goal, the Indian company seeks to eliminate energy poverty by helping marginalised communities obtain clean renewable energy from local sources.

Firmly committed to environmental sustainability and climate stewardship, Avant Garde Innovations was one of only 25 startup companies recognised at the 2015 United Nations Climate Summit (COP21) in Paris for their bold 100% clean energy approach. The

company is currently finishing the development of a low-cost small wind turbine for residential, commercial, and agricultural use. The turbine is slated for release to market by the end of this year.

Avant Garde Innovations is featured as a poster boy for the UN Foundation’s recently launched $1bn Clean Energy Investment Opportunity Directory. It is the only small wind turbine engineering and manufacturing firm from India included in the directory.

The company has branches in both India and Australia and leverages the power of a CFI.co | Capital Finance International

distributed and decentralised business model to broaden its footprint.

The CFI.co judging panel is excited to note that Avant Garde Innovations has chosen to provide practical solutions to bring abundant clean and renewable power to people still deprived of the chance to join modernity and improve their lot. By promoting self-reliance, the company also furthers the cause of social and financial inclusion. The judges are pleased to offer Avant Garde Innovation the 2016 Best ESG Energy Technology Team India Award.

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> TELEKOM NETWORKS MALAWI: BEST MOBILE OPERATOR SOUTH-EASTERN AFRICA 2016

An Internet service that just works.

All the time. Sounds simple enough, but in many parts of Africa even sending an email can be a frustrating exercise. Not so in Malawi.

Here, mobile phone operator TNM – Telekom Networks Malawi – rolled out its state-of-the-art 4G LTE network that ensures fast and reliable connections in Lilongwe and the surrounding area. Since its introduction, TNM’s fast-growing 4G LTE network has expanded to include Malawi’s four main urban areas, including Blantyre, Mzuzu and Zomba. The company is now well on track to offer nationwide coverage

by year’s end.

The new platform offers users not only access to services previously unavailable – such as video conferencing and streaming – but also offers significant cost savings. TNM has spared no effort at streamlining its interaction with customers, simplifying procedures and eliminating bureaucracy in a successful attempt to better engage with customers and improve overall user experience.

Living up to its corporate slogan Always with You, TNM was established in 1995 as a joint venture between government-owned

Malawi Telecommunications and Telekom Malaysia which sold its 60% stake in 2007.

TNM is now a wholly Malawi-owned company, listed on the country’s stock exchange.

The premier provider of mobile telecom services in Malawi, TNM is an important driver of the country’s sustained development.

The CFI.co judging panel congratulates TNM on the great strides the company has made. The judges are pleased to offer TNM the 2016 Best Mobile Operator South-Eastern Africa Award.

> MISYS: BEST FINANCIAL INSTITUTIONS TREASURY MANAGEMENT SOLUTIONS GLOBAL 2016

As the gradient of financial regulation steepens with time in order to keep up with the changing economic environment, there is an unsung hero of fin-tech: Misys.

With a customer base of over 600 banks, Misys digitally facilitates the simplification of complex issues faced by today’s financial services industry. The company prides itself on its cloud-enabled solutions; optimising liquidity, reducing risk, and managing operational processing.

The Misys bank treasury solution – Misys FusionCapital Treasury – is exceptionally promising, and leads the way in fin-tech; 110

traditionally, financial systems have been more or less static – while markets may rise and fall, the regulatory principles have rarely budged.

Amongst globalised capitalism, however, financial regulations are not only forced upon each other, but drive each other’s development, bringing endless challenges to the global financial system – and an increased need for system flexibility and cost reduction.

An astounding 86% of bank treasurers believe that their role has been significantly increased over the past five years.

This is mostly due to out-dated systems which are unable to keep up with the globalised CFI.co | Capital Finance International

landscape. The Misys solution allows consistent regulatory compliance – reducing financial risk – and facilitating pre-deal checks and an all-round understanding of current and future funding requirements.

There are few companies which display both an expertise in the understanding of the improvements needed within the financial industry and their technical application. The CFI.co judging panel declares Misys winner of the 2016 Best Financial Institutions Treasury Management Solutions Global Award.

Summer 2016 Issue

> BANKAOOL: BEST SME BANK MEXICO 2016

Whilst economists agree that small and medium-sized enterprises (SMEs) are formidable engines of growth and job creation, financial services providers seldom cater to the needs of this business segment. In Mexico, Bankaool aims to change that by offering entrepreneurs an array of products and services designed to allow smaller businesses to grasp opportunities and accelerate growth.

Bankaool recognises that even profitable SMEs often cannot meet the stringent requirements imposed by traditional banks. In order to remove hurdles and facilitate access to

credit, Bankaool has cut red tape and streamlined procedures. Most credit applications can now be submitted online with processing times reduced to minutes, instead of days or weeks. Thanks to Bankaool, Mexican entrepreneurs – from sole traders to sizeable businesses – can now easily obtain the credit needed to boost growth.

Bankaool is consistently found at the forefront of the drive to innovate Mexico’s financial services industry. The bank last year launched its digital and mobile platform to offer deposit accounts and term-deposits with an endto-end digital customer experience. The move

aims to deepen the bank’s market penetration – and broaden its footprint – by reaching Mexicans, both private individuals and small business owners, who are yet to be served by regulated banks.

By promoting financial inclusion and focusing on the huge and largely untapped potential of small businesses, Bankaool has carved out a promising niche that already now delivers sustainable growth. The CFI.co judging panel is delighted to hand Bankaool the 2016 Best SME Bank Mexico Award.

> GE CAPITAL AVIATION SERVICES: BEST AVIATION LEASING SOLUTIONS NORTH AMERICA 2016

GE Capital Aviation Services (GECAS), is a global leader in aviation leasing and finance with a presence in over eighty countries. The company’s services are far-reaching and provide finance/leasing options for fleet expansions, upgrades and interim solutions – not just for commercial airlines, but for offshore/mining industry, law enforcements and others as well.

GECAS is a world leader in engine leasing and parts financing/management. It also provides specialised advisory services under the company’s consultancy division AviaSolutions.

Serving over 270 customers globally

– including prominent airlines such as Air Canada, Virgin and Air China – GECAS is the largest commercial airline finance/leasing company in the world. Due to its large fleet size and range of finance and consultancy services, the company optimises its clients’ cash flow and provides flexibility in fleet management.

GECAS maintains close partnerships with aircraft manufacturers such as Boeing and Airbus in order to deliver the largest product portfolio of its kind containing over 2,000 aircraft. By sustaining these good relations, the company is able to offer direct benefits CFI.co | Capital Finance International

to clients – GECAS is the launch customer for Boeing’s 738BCF programme, as well as another aircraft scheduled for release later this year.

The CFI.co judging panel is impressed with the comprehensive array of aviation solutions available, the sheer selection of aircraft on offer, and the management team’s proven excellence in corporate relations. The judges are delighted to offer GE Capital Aviation Services the 2016 Best Aviation Leasing Solutions Award North America.

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> LEARN TO TRADE: MOST TRANSFORMATIVE FOREX EDUCATION PROGRAMME ASIA-PACIFIC 2016

Learn to Trade – a premier provider of courses – was launched in 2003 by an expert trader who managed to retire at age 27. While his life’s course was rather exceptional – and by no means representative – the learning company he founded now helps budding traders navigate markets responsibly and extract profit from volatility. Responding to strong demand, Learn to Trade has now expanded its corporate footprint to include the buoyant Asia-Pacific markets and offer traders there access to its learning programmes.

Learn to Trade trainers boast years of experience in forex trading and are eager to share insights, strategies and tactics with novice traders. The learning programmes show how to steer clear of common pitfalls, mitigate risks and identify opportunities. Driven by its clients’ success, Learn to Trade offers a number of cascading courses that explore markets and their behaviour in depth.

Learn to Trade courses present clear summaries that allow traders to instantly hone their newly-acquired skills on actual online

trading floors, thus offering a potentially profitable shortcut to deciphering markets and trends.

The CFI.co judging panel find much to commend in the Learn to Trade approach.

The firm has helped over 200,000 clients gain confidence as forex traders. By promoting sensible trading practices, Learn to Trade has established a stellar reputation as a platform that demystifies the forex business. The judges are pleased to name Learn to Trade winner of the 2016 Most Transformative Forex Education Programme Asia-Pacific Award.

> SYMANTEC: BEST CYBER SECURITY FIRM GLOBAL 2016

Founded in 1982, Symantec has grown to become a global leader in cyber security with one of the largest cyber-intelligence networks in the world.

With more than 11,000 employees in over 35 countries, Symantec has matured into the giant it is today through a combination of clever partnerships and acquisitions, expanding the company’s brand and technological reach along each step of the way.

Symantec’s $4.65 billion acquisition of Blue Coat is the latest example of the company’s astute decision-making. After 112

having changed Symantec’s direction away from information management with the sale of Veritas for $8 billion last year, the new CEO as of this April, Greg Clark, has been restructuring the company towards a sharper focus on security. The Blue Coat acquisition will not only add a new dimension to Symantec’s security facilities, but also help the company to grow substantially, adding an extra 15,000 or so enterprise clients.

Symantec’s recent acquisition of Blue Coat is innovative for a number of reasons; as online threats become more malicious, the CFI.co | Capital Finance International

PC Antivirus market has entered a deep decline with few security companies able to keep up with new types of attacks – especially on clouds and mobile devices. By adding Blue Coat’s networking and cloud-based security software, Symantec is becoming an impenetrable online fortress for clients.

Symantec has acted with such foresight that it will surely remain an industry leader for years to come. The CFI.co judging panel affably recognises this, and offers Symantec the 2016 Best Security Firm Global Award.

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> EUROBANK CYPRUS: BEST INTERNATIONAL PRIVATE BANK 2016

Seeking to establish long-term relationships with its clients, Eurobank Cyprus is a long-term partner to high-net-worth individuals, family offices, corporations and others in need of protecting and growing their wealth. Eurobank Cyprus’ Private Banking Division boasts an in-house team of seasoned professionals who consistently manage to successfully navigate the markets in both times of heightened volatility or extended calm.

The bank maintains an array of facilities to enable its analysts and traders to hone their skills, broaden their horizons and –

thus – keep their and the bank’s, leading edge.

Eurobank Cyprus has pioneered the Total Wealth Management approach – an integrated solution that ensures optimum results via a personalised subset of products and services designed to dovetail with client needs and requirements.

Plugged into world markets via a close-knit network of correspondent banks and with a large footprint in both Cyprus and Greece, Eurobank Cyprus has a truly global reach.

Thanks to short lines of communication and its integrated operational structure, the bank has the nimbleness to quickly respond to changing

market dynamics.

To best serve its select clientele, Eurobank Cyprus offers a number of specialised services to help with the acquisition of arts, yachts, real estate and other luxury purchases.

The CFI.co judging panel took note of Eurobank Cyprus’ holistic approach to private banking. Its customised flexible offerings ensure excellence in the delivery of services and safeguard their quality. The judges are pleased to offer Eurobank Cyprus the 2016 Best International Private Bank Award.

> RCBC: BEST SME BANK PHILIPPINES 2016

One of the largest privately-owned domestic banks in the Philippines, RCBC (Rizal Commercial Banking Corporation) serves over 7.4 million customers through 477 branches and 1,443 ATMs. The bank is the flagship business of the Yuchengco Group of Companies which is one of the largest conglomerates in Southeast Asia.

Since its foundation 56 years ago, the bank is able to offer its customers an exceptionally broad range of products and services. Amongst others, RCBC maintains a number of highly sought after facilities for small and medium-sized enterprises (SMEs)

such as revolving credit lines, letters of credit, trust receipt financing and pre and post-delivery financing options.

In a nation whose business landscape is largely composed of Small and Medium Enterprises (SMEs), RCBC embarked on initiatives to provide financial inclusion and stability to Filipino entrepreneurs by reaching the unbanked and underserved market whose growth has been stymied by their weak capital base and limited access to the financial market.

RCBC shifted paradigms and “went provincial” where growth opportunities abound but remained relatively untapped.

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RCBC also launched a special financing program aimed at empowering women entrepreneurs through its e-WMN Loan program. The main objective of this specialised loan program is to break barriers and challenge limitations that women entrepreneurs are faced with by expanding their access to financial services.

The CFI.co judges noted that RCBC’s commitment to the SME segment is a longstanding one. The judging panel is therefore pleased to grant RCBC the 2016 Best SME Bank Philippines Award.

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> PETROLEUM DEVELOPMENT OMAN:

OUTSTANDING CONTRIBUTION TO MANAGEMENT EXCELLENCE IN THE MIDDLE EAST 2016

A regional pioneer in enhanced oil recovery techniques, Petroleum Development Oman (PDO) has built-up a vast reservoir of expertise in the cost-efficient exploitation of hydrocarbon reserves. The company has established an impressive track record reinvigorating older wells via the application of gas, chemicals - or the injection of steam.

Leveraging state-of-the-art technologies and knowledge, PDO this year expects to continue to ramp up production and is confident that it will meet its new 600,000 barrels per day long-term oil production target set for 2019 well ahead of schedule.

Notwithstanding the slump in oil prices, the company – 60% state-owned – managed to exceed its targets in 2015. For example, it set a new combined oil, gas and condensate production record of 1.29 million barrels of oil equivalent per day. Although global oil prices have recovered to some extent from the 10-year lows set at the start of 2016, the operating environment remains extremely challenging for oil companies. PDO fully recognises the need to drive down costs without compromising safety and strives for continuous business improvements through its established Lean programme.

PDO is also actively engaged in creating sustainable employment opportunities for Omanis ranging from vocational jobs for school leavers through to roles for those holding post-graduate qualifications. It underwrites a number of initiatives that aim to tap into the talent pool already available in the Sultanate.

The CFI.co judging panel is pleased to announce Petroleum Development of Oman as the winner of the 2016 Outstanding Contribution to Management Excellence in the Middle East Award.

> SAEED MOHAMMED AL TAYER: OUTSTANDING CONTRIBUTION TO LOCAL EMPLOYMENT GCC 2016

HE Saeed Mohammed Al Tayer, MD & CEO of Dubai Electricity and Water Authority (DEWA) – globally recognised as one of the bestrun utility companies – is the driving force behind a number of innovative programmes aimed at expanding local expertise and contributing to the Emirate’s policy of affording UAE nationals every opportunity to partake in, and benefit from, growing economic prosperity.

HE Al Tayer launched a comprehensive policy that seeks to offer both job candidates and staff members ample facilities to 114

further the development of their careers. Thus, DEWA helps form a highly qualified domestic workforce able to maintain and improve the already high performance of the utility. Mr Al Tayer also encourages Emiratis of both genders to submit open job applications. The company provides scholarships and grants at a number of prestigious universities and academies.

Mr Al Tayer is transparent in his quest to reduce the number of foreign specialists in DEWA employ and replace them with equally capable UAE nationals. This process, the MD CFI.co | Capital Finance International

& CEO admits, is evolutionary in nature, as the utility jealously guards its hard-earned reputation for corporate and operational excellence.

The CFI.co judging panel has seldom encountered a company so committed to creating an enabling work environment. The judges applaud Mr Al Tayer’s role in transforming DEWA into a world class employer. The judging panel wishes to recognise Mr Al Tayer for his accomplishments and declares the DEWA MD & CEO winner of the 2016 Outstanding Contribution to Local Employment GCC.

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> Africa:

Mozambique - Busy Bee to Get Busy

By Tony Lennox

“I am the bee that will make honey for all,� said Filipe Nyusi at a rally just before winning the 2014 presidential election in Mozambique. The busy bee is a talisman for one of the poorest countries on the planet which has, against the odds, experienced a remarkable economic surge in the last decade through sheer hard work and dogged determination.

Mozambique: City hall and statue of Michel Samora in Maputo

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he authors of the Lonely Planet guide to Mozambique describe the country as Africa’s best kept secret. They urge travellers to experience its 1,500 miles of unspoilt Indian Ocean coastline and enjoy the African, Arabic, Persian, Indian, and Portuguese cultural influences on food, music, and art. Travelers are advised to do so “before word gets out.”

Lonely Plant’s reporters depict a tropical paradise with an upbeat atmosphere, overflowing markets, and great tourism potential. This view was reinforced by Henning Mankell, the late Swedish crime thriller writer and author of the Wallander books, who spent some time in Mozambique: “The wonderful Mozambican people have endured tremendous misery without losing their dignity and their positive outlook on life. Moreover, they have not lost their will to progress and develop. Mozambique is a country where the people never surrendered.”

GREAT HOPES It’s certainly true that Mozambique is among the continent’s great hopes, having bucked the postcolonial trend in the last decade, emerging from a long and destructive civil war and economic chaos. It is still, however, a long way from being a paradise.

Mozambique, an isolated outpost and remnant of Portugal’s overseas territories ringed by former colonies of the British Empire, fought a bitter battle for freedom, finally ending subjugation to far-away Lisbon in 1975. A Marxist-Leninist state was duly erected and received considerable support from Cuba and the Soviet Union. Economic collapse followed and led, almost inevitably, to civil strife.

The struggle between the Marxist Frelimo movement and Renamo – the anti-communist guerrilla group that enjoyed the support of white South Africa and neighbouring Rhodesia in the early 1970s – went on for seventeen years. The country emerged from its civil war thoroughly devastated.

The eventual peace agreement of 1992 has, by and large, held firm, though Renamo fighters “in the bush” continue to carry out sporadic attacks on government premises and convoys despite the “final” peace agreement of 2014.

Mozambique, while still one of the world’s poorest nations, is Africa’s fastest-growing economy, with GDP growing at a rate of approximately 7.5% annually. Only ten years ago, international creditors wrote off $6 billion of loans to the country as part of the Heavily Indebted Poor Countries (HIPC) initiative.

Since then, Mozambique has striven to root out corruption, passing new anti-graft laws in 2012; it also completely restructured the country’s legal and fiscal frameworks with a view to increasing revenues and improving the business climate.

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“The main drivers of growth are public expenditure and foreign investment. The country’s objective is to remain attractive to foreign investment while juggling its debt.”

The main drivers of growth are public expenditure and foreign investment. The country’s objective is to remain attractive to foreign investment while juggling its debt. Public debt currently stands uncomfortably at more than 50% of GDP. The Maputo Development Corridor – a reinvigorated road and rail link from the capital to South Africa’s northern provinces which has seen $5 billion worth of industrial investment in the last ten years – is also a testament to the resolve of Mozambicans to fight their way out of poverty. Mozambique’s continued growth would seem to be ensured by the recent discovery of vast natural gas fields off the northern coast.

There have even been cases of retro-migration whereby Portuguese citizens, fleeing their own country’s troubled economy, have emigrated to Mozambique to set up businesses.

AVOIDING THE RESOURCE CURSE Some observers are now voicing concern.

Elisabete Azevedo-Harman, a research fellow at Chatham House and an expert on Mozambique, says: “Major new gas and mineral finds promise a shot at greater prosperity, but also hold the threat of a resource curse.”

The term was coined in the early 1990s to describe the paradox of countries rich in natural resources but unable to convert their boosted revenues into a general economic wellbeing, seeing a rise in corruption instead.

The curse appeared to be evident when, in April this year, the Mozambique government disclosed previously hidden, government-guaranteed loans exceeding $1 billion to state defence and security companies.

The International Monetary Fund (IMF), which has been working with the government in Maputo to help it repay a previously undisclosed debt, suspended a second instalment of a multimillion dollar loan to the country. IMF Managing-Director Christine Lagarde said there was more than a whiff of corruption about the loans scandal.

The cut in foreign aid, combined with a fall in global prices for some of Mozambique’s export staples, has led to a foreign exchange crunch.

The Mozambican metical has fallen heavily against the South African rand. Because South Africa provides most of Mozambique’s imported food, the devaluation has caused food prices to rise sharply.

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The root problem affecting Mozambique is, quite simply, poverty. More than 75% of the population lives in the rural areas of the country and, of those, many are subsistence farmers, surviving on the proceed of a single hectare of land and a hoe – not unlike their grandparents did before them. The huge state-owned farms of the early Marxist-Leninist period were neither productive nor profitable. The massive commercial farms of the capitalist era also disappoint.

CHICKENS AND BEER The recent book Chickens and Beer: A Recipe for Agricultural Growth in Mozambique, coauthored by Joseph Hanlon and Teresa Smart, points to a possible solution to the farming dilemma. “It is always assumed that bigger mechanised farms are more efficient than smaller ones,” write the authors. “But research shows that for farming there are few economies of scale and that smaller plots can be as productive as large ones.”

The chickens and beer of the book’s title refer to the number of small and medium-sized agricultural businesses that have blossomed producing these two commodities. Cotton and tobacco, two of the country’s biggest exports, are also farmed in the main by similarly small commercial farmers, not big foreign-owned plantations.

But these new agriculture SMEs (small and medium-sized enterprises), which could help eradicate rural poverty, need financial support to get off the ground, say the authors. General economic success will not happen unless there is a fundamental restructure of the country’s agricultural sector.

Currently, life expectancy for men is just about fifty years, while women on average can expect to live only two years longer. Four out of ten people have are infected with HIV. While the country is mainly Christian, many people, particularly outside the towns and cities, still believe in witchcraft. Every year there are reports of dozens of people being lynched as witches in the countryside.

Some commentators see a link between the belief in witchcraft and the economy. The victims of village reprisals are invariably old people whom the younger members of the community accuse of “casting spells” to ruin their chances of employment.

Despite the many hurdles that lie ahead, however, Mozambique is pinning its hopes on the newly-discovered off-shore natural gas deposits. The hope is that foreign companies will flock to Mozambique, despite the current debt crisis.

Nevertheless, President Nyusi has, so far, retained the confidence of foreign investors. He will now need to become a very busy bee indeed to steer his country back on track. i

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> CFI.co Meets Assupol:

Rudi Schmidt & Bridget Mokwena-Halala

A

ssupol CEO Rudi Schmidt, director of Assupol Holdings since January 2011, steers a company that has bucked the trend and thrives in an otherwise challenging economic environment.

The century-old South African insurance company is widely recognised as an island of corporate excellence.

Assupol is also known for its pioneering role in transforming South Africa’s insurance industry by introducing a number of novel concepts and steadfastly keeping the customer at the centre of all corporate activities. Service excellence and attention to detail have paid off: Assupol is amongst South Africa’s best-run companies.

It is also considered one of the country’s best places to work and consistently ranks high in brand recognition and customer appreciation. Mr Schmidt explains how Assupol attained the top.

“All our business units showed strong growth and achieved impressive results with Assupol Life and Cornerstone reporting their highest sales growth in our history.”

Rudi Schmidt, CEO Assupol Group

“While our 2015 financial year took place against the backdrop of an extremely challenging South African economy, Assupol performed remarkably well in spite of the underlying stresses and weaknesses in various elements and categories of the private and public sectors.”

“All of our distribution channels – franchises, field agents, brokers and direct marketing – achieved double digit sales growth, enabled sales to rise by an impressive 29% on the previous year.”

Bridget Mokwena-Halala, CEO Assupol Life

“Our brand has grown significantly and we have gained substantial market share over the last five years, we have continued to place emphasis on our core competencies. Our focus has been and continues to be on understanding our market better than our competition. We are leaders in

Assupol Group CEO: Rudi Schmidt

Assupol Life CEO: Bridget Mokwena-Halala

our chosen market segment – leaders in product design and delivery, leaders in exceptional client experience, and a leading employer, enabling us to attract and keep great people.”

“While we remain very much focused on our core and traditional markets by serving those who serve, increasing emphasis is going into developing additional and alternative markets in the nongovernment employee space. This also requires investigating and developing alternative distribution channels and models. Considerable focus is also going into our group schemes unit which has been restructured and is now well-positioned to play a role in providing niche offerings, especially at the lower end of the market where there is a need for competitively priced and engineered solutions that will even cover scheme members who do not have traditional bank accounts.”

Bridget Mokwena-Halala, CEO of Assupol Life, emphasises that Assupol has always strived to treat its customers fairly: “With the arrival of Treating Customers Fairly (TCF) legislation, we decided to come up with an innovative strategy to maximise the awareness and participation of our staff.

This was achieved through setting up an exciting competition between departments, each of them needing to come up with a creative interpretation of TCF which had then to be presented to a judging panel. The competitive nature of this challenge brought out the best in our people who came up with some excellent ideas.”

Mrs Mokwena-Halala notes that the Assupol’s transformation journey is making considerable headway as well: “Our latest figures show that 63% of our top 10 sales representatives are black South Africans and 37% are white – back in 2001, the percentages were exactly the other way around. Transformation is something that we at Assupol are passionate about – and we are certainly heading in the right direction in terms of both race and gender measures.”

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CONFIDENCE IN FUTURE Group CEO Rudi Schmidt concludes that “looking forward, Assupol remains focussed on its core competitive advantages and believes that the chosen markets still offer significant potential for growth. In addition, we will continue to seek alternative distribution channels and partnerships that are highly aligned with our core competencies - and we do not exclude the possibility of suitable acquisitions if opportunities arise. However, we are fully aware of the difficulties of finding opportunities that offer the required rate of return and meet the long term strategic objectives of the group.” i 119

> Assupol:

Transforming South Africa’s Insurance Industry

S

outh African insurer Assupol can trace its roots back to 1913 when a group of South African policemen started collecting contributions for bereaved families of colleagues who had passed on. This informal tradition led to the establishment of the South African Police Provident Fund which later became known as Assupol. The company celebrated 100 years of existence in 2013.

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Assupol registered as a life insurer in 1960. In the 1990s, the company spread its wings into the open market, to become a full-fledged life insurer. Its core market is the government sector, but the company is steadily making progress in penetrating the private sector, including the middle-income demographic.

Throughout the years, the business has seen CFI.co | Capital Finance International

many changes, the most significant being the demutualisation. In December 2010, Assupol Life was successfully demutualised and converted into a public company. This led to the formation of Assupol Holdings Ltd and Assupol Investment Holdings (Pty) Ltd. Assupol’s demutualisation is the biggest wealth distribution yet by an unlisted company in South

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Africa. Approximately 400 million shares in Assupol Holdings were allocated to qualifying policyholders (90% of them from previously disadvantaged communities) and staff, and nearly R900 million was paid out in 2013 to those who elected not to keep their shares.

Assupol’s success has always been due to its aim to provide relevant and affordable insurance products and the company remains committed to “serving those who serve”. The company takes pride in pursuing a markedly proactive approach in looking out for the interests of policyholders.

SLASHING RED TAPE Assupol revolutionised the South African insurance business by aggressively reducing red tape and slashing the processing times of claims. The company maintains a number of programmes and initiatives with a view of adjusting corporate policies to best serve its clients. Though Assupol has significantly expanded its niche in the higher-income segment via the excellence of its services, most of the company’s policyholders have but limited means at their disposal to cover emergencies.

Recognising this, Assupol has expended much effort in making sure its clients have the means to face life’s challenges. Immediately upon receipt of a valid claim, an initial payment is authorised in order that a policyholder may meet initial expenses. The full amount of the claim is settled soon thereafter with a bare minimum of processing.

Assupol’s unique approach, now being copied by much larger insurers, has done much to fortify the reputation of South Africa’s insurance industry. The company is keen to keep in touch with policyholders and operates a large network of branch offices and local agents in order to ensure close proximity to clients. By maintaining short lines of communication, Assupol also promotes corporate transparency. Via a variety of product brochures and reports, clients and other stakeholders are continually appraised of the latest developments.

“Assupol’s demutualisation is the biggest wealth distribution yet by an unlisted company in South Africa.”

COMMITMENT TO COMMUNITY As a highly committed and involved corporate citizen, Assupol maintains the Assupol Cares initiative that bundles the company community projects. Initiated as a direct result of its successful demutualisation process, the Assupol Community Trust was established to make a meaningful contribution to society and the communities in which the company is represented prior to demutualisation. Assupol had a certain grouping of policyholders who had contributed to the value of the company, but could not be individually identified.

As a result, it was proposed that the communities from which these individuals came from should benefit and it was so approved by the High Court. Importantly, it CFI.co | Capital Finance International

was decided that the Trust needed to have a specific focus to maximise its impact. The Trust’s purpose and mission is Early Childhood Development (ECD), certainly one of the most vital areas of need in our country.

The trust owns 25.2 million Assupol shares which were allocated to it as part of the demutualisation. The dividends from these shares have started to flow to the Trust, enabling it to fund its ECD interventions.

The five trustees – Bridget Mokwena-Halala (chairperson), Taurai Muranda, Tebogo Malatji, Ntjantja Ned, and Célest van Niekerk (executive trustee) – are overseeing the trust’s operations.

Assupol is excited about the role that the Trust will play in improving prospects for children, who are the adults of tomorrow.

Now in its fifth year of existence, the Assupol Cares Employee Initiative demonstrates the genuine compassion and strong spirit of Ubuntu that exists within Assupol. Employees not only provide the funds, they also oversee the entire initiative, from receiving requests for assistance to deciding on which applicants to benefit, to appointing project managers to run selected projects.

A committee meets once a month to evaluate applications and make financial allocations.

Funded, managed, and monitored by Assupol staff – with a matching financial contribution from Assupol head office every six months – this initiative has a broad focus and benefits worthy recipients in communities located in various parts of South Africa.

Ideally, Assupol branches across the provinces are involved in finding suitable beneficiaries in their local communities. Complementing the financial contributions made by the company’s employees is the generous time and effort they put into making their projects so worthwhile and successful.

CORPORATE SOCIAL INVESTMENT (CSI) PROJECTS CSI projects have grown significantly over the past few years. Assupol’s major CSI projects have been focused on Mandela Day, the Nellmapius soup kitchen, and Kwasa school.

The emphasis continues to be on assisting young people, but Assupol’s projects have also broadened their reach to other beneficiaries.

While Assupol fully supports the concept of giving 67 minutes back to society in recognition of what Nelson Mandela did for the country, the company continues to ensure that it does a lot more than this through regular financial and staff volunteering assistance at the Nellmapius soup kitchen and various other identified projects. Going forward, Assupol will implement and assess its clearly defined CSI policy that incorporates critical elements such as sustainability and resilience with the emphasis on helping people to help themselves. i 121

> National Bank of Commerce:

Supporting Citizenship in Tanzania

I

n 1988, the government of Tanzania formed a presidential commission on banking under the chairmanship of the former BOT (Bank of Tanzania) Governor Charles Nyirabu. The reasons for the formation of this commission was threefold:

The third reason was a non-declaration of dividends by the banks.

First, the banking industry was performing very poorly. Increased losses and non-performing assets (NPAs) resulted mainly from lending to financially distressed parastatals and cooperatives.

Since the government had invested in those banks, it expected to get a return from its investments. However, due to poor performance, the government-owned banks and financial institutions could not declare profits and pay dividends. Despite the failure of many banks during this period, National Bank of Commerce (NBC) has remained solidly in place as one of the leading financial institutions in Tanzania.

Second, there was an increase in the subsidies to the banks which were a burden to the government.

In 2000, the government decided to privatise NBC and, in April 2000, ABSA Group of South

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Africa acquired a majority stake in the bank (55%). The government retained its share (30%), whilst the International Finance Corporation – the investment wing of the World Bank - acquired 15%. The NBC brand, and indeed its legacy, continued to grow under the new ownership structure.

PRODUCTS NBC has now 52 branches located in economically viable areas of the country offering much needed financial services to its customers and Tanzanians at large. To complement the NBC branch network, the bank deployed over 240 EMV compliant ATMs and 150 points of sale. The

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bank now offers secured chip and pin VISA cards allowing customers to access a much wider network of ATMs and POS worldwide.

MARKET NBC is one of the largest commercial banks in Tanzania with 52 branches in retail centres and major towns throughout the country, 250 ATM’s and over 500,000 clients. NBC is the oldest bank in Tanzania and its heritage dates back to 1967. In April 2000, NBC was privatised and sold to ABSA Group in South Africa. NBC is a bank that caters to customers from all walks of life and appeals to mass consumers as well as local entrepreneurs and companies doing business in Tanzania. It is truly the country’s National Bank.

RETAIL BANKING NBC Retail Business targets its customers via a segmented approach: a tailored way of servicing their customers in private, privilege, and personal segments. NBC’s payroll/salary scheme focuses on the NBC Direct proposition which is a comprehensive banking solution for employees designed to offer increased convenience, flexibility, and a range of benefits that will make employees’ experience with NBC even more exceptional.

Many people in Tanzania still live in rural communities and don’t have access to a bank or even an ATM. NBC’s ability to offer mobile financial services through all the major telecoms has brought the bank closer to these communities. NBC offers a full range of banking services in the following areas: NBC Personal Banking offers one-stop banking for personal accounts, student accounts, business accounts, and children’s accounts.

With NBC Personal Banking customers can acquire loans as well as obtain insurance covers for themselves and their property through tailor made products. Savings accounts, current accounts, fixed deposits, group loans, personal loans, unsecured loans, Internet banking, payroll processing and segmented banking services, mobile banking, and merchant services.

“NBC is one of the largest commercial banks in Tanzania with 52 branches in retail centres and major towns throughout the country, 250 ATM’s and over 500,000 clients. NBC is the oldest bank in Tanzania and its heritage dates back to 1967.”

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NBC Benki Nilipo provides service to customers with a unique experience, convenience, and security. Customers can now access banking services anytime, anywhere, within or outside the country through NBC digital products.

Cash deposit services are available on a 24/7 basis through the NBC deposit-taking ATMs deployed across the country.

NBC became the first large bank to launch smartphone and tablet banking in Tanzania.

NBC also became the first bank in the Tanzanian market to roll out deposit-taking ATMs across the county.

TREASURY AND MARKETS NBC Treasury provides foreign exchange solutions such as spot and forward foreign exchange in all major currencies against the 123

Tanzania shilling (TZS) at competitive prices.

Moreover, NBC Treasury provides investment solutions such as call and fixed deposits in TZS, EUR, GBP, and ZAR. With its highly experienced team, NBC Treasury has the capability to offer solutions in the management of exchange rates, interest rates, and commodity price risk by providing a variety of innovative hedging solutions that include interest rate swaps (IRSs), cross-currency swaps (CCSs) and FX options.

Customers can use NBC debit cards in more than 24 NBC ATMs and at over 150 points of sale, including hotels, shopping centres, supermarkets, and hospitals across the country.

CORPORATE AND INVESTMENT BANKING NBC corporate and investment specialist teams cover major industries including oil and gas, mining and metals, commodities, telecoms, infrastructure and public sector, and power and energy with experience and knowledge to support their clients’ diverse financial needs.

Their Global Relationship Model ensures their business has access to the group’s global capabilities with in-country relationship teams and product specialists having extensive knowledge of local markets. These teams are able to provide flexible financial services with the stability and reliability that customers would expect.

Other services offered include international financing, structured trade and project finance, commercial property finance, export and import credit finance, and guarantees including bid bonds and performance bonds.

NBC also offers cash management services with call deposits in both Tanzanian shillings and US dollars, easy collection of cash and cheques through the NBC Cash Service and the NBC Courier Service which provides a dedicated courier that collects and delivers non-cash items to and from the bank on behalf of client.

ISLAMIC BANKING NBC established its Islamic banking services in May 2010. At the time of its launch, NBC was one of only two banks in Tanzania and the first local bank to offer Islamic banking. It has since grown to expand its product portfolio to include both transactional products as well as lending products. To date, NBC is the only bank in Tanzania offering Islamic financial services.

In 2012, NBC Islamic Banking launched a Hajj promotion. This was a marketing promotion aimed at publicising NBC’s Islamic Banking offerings by running a draw for customers under certain products and rewarding them with a once-in-a-lifetime, all-expenses-paid trip to Hajj in Makka, Saudi Arabia. This campaign was the first of its kind to be run by a financial institution in Tanzania.

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In 2014, NBC became the first Tanzanian bank to offer exclusive services to its Islamic Banking high-net worth individual customers through the bank’s private banking suite by introducing the Islamic Affluent Current Account.

The product allows the customer access to certain privileges such as priority service in the branch network, discounts, personalised service through dedicated relationship managers, preferential rates on FX and other products, and many other benefits.

Most recently, NBC Islamic Banking launched an Islamic forward exchange product for corporate and business clients.

ACHIEVEMENTS • NBC has received a number of awards and nominations: • 2005 The BOT Bankers Awards Category: Corporate Bank of the Year • 2005 The BOT Bankers Awards, Category: Special Technology Award • 2008 Amongst seven final nominees, Category: African Banker of the Year Awards • 2009 Winner African Banker of the Year, Category: Best Local Bank in Africa • 2009 Tanzania Revenue Authority Awards, Category: Compliant Large Tax Payer • 2010 Amongst five final nominees, Category: Best Local Bank in Africa • 2010 Deutsche Bank, Category: USD STP Excellence Award • 2015 The Asian Bankers Awards, Category: Best Retail Bank in Tanzania Award • 2015 Superbrand East Africa Award CITIZENSHIP AGENDA In 2013 – 2015, the NBC Citizenship approach was focused on helping the youth of Tanzania achieve their objectives by coaching them in the NBC Core Citizenship Pillars: entrepreneurship, financial literacy, and employability. This agenda was implemented through strategic partnerships with non-governmental organisations with a focus on disadvantaged youths living in vulnerable areas.

The NBC Citizenship Agenda touched about 529,883 lives in 2015 alone through the mobile clinic services and various entrepreneurship programmes. Mind sets were transformed and youths learned that there are more ways than one in which they can strive to build their lives without having to get involved in indecent means of living becoming victims of social vices.

As NBC continues its journey in executing the citizenship plans across the bank’s network, the corporation continues to recognise the need to simultaneously develop a bolder and more business integrated approach to citizenship; one that builds on the strong citizenship foundations NBC has already established. This will be implemented through NBC’s Shared Growth Strategy which is expected to be launched in 2016. i CFI.co | Capital Finance International

Summer 2016 Issue

> CFI.co Meets the Managing Director of Tradex:

Perrial Jean Nyodog

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radex Managing Director Perrial Jean Nyodog knows the hydrocarbon business inside out. He manages the Cameroon oil and derivatives trading company since 2000. During his time at the helm, Mr Nyodog has implemented and maintained a carefully designed strategic diversification plan which resulted in sustained corporate growth and guided Tradex into the key position it currently holds in Africa’s fast-developing and increasingly sophisticated oil market.

Mr Nyodog also holds a seat on the board of directors of Tradex Centrafrique and presides the board of the company’s subsidiary in Chad – Tradex Tchad.

Additionally, Mr Nyodog is president of the board of insurance company GMC (Garantie Mutuelle des Cadres) and sits on the boards of the Société Camerounaise de Dépôts Pétroliers (SCDP) and the Caisse de Stabilisation des Prix des Hydrocarbures (CSPH) – the Cameroonian hydrocarbon price stabilisation fund.

Upon graduation from Institut Français du Pétrole (IFP), Mr Nyodog joined the State-owned Société Nationale des Hydrocarbures (SNH) - established in 1980 and charged with selling the governement’s share of Cameroon’s oil output - in its Exploration Department, in 1983. However, soon after Mr Nyodog moved to the commercial side of SNH operations and became a specialist in the global oil trade, with an emphasis on the intricacies of negotiating, drawing up, and implementing international commercial contracts. In 1997, Mr Nyodog is made director of Hydrac – a wholly-owned subsidiary of SNH. In 1981, Mr Nyodog obtained a degree in Electromechanical Engineering from the prestigious École Nationale Supérieure Polytechnique (Polytechnic) of Yaoundé. Subsequently, he enrolled at the Institut Français du Pétrole (French Petroleum Institute) in RueilMalmaison near Paris from where he graduated in 1983 as a geophysical engineer. Mr Nyodog also obtained an International Trade degree from Oxford. i

Managing Director: Perrial Jean Nyodog

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> Tradex:

A Companion for Individuals, a Partner to Industry

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radex distributes a wide selection of petroleum products in Cameroon and West and Central Africa. The company has become a powerful force in Cameroon and is actively pursuing its regional development and sector diversification.

One of the company’s medium-term goals is to increase its services to industry and boost its participation in major infrastructure projects.

Founded in 1999 and with the Société Nationale des Hydrocarbures (SNH) as a majority shareholder,

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Tradex pursues its corporate development with a view to becoming a major player in key segments of Africa’s oil industry. Initially, the company focused on sales before starting to diversify and branch out into supply and bunkering operations (maritime and aviation) in 2002. Tradex entered the distribution sector four years later. The company has since expanded beyond Cameroon’s borders, becoming a key player in the sale of petroleum products in the ECOWAS (Economic Community of West African States) zone which comprises fifteen states and includes regional powerhouses CFI.co | Capital Finance International

such as Nigeria, Senegal, and Côte d’Ivoire.

DENSE DISTRIBUTION NETWORK Pursuing its expansion policy over the past two years, Tradex now has 57 service stations in Cameroon, up from 32 in December 2011. Four new ones were built in 2015, allowing the company to boost its market share to approximately 22% compared to 14% three years earlier. This makes Tradex service stations more successful than those of its competitors, including those of multinational oil companies.

Summer 2016 Issue

KEY INFRASTRUCTURE PROJECT PARTNER In April 2012, Tradex became the fuel supplier for Camair Co, Cameroon’s national airline, joining the small circle of companies approved for the supply of aviation fuel. A month earlier, Tradex won a contract to supply fuel products and lubricants to CWE – a Chinese company building the Lom-Pangar hydroelectric dam. Since then, Tradex has continued to increase its partnership with construction companies and on strategic building sites. Since 2014, the company has supplied petroleum products and lubricants to the China Communications Construction Company Ltd (CCCC) for its building projects such as the Kumba/Mamfe Road and a stretch of the YaoundéNsimalen urban motorway.

ALLY OF MANUFACTURERS Tradex is the exclusive supplier to many other strategic building sites, including the Kribi deep water port, the Memve’ele and Mekin hydroelectric dams, the Mobilong diamond mine project, the second bridge over the River Wouri, in addition to numerous road-building projects. Tradex is also a trusted partner of most of the largest companies operating in Cameroon in strategic areas such as power generation, hydrocarbon exploration and production, merchant marine, construction, public works, mining, and the agro-industry.

SOCIAL IMPACT Tradex maintains a number of initiatives to contribute to Cameroon’s societal development and growth. Corporate social responsibility (CSR) sits at the centre of the company’s operations and, indeed, forms part of its mission. Trade is widely recognised for responding quickly and positively to social needs and aspirations. The company focuses its CSR efforts on promoting traffic safety, education, public health, sports, culture, the environment, and the ongoing fight against poverty and want.

In order to help save lives of motorists and their passengers, Tradex has organised a number of campaigns to raise public awareness of highway safety. The company supported largescale effort to distribute safety helmets amongst motorcyclists. Tradex also supports an increasing number of non-profit organisations that provide help to disadvantaged and marginalised people.

The company also actively supports government efforts to better equip schools and other institutes of learning.

“Since the opening of the first Tradex service station in 2006, the company has created well over 2,300 full time employment positions in Cameroon, Chad, and the Central African Republic.”

HIGH PROFILE IN AFRICA In 2014, Tradex launched its distribution network in Chad, where it has been active through a local subsidiary since 2004 with two service stations.

Since 2006, the company has also added some twenty service stations in the Central African Republic to which it exports petroleum products.

Always on the lookout for new opportunities, Tradex is open to any investment opportunity in Africa, especially in the ECOWAS sub-region and the WAEMU (West African Economic and Monetary Union) zone.

CFI.co | Capital Finance International

Tradex’ growing network of service stations in both urban and rural areas create numerous job opportunities for local populations. The company ensures that its workers enjoy full legal protection and good labour conditions. Corporate actions and processes are consistently inspired by a sense of fairness. Since the opening of the first Tradex service station in 2006, the company has created well over 2,300 full time employment positions in Cameroon, Chad, and the Central African Republic. i 127

> UNCDF “What Did We Learn?” Series:

UNCDF MicroLead Expansion Innovations Reaching Low Income Markets and Empowering Rural Women Increasing the capacity of financial institutions to provide low-balance savings accounts and reach low-income clients in developing countries with technology-driven products has become an important objective for locallybased financial inclusion practitioners in recent years.

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o support this objective, in 2009 the United Nations Capital Development Fund (UNCDF), in partnership with The Bill & Melinda Gates Foundation, initiated a flagship $27 million global microfinance programme to provide loans and grants on a competitive basis to microfinance institutions, commercial banks, and financial cooperatives based in developing countries and pursuing a savings-based approach to expand operations to underserved markets. Savings, rather than credit, allow poor people to build a safety net to help them weather shocks and climb out of poverty. Savings by women leads to their empowerment, keeping kids in school, and better health outcomes.

In September 2011, in partnership with The MasterCard Foundation, UNCDF launched the expansion of MicroLead via a US$ 23.5 million six-year programme to increase access to financial services, particularly savings services, to a minimum of 450,000 low-income people in rural markets of Sub-Saharan Africa (SSA). Today, MicroLead is a $60 million programme, cofinanced by UNCDF, The MasterCard Foundation, The Bill & Melinda Gates Foundation, and LIFT Myanmar.

The MicroLead Expansion programme has been recently evaluated by specialised evaluation firm Micro-Credit Ratings International Limited, which assessed the relevance, efficiency, effectiveness, sustainability, and likely impact of the programme.

Under MicroLead Expansion in SSA, twelve projects in ten Sub-Saharan African countries received grants for a total of $16.5 million. The projects selected included – amongst others – downscaling of banks and the establishment of greenfield institutions; financial cooperative creation and strengthening; informal savings group linkages to formal financial institutions, MFI transformation into deposit-taking institutions, human-centred product design, and

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“MicroLead is a key programme at UNCDF in support of last mile finance, domestic resource mobilisation, and women’s economic empowerment.” deployment of alternative delivery channels such as mobile money, rural agents, susu collectors, and point of sale devices.

The evaluation concluded that the MicroLead Expansion programme is well on-track to meeting the overarching goal of increased outreach of 450,000 additional low income depositors by 2017. As of March 2016, financial service providers supported by the programme developed 25 financial products with outreach to over 650,000 active voluntary depositors, with an aggregate deposit balance of $21 million. It also concluded that MicroLead’s savings-led financial inclusion strategy has the potential to make a significant contribution in countries where exclusion is high and financial depth is limited.

“Being able to bring banking services to the doorstep of an uneducated rural woman who fears entering a bank hall and seeing the transformation which these services bring to her and her family is what drives all of us on the MicroLead team,” said Pamela Eser, programme manager of MicroLead.

The evaluation recommended that the programme continue its efforts in building links between its financial service providers and informal savings groups; promoting digital financial services as a way to decrease the cost of providing services to rural populations; and ensuring financial service providers embed further financial education concepts when interacting with their clients.

“MicroLead is a key programme at UNCDF CFI.co | Capital Finance International

in support of last mile finance, domestic resource mobilisation, and women’s economic empowerment,” said Henri Dommel, director of the Financial Inclusion Practice Areas at UNCDF. “We look forward to further deepening our engagement on reaching women with customercentric products and services through digital and other technological means, thus bringing down the cost to provide inclusive financial services by financial service providers as well as the cost to access them by under-served populations,” he added.

WHAT DID WE LEARN? • Linking informal savings groups to digital is an option that more and more financial service providers are employing to reach rural markets. Financial service providers continue to experiment with different models to understand what works most effectively and efficiently.

• Options on types of agent network deployment vary. Three routes being pursued by financial service providers include (i) a proprietary agent network implemented by the financial service provider where there is no aggregator (Caisse d’Epargne et de Crédit Cameroun) or when the financial service provider has the internal capacity to do so (NBS Bank Malawi); (ii) the reliance on the Mobile Network Operator agent network when there is a third party/aggregator (UGAFODE Uganda, Mwanga Community Bank Tanzania); (iii) a hybrid model, where the financial service provider uses both its own agent network and Mobile Network Operator agents such as in the case of Fidelity Bank Ghana.

• Mobile money remains an emerging trend, both as a value added service to reach and retain customers and also as a revenue stream for the financial service providers.

• Account dormancy is a constant issue as financial service providers learn (i) the importance of monitoring activity rates of accounts and (ii) how to encourage customers to transact regularly.

• Agent management is the next frontier for financial service providers expanding into

Summer 2016 Issue

In the DRC, one of the world’s poorest countries, where only 1% of the population has access to a bank account, UNCDF’s MicroLead Programme is helping Opportunity International bring safe and affordable access to financial services. Opportunity International Trust Group members in the Democratic Republic of Congo meet weekly to repay their loans and receive training in financial literacy from their loan officer. As a group, these women have pledged to guarantee each other’s loans and support one another’s businesses. Because collateral is not necessary, credit becomes available to those previously locked out from formal financial services. © Opportunity International

In roughly three years, the microfinance institution Buusaa Gonofa in Tanzania has gone from zero depositors to reaching 67,000 savers, out of which more than 20,000 are served through daily doorstep collection services by staff using pointof-service devices. © UNCDF/Ivana Damanjov

agent banking. Financial service providers must understand how to recruit, train, and monitor agents while supporting, incentivizing, and integrating agents into their daily business.

• Increasing customer financial capability through financial education can be labour intensive and expensive, especially for financial service providers targeting informal savings groups. Financial service providers are working on different strategies to provide cost-effective financial and mobile education.

ABOUT UNCDF UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

UNCDF’s financing models work through two channels: financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and by showing how localised investments — through fiscal decentralisation, innovative municipal finance, and structured project finance — can drive public and private

In Juba town in South Sudan, a client of Finance South Sudan Limited, one of MicroLead’s grantees, has been able to increase her tailoring works and income as a result of loans. ©

A small loan helped this woman in Juba, South Sudan, increase the productivity of her business selling charcoal. She is a microinsurance client of Finance South Sudan Ltd, a grantee of MicroLead, the LDC Fund to Develop Savings-led Market Leaders for Inclusive Finance. Through this global UNCDF initiative, microfinance institutions have served some 236,000 depositors and 61,000 borrowers as of 2012. © Emma Kandelaars/Finance South Sudan Ltd

funding that underpins local economic expansion and sustainable development.

By strengthening how finance works for poor people at the household, small enterprise, and local infrastructure levels, UNCDF contributes to SDG 1 on eradicating poverty and SDG 17 on the means of implementation. By identifying those market segments where innovative financing models can have transformational impact in helping to reach the last mile and address exclusion and inequalities of access, UNCDF contributes to a number of different SDGs. For more information, visit www.uncdf.org, follow @UNCDF, and subscribe for updates at ow.ly/ CA0Qy.w ABOUT MICROLEAD MicroLead Expansion in Sub-Saharan Africa, a 5.5 year UNCDF Global Programme in partnership with The MasterCard Foundation (MCF), aims to increase access to savings-driven microfinance to a minimum 450,000 low income individuals, half of whom are women and half of whom reside in rural areas. The programme’s intention was to attract experienced institutions or networks from developed and developing countries to increase the capacity of financial institutions providing low balance savings either through the provision of technical assistance to financial service providers (FSPs) or through CFI.co | Capital Finance International

the establishment of Greenfield institutions.

MLE also has a strong focus on harnessing the potential of technology driven alternate delivery channels (ADCs) and financial education in broadening outreach to financial services. For more information, visit uncdf.org/en/microlead and follow @UNCDFMicroLead ABOUT THE MASTERCARD FOUNDATION The MasterCard Foundation works with visionary organisations to provide greater access to education, skills training, and financial services for people living in poverty, primarily in Sub-Saharan Africa. As one of the largest, independent foundations, its work is guided by its mission to advance learning and promote financial inclusion in order to alleviate poverty.

Based in Toronto, Canada, its independence was established by MasterCard when the foundation was created in 2006. For more information, please visit www.mastercardfdn.org or follow it on Twitter @MCFoundation i

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> PwC:

Technological Innovation to Drive Growth in Africa’s Agribusiness

By Frans Weilbach

Currently, agriculture is standing on the edge of a second green revolution.

This revolution will entail fundamental shifts in how the agricultural sector uses and implements innovative technology to improve output in a sustainable manner and address the need for greater food security globally.

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nnually, PwC produces a publication for agribusinesses in Africa with insights gained from agribusinesses CEOs working in Africa. While the Africa Agribusiness Insights Survey 2016 provides insights into the strategic challenges that CEOs face in their agribusiness, it also highlights areas where technological innovation is already taking place and where it can make a difference in the future. In addition, the survey provides viewpoints on the agricultural sector in South Africa, Nigeria and Kenya.

Africa’s economic performance over the past decade has been remarkable, showing an average growth rate of 5%. If this growth rate is maintained, projections indicate that Africa’s GDP could increase approximately threefold by 2030. The agricultural sector is regarded as one of the most critical industries for the African continent due to its economic potential.

According to the World Bank, it may potentially become a $1 trillion industry in sub-Saharan Africa alone by 2030.

New geographical markets are seen as opportunity

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“Africa’s economic performance over the past decade has been remarkable, showing an average growth rate of 5%.” by agribusiness owners for business expansion.

More than half of respondents (58.8%) taking part in the survey consider investment in Africa as an opportunity for their businesses to expand.

The top four countries they are planning to invest in are Zambia, Botswana, Tanzania, and South Africa. However, agribusiness owners also cited a number of challenges to cross-border expansion into Africa. These include: inefficient and bureaucratic governments; policy instability; corruption, crime and theft; and cross-border regulatory requirements.

As for expectations regarding revenue growth, survey respondents are less optimistic about their growth over the next twelve months compared with their expectations a year ago. The majority of agribusinesses (46.2%) are expecting revenue growth of between 0-5%, and 26.9% of businesses expect it to be between 6-10%.

CFI.co | Capital Finance International

The biggest challenges to business growth cited by business leaders were access to technology, the scarcity of natural resources and supply-side uncertainties. African agribusinesses also feel that there is a long way to go toward better support from government in the sector. For example, businesses are of the view that government does not offer sufficient tax incentives to ensure international competitiveness. Furthermore, they say government is not doing enough to develop skilled workers in the sector.

African agribusinesses also indicated they have maintained focus on risk management, with the majority of survey respondents (95.2%) periodically conducting a formal risk

Summer 2016 Issue

assessment. It is also positive to note that 53.8% of respondents prepare an integrated report.

Human resources (HR) models and processes are beginning to evolve, with more emphasis being placed on technology to improve networks and data. Agribusinesses are looking to their HR teams to provide not only basic services and transactional activities but also strategic insights and workforce intelligence. Businesses indicated internal HR capacity, labour unrest, employee turnover, and communication between employees and management as the most challenging human resources matters.

CONSENSUS Although there is widespread consensus on the reality of global climate change, much uncertainty still exists when it comes to the exact measurable impact of changes in climatic conditions on agriculture and food security. This makes it all the more critical for the agricultural sector to take climate change seriously.

The majority of agribusinesses are of the view that climate change will have a significant impact on SSA agriculture in the future – 41.2% indicated that there will be a significant impact in the short term and 35.3% that there will be an impact over the next twenty years. Agricultural activities can perpetuate climate change due to the resulting emission of greenhouse gases.

However, there is an increasing focus on agriculture’s positive contribution to mitigating climate change through carbon sequestration and, for instance, the substitution of biofuels for fossil fuels. These contributions will hopefully increase in the near future, with a stronger focus on mitigating strategies in the developing world.

In addition, 35.3% of agribusiness leaders

indicated that they are considering investment in renewable energy, while 29.4% have already done so. The main forms of renewable energy that agribusinesses have invested in are solar energy and biogas.

CFI.co | Capital Finance International

Increased pressure on the profitability of farming and agricultural business activities is forcing the agricultural sector to be an early adopter of new technologies in order that it may improve the productivity and profitability of the sector.

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“Global studies also show that artificial intelligence (AI) farming will be the main enabling factor in increasing the world’s agricultural production capacity to meet the demands of the growing population.”

Survey respondents noted the availability of real-time data as the biggest opportunity for technological innovation. The agricultural industry is reaching a level of precision that was almost unimaginable a decade ago. With the existing technologies in place, the availability of real-time data could provide more efficient decision-making and a proactive farming approach that can be tremendously valuable.

According to the survey, drones coming from military aviation technology are fast becoming a real green-tech tool. Real-time aerial data is obtained through precision drones, and significant time and cost are often saved in the process of managing large portions of land in this way. It is estimated that the addressable market of drone-powered solutions in the agricultural industry is $32.4 billion, according to PwC research.

AI FARMING Global studies also show that artificial intelligence (AI) farming will be the main enabling factor in increasing the world’s agricultural production capacity to meet the demands of the growing population. This goes hand in hand with precision farming and other technology trends. The majority of survey respondents (76.5%) agree that AI farming will make a major contribution to increasing capacity in Africa over the next ten years. Only 47% of businesses had already invested or plan to invest in the development of AI farming capabilities for primary production.

This could be due to the cost of implementation, which was noted as the biggest restriction to the use of AI farming capabilities (64.7%).

All agribusinesses indicated that they felt a responsibility towards food security. Food quality and safety is the one pillar of food security that respondents indicated they can contribute towards the most followed by availability and 132

affordability. It is also positive to note that all businesses indicated their agribusinesses contribute towards corporate social investment (CSI). The top three areas of investment are: healthcare, education and personal improvement.

It is predicted that technological innovation will act as a catalyst in lifting agribusiness to the next level in Africa. To sustain growth, it is critical that the agricultural sector adapts to change through agility and absorption, and that agribusinesses have strategies in place that deal with current as well as expected future trends. The winners will be those agribusinesses that seize the opportunity to create new opportunities through technology – they will be able to reach their strategic goals faster and more efficiently. i

Mr Weilbach is also one of PricewaterhouseCoopers’ South Africa firm’s assurance directors for public (listed and unlisted) and private companies. He has held this position for more than sixteen years. His clients include large and small agribusinesses, agro-processors, retailers, manufacturers, and South African groups with foreign private equity owners.

ABOUT THE AUTHOR Frans Weilbach is a partner in PricewaterhouseCoopers’ African firm. He is based in the Stellenbosch office in South Africa’s Western Cape Province.

Mr Weilbach is PricewaterhouseCoopers’ agribusiness industry leader for Africa. He has been the author of many agribusiness survey publications including PwC’s Agribusinesses Insights Surveys over many years. He regularly contributes articles to various agricultural publications and present at conferences and discussion groups.

Over many years Mr Weilbach has worked with businesses and other players in the sector on corporate and other transactions. He is an advisor to a number of agribusinesses in the region. Mr Weilbach has also been the PricewaterhouseCoopers’ South Africa firm’s wine sector specialist for many years and is one of the global anchors for PricewaterhouseCoopers’ International Wine Industry Network.

CFI.co | Capital Finance International

Author: Frans Weilbach

Summer 2016 Issue

> CFI.co Meets the GM & MD of Shiekan Insurance & Reinsurance Co:

Salah El Din Musa Mohamed Sulieman

General Manager and Managing Director: Salah El Din Musa Mohamed Sulieman

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alah El Din Musa Mohamed Sulieman is general manager and managing director of the Shiekan Insurance & Reinsurance Co. Ltd in Sudan. He is a professional qualified insurer with a BSc (honours) degree from the Faculty of Economic and Social Studies of University of Khartoum, Sudan, and holds a diploma in Insurance Studies and Insurance Management from the University of Nottingham and The City University, both in the United Kingdom.

After graduation, Mr Suleiman worked as a teaching assistant at the Faculty of Economics and Rural Development at the University of Gazeera in Sudan. He started his insurance career in Sudan and occupied senior managerial posts at a number of reputable insurance and reinsurance companies in

Sudan, Yemen, Oman, and Qatar.

Mr Suleiman gained a wealth of experience in insurance and reinsurance and is devoted to the promotion of the Takaful industry. He made significant contributions to the establishment of a number of Takaful companies in various countries. Mr Suleiman won the Takaful Leadership Award and the Takaful CEO of the Year Award offered by the International Takaful Awards (ITA) in 2015 during the International Takaful Summit in London.

Mr Suleiman currently holds the following positions: • Member of the central board of directors of the National Economic Corporation, Sudan.

• Director of the National Reinsurance Company, Sudan.

CFI.co | Capital Finance International

• Director of the Sudanese Free Zones & Markets Company Ltd. • Member of the management committee ZepRe Retakaful Window, Sudan.

• Member of the steering group of ICMIF Microtakaful, International Cooperative and Mutual Insurance Federation, UK. • Director of Omdurman National Bank, Sudan.

• Director of Africa Retakaful in Cairo, Egypt.

• Director of the International Cooperative and Mutual Insurance Federation (ICMIF), UK. • Vice-chairman of the International Federation of Takaful & Islamic Insurance Companies (IFTI).

• Member of the executive committee of the Association of Sudanese Insurance & Reinsurance Companies (ASIRC), Sudan.

• Chairman of the ICMIF Takaful Network, UK. • Director of Senimar Engineering Company.

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> Shiekan Insurance & Reinsurance Company:

Largest Takaful Operator in Sudan

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hiekan Insurance & Reinsurance Co. Ltd. is a Sudanese insurance company incorporated in 1983. It commenced its full operations towards the end of 1990. Shiekan is the largest, and leading, Takaful operator in Sudan with a market share of almost 40%.

Shiekan transacts cooperative insurance which dictates the distribution of the surplus generated from insurance operations to policyholders – one of the defining characteristics of this type of insurance as compared to the conventional insurance industry.

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It is Shiekan’s vision to become the world’s foremost provider of Takaful products and services. The company aims to provide first class innovative Takaful products and services to all its stakeholders. Shiekan is committed to maintain a strong, disciplined, and consistent relationship with its policyholders, striving to deliver ever better Islamic financial solutions.

The company takes particular care to encourage the personal and professional development of its employees, encouraging them to maximise their true potential. Teamwork is valued in order to achieve prompt and efficient delivery of CFI.co | Capital Finance International

services across all business lines.

Shiekan Insurance & Reinsurance company maintains a good financial strength which is expressed in its huge wealth of fixed and current assets. The company has implemented a five-year strategic plan (2013-2017) which includes smart objects-based on SWOT (strengths, weaknesses, opportunites, and threats) analysis.

Shiekan has reported a rapid growth in premium income contributions with an average 15% annual increase.

Summer 2016 Issue

CORPORATE GOVERNANCE Shiekan ensures strict compliance to Sharia rules and principles via its Sharia Supervisory Board that consists of eminent Sharia scholars who are supported by legal and Islamic economic experts. The company plots its strategic plans and monitors its performance via a board of directors which is comprised of shareholders, policyholders, and a number of experts. In order to showcase its adherence to Takaful principles, Shiekan organises an annual policyholders’ assembly as well as a general annual meeting for shareholders.

A MULTILINE TAKAFUL OPERATOR Shiekan is a composite insurer that provides general Takaful, family Takaful, medical Takaful, and agricultural Takaful. The company serves commercial, institutional, and individual clients through an extensive countrywide network of more than 82 branches and offices in all the federal states of Sudan in order to provide easy access to its services.

Shiekan strives to provide its policyholders with premium quality and responsive service and aims to develop and offer competitive insurance solutions that contribute to the overall financial security of Sudan’s fast growing economy.

The company achieves this goal with the help of more than one thousand well-trained and experienced staff members who are collectively focused on customers’ current and future needs and expectations.

Shiekan insures most of the major risks in Sudan in all sectors such as industry, construction, business, trade, financial institutions, oil & energy, agriculture, aviation, transportation, livestock, and personal lines for both local clients and foreign investors.

Shiekan’s local and regional standing: • Largest Takaful operator in Sudan.

• Positioned in the best 150 out of 366 MENA insurance companies in 2014.

• Ranked 46th by number of premiums emitted.

• Ranked 19th by profit.

• Ranked 89th by balance sheet (assets).

“The company takes particular care to encourage the personal and professional development of its employees, encouraging them to maximise their true potential.

Teamwork is valued in order to achieve prompt and efficient delivery of services across all business lines.”

CORPORATE SOCIAL RESPONSIBILITY Shiekan Insurance & Reisurance Company plays an important role in corporate social responsibility (CSR) in Sudan allocating considerable funds in its budget every year to help different sectors such as education, public health, drinking water, and poverty alleviation.

The company has acquired a high degree of professionalism in tailoring insurance packages to suit any project’s specific CFI.co | Capital Finance International

requirements. It has a staff of well-trained academically and professionally qualified experts using a highly technical and proprietary underwriting and claim manuals authored by Shiekan’s in-house experts.

These manuals include technical guidelines and company policies and rules.

WHAT MAKES SHIEKAN UNIQUE Shiekan is the only insurer to maintain loss reduction, training, and internal Sharia Audit services in the Sudanese Takaful market.

Shiekan has gone one step further yet by putting in place a Loss Reduction Department – the first service of its kind in both local and regional insurance markets. In essence, this service turns Shiekan into a partner of its client and helps them safeguard their property. The Loss Reduction Department is staffed with qualified engineers and technicians.

TRAINING CENTRE Through Sudan’s first and only insurance training centre, Shiekan provides training services to its own employees, customers’ staff, agents and producers, university students, and staff of local and regional Takaful companies – especially new ones.

Beside training, Shiekan delegates Takaful experts and staff to help in establishing new Takaful companies and service points in the region.

INTERNAL SHARIA AUDIT DEPARTMENT Shiekan has an internal Sharia Audit Department – the only of its kind in Sudan – to ensure that day-to-day transactions are fully compliant with Sharia rules and principles.

Shiekan has received a number of awards: • Quality management system certificate ISO-9001:2008 for the scope and provision of insurance service since 2007 up to now.

• International award for business excellence in recognition of Shiekan’s commitment to the quality and excellence of its services – 2014 by Global Trade Leader’s Club in Madrid, Spain.

• Best Insurance Solutions Team Sudan awarded by Capital Finance International in London, 2015.

• Best Takaful Company Sudan awarded by the International Takaful Awards (ITA) in London, 2015.

• Takaful CEO of the Year awarded by the International Takaful Awards (ITA) in London, 2015, to its General Manager and Managing Director Salah Eldin Musa Mohammed Sulieman.

• Best Takaful Company of the Decade Africa awarded by the International Takaful Awards (ITA) in London, 2016.

• Best Insurance Solutions Team Sudan awarded by Capital Finance International in London, 2016. i 135

> World Bank Group:

Development Finance Frontline Strategic Investment Funds

By Håvard Halland and Michel Noel

This is the first of a series of occasional interviews with senior strategic investment fund (SIF) professionals. Tasked with attracting private investors to priority economic sectors and projects, SIFs combine developmental aims with commercial financial return objectives.

“T

he only way to achieve the sustainable development goals is to use more public capital strategically for unlocking private investment, particularly to infrastructure,” says Amadou Hott, CEO of the Senegalese Fund for Strategic Investments.

The Senegalese Strategic Investments Fund (FONSIS, for its acronym in French) is part of a rapidly expanding network of statesponsored strategic investment funds now emerging in countries at all income levels. The World Bank Group and its partner, the Public Private Infrastructure Advisory Facility, work with FONSIS in an advisory role, and FONSIS provides input to the bank’s research on SIFs. In the World Bank Group’s recently issued Climate Change Action Plan, SIFs feature as one of the tools to crowd in private capital to climate mitigation and adaptation projects.

Mr Hott was in Washington for meetings, and we caught up with him during a break in his schedule. Mr Hott represents a new generation of African financial sector professionals and leaders, who have returned to opportunities at home after earning degrees at leading global universities and gaining extensive experience on Wall Street, in the City of London, and in other global financial centres. He was also nominated a Young Global Leader by the World Economic Forum.

FONSIS has been doing some very interesting projects. Could you tell us about some of your signature investments?

One project that I think is innovative is our building and commercial operation of the POLIMED (Pôles d’Infrastructures Médicales) diagnostic centre within the public hospital of M’Bour, a coastal city seventy kilometres from Dakar. The hospital itself couldn’t afford to buy the required advanced technological equipment, and we were asked to build and run the diagnostic centre as a commercial operation, with the public doctors and technicians of the hospital providing the medical services to keep

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“Essentially, we invest in good opportunities that can meet our minimum projected rate of return” down patient fees. Since operations started at the end of December 2015, more than 4,000 patients have been diagnosed, and the financial results are looking good so far. We intend to replicate this model all over the country to upgrade our medical infrastructure.

Another interesting project is the 30 megawatt, €41 million, solar energy power plant Santhiou Mékhé, and a nine kilometre transmission line to the grid. We closed that deal this past February. We were approached by the project’s initial developer, and our role was to structure the financial side of the project, help finalize the power purchase agreement with the off-taker, reach out to potential investors, and negotiate the debt and equity contributions. We also put down about one million euros of our own capital as a cornerstone investor, to give the project credibility at the initial stage. We expect the plant to be producing electricity in late 2016. I think we’ve achieved a good result: about €40 of external equity and debt co-investment for every euro that we ourselves invested. In general, we aim to achieve a multiplier of around 10 on our own invested capital, but we achieved an exceptionally high multiplier in this case, as we managed to secure a debt/equity ratio of 80/20.

Essentially, we invest in good opportunities that can meet our minimum projected rate of return, or hurdle rate, but focus on projects that generate jobs and have a developmental impact in the framework of the Plan Sénégal Emergent (PSE). For example, within the energy sector we can provide early-stage money if we know that afterwards there is a good chance CFI.co | Capital Finance International

of private interest. Furthermore, we serve as a local champion of entrepreneurship, and have invested €1.5 million in a venture capital fund of €6.1 million for small and medium-sized enterprises (SMEs). As we see it, Senegal is heavily dependent on its export potential, and innovative SMEs have been instrumental in developing the export sector in many other countries.

FONSIS combines developmental objectives with those of a commercial investor. Isn’t this a contradiction?

Look, we are an investment holding company focused on creating value for investors in our projects, and we operate as a private equity investor on behalf of the Senegalese government.

We are rigorous in our investment decisions, and our hurdle rate is 12%. I think we bring good value, both in terms of the social and economic contribution of the projects that we are able to deliver, and in terms of the financial returns that we are able to generate for the state.

Our staff’s background – as investment professionals in global financial centres, and from multinationals in our core sectors – means that we have access to a network of international private investors, we have transaction experience, we have negotiation experience, and our co-investment on behalf of the state brings credibility to our projects. We may, exceptionally, participate in projects that have returns below the hurdle rate, but only if the government, or a donor, provides an equivalent subsidy to the project, which, of course, has to be approved in the government budget.

Not all state-sponsored investment funds have been successful, and some have ended up losing significant amounts of their capital on politically motivated projects that were not profitable or even had a developmental impact. How do you solve this?

In my view, independence and transparency are key. FONSIS is established by dedicated legislation, not simply by decree, and the terms of our board and management transfer across

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election cycles. Our investment strategy, ticket size per investment, and project selection criteria have all been extensively published in the national press and elsewhere to reduce external pressure. And transparency helps provide a sense of public ownership of the fund. In any case, I don’t expect that the public decision makers, who have strongly stressed the need to invest only in viable projects, would try to impose any transaction on FONSIS. Our investment committee and our board are very independent, with healthy debates taking place before we approve any project. Furthermore, the requirement to secure equity co-investment from professional investors and non-recourse debt from tough commercial and development banks, provides further assurances that financial return criteria will be met by our projects.

You also need a very strong team of investment professionals, people that have a future after FONSIS in other financial institutions, and therefore a reputation to protect. Having a highly qualified team of experts that can find other attractive jobs relatively easily makes it easier to resist external pressure. The FONSIS legislation sets specific requirements for staff financial sector experience and education.

We used a professional recruitment firm to help select our staff, and now have thirteen investment professionals with backgrounds in international private equity firms, the global top-five consultancies, various industries and sectors, and investment banking. We felt it was critical for the Fund’s success to be able to hire on relatively competitive terms—albeit lower than those of international private equities or investment banks. So, benefits and performance-based remuneration are similar to the private sector, and FONSIS is by legislation exempt from the public sector’s salary structure.

This is standard practice for well-functioning SIFs and sovereign wealth funds.

Strategic investment funds seem to be emerging everywhere now in Europe, Asia, Africa and elsewhere. How replicable is the FONSIS model in other countries?

I cannot emphasise enough that capacity is key. In Africa, the bigger and more dynamic economies have this capacity available at home or in their diaspora. For example, Kenya, Nigeria, Côte d’Ivoire, several of the North African countries and, of course, South Africa.

Smaller countries may need to get external help to build this capacity over time, and political authorities need to allow SIFs to operate as fully independent professional investment managers, within a stable government-defined mandate.

SIFs represent a relatively new model of blending public and private capital. What, in your view, are the implications for development finance overall?

When it comes to development aid, you can just do the math. The annual global development aid budget is about $140 billion, whereas the investment needed to address development and climate change runs into the trillions. Only institutional investors and the private sector

CEO of the Senegalese Fund for Strategic Investments: Amadou Hott

have that kind of investment capital available.

Development finance institutions have a critical role to play, because low and middle-income countries are capital scarce. So, they don’t have much public capital to deploy for attracting private investment.

In my view, developing countries that have the required capacity and conditions could set up FONSIS-like structures, receive some development aid or even commercial loans - so long as the projects generate financial returns as well - to fund those structures, and use that capital to crowd in private investment. While in Washington, I have attended the seminars of the Sustainable Development Investment Partnership, which seeks to increase the impact of public capital by finding new ways of leveraging it with private investment, and where both IFC and MIGA are members.

What attracted you to return back home to Dakar after an itinerant career as a global investment professional?

President Sall and I first met at the World Economic Forum in Cape Town, a year before he was elected, while I was running a financial advisory firm in Dubai. I felt this initiative was important to Senegal, so it was an easy choice to get involved by starting as his special adviser with a focus on investment issues and setting up FONSIS. i CFI.co | Capital Finance International

ABOUT THE AUTHORS Håvard Halland is a senior economist at the World Bank’s Finance & Markets Global Practice, Investment Funds Group. His research and advisory work focus on sovereign wealth funds and strategic investment funds. In particular, his work has focused on fund mandates, governance frameworks, as well as economic and policy implications of SWFs’ domestic investment. He is an author or joint author of academic and policy research papers, book chapters, magazine articles and blogs, and regularly presents at international conferences and seminars. He earned a PhD in economics from the University of Cambridge.

Michel Noel is currently Head of Investment Funds in the Finance and Markets Global Practice, Equitable Finance and Institutions Vice-Presidency of the World Bank. Previously, Michel was Practice Manager for Non-Bank Financial Institutions in the Finance and Markets Global Practice and Lead Financial Sector Specialist in the Africa Region and in the Europe and Central Asia Region of the Bank. He was on secondment from the Bank to Dexia Asset Management in Geneva and London from 2000 to 2003 working on local infrastructure private equity funds. Previously, Michel held a number of positions in the Africa and Europe and Central Asia Regions of the Bank. He also consulted for the OECD Development Research Center in Paris. Michel holds a MA in Economics and Social Sciences from the University of Namur, Belgium.

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> Middle East:

Kuwait - Silver Cloud with Dark Lining

By Tony Lennox

There isn’t an Arabic equivalent to the saying: Fix the roof while the sun is shining. The sun almost always shines in Kuwait – annual rainfall is, on average, just three precious inches. Consequently, Kuwait has led the world in the development of efficient desalination techniques which now supply the country’s 2.9 million inhabitants with clean water.

Kuwait

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K

uwait, once a tiny collection of settlements at the northern tip of the Persian Gulf, earned its living from fishing and boat-building. Kuwaiti seamanship was renowned throughout the Arab world. Then, in 1931, oil was discovered under the arid sands, and the little sheikhdom suddenly found itself very rich indeed.

There is an appropriate Arabic proverb – wealth comes like a turtle, but runs away like a gazelle.

In Kuwait the turtle arrived quite quickly, but everyone is acutely aware of the date and time that the gazelle will make a run for it. While there are an estimated 96.5 billion barrels of oil still to be extracted, it will eventually run out; the current guess is within a century.

Kuwaitis are proud of their country’s reputation for ingenuity and skill, whether in boat-building, desalination, or oil extraction. The problem is that Kuwait – the fourth richest state on the planet – while knowing that its reliance on oil must end, is pretty comfortable right now, and there’s always a temptation to put off difficult jobs until tomorrow.

Kuwait runs a healthy current account surplus, holds almost 10% of the world’s oil reserves, the Kuwaiti dinar is the highest-valued currency unit in the world – but 95% of government income is derived from oil exports. Diversification is the buzz word, but the economic reforms needed to push the country towards that goal are being hampered by constant squabbles between parliament and the all-powerful ruling dynasty – the Al Sabah family.

Before the Iraq invasion of 1990, the rest of the world considered Kuwait to be a cutting-edge state; a liberated, technologically-advanced, open Muslim society which was welcoming and business-friendly. Indeed, it was seen to be at the forefront of the development of the “virtual state” – tiny in terms of its land mass, but a giant in the new climate of globalisation.

When Iraqi tanks rolled into Kuwait in August 1990, for instance, the invaders made for the country’s financial institutions to try to grab its wealth. Richard Rosecrance, in his book The Rise of the Virtual State describes how outdated the notion is that wealth can be physically captured by an act of war. “Capital and information can slip away like quicksilver after an attack,” he writes. “The Iraqi Army ransacked the computers in downtown Kuwait City, only to find that the cash in bank accounts had already been electronically transferred.”

Some of that cash, billions of dollars’ worth, was used to mount an international campaign of resistance and helped fund the fight back. But one cannot underestimate the paralysing effect the invasion had on Kuwait. For seven months the population was under a brutal occupation

by Iraqi forces who vandalised the economic structure and carried out untold atrocities.

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“Kuwait runs a healthy current account surplus, holds almost 10% of the world’s oil reserves, the Kuwaiti dinar is the highestvalued currency unit in the world – but 95% of government income is derived from oil exports.

Diversification is the buzz word, but the economic reforms needed to push the country towards that goal are being hampered by constant squabbles between parliament and the allpowerful ruling dynasty – the Al Sabah family.”

RECOVERY Unsurprisingly, Kuwait has taken a long time to recover from the shock of invasion. Even after the success of Desert Storm – the liberation of Kuwait by an American-led coalition of international forces – Kuwait existed for a decade in an uncomfortable stasis which smothered development. Saddam was defeated, but still bellicose. It wasn’t until the invasion of Iraq in 2003, and the final removal of its dictator, that Kuwait could relax and begin thinking of the future.

Even today, commentators detect an underlying hesitancy in Kuwait. The hangover effects of invasion meant that, throughout the 1990s, the economy seemed to just bumble along while fellow Gulf states like Dubai, Qatar, Abu Dhabi, and the UAE picked up the pace.

Kuwait today finds itself struggling to develop an adequate structure to encourage and promote private enterprise, and so diversify its economy from almost total reliance on oil revenue.

Approximately 90% of working-age Kuwaitis are employed in the public sector, where salaries are traditionally high. This doesn’t mean there isn’t a flourishing private sector – it’s just that its workforce is made up mainly of non-Kuwaitis.

The IMF believes that Kuwait’s economy needs to be restructured and reformed – particularly its reliance on the public sector. IMF observers say this is a problem for Kuwait’s future economic security; that the strength of the sector was stifling the development of a healthy, diversified private sector.

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Government salaries are famously large – and annual increases tend to far outstrip inflation, currently running at around 2.5%. A government worker can retire before his 50th birthday, and can expect a handsome pension, despite the fact that life expectancy for men is 74 years.

Nevertheless, according to the Kuwait Times in 2014, the country was experiencing “an extraordinary rise in entrepreneurship and small business start-ups.” It called the phenomenon “souk culture” – a reference to the Arabic openair markets that exist across North Africa and the Middle East.

Souk culture – the rapid growth of the “informal economy” – is due in part to Kuwait’s tough laws on starting a business. In order to get an official licence, new businesses, for instance, must already possess a physical building from which to operate. The licensing process is long and frustrating. It seems to make little sense for an educated Kuwaiti to put himself to all that trouble when there are plenty of cushy government jobs available.

The trend for unofficial trade, though, appeals to the younger members of the Internet-savvy generation, who are using social media to sell wares – from cupcakes to computer repair services. Some subsequently avoid not just officialdom and bureaucracy, but also taxes – not a big problem for a state as rich as Kuwait, but in a diversified future, a sensible and robust system of taxation will be necessary and it would be better to tackle tax evasion before it becomes an ingrained habit.

DEMOCRATIC Politically Kuwait is seen as one of the most democratic of the Gulf states – though there are rumblings of discontent. While never reaching the boiling point of the Arab Spring revolts elsewhere, political opposition to the ruling family is growing. There is now a broad coalition of opponents who are demanding full parliamentary democracy and widespread reform.

These reforms are essential, they say, if Kuwait is to regain its regional prestige – though the country is playing catch-up, building two massive waterside developments to match the glitz of other Gulf states down the coast.

The opposition complains that Kuwait’s oil wealth has been plundered by corrupt officials, the justice system is unfair, and human rights are disregarded. Their demands, which include radical changes to the country’s constitution, would greatly diminish the power of the emir, Sheikh Sabah al-Ahmed al-Jaber al-Sabah. He has ruled Kuwait since 2006 - and shows no signs of relaxing his grip on the reins.

But while this wrangling between parliament and the ruling family continues, no-one is actually fixing the roof – and those dark rain clouds are inching ever closer. i

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> CFI.co Meets the CEO of ASTAD:

Ali Al-Khalifa

A

li Al-Khalifa is a leading executive at the forefront of the project management business in the Middle East. Mr Al-Khalifa has a proven track record of delivering complex megaprojects with international partners across a broad range of sectors. He developed ASTAD’s dynamic and visionary approach to corporate management which has resulted in ASTAD Project Management becoming one of the largest project management consultancies in the region.

Mr Al-Khalifa studied mechanical engineering in the United States, followed by an MBA, before embarking on a career spanning almost two decades working in Dubai, Singapore, Malaysia, and China. He has been ranked in the Top 15 of Construction Week Magazine’s annual Power 100 list various times.

Taking stock of his company’s performance, Mr Al Khalifa noted that, “ASTAD has developed considerably over the past year. The unwavering commitment and innovation of our teams has enabled successful growth and expansion, further building upon our vision to cement ourselves as a world-class service provider on a global level.”

“Our growth has been driven by the vision and wide leadership of the Emir of Qatar, His Highness Sheikh Tamim Bin Hamad Al Thani, and the Father Emir, His Highness Sheikh Hamad Bin Khalifa Al Thani. With growing diversified developments, Qatar is steadily transforming into a knowledge based economy.

Our team’s international wealth of knowledge and experience has enabled us to successfully develop some of the region’s most prominent landmarks, further supporting our journey towards the fulfilment of the Qatar National Vision 2030.”

“These successes have enabled us to undergo structural expansion to further accommodate and support the development of projects in Qatar and abroad. I am pleased to announce the establishment of ASTAD International and ASTAD Consult. These establishments will play a crucial role in future operations, furthering our vision to provide superior services across the globe.”

“ASTAD International will act as our global arm, while ASTAD Consult will be home to new services covering the fields of construction management & supervision, design consultancy, facility management, asset management, and staff augmentation.

CEO: Ali Al-Khalifa

We will undergo new challenges; however, I am confident that our team’s innovation and commitment will overcome such challenges and continue to provide global best practice.

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I look forward to building upon our recent success in the months and years ahead, cementing our position at the forefront of the construction industry.” i 141

> ASTAD:

Delivering Iconic Projects in the Gulf Region and Beyond Established in 2008, ASTAD has grown to become a leading company within the construction industry, delivering some of its most iconic projects.

O

ver the years, the firm has managed the development of some of the most complex infrastructure and building projects, while using its wealth of global knowledge to provide world-class services. ASTAD proficiently manages its clients’ entire project life-cycle in-line with industry standards and international best practices. ASTAD has successfully managed the development of projects across a diverse range of sectors, enabling the firm’s expansion to a global level. The company’s aim remains clear: collaborating with clients to strengthen communities and contribute to the economic improvement of societies.

ASTAD delivered projects with its teams’ determination and innovation which facilitated the achievement of milestones and led to further growth, enabling business operations to expand while managing and delivering the development of the region’s most prominent landmarks.

The firm provides services in the areas of construction, engineering, cost, commercial, design, and sustainability, using the teams’ shared experience and expertise to meet the highest international standards, ensuring all aspects of a project are delivered efficiently and sustainably.

The continuous construction opportunities in Qatar have allowed ASTAD to work across a diverse variety of sectors including education, healthcare, research & technology, residential, commercial, and transport – all fundamental sectors that have broadened the firm’s capabilities and services, and will continue to do so.

“ASTAD has successfully managed the development of projects across a diverse range of sectors, enabling the firm’s expansion to a global level.”

GSAS Sustainability Rating System. Lusail is the largest multipurpose hall in the Middle East. The completion of these projects was a remarkable feat for the company.

ASTAD also delivered the international awardwinning architectural masterpiece Qatar Faculty of Islamic Studies (QFIS). QFIS is a profoundly spiritual building that communicates and imparts Islamic values and education in a setting that is modern and progressive. It was established to provide academic facilities while emphasising the richness and diversity of the Islamic heritage.

ASTAD was honoured to have managed and delivered the Qatar Foundation Headquarters, which hosts the office of Her Highness Sheikha Moza Bint Nasser and the top management of the Qatar Foundation (QF) in the heart of Education City. The project is a world-class and internationally renowned landmark compromising of thriteen floors with the capacity to accommodate over 500 QF employees and stands at approximately 57 meters tall.

Looking back over the years, it is really quite incredible to reflect on the fact that many of the iconic buildings in Qatar today were indeed brought into existence by ASTAD. These include the Museum of Islamic Art, Education City, and the Qatar National Convention Centre, the Qatar Science and Technology Park (QSTP), and many others.

During Qatar National Sports Day festivities and Ramadan Celebrations at Education City, ASTAD’s Oxygen Park project was opened to the public, enabling all to enjoy the sporting and spiritual activities. The facility comprises of parkland with multifunctional grass surfaces including various pitch sizes, hard and soft landscape features, water features, a 511m covered walkway, a 1,600m running track, and a 981m equestrian track.

SUSTAINABLE STADIUMS In 2015, ASTAD successfully delivered the Ali Bin Hamad Al Attiya Arena and the Lusail Sports Arena in time for the 24th Men’s Handball Championship. These arenas were the first stadiums in Qatar to receive four stars in the

Currently, ASTAD is managing the delivery of the Qatar Foundation Stadium, one of the proposed stadiums for the 2022 FIFA World Cup and the New Doha Tennis Stadium, both of which will continue to embrace the nation’s commitment to sport.

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The Qatar Foundation Stadium has a total gross area of 233,000 m2, with the capacity to accommodate 40,000 spectators.

ASTAD takes pride in working closely with Qatar Foundation to implement the Carbon Management Plan while targeting a prestigious LEED Gold rating as well as a GSAS 4 Star rating on the Qatar Foundation Stadium. The stadium will set a worldwide benchmark for sustainability in sports facilities and aims to inspire the new generation towards a more sustainable future.

The New Doha Tennis Stadium project is 12,000 seat capacity tennis-focused multipurpose bowl designed as a hub within the greater tennis complex, immediately adjacent to other key sporting venues within wider Khalifa Sports Precinct. The New Doha Tennis Stadium will be an iconic landmark linking the land with the sea within the context of the Doha skyline. The New Doha Tennis Stadium is it is designed to function as a multi-purpose arena, reconfigurable for multiple sports events as well as non-sport activities. The focus is on sports events, entertainment events, meetings, incentives, conferences, and exhibitions.

Other projects nearing completion are the Sidra Medical Research Center and the National Museum of Qatar. Sidra aims to be a groundbreaking hospital, research, and educational institution – focusing on the health and wellbeing of children and women. Sidra will be a milestone along the path to achieving the Qatar National Vision 2030 and will house some of the most advanced technologies within the region and the world.

The National Museum of Qatar will give voice to Qatar’s heritage whilst celebrating its future.

Visitors will be able to learn about Qatar’s ancestors and the formation of early cities, as well as the modernisation of Qatari society, all within an award-winning architectural masterpiece that embodies the desert rose.

ASTAD is also working to obtain Green Building Certification for this iconic museum as part of its commitment to sustainability.

With the experience ASTAD accumulated in managing the development of Qatar’s most

Summer 2016 Issue

Qatar Foundation Stadium

Qatar National Convention Center

Qatar Foundation Headquarter

Lusail Sports Arena

iconic projects, the company successfully expanded its operations with the establishment of ASTAD International and ASTAD Consult.

Some of the most common challenges include frequent claims, awarding the lowest bidders, and misunderstood risk appropriation – all issues that are not addressed properly on a contractual level and are often due to unclear contracts, creating a lack of understanding and inefficient contract administration. This often delays projects, increases costs and in some cases, leads to incomplete projects.

However, ASTAD’s sustainable capabilities span beyond green building. Through various mega project experiences in Qatar, the firm is well aware of applicable sustainability solutions in local conditions. In addition, it has been actively developing carbon emissions accounting tools, providing energy conservation and auditing solutions, and developing sustainability master planning and sustainability strategy. Current sustainability specialty services include green building certification – LEED & GSAS, energy simulation, energy audit, carbon accounting and modelling, and sustainability master planning and strategy.

These two new entities will accommodate corporate growth and play a vital role in the firm’s progression throughout the next year, furthering the vision to provide superior services across the globe. ASTAD International will act as a strategic global arm, and will be the parent entity for all international operations, providing world-class project management services beyond Qatar. ASTAD is planning to open branches in Saudi Arabia, Oman, Egypt, and the United Kingdom.

ASTAD Consult will be home to entirely new services covering the fields of construction management & supervision, design consultancy, facility management, asset management, and staff augmentation.

The company continues to work together with clients locally and across borders, remaining committed to the delivery of projects in line with international best practices, while sharing knowledge in an effort to develop solutions that strengthen the region’s construction industry.

STREAMLINED CONTRACTS During its work, ASTAD has experienced and recognised first hand some of the repetitive challenges faced by the region, which have often escalated to disputes between employers, contractors, and consultants.

As a response, ASTAD has developed its very own Integrated Suite of Contracts, which are expected to be launching in 2016. These contracts were created as a result of the distinctive contractual challenges faced within the construction industry in the Gulf Region to aid, support, and streamline contractual procedures. Amid going international, ASTAD developed these contracts with the added value of customisability, as well as designing them to suit the needs of not only Qatar, but the entire Gulf Region, further supporting the corporate goal to share knowledge of this industry and the strategic aim to ease contractual procedures across the region.

Additionally, Qatar has enabled ASTAD to gain a lot of diversified experience. The firm currently has the most experience when it comes to green building projects in Qatar and has consistently promoted sustainability in the built environment for many years. The company delivered the first LEED project and thirteen LEED Platinum projects in the country as well as completed two GSAS 4-Star projects.

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Qatar is considered to be the Middle East’s most reliable economy for investment and business due to the construction works that are necessary for the Qatar National Vision 2030 and the 2022 FIFA World Cup. Qatar is undergoing a boom within the construction sector with many mega building and infrastructure projects underway. This will see Qatar grow at a fast pace for the next five to seven years.

Overall, the future is positive for the construction industry in the GCC. Demand is increasing as deadlines for major international events are approaching in different countries around the world. The commitments and set budgets for major construction projects, specifically in Qatar for the 2022 FIFA World Cup, and the UAE for EXPO 2020 Dubai, will guarantee a healthy and strong year for the construction industry in this region. i 143

> Image Nation:

Taking the Media World by Storm

H

aving launched a brand new freeto-air Arabic language channel, finished production on a number of local and international feature films and documentaries, and produced a landmark 20-part dramatic TV series in the past six months, you’d think Image Nation Abu Dhabi may be running at full capacity. But, under the guidance of Chairman Mohammed Al Mubarak and CEO Michael Garin, the leading media and entertainment company of the Middle East shows no signs of slowing down.

Image Nation Abu Dhabi was formed in 2008 with a mission to build a strong and sustainable local film and TV industry. It started its mission by investing in partnerships with some well-known producers in 144

Hollywood which generated such projects as the Academy-Award nominated The Help and The Best Exotic Marigold Hotel series on its international slate – created via partnerships with ParkesMacdonald and Hyde Park Entertainment. Profits made from these international productions were reinvested back into the local industry to develop local and regional talent, helping to create and build a thriving film and TV hub in the UAE. Last year, Image Nation announced it would invest AED 400 million in the local film and television industry over the next five years. That same year, the company released From A to B, directed by Emirati filmmaker Ali Mostafa, and Zinzana, helmed by Emirati first-time feature director Majid Al Ansari, as well as co-financing Palestinian CFI.co | Capital Finance International

director Hany Abu Asad’s international production The Idol, and began production on Ali Mostafa’s third film The Worthy.

In addition to blockbuster feature films, Image Nation has also created a strong presence in the documentary world, with the addition of a dedicated division launched in 2012. As One: The Autism Project was the first feature length documentary to be produced for Image Nation Abu Dhabi. Since then, its documentary division has gone from strength to strength to produce the critically acclaimed polio documentary Every Last Child about the polio crisis in Pakistan by multi-award winning documentary filmmaker Tom Roberts and co-produced Academy Award winning director Davis Guggenheim’s international

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documentary He Named Me Malala, an intimate portrait of Malala Yousafzai who was wounded when Taliban gunmen opened fire on her and her friends’ school bus in Pakistan’s Swat Valley. He Named Me Malala was released by Fox Searchlight Pictures in association with Image Nation Abu Dhabi and Participant Media, with National Geographic Channel and produced by Walter Parkes and Laurie MacDonald under their long-term partnership with Image Nation.

Image Nation has also invested heavily in television with the recently wrapped-up pioneering legal series Qalb Al Adala – filmed entirely in Abu Dhabi with a crew of over seventy regional filmmakers and a cast of over 1,150 actors and extras.

In late 2015, the company launched Quest Arabiya in partnership with Discovery Communications, a new Middle East and North Africa free-to-air factual entertainment Arabic-language TV channel which reaches 45 million homes in 22 countries. Quest Arabiya fulfils Image Nation’s mandate to create content in the region for the region, creating programming that will be developed, shot, and produced across the region, and fronted by regional talent. Recent shows including extreme travel show Nabd Al Moghamara (Pulse of Adventure) ¬– the channel’s first regionally-produced long-form show.

In 2012, the company launched Arab Film Studio (AFS) – a short narrative film programme for UAE nationals and residents. The programme was comprised of a month long boot-camp taught by industry professionals where participants learnt everything from scriptwriting to special effects. The programme culminated in a short film competition where the winner would receive a coveted film grant or internship with Image Nation.

The AFS Narrative is now in its fifth year, the programme has gone on to expand to include documentary filmmakers and scriptwriters, as well as a special highschool edition in partnership with New York University in Abu Dhabi.

And now, Image Nation’s development and investment in local and regional talent, alongside other local leading media organisations over the last few years, is really beginning to pay off.

“For Image Nation, this is just the beginning with more ambitious plans for ramping up its film and TV productions planned for the next five years – watch this space.”

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Amna Al Nowais, winner of Arab Film documentary has gone on to screen her short film Omnia at film festivals around the world and has scooped top awards including Best Short Film at Dubai International Film Festival and the Jury Award at the San Francisco Shorts Festival.

Majid Al Ansari, a young Emirati director who started his career as an intern at Image Nation six years ago, completed his first feature film Zinzana in late 2015. The film gained worldwide recognition, was screened at major international film festival’s around the world including the BFI London Film Festival and Fantastic Fest, earned him Variety’s coveted Young Arab Filmmaker of the Year Award at this year’s Berlin International Film Festival, and secured a global distribution deal with Netflix.

For Image Nation, this is just the beginning with more ambitious plans for ramping up its film and TV productions planned for the next five years – watch this space. i 145

> CFI.co Meets the Chairman & CEO of Image Nation Abu Dhabi:

Mohamed Al Mubarak & Michael Garin

Chairman: Mohamed Al Mubarak

M

ohamed Al Mubarak and Michael Garin were appointed chairman and CEO of Image Nation Abu Dhabi in 2011, three years after the company was established. Over the past six years, Messrs Al Mubarak and Garin have mapped the company’s business plan and strategic vision which has led to the development and growth of Image Nation, creating one of the leading media and entertainment companies in the Middle East today.

As Mr Al Mubarak likes to say: “There are two sides to show business – the show part, and the business part.” The CEO’s and the chairman’s combined experience have produced a winning combination.

MOHAMMED AL MUBARAK – CHAIRMAN As well as heading Image Nation, Mr Al Mubarak holds the title of chief executive of Aldar properties. He was integral to the development of Aldar’s operational businesses 146

CEO: Michael Garin

as well as that of the fast-growing Sales & Leasing, Property & Asset Management, and Facilities Management units within the organisation.

Prior to joining Aldar, Mr Al Mubarak worked with the corporate and investment bank Barclays Capital in London, focusing on investment and finance in the MENA (Middle East and North Africa) Region. Mohamed Al Mubarak also played an integral role in the development of Yas Island, making it one of the premier destinations in the UAE. In 2015, Mr Al Mubarak was named chairman of the Abu Dhabi Tourism & Culture Authority which oversees the conservation and promotion of Abu Dhabi’s heritage and culture, leveraging them to develop distinctive Abu Dhabi experiences designed to enrich the lives of visitors and residents.

Mr Al Mubarak is a graduate of Northeastern CFI.co | Capital Finance International

University (USA), with a double Major in Economics and Political Science.

MICHAEL GARIN – CEO With over forty years as a highly-respected industry executive, Mr Garin oversees Image Nation’s strategy and operations and has played a vital role in managing and forging key international partnerships.

Mr Garin’s media career began at Time Inc. where he worked for TIME, Fortune, and TimeLife Television for over a decade. From there, he helped to found what would eventually become Lorimar-Telepictures – a leading independent television company which became the largest TV company in the US and produced such iconic shows as Dallas, The Waltons, and Full House.

His previous roles included CEO of Central European Media Enterprises (NASDAQ:CETV) and global head of Telecommunications and Media Investment for Dutch bank ING. i

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> CFI.co Meets the CEO of Jordan Dubai Islamic Bank:

Sami Al Afghani

S

ami Al Afghani joined Jordan Dubai Islamic Bank (JDIB) in December 2009.

He brought along a professional experience spanning more than 25 years in the banking sector both locally and regionally.

Previously, Mr Al Afghani held many important positions at prestigious banks. Most recently, he served as the Senior Vice President - Corporate Banking Group (Dubai and Northern Emirates) at Abu Dhabi Islamic Bank – UAE, prior to joining JDIB. He also held several positions in the same sector regionally and internationally, including the position of Regional Director for the Western Region at the Arab National Bank in Jeddah and Director of the Credit Group in Riyadh. Mr Al Afghani holds a Master’s Degree in Business Administration from Northrop University - California, and a Bachelor’s Degree in Civil Engineering from the University of Southern California.

Mr Al Afghani sets a tone of excellence in corporate governance through personal example. He also upholds a strict code of business ethics throughout the bank and builds high standards of governance, controls and accountability into the execution of business growth and expansion plans. Moreover, Mr Al Afghani is able to maintain the right balance in the relationship between the board and the management with a view to enhancing overall effectiveness. He acts as a true advocate of bestin-class board practice.

Mr Al Afghani believes that good talent management is a critical factor in the success of organisations and continuously aims to inspire the management team to bring the best out of the staff. He readily recognises that further learning, education, and development can be used to develop skills and competencies of team members and their subordinates. He is determined to focus on providing the empowerment necessary to guarantee JDIB employees – at all levels - can succeed.

He is well-aware of how the management of change can get JDIB into a leading role in the local market by the ongoing efforts in helping the staff adapt quickly to changes in the marketplace and communicate these throughout the organisation, thus getting the entire staff behind the changes inspired by his unique visionary leadership style.

Through his forward thinking, Mr Al Afghani always stands behind the concept of adapting to external changes. As a leader, he sees current market twists and envisions future trends, deftly applying them to JDIB and instantly encouraging the management to develop and reform them in the best possible way that ultimately results in keeping JDIB ahead of the competition.

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This may be clearly seen in current policies where staff can express ideas, concerns, and complaints which are subsequently dealt with transparently, fairly and confidentially. Mr Al Afghani is also actively engaged with staff through a number of events, meetings, and other occasions as he realises the importance of such gatherings to listen, share conversation and exchange ideas with staff.

CEO: Sami Al Afghani

By adopting resilience, perseverance, and motivation practices as keys to lead the management team in today’s climate, Mr Al Afghani always manages to motivate the team. Understanding that setting an example of commitment, even in times of extreme hardship, Mr Al Afghani encourages the teams to think and act positively.

Mr Al Afghani has adopted a clear vision to build a long-term sustainability into the business. He thinks strategically and leads change at the bank to achieve that vision. Based on this vision, he has developed a high-impact corporate strategy by integrating market, competition, trends and other factors to create significant impact on the whole bank. Mr Al Afghani further built group momentum for change to ensure the bank remains at the forefront. He introduced high-impact actions such as redesigning the bank’s structures, processes and systems to drive and reinforce the desired changes.

COMMUNICATION Mr Al Afghani enjoys strong, positive, and clear conversations resulting in the assignment of tasks as a result of daily, weekly, monthly, or annual meetings with his team and staff. He believes that targets included in the strategy and business plans cannot be achieved without having the message clearly reaching the people concerned in order to keep them focused.

Mr Al Afghani inspires his direct associates and staff by acting as a role model in everything. He is known among JDIB staff as an active listener who adopts an open door policy and takes every matter as one of supreme importance. Mr Al Afghani goes into detail and actively encourages the exchange of ideas in order to find and adopt those brilliant ideas that could reflect positively on the progress of the business and allow others space and empowerment to share responsibility and make decisions through the delegation of authority.

CFI.co | Capital Finance International

TEAMWORK As a team leader, Mr Al Afghani persuades his staff to be fully committed in achieving their mission and goals as he ensures that each member devotes a reasonable amount of time and energy to advance towards the overall objectives. He must be able to trust that all team members are doing likewise.

Mr Al Afghani believes that effective teams must have open lines of communication which must be honest and flawless between all team members equally.

The uniqueness of Mr Al Afghani’s teamwork style lies in the fact that he fully realises and understands that each team member has a distinct style of communicating and that he/she can move his/ her team in a productive direction which everyone understands and supports. He advocates that team members must never hesitate to communicate with other members about issues and concerns, as well as new ideas or personal observations.

Mr Al Afghani elaborates on the fact that his team possesses a wide range of professional competencies and is fully equipped to meet a wide range of challenges. When building teams, he takes time to ensure that each team member has skills and strengths that complement the skills, strengths, and weaknesses of the other members. Bringing together people with common skill-sets can lead to a great deal of discussion followed by little action. Ensuring that each team member possesses a unique specialty, allows team members to trust each other for certain aspects of performance, while fully understanding the nature of their own contribution.

AWARDS All the way through the journey of Mr Al Afghani, Jordan Dubai Islamic Bank witnessed numerous successes and achievements on the national, regional and international levels. Receiving significant awards proved how successful and fruitful the Bank’s journey is. Amongst the received awards, and the most prestigious award on the local level, The King Abdullah II Award for Excellence came to proudly honor JDIB’s excellence and to celebrate its outstanding performance - an achievement that would have never happened without the dedication and commitment of JDIB’s distinctive leadership and qualified team. i

Summer 2016 Issue

> Jordan Dubai Islamic Bank:

Corporate Governance Instrumental in Earning Clients’ Trust “How to direct, administer, and control the business processes says a lot about any corporation’s identity. Developing proper processes and policies is essential to a well-functioning banking system. It also reflects a bank’s mission and is fundamental to earning and maintaining the confidence and trust of all stakeholders, including clients. From that belief, Jordan Dubai Islamic Bank (JDIB) has carved out a unique position for itself. The bank remains a top-tier player in terms of corporate governance codes.”

F

or the second consecutive year, Jordan Dubai Islamic bank has been awarded Best Corporate Governance Jordan.

The bank was honoured to once again receive this prestigious award granted

by Capital Finance International (CFI) in London.

The recognition results from the bank’s efforts in applying operational and effective corporate governance policies in harmony with the best international standards which together lay at the core of Jordan Dubai Islamic Bank’s corporate identity.

The bank ensures responsible and value-driven management practices are adhered to throughout its system of corporate governance, which is built on key elements of discipline, transparency, independence, and fairness. As it strengthens its presence, JDIB continues to review compliance, risk management skills, systems and processes, and – where appropriate – aims to enhance these further.

This commitment applies to JDIB’s relationship with shareholders, customers, employees, suppliers, regulators, and the communities in which it operates.

The main characteristics of JDIB’s corporate governance policy are: • Discipline – Employees and senior management members are committed to adhere to procedures, processes, and hierarchies established by the bank.

These are recognised and deemed to be correct and proper.

• Transparency – This is mentioned in almost every policy. All actions implemented, and the procedures that led to them, will be available for inspection by authorised entities and provider parties.

• Independence – Mechanisms and regulations have been put in place to minimize or avoid potential conflicts of interest, such as undue dominance by chairman, chief executive, or a large share owner.

These mechanisms range from the composition of the board to committee appointments and involve

“The bank ensures responsible and value-driven management practices are adhered to throughout its system of corporate governance.” external parties such as the auditors. Decisions made, and internal processes established, are designed in a way that does not allow for undue influences to be exercised.

• Accountability – At JDIB, the individuals and committees who make decisions and take actions are held accountable for their decisions and actions as per authorities’ matrix manual.

• Responsibility – JDIB believes that responsible management would, whenever necessary, take appropriate actions to set and keep the bank on the right path. While the board is accountable to the bank, it must act responsively to, and with responsibility towards, all stakeholders.

• Fairness – JDIB systems that exist within the bank are balanced and take into account all those that have an interest in the bank and its future. The rights of various groups have to be acknowledged and respected.

JDIB is fully aware of its social responsibility, and will promptly respond to social issues, while placing a high priority on ethical standards and believing that a good corporate citizen is increasingly seen as one that is non-discriminatory, non-exploitative, and responsible with regard to environmental and human rights issues.

No wonder, then, that JDIB earned the CFI.co award for Best Corporate Governance based on being a best-in-class Islamic financial institution that not only stands out in terms of financial performance, profitability, market share, and assets but also continues to innovate and strive for greater operational efficiency through enhanced risk management and technology. JDIB is a leader in its CFI.co | Capital Finance International

home market and is expanding globally in order to drive growth and sustain future profitability.

To be qualified for achieving International and local awards, JDIB has set all operations on solid foundations and standards. Such foundations and standards are manifested in JDIB’s Vision and Mission represented in: VISION To be the leading Islamic bank that serve all of society.

MISSION To provide distinctive and innovative services emanating from the divine principles of Islam in order to build lasting and solid partnerships and to maximise benefits to all stakeholders.

VALUES Innovation, knowledge, quality, value, and world class service.

JDIB’s latest Best Corporate Governance award follows a number of other awards the bank has recently picked up including ISO 9001:2008 certification, Best Islamic Bank (2013), and PCIDSS certificate for the Payment Card Industry Data Security Standard by Trustwave. JDIB, since inception, has been achieving one success story after another and has been capable of providing solid proof on its leadership in the Islamic banking in particular and in the banking industry in general.

JDIB have received in March 2016 the prestigious King Abdullah II Award for Excellence – Private Sector. Established in 1999, this award recognises organisations with best-in-class policies and procedures, superior quality systems, outstanding corporate social responsibility practices and operational excellence. The award is considered the national reference for quality and excellence among organisations and businesses in Jordan. i 149

> Petroleum Development Oman:

Excellence in Operations and Community Engagement Petroleum Development Oman (PDO) is the major hydrocarbon exploration and production company in the Sultanate of Oman. The company accounts for about 70% of the country’s crude oil production and nearly all of its natural gas supply. Most gas fields and processing plants are operated by PDO exclusively on behalf of the government.

P

DO is a limited liability company which is owned by the government of Oman (which has a 60% interest), the Shell Group (34%), Total (4%) and Partex (2%).

The company adopted its name in 1951, first struck oil in Yibal in 1962, and has been exporting oil produced in its 90,874 km2 concession area known as Block 6 since 1967.

Including trainees, PDO has around 9,000 staff and is supported by over 40,000 contractor staff, made up of more than sixty nationalities. PDO has more than 8,000 wells, some 20,000 km of flow/pipelines, but the size and scale of the operation is best represented by the mileage that our staff and contractors drive every working day – to the moon and back – to run projects and operate the fields.

PDO’s mission is to find, develop, and produce oil and gas safely, responsibly, and profitably in order to contribute to the sustainable development of Oman and to the benefit of all its stakeholders. PDO is the custodian of the major source of national income and one of the largest private sector employers in Oman. The company manages a large and diverse portfolio of oilfields in terms of field sizes, and reservoir and oil types, development methods, and maturity.

The corporate aim is to improve the recovery factor of hydrocarbons through the application of a combination of world-leading well, reservoir, and facilities management, the deployment of the latest innovative technology, and a comprehensive gamut of recovery mechanisms including: • Primary, such as natural flow and artificial lift • Secondary, such as water floods and pressure maintenance • Tertiary, such as enhanced oil recovery.

The company has become a global pioneer in enhanced oil recovery (EOR) due to its maturing asset base and the complexity and the challenging nature of Oman’s geology. The three 150

“PDO’s mission is to find, develop, and produce oil and gas safely, responsibly, and profitably in order to contribute to the sustainable development of Oman and to the benefit of all its stakeholders.” main EOR methods currently in use are thermal, chemical and miscible gas injection.

SPIRIT OF INNOVATION This spirit of innovation underpins PDO’s approach to EOR and has resulted in the development of several ground-breaking projects.

For example, the Miraah solar energy installation, which is currently being built in Amal in southern Oman, will produce steam for thermal EOR by harnessing the sun’s rays as an alternative to natural gas. At peak production, the 3km2 facility will be the largest of its type in the world and save 5.6 trillion British Thermal Units (BTUs) of gas each year, enough to provide electricity for more than 209,000 people in Oman. It is also expected to reduce CO2 emissions by over 300,000 tons annually, the equivalent of taking 63,000 cars off the road.

Another example is the Nimr Reeds water processing project which uses the power of nature to remove trapped and un-separated oil from produced water with an energy reduction (fuel and emissions) of 98% and providing clean water for industry and agricultural use.

The overall aim of the PDO corporate strategy is to maximise production and minimise the financial costs and environmental and social impact of operations by following best oilfield practices. This means engaging efficiently, responsibly, and – above all – safely in the exploration, production, development, storage, and transportation of hydrocarbons.

CFI.co | Capital Finance International

To do this, PDO has become a pathfinder in the deployment of new technology. At any one time, the company is testing, reviewing, and piloting between 50-70 technologies but the success criterion is less about technology development and more about proficient technology deployment which enables greater safety, accelerated monetisation, higher production, lower costs, and a strong return on investment.

At the same time, world-class well, reservoir and facilities management, reflected in an ability to maintain the stability of the fields and uptime in the facilities have been key success factors. The focus on lean continuous business improvement has been striking and allows PDO to continue to reduce natural and historical reservoir decline rates as well as sustaining the high availability of assets.

RECORD PRODUCTION Last year, PDO delivered a record combined oil, gas, and condensate production of 1.29 million boe/d, and the company is well on its way to reaching a new long-term oil production plateau of 600,000 bpd (excluding condensate) well before its target date of 2019. PDO also recorded an improved safety performance, with enhanced asset integrity and process safety management, and added significant reserves and contingent resources in excess of annual production.

PDO endeavours to meet its wider responsibility to society by aiming to secure a social licence by taking economic, social, and environmental considerations into account in all decisions.

Specifically, this is represented in terms of the provision of oil revenues, domestic employment, staff and contractor training, the support and development of local businesses, and community investment.

Underpinning this approach is PDO’s corporate vision “to be renowned and respected for the excellence of our people and the value we create for Oman and all our stakeholders.”

Summer 2016 Issue

This means the continual development and growth of staff members, leading performance across the industry, and adopting a continuous improvement mind-set to ensure the company protects its reputation, sustains progress, complies with standards, and delivers value to all its stakeholders.

The PDO General Business Principles are the foundation on which business strategies and activities are based. These lay down an insistence on honesty, integrity, and fairness in all aspects of the business, including relationships with contractors, suppliers, and other external stakeholders.

SOCIAL COMMITMENTS This commitment was further reaffirmed by the fact that PDO became the first national oil company in the Gulf Region to sign up to the United Nations Global Compact (UNGC) – the largest voluntary corporate responsibility initiative in the world.

The move means the company has committed itself to supporting the UNGC’s ten universal principles on human rights, labour, environment, and anti-corruption; making them part of the corporate strategy, culture, and day-to-day operations. At the same time, PDO is committed

to engage in collaborative projects which advance the broader development goals of the United Nations.

Supporting the communities in which it operates, and the Sultanate’s economy, through the development of Omani professionals and local companies are key strategic priorities. Since 2011, PDO, working with its contractors, has created more than 22,000 job, training, and redeployment opportunities – beyond those directly employed in PDO – for Omani jobseekers.

The company has also established four Super Local Community Contractors – communityowned companies providing job, training, and investment opportunities for Omanis. To ensure their success, PDO seconded its professionals, trained their staff, secured the services of financial consultants to guide spend and burn rates, and even purchased their equipment (given their much higher cost of capital). These companies are owned by more than 9,400 shareholders and employ in excess of 800 Omanis – all from the respective communities in which PDO operates.

They perform impressively well for an all-round win-win.

The PDO social investment programme works on the basis of helping communities help themselves.

CFI.co | Capital Finance International

The company provides vital infrastructure such as roads, clinics, livestock markets, mosques, and water haulage and vocational training schemes. A good example is the Banat Oman social enterprise initiative which has trained 300 women from lowincome backgrounds in trades and skills which enable them to earn a living. Importantly, PDO doesn’t determine success by the quality and numbers in training, but by the trainees’ ability to secure sustainable employment. Every year, PDO also funds the higher education of 200 students from its concession area.

This commitment to communities remains strong despite the current environment. As with other operators, PDO has been challenged by the global fall in oil prices. However, its strong foundations and ability to adapt and drive cost efficiency through greater collaboration with contractors and lean process management have helped PDO to combat the recessionary pressures.

PDO’s business plan and performance delivery are stronger today than when prices were above $100 a barrel in every single key performance indicator, bar total revenues. Corporate projects are profitable and, provided the company continues to work with its contractors to optimise expenditure and implement structured cost control, the future for PDO is bright. i 151

> CFI.co Meets the Management of Petroleum Development Oman (PDO):

Incubator of Managerial Expertise

T

he Managing Director’s Committee (MDC) of PDO is a beacon for both the oil and gas industry and the region in terms of workplace diversity, proficiency in execution, and breadth of scale and

purpose.

Four of the fourteen directors on the MDC are women: Finance Director Haifa Al Khaifa, Exploration Director Intisaar Al Kindy, People and Change Director Ibtisam Al Riyami, and Corporate Planning Director Ruqaiya Al Hinai, with recently retired Gas Director and In-Country Value Director Abla Al Riyami making a fifth.

Additionally, thirteen MDC members are Omani nationals, reflecting one of PDO’s key goals of attracting, retaining, and developing high-calibre and capable Omani leaders and professionals.

MDC members and senior executives have a broad experience of the oil and gas industry, with many seconded on international assignments with partners such as Shell to enhance their managerial and technical skills and expertise.

Furthermore, PDO maintains a comprehensive system of structured succession planning and talent management to ensure the sustainability of the leadership team and its corporate ethos.

The MDC shares responsibility for PDO’s overall performance and business direction, starting with its overarching priority on health, safety, and the environment (HSE), right through to operational and strategic delivery of oil and gas exploitation and long-term sustainability of employee to community value propositions.

The MDC comprises a mix of asset/line and functional directors, the former driving execution 152

and the latter focused on raising technical and commercial standards and optimal staff development and deployment.

Honesty, openness, and transparency are central pillars of the PDO management philosophy. The large group meets weekly to address corporate and strategic opportunities. Its principal role is to align direction, focus, and communication. As Raoul Restucci, PDO’s managing director, clarifies: “Beyond strategic imperatives, it’s not a decisionmaking body (given the size, scale, and scope of the group) but a very effective committee to challenge ways of working, share, and raise best practice and secure alignment in cohort style to drive and lever more effective execution and change across the company.”

The bulk of operational and other decisions take place through many subcommittees that comprise selected directors, accountable for specific deliverables. “Respect and trust are fundamental in this modus operandi, ensuring clear and unequivocal accountabilities and more efficient/ responsive decision making.”

Importantly, the weekly MDC agenda comprises the Let’s Talk Talent (LTT) session where directors diligently address and focus on talent development and succession planning.

Communication is key and Raoul and Amran Al Marhubi, Technical Director, regularly engage in several “town hall” sessions each year which are also streamed live on the PDO intranet to enable all employees to participate.

The Managing Director also hosts biweekly lunches with employees on a first-come, first-served basis CFI.co | Capital Finance International

to discuss matters of interest and opportunity.

Other directors hold “cappuccino” and other gettogether sessions for staff and, most importantly, all dedicate considerable time in the field – engaging with the front line – where value is created.

Raoul comments that: “As leaders, we don’t pretend to have all the answers, but we work to understand our staff constraints and where change is required.” Raoul also issues a monthly web message detailing developments across the company and all employees can query and challenge him through a dedicated webpage.

Continuous improvement through Leader Standard Work and aligned and consistent goal deployment – where everyone, from junior staff to senior managers and directors, understands key levers and their role in value creation – is PDO’s recipe for sustained delivery and growth, especially in a time of significant challenge to the oil and gas industry.

Many of the directors started their career on the company’s scholarship scheme which sponsors students at leading universities and academic institutions in Oman and around the world in a range of both technical and non-technical disciplines and qualifications, including PhDs, Master’s and Bachelor’s degrees. This year, PDO celebrated the graduation of its 100th sponsored PhD student, the first being current Petroleum Engineering Director Ali Al Gheithy who graduated in 1986.

PDO is regarded as an “academy for the nation’s CEOs”, attracting the brightest and best. Many of the company’s former directors have gone on to lead organisations across Oman’s political, economic, and social spectrum. i

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> CFI.co Meets the MD & CEO of DEWA:

Saeed Mohammed Al Tayer For over thirty years, HE Saeed Mohammed Al Tayer, MD & CEO of Dubai Electricity and Water Authority (DEWA) has worked in the telecommunications, energy, water, and infrastructure sectors.

A

l Tayer has been at the helm of Dubai Electricity and Water Authority (DEWA) since 1992, transforming the state-owned corporation into one of the best-run companies of its kind.

DEWA has gained global recognition for its peerless customer care, the dependability of services, and innovative corporate processes.

The company is also one of the best employers in the wider GCC (Gulf Cooperation Council) Region.

Al Tayer has established a number of successful companies such as Emirates Central Cooling Systems Corporation (EMPOWER), amongst others. He is a member of the Executive Council of Dubai, Chairman of the Infrastructure and Environment Committee, Vice Chairman of the Dubai Supreme Council of Energy, Chairman of Dubai Smart City Office, Vice Chairman of Emirates Global Aluminium (EGA), Vice Chairman of Emirates National Oil Company (ENOC), and Chairman of UAE Water Aid (SUQIA) Board of Trustees, as well as a member of other high-level committees, and councils in Dubai.

In recognition of his qualities as a corporate leader, Al Tayer has received a number of prestigious awards such as the Middle East Champion of Energy Award received at the World Green Economy Summit 2015 from the United Nations Development Programme (UNDP).

Al Tayer has been particularly proactive instilling team spirit amongst staff and encouraging employees to increase their operational and procedural efficiencies. Al Tayer has pushed for, and helped organise, a number of workshops for its divisions in order to review and coordinate strategic plans. The events underpin DEWA’s efforts to cascade its corporate strategies according to the fourth-generation government excellence system.

“In recognition of his qualities as a corporate leader, Al Tayer has received a number of prestigious awards such as the Middle East Champion of Energy Award received at the World Green Economy Summit 2015 from the United Nations Development Programme (UNDP).”

Divisions are encouraged to constantly monitor key performance indicators and adjust performance where necessary to remain aligned with the vision as put down in the DEWA’s Strategic Plan 2021.

“Strategy is the cornerstone of our success and the means by which we can achieve our vision to become a sustainable innovative world-class utility. This year, we are focusing on cascading DEWA’s strategy based on the fourthgeneration government excellence system.

This supports the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice president and Prime Minister of the UAE and Ruler of Dubai, to implement this system across all Dubai government organisations. The

fourth generation of the government excellence system will upgrade government work based on innovative standards to achieve the Dubai Plan 2021. It focuses on the results as basis for excellence in government performance and services in three main areas: achievement of the vision, innovation, and enablers. This in turn, achieves the highest rates of people’s happiness,” said Al Tayer.

“All of DEWA’s divisions and departments contribute to achieving DEWA’s vision, which supports the Dubai Plan 2021 and the National Agenda of the UAE Vision 2021. The strategy-cascading workshops reflect DEWA’s commitment to best practices in strategic planning and implementation. Leadership and innovation are key components in DEWA’s growth and development as a strategy-focused organisation. This supports Dubai’s directives and aspirations to achieve sustainable development, and promotes the Emirate’s position as a global hub for trade, finance, and tourism,” added Al Tayer.

DEWA was the first organisation in the Middle East and North Africa (MENA) to be inducted into the Strategy Hall of Fame. The company earned its place for implementing the balanced scorecard system and for its unwavering commitments to the five principles of the strategy-focused organisation which was developed by Drs Kaplan and Norton, the creators of the balanced scorecard.

Outwardly, DEWA remains focused on offering its customers a consistently-superior level of service via the streamlining of processes, cutting red tape, and minimising wait times.

The company maintains a Customer Happiness Centre at Umm Ramool in Dubai where customers’ opinions and remarks are tabulated and analysed with a view to further enhancing service levels. Most customers praise DEWA

“Strategy is the cornerstone of our success and the means by which we can achieve our vision to become a sustainable innovative world-class utility. This year, we are focusing on cascading DEWA’s strategy based on the fourth- generation government excellence system.”

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for the ease of access to its service platform which operates as a one-stop shop for all the company’s interactions with the public.

“DEWA gives high priority to enhancing its customers’ experiences to achieve their happiness,” said Al Tayer, who emphasises that DEWA fully supports the vision and directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, who more than once observed that the government’s policies, programmes, and services should contribute to building a positive and happy community .HH Sheikh Mohammed bin Rashid Al Maktoum also stated that his government’s main task is to ensure that conditions are conducive for delivering happiness to individuals, families, and employees.

Al Tayer says that DEWA is constantly working to improve its performance to provide the best services at the highest international standards of availability, reliability, and efficiency. “In line with our vision to position our customer as the main pillar of the success of our future plans, achieve sustainable development and the Dubai Plan 2021, to make Dubai the preferred place to live, work, and visit, DEWA works to optimise electricity and water services to achieve higher levels of success.

This not only enhances our competiveness locally, regionally, and internationally. DEWA strives to achieve the directives of our wise leadership by improving and speeding up the work process in line with the smart transformation strategy, so customers can get DEWA’s services anytime, anywhere.”

Al Tayer adds that DEWA provides all its services through its smart app and website.

The single-window service helps save customers’ time and effort. The customers will not need to visit other branches to finish their transactions. It provides services like Move-in, Move Out, paying bills and temporary connections for customers.

“At DEWA, we do our best to provide excellent services that exceed customers’ expectations and make them happier. This supports our Customer Happiness Charter in which we are committed to providing the best services to our customers by a helpful and knowledgeable team that understands and answers their queries,” said Al Tayer.

“The UAE, represented by DEWA, has been ranked first in the Middle East and North Africa and fourth globally for the third consecutive year for getting electricity in the World Bank’s Doing Business 2016 report, which measures doing business in 189 countries around the world,” concluded Al Tayer. i CEO: Saeed Mohammed Al Tayer

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> OECD:

21st Century Trade Agreements & Regulatory Coherence

By Hildegunn Kyvik NordĂĽs

In the past, services markets were largely local and countries mostly worked out their regulation without consideration for how other countries regulate. As a result, an abundance of different regulatory measures and systems exist across countries and sectors.

T

echnology and the cost and convenience of travel have brought most services onto international markets. With this development, the plethora of regulatory approaches and systems that is in place to solve the same problems has become an important constraint the effective and efficient international operations on firms.

To reduce the cost of international operations, regulatory cooperation in various shapes and forms has taken centre stage in trade and investment negotiations. Such agreements can substantially reduce trade costs and stimulate trade in services. However, regulatory harmonisation brings by far the largest gains when the harmonizing countries are relatively open to foreign trade and investment. Where significant barriers to services trade still exist, bringing them down is a prerequisite for regulatory cooperation to make a substantial difference for businesses.

REGULATORY COOPERATION Mutual recognition, compliance assessments, and regulatory cooperation in specific areas feature prominently in recent trade and investment agreements. The objective of such regulatory cooperation is to simplify the life of companies, particularly SMEs, without compromising consumer protection or the independence of regulators. Systematic monitoring of implementation is however scant and assessments of the benefits of more coherent regulation far between, largely due to lack of adequate analytical tools.

Recent OECD work provides a new tool and demonstrates how it can be used for monitoring regulatory convergence and assessing its economic benefits. Based on the rich and detailed information in the Services Trade Restrictiveness Index (STRI) database, regulatory heterogeneity indices are created for each country pair and each sector. The heterogeneity indices exhibit the weighted share of policy measures for which countries have different regulation by country pair and sector. They take values between zero and one, where zero signifies country pairs that have

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“To reduce the cost of international operations, regulatory cooperation in various shapes and forms has taken centre stage in trade and investment negotiations.� exactly the same regulations in a sector, while one portrays country pairs that have completely different regulations.

On average the country pair that has the most similar regulations is Norway and Sweden, where only 13% of the policy measures are different, while the least similar country pair is the US and India where almost half the policy measures are different. The average across all country pairs and sectors is about a quarter. There are also large differences across sectors as far as regulatory heterogeneity is concerned.

Legal services, broadcasting, and maritime transport have the most heterogeneous regulation.

These are sectors that are subject to sectorspecific national regulation and legal services and broadcasting are also among the sectors the least open to trade and investment. The lowest average heterogeneity indices are found in road transport and distribution services, two sectors that also have low average STRI indices. Note, however, that a high level of restrictions does not necessarily go together with heterogeneous regulation. Air transport, for instance, is a highly restricted sector, but where countries tend to restrict trade and investment in the same way.

REGULATORY CONVERGENCE FOR TELECOMMUNICATIONS Figure 1 summarises the changes in regulatory heterogeneity from 2014 to 2015 for the seven sectors where information for both years is CFI.co | Capital Finance International

currently available. Two years is too short to establish trends, but the chart shows that with the exception of telecommunications a larger number of country pairs have become less rather than more similar.

Interestingly, telecommunications is one of the few sectors for which international trade agreements tend to have binding commitments related to behind the border pro-competitive regulation. Furthermore, international regulatory cooperation has been institutionalised for more than a century through the International Telecommunication Union (ITU).

Regulatory heterogeneity inhibits bilateral services trade flows, particularly in relatively open economies. As depicted in Figure 2, the trade stimulating effect of regulatory convergence is higher the lower the level of the STRI. For example, if two countries have the same low STRI score (0.1), harmonising regulation on a few measures is associated with about 12% more bilateral services trade.

In contrast, harmonising a few measures at an STRI level of 0.4 is associated with only 3.5% more bilateral trade. Intuitively, this means that harmonising regulations that constitute a significant barrier to trade and investment does not stimulate trade much. In fact, when the level of restrictiveness as measured by the STRI reaches a critical point around 0.5, harmonisation discourages trade.

SIMILAR LEVELS OF RESTRICTIVENESS Regulatory convergence can reduce bilateral trade costs substantially. The trade enhancing effect of regulatory convergence depicted in Figure 2 is explained by lower trade costs due to the elimination of the duplication of compliance cost with regulation. Figure 3 exhibits the bilateral ad valorem trade cost equivalent of the average regulatory heterogeneity index (0.26) at different levels of restrictiveness. It shows that the trade costs implied by regulatory heterogeneity depend on the level of trade restricting regulation as well as how good substitutes local and foreign services

Summer 2016 Issue

are. The more similar the services, the better substitutes they are, and the less concerned are customers about where the service comes from.

Telecommunications

Accounting

Construction

Engineering

converge diverge

Architecture

Same

Computer services

Legal services 0

200

600

400

800

1000

Number of country pairs Figure 1: Changes in regulatory heterogeneity 2014-2015. Note: There are 861 unique country pairs in the STRI database. In total for the

seven sectors, 31% of the country pairs converge, 34% diverge and 35% stay the same.

16

Predicted change in exports %

14 12 10 8 6 4 2 0 -2

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

STRI level

-4

Figure 2: Predicted impact on services exports of reducing the bilateral heterogeneity index by 0.05 points. (When the country pair has the same level of restrictiveness)

Iceberg cost equivalents

80% 70%

good substitutes

60%

poor substitutes

50% 40% 30% 20% 10% 0% -10% -20%

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Conversely, when services firms are highly specialized, for instance in engineering, architecture or legal services, customers care a lot about buying from the suppliers that best meet their needs. It is the latter type of services that will gain the most from regulatory cooperation.

When markets are relatively open, trade costs imposed by regulatory differences range between 20% when local alternatives can be easily found and 75% when they cannot.

The results do not imply that overall trade costs are higher when the STRI scores are low, which a casual reading may suggest. Rather, when the STRI score is high, the level of restrictiveness dominates regulatory differences. For example, differences in qualification requirements and licensing procedures only matter if foreign suppliers can obtain a license to operate at nonprohibitive costs in the first place. Only then will they consider entering the market and face the cost of complying with a different set of regulations.

POLICY IMPLICATIONS As noted, regulatory cooperation has become prominent in trade and investment agreement, including the so-called mega-regional trade deals. It has been shown that such cooperation can potentially bring down the costs of servicing multiple foreign markets substantially. The trade stimulating effect is however larger the more open the cooperating partners are to trade and investment and the more specialized are the services. The policy implications that can be drawn from these findings are summarised in the bullet points: • First, bringing down high levels of services trade restrictions or implement reforms to that effect unilaterally should be a first step. An STRI score above 0.4 in a sector is an indication that reforms should be a priority.

• At the same time, introducing forward-looking regulatory cooperation would avoid creating new sources of regulatory heterogeneity.

• As the level of trade restricting regulations comes down, more priority to regulatory cooperation should be given, both on future regulation and exploring ways to make existing regulation more coherent.

• Priority could be given to sectors with a high degree of specialisation, which also tend to be subject to sector-specific regulation.

• Make sure that regulatory cooperation successfully eliminates duplication of regulatory compliance costs for exporters in the areas covered by the agreement.

0.55

STRI level

Figure 3: The ad valorem trade costs of regulatory heterogeneity. (When country pairs have the same STRI score and the same regulation on a quarter of the measures) Note: The graphs in Figures 2 and 3 are calculated for cases when exporter and importer STRI levels are the

same, depicted on the horizontal axis. The estimates take into account the interaction between the STRI level and regulatory heterogeneity.

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Finally, it appears that regulatory coherence is most successful when there are clearly defined regulatory objectives and well-proven regulatory tools are available, such as in telecommunications. A coordinating body also helps. i 157

>

THE EDITOR’S HEROES

Eclectic Bunch

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rags-to-riches story is hard to resist. Spinoffs such as rags-toexcellence stories are likewise fascinating. Carlos Acosta’s rise from the mean streets of Havana to the world’s greatest concert halls is such a story. Hailed as one of the best ballet dancers ever, Mr Acosta wows global audiences with his grace, style, and a lightness of being that, in his case, seems far from unbearable. He is one of CFI.co’s ten summer 2016 heroes.

This issue’s crop of heroes also includes staples such as Steven Spielberg who is singularly unable to produce a flop. But what about his 1989 flick Always? That movie may only have netted a paltry $74 million at the box office, but it did feature Audrey Hepburn in one of her last performances.

A love story and tear jerker sans pareil, Always is both light and deep. The movie may have been underappreciated by audiences; it remains a masterpiece, albeit one that requires a peek beyond its decidedly simplistic aesthetic.

Luckily, not all heroes are created equal.

Take former Bank of England Governor Mervyn King whose tenure was not devoid of controversy. Lord King, as he is known now, remains a fence-sitter who relishes to dispense advice – oracle-like – to those he considers either misguided or misinformed.

Lord King, a crackpot to many and a sage to a few, is included as a hero for his almost adorable and certainly quaint insistence on keeping a stiff upper lip and his stalwart adherence to the uniquely British stay-calm-

Berlin: Museum Island (UNESCO World Heritage Site)

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and-carry-on attitude. After all, it helped win two world wars and kept a quarter of the world’s land surface coloured red for an awful long time.

Lord King seemed to lose the plot whenever expressing doubts about the benefits of Britain’s membership of the euro. Unlike his successor at the Bank of England, he fails to grasp the seriousness of the UK’s many deficits, the country’s lagging productivity, and the dangers of devaluation as an instrument to provide solace in times of financial need. In any case, kudos to Lord King for muddling along in the best British fashion.

This issue features no less than two heroic lords: David Owen made it into our list because – although a somewhat of a political chameleon – he unfailingly managed to remain an outsider, even when very much on the inside. It takes gumption and skill to pull that off – and still manage to attain the aura of elder statesman. Lord Owen’s well-reasoned lack of party discipline – he jumped between a number of political entities – did, however, subvert his career.

He is widely considered “the best primeminister that never was.”

The CFI.co hero list is usually an eclectic gathering of noteworthy people. This issue’s is no different and features Wales’ first billionaire (Terry Matthews), a polymath (Robert Winston), a beauty-queen-turnedlawyer (Kimberley Motley), a rock star (Ian Anderson of Jethro Tull fame), a high-flying politician (Jean-Claude Juncker), and a singing angel (Charlotte Church): all heroic in their own way. i

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> CARLOS ACOSTA From the Mean Streets of Havana Charismatic, highly acclaimed Cuban ballet star Carlos Acosta is embarking on a new project.

The greatest male ballet dancer since Rudolf Nureyev and Mikhail Baryshnikov has formed his own contemporary dance company in Cuba and is setting up a ballet school to train young people.

Mr Acosta is the eleventh child of an impoverished family of mixed Spanish and African heritage. He was a hyper-active kid who courted danger out on the streets. His father, a truck driver, dispatched Carlos to a state-funded ballet school to keep him out of trouble and dispense discipline. Looking back, Mr Acosta says: “I wanted to be a footballer. I didn’t know what ballet was. I don’t think my father did either but he wanted me to go.” Despite having no knowledge of ballet, the Michael Jackson fan from the wrong side of Havana passed his audition.

It was an inspired decision for the boy proved to be an exceptional dancer and went on to train at the Cuban National Ballet School to earn a diploma at the highest level. In 1990, sixteen-year-old Carlos Acosta won the prestigious Prix de Lausanne which immediately brought him international acclaim.

This led to many foreign performances and awards. In 1991, Carlos Acosta became a principal with the English National Ballet.

He moved to the Houston Ballet, then back to London to the Royal Ballet. He has performed as guest principal artist with all the leading ballet companies of the world. Mr Acosta has been a pioneer: the first foreigner to be a guest principal with the Bolshoi; the first black principal with the Royal Ballet, and the first black Romeo.

Mr Acosta’s other artistic ventures include writing and choreography. His semiautobiographical show Tocororo broke all box office records at Sadler’s Wells Theatre. It was nominated for an Olivier award in 2004.

Tocororo is the story of a young Cuban boy who leaves his family and home in the countryside to find a new life in the city.

The original music blends popular and symphonic Cuban styles. He has choreographed established pieces, including Guys and Dolls and Don Quixote. Mr Acosta’s written work includes the autobiographical No Way Home published in October 2007, and the novel Pigs Foot – a Cuban family saga spanning five generations.

Mr Acosta is still in phenomenal physical

shape. However, at 42, he has begun cutting down the number of performances. Mr Acosta married an English former model. The dancer has spent his life defying and exceeding expectation.

The mango-stealing street-kid-turned-balletdancer has become a role model. His strength, energy, and creativity have significantly raised the bar.

“It was an inspired decision for the boy proved to be an exceptional dancer and went on to train at the Cuban National Ballet School to earn a diploma at the highest level.”

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Summer 2016 Issue

> CHARLOTTE CHURCH Of Two Minds in the Public Eye At age of eleven, Welsh schoolgirl Charlotte Church’s fabulous voice and classical song repertoire catapulted her onto the global stage and into the headlines. Fame can bring fortune but the excessive media interest which accompanies it is less welcome. As Charlotte and her family soon discovered, tabloid gossip pages are a very exposed place for adolescents.

The Voice of an Angel, Ms Church’s first album, is a collection of arias and sacred songs in English, Welsh, Latin, Italian, and French.

A contract with Sony Music paved the way to stardom and hit songs in both the US and the UK. Thirteen-year-old Charlotte was offered £100,000 to sing Pie Jesu at Rupert Murdoch’s New York wedding to Wendi Deng in 1999. The magnate has since replaced Ms Deng with former super model Jerry Hall.

At the suggestion of her manager, Charlotte Church did not charge the Mr Murdoch for her appearance, preferring favourable coverage by his newspapers instead. However, within months Ms Church had sacked her manager and soon after the deal was to bomb spectacularly. The tabloid press held the young singer firmly in its sights. Though Ms Church had chosen to stay in her home town Cardiff in order to enjoy the normal life of a Welsh teenager, she was almost constantly preyed upon by photographers determined to record her every move.

Charlotte Church moved away from her classical roots to enter the realm of pop, releasing records and hosting a chat show. A relationship with photogenic Welsh rugby star Gavin Henson only heightened her appeal to the paparazzi. In 2007, Charlotte and Gavin were ranked the 49th richest young people in Great Britain with an estimated joint wealth in excess of £12 million.

The couple has since split up.

In 2011, Ms Church appeared at the Leveson Inquiry that investigated the ethics and culture of UK media in the wake of the phone hacking scandal uncovered at Rupert Murdoch’s News International. She described the detrimental effects on her personal life of the persistent intrusions by members of the press.

News International agreed to pay £600,000 in damages and costs arising from the scandal in an out of court settlement. During the Leveson Inquiry, Ms Church underwent a political awakening of sorts. She has since appeared on Question Time and Have I Got News for You, and became a regular at events such as anti-austerity marches and similar protests.

In the 2013 John Peel Lecture she criticised the music industry for maintaining a culture that encourages female artists to project a sexualised image.

Ms Church has packed a lot into her life: a

global superstar at the age of 12 she went on to sell ten million records in under a decade, host a primetime television talk show, and become a single mother of two. Now aged thirty – feisty, opinionated, and outspoken – Ms Church remains true to her Welsh working class roots. Her latest venture is a musical version of

Hans Christian Andersen’s fairy tale The Little Mermaid commissioned by Festival of Voice – an international arts festival in Cardiff.

This self-declared prosecco socialist – one notch up from the salon variety – will continue to use her high profile to act as a spokesperson – if not role model – for the disenfranchised.

“Now aged thirty – feisty, opinionated, and outspoken – Ms Church remains true to her Welsh working class roots.”

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> DAVID OWEN The Best Leader That Never Was In the long list of those described as “the best leader we never had,” David Owen’s name is found near the top. Uniquely among modern British politicians, he has won admirers in equal measure from left, right, and centre.

David Owen held senior office only a few years as foreign secretary in James Callaghan’s crisis-riven Labour government of the 1970s.

For most of his political career David Owen has been an outsider whose integrity, while rarely questioned, led him to quit first the Labour Party and then the Social Democrat Party, which he helped form in 1981 as one of the Gang of Four – prominent Labour leaders opposed to the radicalisation of their party.

Made a life peer by Prime Minister John Major in 1992, Baron Owen of the City of Plymouth now dwells in the House of Lords as an independent social democrat. Here, he has become a vocal critic of the Tory government on issues including Europe, foreign affairs, defence, and the NHS. Despite his many political achievements – including attempts, with US Special Envoy Cyrus Vance, to bring peace to the Balkans in the 1990s – Lord Owen’s legacy remains untainted, possibly because he did not hold power long enough to become corrupted. As a neurologist and one-time psychiatric registrar, Lord Owen was particularly well-placed to witness and record the behaviour of those around him who did give in to the temptations offered by high office.

Lord Owen joined the Labour Party in 1959 after witnessing the ravages wrought by poverty first-hand while working at St Thomas’s hospital in Lambeth, on the opposite bank of the River Thames from the Palace of Westminster. It was here that he also met politicians battling personal issues – stress, alcohol addiction, and depression amongst them. This inspired Lord Owen to develop theories about the price of political power and its correlation to illness.

In his 2007 book, In Sickness and in Power: Illness in Heads of Government in the Last 100 Years, Lord Owen vividly describes how absolute power corrupts absolutely, based mostly on his own close-quarter observations of those in high office.

Lord Owen continued to examine this theme in The Hubris Syndrome: Bush, Blair, and the Intoxication of Power (2012). In this book he illustrates how arrogance taken to extremes can lead to incompetence.

A tell-tale sign of hubris is the inability to change direction since doing so involves admitting to a mistake, concludes Lord Owen.

He might have been thinking of Harold Wilson

who grimly clung to power during his second premiership (1974-1976) or Margaret Thatcher in her later Downing Street years as she grew increasingly isolated and estranged from political reality.

Lord Owen is a passionate believer in European unity. But, as his support for Brexit suggests, he is fundamentally opposed to the EU in its current form. His own belief is that Europe needs drastic reform if it is to fulfil its manifest destiny.

For a brief period in the early 1980s, it seemed Lord Owen was actually destined to break the mould of British politics. While Labour struggled with its own demons on the far left,

the Tory government of the day proved highly unpopular. Lord Owen and his fledgling Social Democratic Party appeared poised to seize the centre ground. Then, in 1982, the Falklands War pulled the nation out of its stupor. Margaret Thatcher rose to the occasion, promptly regained her poise, and shattered Lord Owen’s political centre in the process. The first stirrings of what was to become New Labour signalled the end of his dream. In 1988, Lord Owen quit his party on the eve of its merger with David Steel’s Liberals.

Thus, the nation will never know if David Owen would have succumbed to the malady that afflicts those wielding power – he never did get that far.

“Lord Owen is a passionate believer in European unity. But, as his support for Brexit suggests, he is fundamentally opposed to the EU in its current form.”

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Summer 2016 Issue

> JEAN-CLAUDE JUNCKER Navigating the Perfect Storm Jean-Claude Juncker’s political fuse was lit at an early age. The trajectory of his ballistic career path tracked straight and true to the most powerful position in the EU’s vast edifice: President of the European Commission.

Luxembourger Juncker became his country’s labour minister at the age of 30. He later held the twin positions of finance minister and prime minister. His reign as PM – from 1995 until Xavier Bettel took over in 2013 – made him the longest-serving head of any government in the European Union.

Mr Juncker smokes, drinks, and lives in a modest house – way edgy for a Eurocrat. He is fluent in English, French, and German – the hallmark of EU heroes. The fortnight Mr Juncker spent in a coma after a traffic accident in 1989 is probably the closest this workhorse has come to any real time off.

Back in 1991, Mr Juncker was a driving force behind the signing of the Maastricht Treaty, paying particular attention to the clauses focusing on European monetary union.

He was awarded the Charlemagne Prize in 2006 and anointed president of the European Commission in 2014 by member states after being nominated for the job by the European Parliament.

This story is not without its twists and turns, and Mr Juncker’s power-walk to the top hasn’t been all beer, skittles, and policy-making.

Or – according to some – perhaps it has: Mr Juncker’s decidedly continental drinking habits – including a revitalising shot of cognac with breakfast if British tabloids are to be believed (which they are not) – have reportedly caused concern “at the highest levels” of the EU. He has also been chastised for chain-smoking through meetings and blamed for budget blowouts on grandiose domestic projects.

Mr Juncker had the misfortune to be at the helm as the good ship Europe founders on the financial and sovereign debt crises – perhaps a storm too perfect. While he has won plaudits for his dedication to the European cause, he is far from universally popular. David Cameron hinted at a British EU pull-out in 2014 should Mr Juncker be appointed commission president.

He was and Mr Cameron, in turn, left the scene after his bungling Brexit performance.

Disgruntled Brexit referendum voters – who, by now, may be the only kind of the species left – most recently revered Juncker for calling out Nigel Farage – who had the front to pitch up, post-referendum, to Brussels – with the words,

“why are you still here?”

Mr Farage severely dislikes the European Union but is much less averse to pocketing his £79,000 compensation as a member of the European Parliament. He is also well-versed in maxing out his EU expense account.

Mr Juncker is a man never far removed from the headlines. One of the most enticing, in recent weeks, comes from the July 10 edition of Britain’s Daily Mirror: Jean-Claude Juncker Believes Aliens Are Worried About Brexit – claiming he had “heard from leaders of other planets”. Online footage does indeed show Mr

Juncker referring to other planets. Perhaps it was something he had for breakfast.

One of the most telling, and possibly prophetic, headlines came from Deutsche Welle the very next day: Jean-Claude Juncker, The EU’s Scapegoat.

If there’s any veracity to either of those headlines, it will doubtless come to the fore eventually. In the meantime, this planet should be grateful for Jean-Claude Juncker’s presence, for his drive, his focus, and his fortitude. The man is not unlike a machine, huffing and puffing but keeping momentum.

“Mr Juncker had the misfortune to be at the helm as the good ship Europe founders on the financial and sovereign debt crises – perhaps a storm too perfect. While he has won plaudits for his dedication to the European cause, he is far from universally popular.”

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> IAN ANDERSON Living in the Present When Ian Anderson, the lead singer of the celebrated band Jethro Tull bought a 15,000-acre estate on the Isle of Skye, the locals were less than enthusiastic. “He’ll probably grow poppies,” said one, alluding to the widely-held belief that all rock stars are drug-crazed idiots. They were wrong.

From the late 1970s to the 1990s, Mr Anderson turned the Strathaird Estate from a run-down hill farm into an impressive salmonfarming enterprise which, at its height, employed 400 people and turned over £10 million annually.

The pipe-smoking, fly-fishing laird of that rugged and remote peninsula, was a long way from Mr Anderson’s stage persona. In the summer of 1969, the band’s major commercial hit Living in the Past was the anthem for a generation of hippies and free lovers.

The long-haired and bearded Ian Anderson, with his flamboyant posturing, flailing arms, staring eyes, and that standing-on-one-leg-whileplaying-the-flute fixation, epitomised a period when popular music began to go a bit wild.

And yet Mr Anderson was a most unlikely rock god: “I was put off by all of that drugs and free sex. I took to a life of early-to-bed, early-towake. After a concert, I’d be tucked up in bed with a sandwich by 10.30pm.”

Ian Anderson was born in Fife, hence his desire to return to Scotland at some stage in his life. However, his family moved to Blackpool where, as a rebellious grammar school boy, he learned to play the guitar and gathered a little band around him. Mr Anderson took up the flute after he heard Eric Clapton play, realising that there can only be one god.

It was the same with singing. “I became the singer because the others [in the band] were worse than I was,” he says. Even his flute-playing wasn’t really up to scratch. It was only when Ian Anderson’s daughter came home from school with a how-to-play-the-flute manual that he figured out how to properly play the instrument.

When Mr Anderson and his fledgling band arrived in London in the late 1960s, their manager changed the group’s name on an almost nightly basis in order to get rebooked at clubs.

Jethro Tull stuck after one particularly wellreceived performance.

The real Jethro Tull was an 18th century agronomist: “It was only later that I realised we’d been named after a dead guy who’d invented a seed drill.”

Mr Anderson’s musical influences are broad.

He became interested in the big band sound of Glen Miller thanks to his father’s record collection.

Later on he developed a love for blues kings such as Muddy Waters and Howlin’ Wolf. Mr Anderson also admits to being inspired by Beethoven, church music, and Scottish folk songs.

Mr Anderson sold his interest in salmon farming in the late 1990s to concentrate on music. He and the band – now a completely different line-up – continue to perform regularly at concerts and festivals, defying all attempts to categorise their style – prog rock, folk rock, jazz, or blues?

“Jethro Tull remains an underground group.

We still play to upwards of 15,000 people, but if you ask the man in the street, some may have

heard of us, others haven’t. I think that’s great – to be somehow anonymous.”

The band has released thirty studio and live albums – including Aqualung, Thick as a Brick, and Homo Erraticus – selling more than sixty million copies since their 1968 debut in London.

They still play dozens of concerts a year.

Next summer, Mr Anderson will celebrate his 70th birthday. He has no plans to retire – ever.

Ian Anderson hates inactivity and still spends his days writing and recording at the Home Counties farm he shares with Shona, his wife of 38 years.

No-one could ever accuse Ian Anderson of living in the past.

“The pipe-smoking, fly-fishing laird of that rugged and remote peninsula, was a long way from Mr Anderson’s stage persona. In the summer of 1969, the band’s major commercial hit Living in the Past was the anthem for a generation of hippies and free lovers.”

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Summer 2016 Issue

> KIMBERLEY MOTLEY Front Line Lawyer Grit and glamour rarely go hand in hand, but in Afghanistan – known mostly for being poor, full of poppies, and home to the Taliban – an attractive American lawyer encapsulates both. In this raw and rugged country, where tribal law often trumps civil and criminal law, Kimberley Motley has been catapulted onto the world stage as she fights for the marginalised and oppressed.

In 2008, the former-beauty-queen-turnedtenacious-lawyer rocked up in Afghanistan on a nine-month funded scheme to train local lawyers.

For Ms Motley, fresh from five years practising law in the US, it was an experience akin to Alice falling down the rabbit hole.

She encountered staggering corruption, and an overuse of harsh, illegal punitive measures while laws that could and should protect the people were underused. Worst of all was the noxious tradition of baad where tribal councils, or jirgas, allow girls as young as four years to be exchanged to pay debts or appease feuds. These human scapegoats are invariably subjected to heart-breaking physical and sexual abuse.

Kimberley Motley didn’t walk on by. With her legal background and the heart of an activist, she dug in and became the first non-Afghan lawyer to litigate in the country since 2008. She first caused a stir by representing expats incarcerated on dubious fraud or murder charges. And although she initially shied away from human rights cases, she felt compelled to use the opportunity to use Afghan law to help some of its most vulnerable people.

Now a wife and mother of two children, Ms Motley spends some six months of the year in a high security house in Kabul, and to date, remains the only Western lawyer operating in Afghanistan.

She reports a 90% success rate. Ms Motley uses an iPad app to translate tracts of Sharia law from the Koran and relies on an army of translators. Her reputation has grown and she now also practices law in the US, Dubai, and before the International Criminal Court.

As Ms Motley explained to an audience at a TED talk in 2014 “…the reason for my success is very simple: I work the system from the inside out and use the laws in the ways that they’re intended to be used.”

The presence of the elegant and feminine Ms Motley litigating for top CEOs through to pitifully mistreated pro-bono clients, was a seismic shock for the male-dominated Afghan legal system.

Whilst she has earned the grudging respect of some of her Afghani peers, her high profile has come at a cost. Ms Motley’s fearless approach and refusal to pay bribes – normally par for the course – has turned her into something of a target.

But the daughter of an African American father and North Korean mother was raised in the tough, racially tense neighbourhood of Milwaukee, Wisconsin, and instilled with a robust sense of selfdiscipline and formidable inner strength. As well as anonymous emails threatening rape or death, she has been called a spy, a brothel owner and even had a grenade lobbed through her window (it didn’t detonate).

Life in Afghanistan for any foreigner is a bit of a lottery, but Kimberley Motley is more of a target than most. She is matter-of-fact about the dangers, and says she is more concerned by the risks her clients take in seeking her representation than her own safety.

Gulnaz, a young woman jailed for adultery

after being raped and impregnated by her cousin’s husband, is one of Ms Motley’s most well-known human rights cases. The story generated global outrage, and she was able to negotiate the release of Gulnaz and her child from jail, and even managed to gain her a pardon from President Hamid Karzai – an unprecedented demonstration of the power of the law applied properly. In a cruel twist of irony, Gulnaz later succumbed to social pressure and became the second wife of her attacker.

In Ms Motley’s own words: “We can all do something… we can all be contributors to a global human rights economy. We can create a culture of transparency and accountability to the laws, and make governments more accountable to us, as we are to them.”

“With her legal background and the heart of an activist, she dug in and became the first non-Afghan lawyer to litigate in the country since 2008.”

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> MERVYN KING Opinionated Lord During his time as governor of the Bank of England, Sir Mervyn King – now Lord King – had a habit of using sporting metaphors to make a point.

He has advanced the opinion, for instance, that countries in the Eurozone would benefit from a football-style promotion/relegation system to achieve successful monetary union, saying that premature promotion can be a misfortune, while relegation often offers the opportunity of a new start.

Earlier this year, Lord King got a taste of the real thing – taking a seat in the boardroom of Aston Villa as the football club, which he has supported since boyhood, plunged headfirst into the void.

Lord King didn’t cope quite as well at Villa Park as he had in Threadneedle Street during his ten years at the helm of the UK’s central bank. He quit after just two months.

Mervyn King might be described as a reliable defender who is sometimes deceived by the speed of the ball. His critics certainly believe he was slow to react to the looming economic crisis of 2008. Some even blame him, and his American counterpart Alan Greenspan, for the housing bubble which, once it burst, resulted in the worst global crash since the Great Depression of the 1930s.

Messrs King and Greenspan watched passively as the bubble inflated on either side of the Atlantic. Neither did much to prevent it or produce strategies to soften the blow when it fell.

Lord King said later: “There were imbalances – we knew things were unsustainable – but it was not entirely obvious where it would come unstuck.”

With his owlish appearance and soft voice, Lord King presented a reassuringly avuncular, trusted face to the British public which may be why Gordon Brown, the then prime minister, reappointed him for a second term as BoE governor on the eve of the banking crisis. But those who served alongside Lord King usually describe a much tougher character. Indeed, he was called a tyrant by David Blanchflower, one of his colleagues.

Mr Blanchflower, a British-born Americanbased economist who was co-opted by Prime Minister Brown on to the Monetary Policy Committee of the bank in 2006 – against Lord King’s wishes – is scathing about the governor’s stewardship: “He controlled the bank with an iron fist, slaying any dissenters in his path.”

Lord King was also accused of meddling in politics when he criticised the policies of Labour chancellor Alistair Darling in the run-up to the 2010 general election, while openly supporting the cost-cutting proposals of the incoming Conservative-Liberal coalition. He denies this, insisting that the Labour government was not

responsible for the crash. There was a shared responsibility, he says, across the political parties and financial institutions for failing to foresee the problems.

Since leaving the Bank of England in 2013, Lord King has been appointed a life peer and has written a book – The End of Alchemy: Money, Banking, and the Future of the Global

Economy – warning that if the financial system is not reformed, the world faces another economic crisis. He also holds forthright views on European monetary union which, he predicts, will lead to disaster if current directions are not changed.

Lord King may have left the pitch, but is still busy dispensing mostly unsolicited advice from the side lines.

“Lord King may have left the pitch, but is still busy dispensing mostly unsolicited advice from the side lines.”

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> PROFESSOR ROBERT WINSTON A Polymath with Faith It takes a rare talent to straddle science and the arts, but Professor Robert Winston can lay claim to this fame. A pioneer in fertility treatment since the 1970’s, he juggles a mind-boggling portfolio of roles across both worlds – including professor of Science and Society and emeritus professor of Fertility Studies at Imperial College London and chairman of the Genesis Trust – which funds research into the health of women and babies.

Prof Winston is also chair of the Royal College of Music Council, a one-time awardwinning theatre director, a TV presenter, author, and politician – he was appointed a Labour peer in December 1995.

His prolific TV career includes BAFTA award-winner The Human Body, and Child of Our Time – a ground-breaking and ongoing BBC documentary charting the lives of a group of children, all born in 2000, as they grow to the age of 20.

Raised an orthodox Jew, Prof Winston has found himself in the middle of the debate between science and religion – although he doesn’t see it as a clash of two opposing paradigms, and believes the debate to be largely artificial.

“Both are important, both reflect on some aspect of our personality, both reflect our humanity, both are needed and they shouldn’t be seen in competition with each other,” he told the BBC in 2010.

He presented The Story of God, which first aired in December 2005, exploring the development of religious beliefs from the three Abrahamic faiths and the issues around belief in God in a scientific age.

A prolific author, Prof Winston has more than 300 scientific papers on human reproduction and early pregnancy to his name. One of his many books, The Essential Fertility Guide, was published by Quadrille in September 2015.

He was married in 1973 to Lira Helen Feigenbaum (now Lady Winston), and the couple have three children – whom the professor regards as his best achievements.

With a string of high ranking positions, memberships, and awards, and with characteristic grace, Prof Winston says he is most proud of the work for which he is best known – helping infertile couples.

The gynaecological surgical techniques he developed in the 1970s boosted the success rate of fertility treatments, and he pioneered improved IVF treatments enabling screening for genetic diseases – allowing parents carrying faulty genes to have children free of illnesses such as cystic fibrosis.

Professor Winston runs a research programme at the Institute of Reproductive and Developmental Biology, focussed on transgenic and gamete biology, which by injecting one man’s sperm into another may result in infertile men being able to father their own children.

Outreach is a big feature of Prof Winston’s work – as well as a myriad of public lectures, he founded the Reach Out Laboratory in Imperial Collage – which brings schoolchildren of all ages into the university for practical science sessions

and to debate the issues raised by science and technology.

Prof Winston was a council member of the Imperial Cancer Research Fund and Cancer Research UK, and until 2013 was a member of the Engineering & Physical Science Research Council where he also chaired the Societal Issues Panel.

Rarely can one man excel at many things – but with his stupendous range and energy, Professor Lord Winston shows it’s not impossible.

“Raised an orthodox Jew, Prof Winston has found himself in the middle of the debate between science and religion – although he doesn’t see it as a clash of two opposing paradigms, and believes the debate to be largely artificial.”

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> STEVEN SPIELBERG Storyteller Extraordinaire It takes a remarkable man to change the course of a whole industry with one mechanical shark. Steven Spielberg did just that with his 1975 American thriller Jaws which raked in an estimated $2 billion at the box office and kick-started the era of the Hollywood blockbuster.

Being right out on the edge, using muscles he never knew he had – fear, or anticipation of the unknown – is the drive that Spielberg credits for his talent. His bold approach, insight, and painstaking observation of angles and techniques in all-time great movies has culminated in a golden equation for the visual entertainment industry.

Today, his name conjures up a kaleidoscope of images – ET, the engaging extra-terrestrial; Indiana Jones dodging snakes and disaster in the Raiders of the Lost Ark trilogy; adrenalin-jerking dinosaurs in Jurassic Park, through to his intuitive rendering of a Japanese prisoner of war camp, with a wide-eyed young Christian Bale chasing aeroplanes and counting weevils in Empire of the Sun. Dubbed Prince of Hollywood by the press, Mr Spielberg has channelled his huge creative freedom to craft films across all genres and tackle issues from racism, incest, and war. His controversial dramatization of The Colour Purple received eleven Oscar nominations. His haunting Schindler’s List won multi Academy Awards for its portrayal of Oskar Schindler who saved more than a thousand Polish-Jewish refugees during the Holocaust.

Growing up in Phoenix, Arizona, Steven Spielberg’s fascination for film-making first came to light as a young boy when he decided to film his toy trains having a crash. Later, for his Scouts merit badge, he used the family video camera to craft a short Western starring himself and his friends in their cowboy costumes.

Young Mr Spielberg’s passion for his craft drove him to create several films and by the age of sixteen he had made a 140-minute film, Firelight, which was screened in a local theatre.

Shortly afterwards he moved to Los Angeles where he landed an unpaid internship at Universal Studios via a family friend – a life chapter which has been a fertile breeding ground for catch-meif-you-can style anecdotes of him sneaking in and commandeering studios.

Anecdote or not, when Syd Sheinberg, head of TV production at Universal, saw his 26-minute film Amblin’ Mr Spielberg was immediately offered a seven-year gig – making him the youngest ever director to land a long-term contract with a major Hollywood studio.

Despite guffaws from an occasionally hostile crew not keen to take orders from a long-haired

love beads wearing teenager, by the age of 22, Spielberg was directing Joan Crawford in the pilot episode of Night Gallery for Universal Television.

Mr Spielberg took the cinema industry by storm with his 1971 release of Duel. The suspense-driven thriller was made for TV but was later released into cinemas. It catapulted him into

full length feature films.

For millions of people across the world, Steven Spielberg represents all that is powerful in the essence of filmmaking. For a generation he has dominated the art form. In the hands of a master filmmaker, humanity can be looked at from all dimensions.

“For millions of people across the world, Steven Spielberg represents all that is powerful in the essence of filmmaking. For a generation he has dominated the art form. In the hands of a master filmmaker, humanity can be looked at from all dimensions.”

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Summer 2016 Issue

> SIR TERRY MATTHEWS The Fixer Bon viveur, tech giant, inspirational leader, history enthusiast, family man – Sir Terry Matthews can be viewed from many perspectives. But for the Welsh, he will always be the man who brought the Ryder Cup to Wales in 2010. Hosted by the Celtic Manor, which he owns, Sir Terry was the visionary behind securing the landmark event – having ploughed £150m into the state-of-the-art hotel site to ensure it would land the deal.

Now the billionaire Welsh-Canadian is putting his business might behind the UK’s beleaguered steel industry. Following announcements by Tata Steel to sell its behemoth Port Talbot site, Sir Matthews is helping to build a consortium of public and private sector figures focussed on a rescue deal for the steel town.

Sir Terry Matthews was Wales’ first billionaire.

In 2015, he was named as Wales’ fourth richest man, according to The Sunday Times Rich List.

He now ranks amongst five Welsh billionaires and is famous for championing local causes.

The fixer has been a driving force – a necessary bulldozer, some might say – behind the creation of the Swansea Bay City Region (SBCR).

He chairs this over-arching body which is heavily involved in directing the regeneration of south West Wales.

A serial tech entrepreneur, Sir Terry made his fortune primarily through technology and telecoms. He is founder and chairman of Wesley Clover International, an investment management firm, and has founded or funded more than 140 companies, making his millions by building them up and selling them on.

“I helped to build Mitel and then Newbridge and lots of other companies, developing a tight team relationship and a fighting spirit that wins.

I love kicking ass,” is how he described the process.

Passion, or hwyl in Welsh, is part of the local DNA. And it’s not just in his ambassadorial role that Sir Terry Matthews shows that “you can take the boy out of Wales, but you can’t take Wales out of the boy;” his choice of company names, such as Newbridge, often hark back to his heritage.

March Networks was inspired by the Welsh Marches – the much-disputed border country between England and Wales in bygone days.

The telecoms tycoon is famous for his tenacious approach to business and life – guided by his own motto: “Make a mark; don’t be part of the living dead.”

There are shades of Owain Glyndwr, last prince of Wales, to Sir Terry – the Welsh business hero and de facto king of broadband. As well as championing tech-focussed regeneration to replace the manufacturing industries of South Wales, Sir Matthews has been an advocate for turbo-charging innovation in Wales and the UK.

Appointed an Officer of the Order of the British Empire in 1994, Terry Matthews was awarded a Knighthood in 2001. He was also appointed Patron of the European Cancer Stem Cell Research Institute in 2011.

“I don’t think I’m stubborn. I just focus on the task at hand and do what it takes. Persistence is the single most important thing for success,” he said. It’s certainly a formula that worked for him.

“I don’t think I’m stubborn. I just focus on the task at hand and do what it takes.

Persistence is the single most important thing for success.”

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> Latin America:

Corruption - Disrupting Business as Usual

By Tony Lennox

“I’m shocked, shocked to find that gambling is going on here,” says Captain Louis Renault of the Casablanca police upon entering Rick’s Bar. A croupier approaches: “Your winnings, sir…” “Oh, thank you very much,” he says.

Just a line from an old film, but one that resonates still. The casual, unashamed corruption of a Vichy chief of police in wartime North Africa would be recognised today in much of Latin America. Corruption is the canker that has eaten away at the very structure of a region which should have everything going for it; a rich and fertile land of abundant natural resources.

Mexico: The Senate of Mexico building in Mexico City

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n 2004, Casals and Associates undertook an investigation for the United States Agency for International Development (USAID) on corruption in Latin America.

It made grim reading. The report found widespread and systematic corruption.

Measures adopted for the combat of dishonesty were not only inefficient, said the report, but the institutions charged with implementing them were also riddled with corruption.

Worse still, whereas once the common perception of corruption in Latin America was that it was just a cultural feature, it had come to be accepted as the only way to do business.

Akaash Maharaj, executive director of Global Organisation of Parliamentarians Against Corruption (GOPAC) compares corruption to war crime. Many thousands die each year as a direct result, he says: “This is not merely stealing money; political corruption kills more people than war and famine put together.”

Its roots are complex. Many Latin American countries employ confused and redundant legal systems; byzantine bureaucratic procedures and regulations; inefficient oversight and control systems; and, crucially, a lack of political will to combat it.

While the lawmakers pass down ever greater swathes of legislation, the complexities are such that most are by-passed or ignored, making it easier for corrupt practices to flourish. Bribery is accepted as a normal part of commerce.

The World Bank’s Ease of Doing Business index of 189 countries ranks Argentina at 121. Brazil is currently at 116. Venezuela, unsurprisingly, is ranked at 186th. Leaving aside the tragedy of Venezuela, which is on the brink of bankruptcy, the two biggest villains are Brazil and Argentina.

Official advice from the British government to those thinking of doing business in Brazil and Argentina doesn’t actually mention the need to budget for bribes – but the advice does urge caution. Employing local people who “know their way around” is seen as an essential. There is no doubt that there is potential in these countries, but it is buried under deep layers of bureaucracy.

CULTURE OF TOLERANCE There is a culture of tolerance of corruption in Brazil. Politicians who have been convicted of corruption are often re-elected by voters who seem to accept that crooked behaviour is a fact of life.

“Its roots are complex. Many Latin American countries employ confused and redundant legal systems; byzantine bureaucratic procedures and regulations; inefficient oversight and control systems; and, crucially, a lack of political will to combat it.”

The country is experiencing a tough recession because of the global fall in prices for oil, iron ore, and soya – Brazil’s main exports. The economy is shrinking – down 3.8% last year – unemployment is high, and inflation soaring.

Despite recent convictions of politicians and businessmen for corruption, the Brazilian Supreme Court’s efforts still have a long way to go.

Income tax evasion in Argentina runs at 60%.

In 1913, Argentina was the 10th richest nation on the planet – ahead of France and Germany. Today it is in 66th place. The country is bedevilled by a combination of barriers to efficient business. Setting up a business in Argentina involves a snowstorm of form-filling and permission-seeking – and it takes ages An honest businessman in Argentina is at a big disadvantage. According to figures released by the World Bank, Argentina’s total tax rate – which is a measure of taxes payable by businesses after deductions and exemptions, as a share of commercial profits, currently stands at 137% – which, self-evidently, would cripple any honest business.

Marcelo Bergman, the author of Tax Evasion and the Rule of Law in Latin America, says that people see that their neighbours are cheating the system and getting away with it – so they cheat too. It’s a never-ending cycle that can only be broken by a “shock and awe” blitz on everyone by the tax authorities, he says – a rather unlikely prospect in most of Latin America.

In both Brazil and Argentina, crime is endemic – for individuals and businesses. Successful entrepreneurs tend to deal in stable foreign currencies, and salt away profits in overseas

accounts and bonds. Many companies trade off the books to avoid crippling levels of taxation, but that leads to its own problems. No entrepreneur who avoids tax could ever sell his business on.

Every so often, in an effort to recoup some of the lost tax, the Argentine government offers an amnesty which allows dodgers to pays a small percentage of what they owe, and become legal again – which penalises the honest companies who paid their bills all along. This is another incentive to cheat the system.

BRIGHT SPOTS There are a couple of bright spots in the region: Chile and Uruguay, which are seen as generally clean of corruption. Chile’s long Pacific Ocean coastline has helped it look outward for trade and investment. After the departure of dictator General Pinochet in 1990, Chile rebuilt its institutions and managed to crack down on corruption and bribery.

The country now has that most unlikely Latin American advantage – a balanced budget and low inflation (2%). A free trade agreement with the USA has also led to a surge in trade.

Uruguay, another former dictatorship, has, in the last five years, developed practical and realistic economic policies which favour business and foreign investment. GDP is growing at an average annual rate of 5%.

In Mexico, where the price of doing business has always involved kickbacks, the anti-corruption movement is making headway. The cornerstone, as with all efforts to clean up corruption, is transparency. The initiative aims to impose disclosure rules on all public servants, at all levels – including revealing personal assets and possible conflicts of interest.

The Mexican drive to eradicate corruption comes from the grassroots, and if it succeeds the hope is that it will serve as a model for the rest of Latin America.

Throughout the region the response to demands to clean-up corruption in the past has driven the authorities to “round up the usual suspects” – usually low-level officials; enough to satisfy the popular demand for justice, but leaving those further up the crooked ladder, untouched.

But the world is keeping its fingers crossed that corruption can be beaten – and if that happens, it could be the beginning of a beautiful friendship. i

“An honest businessman in Argentina is at a big disadvantage. According to figures released by the World Bank, Argentina’s total tax rate – which is a measure of taxes payable by businesses after deductions and exemptions, as a share of commercial profits, currently stands at 137% – which, self-evidently, would cripple any honest business.”

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> CFI.co Meets the Management of Credicorp Capital:

Hugo Horta & Eduardo Gómez de la Torre

Hugo Horta

T

he Capital Markets and Corporate Finance divisions of Credicorp Capital offer their clients a substantial value proposition that is based on their experience and capabilities in the MILA (Mercado Integrado Latinoamericano) region – the new extended home market for many Peruvian, Colombian, and Chilean companies – and one that offers global institutional investors some of the most attractive investment opportunities within the emerging markets space.

The Capital Markets Division, through its broker dealers in Chile, Colombia, and Peru, is active distributing, placing, and negotiating equity and fixed income transactions. Its footprint in the US and in the UK allows it to have a global reach for companies and investors. Also, it is a leader in trading and expert in local and international fixed income.

Hugo Horta, head of Capital Markets, joined Credicorp Capital Chile (previously known as IM Trust) in 2006 as vice-director of the Capital

Eduardo Gómez de la Torre

Markets Fixed-Income Division. Mr Horta held this position until 2011 when he was appointed general manager of IM Trust in Peru, prior to the merger of IM Trust with BCP Capital (Peru) and Correval (Colombia) to form Credicorp Capital in 2013.

Previously, Mr Horta was manager of Corporate Banking at Citibank and sales manager at BBVA in Chile. He has led major structured finance operations and bond issues on the Chilean and Peruvian markets for a total in excess of $15bn. Mr Horta has a degree in Business Administration from the Universidad Católica de Chile and an MBA from the Booth Graduate School of Business.

On the other hand, the Debt & Equities Corporate Finance Division (DECF) leads transactions to achieve the strategic goals of its clients. This team responds creatively by keeping a keen eye on the market context and on the capital requirements of its clients. To accomplish this, the team pools their experience in the capital CFI.co | Capital Finance International

markets and in investment banking to offer specialised advisory services and sophisticated solutions.

DECF originates structures and executes public and private placements in a variety of fixed income and equity securities. With fresh ideas and a regional distribution capacity in hand, they maximise value at each stage of the transaction and continually develop solutions that help its clients mitigate strategic, operating, credit, and market risks.

Eduardo Gómez de la Torre, head of Corporate Finance, joined Credicorp Capital in 2012. He has more than 18 years of experience in banking and has lead major transactions for local and international clients. Over the course of his distinguished career, Mr Gómez de la Torre led the Corporate Finance Division at Scotiabank Perú and worked as an associate at Deutsche Bank Securities NY. He holds a degree in Economy from the Universidad del Pacífico and an MBA from Wharton School of Business. i 173

> IFC: Latin America and the Caribbean -

Seizing a Trillion Dollar Opportunity in Climate Investments

By Christian Grossmann

S

oon the world will celebrate the one-year anniversary of the historic climate agreement signed in Paris in December 2015. The agreement will be implemented through country-led greenhouse gas (GHG) emissions reduction commitments known as their intended Nationally Determined Contributions (NDCs), which to date have been submitted by 189 countries covering 95 percent of global GHG emissions.

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Apart from signaling concrete commitments, these reduction targets also offer a clear signpost of the investment direction countries need to follow as the global economy steers towards a low-carbon, climate-resilient pathway. Estimates point to between $57 trillion and $93 trillion in new low-carbon, climate resilient infrastructure investment by 2030. How developing countries evaluate and respond to their infrastructure needs will greatly CFI.co | Capital Finance International

determine their ability to meet GHG reduction commitments.

Allocating funds to support these commitments poses a significant challenge, as many governments already face overstretched national and subnational budgets. Many will be unable to meet the levels of financial support required to reach the 2° Celsius target. Amidst budget constraints and ambitious goals, it’s clear that major investment

Summer 2016 Issue

is needed from the private sector. According to the United Nations, 80 percent of the capital needed to transition to a low-carbon future must come from the private sector. This requirement presents both an enormous challenge but also a huge opportunity for the private sector to help turn these intended national commitments -- NDCs into concrete policies and plans that will help spur necessary climate-smart infrastructure investments.

This holds especially true for Latin America and the Caribbean – a region blessed with natural resources that also faces daily threats and challenges posed by a changing climate.

So just how big is the investment opportunity for Latin America? It’s important to note several key trends the region must respond to in the coming years. Latin America is the world’s most urbanized region, and cities like Sao Paulo, Buenos Aires, and Mexico City house nearly 80 percent of the region’s total population, a figure that will reach nearly 90 percent by 2050. Coupled with this urbanization is a flourishing middle class – positioning the region as a star in the eyes of investors looking to build up climate-smart industries like green urban infrastructure and renewable energy generation.

Latin America is not only a hotbed for investment based on demographic demands. Country policies are growing increasingly reflective of aspirations for green investment. LAC countries are creating and revising regulatory frameworks and goals to spur private sector investment and generate more opportunities for climate-friendly business.

The region is consistently moving towards greater legal security for investors, and climate change mitigation and adaptation projects will see significant investment inflows as a result.

Altogether, IFC estimates the market for lowcarbon investments in Latin America and the Caribbean to be $1 trillion by 2040, with $600 billion materializing by 2030.

“Allocating funds to support these commitments poses a significant challenge, as many governments already face overstretched national and sub-national budgets.”

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For a region that already boasts the world’s cleanest power mix, this is an incredible sum of money. According to IFC’s recently released white paper Climate-Smart Investment Potential in Latin America: A Trillion Dollar Opportunity, it is actually quite a conservative projection. IFC’s analysis focuses largely on the energy sector and thus the complete range of mitigation and adaptation investment opportunities available in the region certainly surpasses this figure.

Furthermore, the first global crop of NDCs does not capture the full ambition of future climate policies. The Paris Agreement requires countries to increase the level of their response to climate change every five years so that efforts to meet the 2° C target do not bottom out and stagnate.

Stretching from the frosty southern islands of Chile and Argentina to the sun-soaked reaches of Northern Mexico, the region’s ecological diversity and resources present ample space for investment. Economically speaking, the last 15 years have been significant, with poverty 175

levels falling and prosperity skyrocketing as 90 million people entered the middle class.

The opportunity for trillions of investment is clear, and organizations like IFC are playing a vital role in supporting countries as they create environments where risk is rewarded and the private sector is enabled to do what they do best—innovate.

It was with this vision in mind that IFC recently spearheaded a regional LAC Climate Business Forum in Bogota, Colombia that convened regional public and private sector leaders to discuss opportunities in industries ranging from green buildings to renewables to sustainable cities. Colombian President Juan Manuel Santos opened the event as CEOs, business leaders, government representatives, and mayors expressed their dedication to the climate agenda and reiterated that climate-smart investing is not only good for the environment but it is also good business with healthy returns on investment.

IFC has a significant track record making climate investments in the region, among them a green-bond supported wind farm in Penonome, Panama – the largest wind farm in Central America and the largest grid-connected wind farm in the country. Right in Bogota, where the conference was held, the city’s bus system operator, Recaudo, benefited from a $176 million financing package in 2012, supporting its efforts to develop and operate fare collection and fleet management and implement real-time information technology. The financing was also IFC’s first loan to a transport payment system and is helping to increase public transportation and thereby reduce GHG emissions in Latin America’s sixth largest city.

The potential in the region is indeed enormous, but to make the most of it governments must address some key issues, including putting a predictable price on carbon to help companies shift their investments; creating favorable regulatory frameworks for industries with great promise; publishing a pipeline of climatefriendly projects to raise investor confidence; and supporting the private sector with their corporate pledges to reduce GHG emissions in their supply chains.

As a trusted partner of choice, IFC stands ready to continue supporting the LAC region in maximising investments in climate-smart industries. i ABOUT THE AUTHOR Christian Grossmann, a German national, is the Director of Climate Change, World Bank Group, a position he assumed in October 2014. In this role, he coordinates IFC’s climate change strategy and product development, embedding climate knowledge and capacity in IFC’s operational groups in support of investments in clean energy, green buildings, sustainable agriculture, manufacturing, and climate 176

Author: Christian Grossmann

mitigation through financial markets. In 2015, IFC’s total climate-related investments were $2.3 billion and an additional $2.2 billion was mobilized from other investors.

Christian has been a Director at IFC since 1998, leading a number of key positions and mostly recently managed IFC’s Corporate Strategy department. From 2002-2006, Christian was based in Moscow, Russia and led IFC’s Private Enterprise Partnership Advisory Facility, where he successfully introduced several new product lines, most notably in the financial markets, investment climate reform and energy efficiency. From 1998-2002 and 2006-2008 he served as the Director of IFC’s Controllers and Budgeting Department.

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Before joining IFC, Christian held senior finance positions within Dresdner Bank Group in Paris, New York and Frankfurt. In the earlier stages of his career he worked as an international management consultant in Europe, United States and South Africa, and as a civil-engineer in France and North Africa. In 2011, he coauthored the joint report of 31 multilateral and bilateral development finance institutions, “Development through the Private Sector,” as well as a discussion note on “World Bank Group Innovations in Leveraging the Private Sector for Development” in 2012.

Christian holds a Dipl.-Ing from TU Munich, a CES of ENPC, Paris and a MBA from INSEAD, Fontainebleau. He is married and has a son.

Summer 2016 Issue

> Banco do Brasil:

Risk Management at Banco do Brasil Banco do Brasil is the largest bank in Latin America in terms of total assets, having a broad customer base and a diversified business portfolio in different segments, such as banking services, insurance, capital markets, asset management, cards, and customer service abroad.

I

n March 2016, Banco do Brasil recorded over R$1.4 trillion in assets with a portfolio composed of more than 63.8 million clients. Among Banco do Brasil’s leadership positions, highlighting the volume of assets (20.3% market share), loan portfolio (20.6% market share), deposits (23.7% market share), and assets under management (22.0% market share). It is also worth mentioning the lowest delinquency level in the Brazilian banking industry.

Banco do Brasil has strong ties to agribusiness, accounting for 61.2 % of total rural credit in Brazil. In addition, Banco do Brasil has been operating abroad for over fifty years, is present in over twenty countries, and supports trade relations between Brazil and its partners – entrepreneurs, investors, economic agents, and other countries that maintain investments or wish to invest in Brazil.

Its origins date back to 1808 when the Portuguese Royal Family moved to Brazil.

Banco do Brasil was the first Brazilian company listed on the stock exchange, which occurred in 1906, and joined the Novo Mercado of the São Paulo Stock Exchange in 2006, being the only Brazilian bank listed in this segment of the BM&FBovespa which is intended for companies that voluntarily adopt the best corporate governance practices. In 2009, the American Depositary Receipts (ADR) Level I Programme was launched. In 2012, Banco do Brasil joined the Dow Jones Sustainability Index of the New York Stock Exchange (DJSI).

Aware of its commitment to clients, investors, employees, regulators, and the wider society, Banco do Brasil adopts a conservative attitude towards risk management, by having as a fundamental pillar the segregation between business management functions and risk management and internal control functions. It is important to highlight the role of the chief risk officer (CRO), performed in an autonomous and independent way.

Banco do Brasil considers risk management and capital management essential tools in the decision-making process because they provide

“Banco do Brasil considers risk management and capital management essential tools in the decision-making process.” support to the business portfolio risk-return ratio optimisation process. Based on this perspective, Banco do Brasil invests in the continuous improvement of the process and practices of internal controls and risk management, in line with international benchmarks, in terms of regulation and supervision standards, as well as in terms of best market practices.

On a panoramic view, the process of risk management at Banco do Brasil can be synthesised from the following elements: (a) definition of the relevant risks set, (b) risk appetite statement, (c) risk management policies and strategies, (d) risk management tools, and (e) reporting to the senior management and to the board of directors.

The governance model involves a framework of superior and executive committees, ensuring a protagonist role to senior management in the processes related to risk management, internal controls, and capital management of the Institution, and contributing to the achievement of the conglomerate’s objectives at all levels and over all entrepreneurial processes.

Banco do Brasil continuously invests financial, human, and technological resources to ensure the existence of a risk management architecture with multidimensional scope.

In order to continue with the evolving process in the risk and business management practices, Banco do Brasil has been investing in the implementation of internal models for risk management. It is also relevant to note the strategic objective of adequacy of Banco do Brasil’s internal control practices to the Sarbanes-Oxley Regulation (SOX) requirements CFI.co | Capital Finance International

by ensuring periodical assessments of the related processes and ongoing monitoring by senior management. Among the main observed benefits may be highlighted the improvement on the processes of identification and mitigation of relevant risks.

The effectiveness of corporate risk management is related to a consistent process of identifying and assessing the relevant risks to which the institution is exposed, considering its strategic objectives.

In the risk management process, mechanisms expressed in corporative normative systems are used, detailing the procedures required for the implementation of organisational decisions related to the business and affairs of the company and meeting legal and regulatory and supervisory agencies requirements.

It is worth mentioning the use of stress metrics from simulations of the behaviour of the exposures subject to risks under extreme conditions, such as financial crisis and economic shocks, in order to scale the impacts from events with low probability of occurrence.

The performance of risk metrics is periodically assessed and the risk measurement models and back test models are subject to an independent validation process, performed in a segregated way from the areas in charge of developing and/ or using models.

As transparency best practice, Banco do Brasil discloses information to the public on its website which can easily be found and accessed. It allows investors and stakeholders to know and monitor risk management practices adopted by the institution.

The soundness of Banco do Brasil over 200 years is a result from the frameworks, policies, strategies, processes, procedures, and systems applied to risk management, internal controls and capital management, derived from investments that have been made throughout decades by providing the institution with the conditions to carry out its protagonist role regarding best market practices.

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PAULO CAFFARELLI Are there any ESG challenges that merit special attention?

In 2004, we implemented a systematic process for the evaluation of environmental variables that affect our business performance. We call this process Agenda 21, as a reference to the United Nations Global Agenda 21. Revised biannually, this instrument allows us to improve our business processes and align them to global best practices, contributing to generate even more sustainable results.

In the current version of the Sustainability Plan – Agenda 21 BB 2015-2017 – the ESG challenges that deserve our attention are: (a) maintenance and expansion of the bank’s role as an inductor of sustainable development through financial inclusion and social business, integrating public policies and programmes, partnerships with the private sector and BB’s sustainable development strategies; (b) improvement of the social and environmental risk management in our lending process, investments, and administrative practices; and (c) identification of business opportunities for products development that meet the expectations for environmental and climate change issues.

Can you please elaborate on Banco do Brasil’s programmes and initiatives aimed at promoting financial inclusion?

Banco do Brasil plays an important role in the country’s development, promoting social inclusion and fomenting social businesses committed to environmental care.

We act as one of the main financiers of social policies and programmes such as Fundo de Financiamento Estudantil (Fies), a college graduation financing fund; the Minha Casa Minha Vida (MCMV), a housing construction programme for lower income families; and Microcrédito Produtivo Orientado (MPO), a microcredit facility destined to individuals and small entrepreneurs. Those are products that have an environmental and inclusive side that makes education, home acquisition, and employment and income generation possible.

We also promote several initiatives on financial education to provide our customers with basic credit knowledge, focusing on the importance of financial planning and management.

Stakeholder inclusiveness: how does Banco do Brasil put into practice its mandate to be the bank for all Brazilians?

We are focused on businesses oriented to the generation of sustainable results. We operate in all customer segments, both individuals and companies – from very small companies to large corporates, including the public sector. That said, we serve more than 63 million customers, providing complete and innovative solutions in credit, asset management, investments, insurance, payment methods, capital market, and treasury.

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CEO: Paulo Caffarelli

Our historical expertise makes us the main partner to Brazilian agribusiness as the major financial agent. We are also known as the foreign trade bank, offering complete and diversified solutions to exporters and importers alike.

Another important area is the infrastructure services segment where we provide services such as projects and resources management, as well as project finance advisory.

We have the largest service network in the country and abroad, among Brazilian financial institutions and we are present in 99.8% of the Brazilian municipalities with our own service network, MaisBB Network (banking correspondents), and shared network channels, enabling banking inclusion for thousands of people and fomenting the production chains in Brazil’s every corner.

What do you consider to be the next frontiers in ESG? Considering the present world’s environmental CFI.co | Capital Finance International

concerns, it is vital to companies to identify threats and opportunities and understand their role in the societal development, elaborating strategic financial plans and providing more services and products with fewer resources.

ESG frontiers rely on effective partnerships to carry on local and national projects in line with world’s needs and expectations to achieve United Nations Global Goals for Sustainable Development, launched last year.

Going green, Banco do Brasil has, among other initiatives, the Água Brasil Programme in partnership with Fundação Banco do Brasil, Agência Nacional de Águas, and WWF-Brasil, which identifies and tests agricultural practices to conciliate production, social inclusion, and environmental conservation. This initiative also intends to improve environmental risks in financing and investments monitoring tools; develop studies and business models to promote green and inclusive economy, and so on.

Summer 2016 Issue

What processes has Banco do Brasil put in place to further improve corporate transparency?

Transparency is important in the decision-making process. The higher our level of transparency, the greater the confidence and reliability we provide to our investors and stakeholders. That is why ethics and transparency guide our relationship with investors, analysts, rating agencies, and regulators, providing clear and accurate information.

Banco do Brasil goes beyond rules disclosing voluntary additional information beyond that required by laws and regulations. In this context, we can mention the complete financial statements, including quarterly earnings reports, cash flow statements, and consolidated reports according to international standards (IFRS). The financial statements have the Audit Committee, Fiscal Council and Independent Auditors review, as well as explanatory notes, containing the disclosures provided in accordance to the financial rules.

Another example is the publication of the Shareholders’ Meetings notice at least 15 days in advance and the strict limitation of the agenda to its purpose (no general affairs can be included).

The bank also publishes on its investor relations website information about its bylaws; governance code; code of ethics and standards of conduct; policies; composition of administrative bodies and audit committee; management professional resume summary; shareholders’ meetings and board of directors’ meetings records; and the management report. We also have a disclosure policy for material facts and securities trading.

We also keep a close contact with the market.

In 2015, we met investors and analysts in six Brazilian cities, we went through five non-deal roadshows abroad, 10 conferences in Brazil and another 15 abroad, and organised four earnings conference calls with analysts and investors, both in Portuguese and English. Altogether, over 958 meetings were conducted with investor and market analysts, including meetings and telephone calls.

Can you please elaborate on the processes and frameworks adopted by Banco do Brasil to ensure excellence in corporate governance and the monitoring of performance?

Respecting transparency principles, our corporate governance aims to mitigate risks, sharing visions, aggregating value and quality to the decisionmaking process, and disseminating knowledge.

To accomplish all that, BB adopts practices to ensure the balance between shareholders’ rights, clear information to investors and society, ethics in dealing with the public, and business sustainability through the use of monitoring tools that align our executives’ behaviour to the interests of our shareholders, stakeholders, and the society in general.

In recognition of these efforts, since 2006, we have been part of BM&FBovespa Novo Mercado, a listing segment for companies subject to the strictest corporate governance practices. Moreover, we are listed on ISE (Corporate Sustainability Index), ITAG (shares with differentiated Tag

Banco do Brasil

Along Index) and IGC (shares with differentiated corporate Governance). Since 2012, BB is listed on the Dow Jones Sustainability Index (DJSI), boosting our position in the international scenario.

Among our commitments, due to our listing on the Novo Mercado, we highlight: (a) existence of only common shares in the market; (b) a two-year term of office for the entire board of directors, of which at least 20% of the members must be independent; (c) 100% tag along; (d) maintenance of a minimum free float equivalent to 25% of the capital; (e) arbitration chamber for solution of corporate conflicts.

Banco do Brasil’s corporate governance structure has the board of directors composed of eight members, assisted by the Audit Committee and Remuneration Committee and also by the Internal Audit. We call the attention to the fact that currently 25% of the members of the board of directors are independent. We also have on a permanent basis, the Fiscal Council composed of five effective members and five substitutes.

BB’s bylaws establish that the statutory managing CFI.co | Capital Finance International

directors are BB employees only. It also separates management duties in order to avoid conflict of interests.

Decisions at any level of the company are made collectively in order to engage all the executives in defining strategies and approval of proposals regarding BB’s several businesses. For this matter, senior management uses superior committees, executive committees, and strategic level commissions, to ensure timing and reliability for the decision-making process.

How does market volatility affect corporate governance?

We are very transparent, providing a high level of disclosure to the market, in a timely manner. We manage our businesses and client relationships in compliance with the Brazilian and international regulations. I believe that having these outstanding corporate governance practices and high level of disclosure help our investors to correctly value our securities, potentially reducing volatility. All this together contributes to create value to our shareholders in the long run. i 179

> Credicorp Capital:

A Regional Powerhouse

F

ollowing the regional expansion undertaken by many companies over the past few years within the Andean and the MILA (Mercado Integrado Latinoamericano) regions, and in order to take advantage of the potential that this expanded market offers, Credicorp Capital decided to bring together three leaders in the MILA region: Credicorp Capital PerĂş (formerly BCP Capital), Credicorp Capital Colombia (formerly Correval), and Credicorp Capital Chile (formerly IM Trust), under the umbrella of a single entity. This has allowed the firm to form a regional platform that is dedicated to providing financial services, primarily in the areas of corporate finance, asset management, and sales and trading.

This platform helped Credicorp Capital capitalise 180

on the presence, experience, and leadership of these three companies in their respective countries.

It has also led the firm to expand the financial advisory services that it offers in the Andean region in general, and in MILA in particular. In addition, Credicorp Capital maintains an introductory broker dealer in the United States, a sales office in the United Kingdom, and a broker-dealer in Panama.

This allows the company to offer its domestic clients top-tier access to international markets while channelling investments from international institutional asset management clients that are active in the MILA region.

The Debt & Equity Capital Markets team, one of the three units of the Corporate Finance Division, offers a range of products and services CFI.co | Capital Finance International

that includes the structuring of debt issuances (corporate bonds, project bonds, securitized bonds, etc.) and equity offerings (initial public offerings, follow-on offerings, etc.), and the advisory and execution of liability management transactions such as exchange offers and consents solicitations.

In Peru, the Debt & Equity Capital Markets team is the largest team dedicated to capital markets for Peruvian corporate clients. The most important transactions executed in the last few years include the structuring – jointly with international investment banks – the Rutas de Lima transaction, a $720 million financing for a Peru-based toll road operator (2014). This financing included a $520 million senior secured bond issued under Rule

Summer 2016 Issue

international bonds. This demonstrates the depth of the local capital market for investment grade issuers.

In Chile, 2016 has been a great year for the firm’s ECM franchise and the demonstration that even amidst volatile market conditions, good names that have attractive equity stories and projects are well received by the market. Credicorp Capital started the market with a $336m block trade and a $171m tender offer for Habitat, in the context of the association between ILC and Prudential (in which the firm also acted as M&A advisers to ILC).

Credicorp Capital subsequently advised two followon capital increases: BCI’s $417m follow-on and Entel’s $515m follow-on.

During the first quarter, the firm advised BCI’s $417m follow-on offering, aimed to increase the bank’s capital base after the acquisition of CNB Florida. This rights offering was followed by a $94m secondary block trade. The overall transaction was a complete success, with a high level of subscription during the 30-day pre-emptive rights period and a seven-fold demand for the auction that followed.

Demand was strong from both international and local investors.

Credicorp Capital is currently advising Entel’s $515m follow-on offering which will conclude its 30-day pre-emptive rights period in late July. The firm is also advising the controller of Cencosud on a secondary sale of approximately $500m of Cencosud shares.

In Colombia, corporate bonds issuances in the primary market totalled COP 4.6tn compared to COP 4.1tn during the same period in 2015.

Credicorp Capital has placed 24% of the mentioned issuances. There is a marked concentration in financial sector issuers (53%) given the strong growth of their loan portfolio and in inflation indexed securities (80%), explained by the consumer price index’ upward trend experienced since August 2015 and high liquidity levels in the local market.

The world has it’s eyes on Latin America.

“During the first quarter, the firm advised BCI’s $417m follow-on offering, aimed to increase the bank’s capital base after the acquisition of CNB Florida.”

144A/RegS – the largest bond offering in soles of a Peruvian private firm.

Also, in 2015, the team structured a solution to finance the second phase of the concession owned

by Norvial, a toll road operator, that included three facilities: a S/ 180 million bridge loan, a S/ 100 million revolving credit facility, and a S/ 365 million senior secured bond – an issuance that set a milestone in terms of local regulation and auction method. And since 2015, Credicorp Capital has been executing several senior unsecured bonds for approximately S/ 850 million for Alicorp, the largest Peruvian consumer goods company, in order to finance the liability management of its CFI.co | Capital Finance International

There will be private debt maturities (principal + interest) in the second semester of 2016 for a total amount of COP 9.6tn. The mismatch between expected maturities and market issuances has only increased institutional investors’ needs for corporate debt instruments, creating space and strong demand for new issuances in the local fixed income market. In 2016, Credicorp Capital’s Corporate Finance team in Colombia placed a corporate bond for UNE EPM Telecomunicaciones SA, COP 540m transaction in three tranches of 8, 10, and 20 years.

Finally, Credicorp Capital’s franchise has lead the MILA market on equity sales trading. In 2012, the operations in Chile, Peru, and Colombia were merged. At the time, the three constituent parts of Credicorp Capital boasted market shares of around 16% in Peru, 7% in Chile, and 15% in Colombia.

Today, after four years, the firm is leading its markets with approximately 35% market share in Peru, 15% in Chile, and 25% in Colombia. i 181

> Bankaool:

Transforming the Banking Experience in Mexico for SMEs

I

n Mexico, small and medium sized enterprises (SMEs) play a major role in the social and economic development of the country. These businesses are critical in creating jobs and generating income for people; they support the development of the private sector; and benefit social stability and foster economic growth. However, most small and medium sized companies experience difficulties and face hurdles when seeking access to credit and financial services from traditional banks.

Over the last years, Bankaool has played a critical role in helping SMEs in Mexico achieve their goals by providing access to financing.

The bank does so with a disruptive business model based on technology and procedures that are streamlined and simplified. Bankaool has become a leader in financing corporate ecosystems in both the supply and distribution chains with contextual lending. With Bankaool, Mexico’s SMEs can now obtain a personalised credit facilities via an online application process that saves time and effort. Entrepreneurs may now obtain a full range of financial services without leaving their business unattended.

Bankaool is the first branchless bank in Mexico offering its customers the opportunity to open a bank account in a few clicks and minutes.

Bankaool offers a completely online user experience. As such, its clients have become pioneers in the use of high-end digital platforms that transform the banking experience and the interaction between costumers and financial institutions.

CEO: Francisco Meré

In 2012, Bankaool was recognised as one of the fifteen Global Leading Innovative Companies in Inclusive Business by G20 and the International Finance Corporation (IFC, part of the World Bank Group). A year later, Bankaool won the IFC’s prestigious Inclusive Business Leader Award.

CEO FRANCISCO MERÉ Fintech pioneer Francisco Meré has more than twenty years of experience in the financial services industry, serving in leading positions in both the public and the private sectors. He was head of FIRA (Fideicomisos Instituidos en Relación con la Agricultura – Agricultural Trust Funds) for more than eight years. FIRA is a government-owned financial agency for rural development. Mr Meré was also CEO for Development Banking at the Ministry of Finance and Public Credit and deputy manager of Financial Regulation at Mexico’s central bank. He also worked for Société Générale and for the Cleary, Gottlieb, Steen and Hamilton law firm in New York, and has been a board

Bankaool, transforming the banking experience in Mexico for the SMEs

Leader in financing ecosystems supply and distribution chains with contextual lending

SMEs in Mexico can get a personalized credit with an online on boarding

Bankaool

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member of several financial institutions. He is the author of the ground-breaking article Why Am I Not Gonna Be Able to Enter the Bank, published in The Fintech Book.

Mr Meré was named CEO of Bankaool in 2008, where he leads a multidisciplinary team of Financial, Banking, Innovation, Strategy, Digital marketing and Technology experts. The Chief Financial Officer, Carlos Budar was graduated from the NYU and has long experience in private and public Banking. Juan Carlos Espinosa Chief Digital and Marketing Officer has proven international experience in Strategy, Marketing and Innovation in several industries such as Banking, Mobile, Information Technology and Business Processes.

Mauricio Almagro, Chief Credit and Risk Officer, has a MBA from Duke University and expertise in Risk Analysis in private banking sector. The Chief Technology Officer Fernando Luege is a Systems and Information Technology expert, specialised in Big Data and a recognised entrepreneur. i

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Official Magazine

Organisers

> Vantrust Capital:

Securing Profits and Client Loyalty Vantrust was established in 2006 as a multifamily office led by Patricio Nazal. Ten years later, the company has achieved a rock solid performance as a financial boutique in the competitive and demanding Chilean market.

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antrust started operating in a very adverse and convoluted financial and economic environment given that only a year after it had been established, and after having ventured on this challenging road, the first signs of a financial crisis began to appear – a great crisis that, at the time, had unknown consequences. Two years later, in September 2008, the Lehman Brothers’ bankruptcy would dramatically change the business environment in which companies had to operate.

A beginning full of illusions with banks willing to do business, had two years later turned into a restrictive financial environment with little appetite for risk towards financial brokers who were just embarking on the business and who had no past record to show. However, having a light structure and little to lose, the company managed to sail through these adversities with far fewer problems than its competitors during that period.

After the crisis had subsided, some changes took place in the company’s ownership.

In addition to the departure of the main shareholder, Alberto Hurtado, new capitalist partners arrived: The Sabag and Selman families – well-known entrepreneurs in the areas of retail, consumer goods, and real estate.

In 2009, Julio Náray became part of the company as a new partner in charge of the Asset Management area. Thus began a successful road in the structuring and management of private investment funds, which since has grown both in the number of managed funds and their size.

At the very beginning, Vantrust’s first real estate fund took more than six months to be placed with investors. This year, the latest real estate fund, much larger than the first one, was placed in less than a month.

At the same time, there were several and continuous attempts to create a robust 184

“At the very beginning, Vantrust’s first real estate fund took more than six months to be placed with investors. This year, the latest real estate fund, much larger than the first one, was placed in less than a month.” commercial area that would permit the company to face its challenges with the deep conviction that, for Vantrust, the customer comes first. “Our clients’ interests always come first, and all of our actions will always be aimed at that, because only this way can we guarantee a long-term relationship with them,” says Mr Nazal. “There are businesses that can go right or wrong, but if our customers are convinced that all our actions are always in their best interest and in the interest of their investments, we can guarantee their commitment and loyalty and vice versa.”

At the end of 2013, Ignacio Barrera joined the company as a partner in charge of the brokerage business including foreign currency, fixed income, equity, and others. This new arrival provided Vantrust with a new transactional and brokerage impulse that has led the firm to become one of the most important brokers in the foreign currency segment.

Today, Vantrust is giving a strong push to the local and international fixed income business with the recent addition to the team of two professionals with great experience in this segment. In the area of equity, Vantrust is currently rethinking the way to operate its business in view of the difficult times this sector is going through locally.

CFI.co | Capital Finance International

CONSOLIDATION OF THE COMMERCIAL AREA Last year, Gabriela Salvador joined the company as commercial manager in order to give this important area an additional impulse and provide it with a final structure. Some of changes have been implemented since then and include sub-segmenting customers according to their profiles and needs in order to maintain a service of exceptional excellence provided by highly qualified commercial and investment executives.

During the second quarter of 2016, Vantrust hired a new team to complement its product range. The launch of fixed income funds added a new boost to the brokerage’s business.

In relation to its staff – the company’s main asset – Vantrust has constantly invested in people seeking to encourage excellence. The company is one of the few financial institutions that hires new staff in the current macroeconomic environment.

Today, Vantrust provides services to an exclusive customer segment which includes high-net-worth individuals, family offices, institutional investors, and import and export companies. Its wide range of products ranges from alternative investments such as structured notes, leveraged funds, loan funds, and private equity to traditional products but which carry an added value such as real estate funds, shares, bonds, fixed income, and foreign currency.

Vantrust’s main focus is on providing a personalised and tailor-made service, an excellent trade execution, and deep professional management of its funds – always keeping the interest of Vantrust customers in mind.

VANTRUST IN A NUTSHELL Number of employees: 42 Number of clients: 1,300 Number of existing private funds: 11 Number of private funds created: 23 Number of existing structured notes: 10 Number of structured notes created: 25 Assets under management: $500 million i

Summer 2016 Issue

> CFI.co Meets:

Vantrust Capital Management Team PATRICIO NAZAL - GENERAL MANAGER Patricio Nazal is a Vantrust Capital founding member who is currently responsible for the operation and growth of the Brokerage House and Asset Management divisions. Under his management, Vantrust Capital has achieved nationwide recognition. Before setting up the company, Mr Nazal was finance manager at Banco A Edwards and international area manager at Banco de Chile. He has a degree in Business Administration and an MBA from Adolfo Ibáñez University. Mr Nazal holds an MSc in Mathematical Trading and Finance from the University of London and an MSc in Finance from London Business School.

JULIO NÁRAY - DIRECTOR Vantrust director Julio Náray has 23 years of professional experience in investment, in areas that range from stock brokerage to private and mutual fund management. He worked as investment division manager at Banchile AGF (2001-2008), a subsidiary of Banco de Chile, which in 2008 produced 20% of the bank´s profits and reached a 27% market share in mutual funds. Mr Náray has a degree in Business Administration from the University of Santiago de Chile and an MBA from UAI/UCLA. He is recognised as one of the leaders of the biggest strategic alliances reached between two largest commercial private banks: Banco de Chile and Bradesco (2007).

IGNACIO BARRERA - DIRECTOR OF INVESTMENTS Backed by twenty-five years of experience in the Chilean financial services system, Mr Barrera has been employed at international banks in global markets, foreign exchange, fixed income, and derivative products departments. Before joining Vantrust, he was head of Global Markets at HSBC Chile for eleven years. He led HSBC to become number one in Chilean peso transactions according to the Euromoney Global FX Survey. Mr Barrera was also trading and sales manager at BankBoston NA. He has been a lecturer at multiple seminars on financial derivatives and an economy and finance teacher. Mr Barrera has long experience in developing tailor-made customer-focused products and solutions as well as staff training. He has a degree in Business Administration from the Pontificia Universidad Católica de Chile and obtained a diploma in Leadership and Coaching from the School of Engineering of the Pontificia Universidad Católica de Chile.

GABRIELA SALVADOR - COMMERCIAL MANAGER Gabriela Salvador is a commercial engineer of the University of Chile with 21 years of experience in the financial market – a proven banking experience which has given her a deep understanding of the sector. Prior to joining Vantrust Capital, she held various management and divisional charges at CorpBanca, Banco de Chile, and Citibank. She has ample experience in foreign trade financing, leasing, factoring, insurance brokerage, mortgage, cash management, and retail and corporate banking. i

General Manager: Patricio Nazal

Director: Julio Náray

Director of Investments: Ignacio Barrera

Commercial Manager: Gabriela Salvador`

CFI.co | Capital Finance International

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> BAC Credomatic:

Driving Progress lot of years have passed by since Grupo BAC Credomatic was founded. The company has followed a strategy with lots of flexibility in order to adapt to change. It has also implemented many processes and improvements, and expended considerable effort to become one of the main financial entities in Latin America. The company maintains a clear objective: fulfill client expectations and satisfy their needs.

A

preparing to face the fast technological changes experienced throughout the world.

and become more efficient in order to keep the privileges now attained.

Part of the success achieved has been possible thanks to the BAC Credomatic employees who have been key in driving the growth experienced throughout the years. They showed an understanding of the company’s reason for being: fulfilling client expectations and becoming more successful by so doing.

HISTORY Banco de AmĂŠrica was founded in 1952 in Nicaragua. This constituted the beginning of Group BAC Credomatic who was initially owned by a group of Central American shareholders led by Pellas Family. It was also the start of a process that, as any company, required time to consolidate and expand.

The values espoused by Grupo BAC Credomatic have certainly allowed the company to position itself as a trustworthy and solid alternative and enables it to respond to ever-changing needs and requirements. Currently BAC Credomatic is

BAC Credomatic considers it a great honour to have received the award of best Latin American Commercial Bank from CFI.co. This recognition offers inspiration to keep, and strengthen, the commitment to constantly improve services

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In the 1970s, BAC Credomatic entered the credit card business through the Credomatic company. At the time, the corporate DNA already had the values that characterise the

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BAC: Branch

company today and which strengthened over time: customer service as a priority as well as an adherence to the best standards in transparency, honesty, and social projection.

In the 1980s, conditioned by the crisis affecting some countries in Central America, Bank of America was acquired and renamed Banco de San José in Costa Rica. In the 1990s, with thirty years of experience during which vast stores of experience and expertise was acquired, an expansion drive was initiated. As a result, BAC Credomatic reinforced its presence across the region. That process is still ongoing.

In 2005, a strategic alliance was forged by which GE Consumer Finance acquired 49.99% of the capital from BAC Credomatic – the society that indirectly controlled 100% of BAC International Bank.

At the same time, and as a result of the expansion strategy, Banco Mercantil in Honduras was acquired in order to build what is known today as BAC Honduras.

This process of development and growth continued in 2007 with the acquisition of the Programa de Promoción a la Pequeña y Microempresa in El Salvador and Corporación Financiera Miravalles in Costa Rica.

San Jose, Costa Rica: National Theater

“Part of the success achieved has been possible thanks to the BAC Credomatic employees who have been key in driving the growth experienced throughout the years.”

With these two acquisitions the horizon expanded to more specific sectors of the market, which allowed the group to respond to the expectations and needs of other kinds of clients. This had always been a key objective.

In 2010, Aval Group of Colombia (controlled by the Sarmiento Family) – the largest financial conglomerate in that country – acquired 100% of the shares of Grupo BAC Credomatic. In December of that same year, the purchase process finished with a positive outcome after obtaining the necessary approval of the financial superintendent and regulatory entities.

It is important to point out that despite the share control change, the business

CFI.co | Capital Finance International

strategy and identity of Grupo BAC Credomatic remained unaltered. As a result of the acquisition, it has been possible to offer products with added value to clients, pool experience, take advantage of synergies and best practices, and – above all – share the business vision, which allows BAC Credomatic to continue today as an organisation characterised by continuous improvement, a passion for excellence, innovation, and creativity.

PRESENCE IN THE REGION The history of BAC Credomatic – its corporate evolution, values, reputation, and dedication to satisfy the clients’ needs – has allowed the company to grow significantly over the last years, continuing its expansion.

BAC Credomatic is present in seven countries at the moment: Panamá, Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala, and México. With the expanded geographic footprint, the group has also been able to boost its client portfolio. It currently serves well over 2.2 million individual clients and more than 100,000 businesses.

To efficiently serve its clients, BAC Credomatic has over 22,000 employees distributed in the seven countries where it has a presence. This enables the company to generate excellent jobs and offer stability to many families in the region.

BAC Credomatic’s expansion is not nearing its end. The company remains focused on moving forwards with a digitalisation process in order to respond more efficiently to the requirements of its clients.

The group has implemented several processes in order to be more efficient, increase specialization, allow for faster response times, and hold a position at the forefront of technological progress with digital platforms that enhance the user experience and offer both added security and convenience.

BAC Credomatic takes great pride to foster the development and growth of the different nations where it operates. i 187

> CFI.co Meets the President and CEO of BAC International Bank:

Ernesto Castegnaro

President and CEO of BAC International Bank: Ernesto Castegnaro

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rnesto Castegnaro, president and CEO of BAC International Bank, personifies the growth and consolidation of the entity as one of the most solid financial services providers in Latin America.

When Ernesto Castegnaro was studying at the Engineering School of the University of Costa Rica (Universidad de Costa Rica) in the early 1970s, he could not have imagined that his destiny was to build financial platforms instead of roads, bridges, and other civil engineering marvels as he had originally intended to.

The career change was rather unexpected.

The completion of his master’s programme in Business Administration at INCAE Business School coincided with an offer to assume the management of Credomatic Costa Rica.

This was the start of a great adventure that in over forty years has turned BAC Credomatic into one the most solid and strongest financial 188

institutions in Latin America, boasting a futuristic vision that is part of Mr Castegnaro’s legacy.

institutions followed. This contributed towards the further consolidation of BAC Credomatic and its improved position in different markets.

He embarked upon his career in upper management by first entering the world of credit cards – at the time a topic nobody talked about in Central America. The economic crisis of the time was an obstacle that was only overcome after many years of advancement towards growth and consolidation.

In 2010, Aval Group from Colombia acquired the shares that previously belonged to GE Capital – a financial branch of General Electric.

Mr Castegnaro’s current challenge is to continue towards the digitalisation process of the bank and respond to the high expectations set by globalisation and the onset of the digital era.

During the 1980s and 1990s, with the values he instilled and the total support of shareholders and directors, Mr Castegnaro generated an expansion process that allowed BAC Credomatic’s consolidation in Central America as a solid organisation focused on the future and devoted to generating trust amongst its thousands of clients.

PERSONAL PROFILE Ernesto Castegnaro is Costa Rican. He went to Calasanz High School and graduated as engineer from the Engineering School of the University of Costa Rica. He holds a master’s degree in Business Administration from INCAE Business School. Mr Castegnaro promotes team work as essential in order to achieve objectives and success. His main hobbies are reading and enjoying the countryside. He is father to three children. i

Once this stage was overcome, a process to create strategic alliances with global financial CFI.co | Capital Finance International

Summer 2016 Issue

> ENGIE Energía Perú:

Sustained Growth

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ith six power plants, ENGIE Energía Perú is one of the country’s most diversified electricity generators when it comes to energy sources and geographic location. Since its foundation nineteen years ago, the company has invested over $2.2bn which turned ENGIE Energía Perú into one of the country’s most important suppliers of electrical power.

During the past six years, the company has registered strong growth – outpacing most of its peers – and managed to double its installed generating capacity to almost 2,000 MW. “Our growth has been wholly organic and was realised by developing and implementing new projects.

We currently are in the process of building an additional 700 MW of capacity which will allow us to breach the 2,700 MW mark about fifteen months from now,” says CEO and Country Manager Michel Gantois.

In order to attain the levels of growth registered it was necessary to earmark over $2.2bn for investments between 2007 and 2018. The company’s dynamics were also sustained by the careful management of cash flow and corporate health. “Our financial strategy consists of preserving an equilibrium between capital and debt in order to minimise capital costs and maintain sufficient flexibility to respond promptly to any necessity or opportunity that may present itself,” says ENGIE Energía Perú’s CFO Eduardo Milligan.

LONG-TERM RELATIONSHIPS ENGIE Energía Perú possesses an exceptionally well-balanced portfolio of clients amongst whom are some of the largest mining and commercial businesses in the country. The company also works closely with Peru’s main

power distributors. “We are always looking to offer optimised solutions that dovetail with the needs and requirements of each of our individual clients in order to forge long-term relationships. This policy allows us the remain at the forefront of innovation in the market,” comments Daniel Cámac, vice president of the company’s commercial department.

NEW TECHNOLOGIES The company operates a well-diversified portfolio of generating facilities that use different power sources such as water, natural gas, and oil. The geographical spread of the plants has been chosen to offer the best possible mix of solutions to clients anywhere in Peru. “We are continually working to add new ways of generating power in order to increase efficiencies and, decrease, our carbon footprint. We have accepted this challenge across all parts of the ENGIE Group and are optimising corporate performance so that we may take the lead in transforming the energy sector in all countries where ENGIE is present,” says Mr Gantois.

Vice President Alejandro Prieto of Corporate Affairs adds that “the recently obtained approval for our first solar energy project in the South of Peru represents a tangible way in which ENGIE applies clean energy technology.” The company is about to break ground on the facility.

RESPONSIBLE OPERATOR ENGIE Energía Perú considers that maintaining operational excellence is key to linking its business objectives to overall efficiencies. It is with this in mind that the company adheres to the highest international standards of quality, safety, and environmental protection. ENGIE Energía Perú is committed to sustainable business practices that ensure consistent growth

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CEO and Country Manager: Michel Gantois

while addressing the challenges of energy transformation towards a low-carbon economy that ensures equitable access to energy and mitigates the effects of climate change.

“The growth of our company has not taken place in a vacuum. ENGIE Energía Perú’s growth is the end products of the trust placed in our venture by both investors and the ENGIE Group’s corporate management. We have also benefited from the support received out of communities where we have a presence and which we have supported in turn with investments to improve living standards, infrastructure, healthcare, and education. We are guided by an unwavering commitment to corporate social responsibility and can only grow and prosper if our neighbours are able to do likewise. Ours is the work of all stakeholders: staff, collaborators, clients, subcontractors, partners, and shareholders,” concludes Mr Gantois. i

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> Unity:

Insuring Businesses and People in Central America

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nity Ducruet is the largest insurance broker in Central America with ample expertise in insurance and risk management. The firm’s geographical footprint includes a presence in Panama, Costa Rica, Nicaragua, El Salvador, and Guatemala where it offers services in the areas of individual, corporate, and group insurance. Still on a growth trajectory, Unity Ducruet will shortly expand into Honduras.

Due its experience with widely recognised local companies, Unity Ducruet has grown into a solid and large regional company with a promising future. Currently, the firm integrates

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different cultures with the same mission: To ensure the satisfaction of all customers.

THE UNITY DREAM In 1991, Louis Ducruet and his brothers decided to found LR Ducruet and Sons which started operations with an important client portfolio. Mr Ducruet started his career in 1980.

That same year, the international insurance broker Alexander & Alexander (A&A), one of the three largest brokerage firms in the world, appointed LR Ducruet and Sons as its exclusive representative in Panama.

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Months later, A&A designated Ducruet as its Global Business Unit for Central America, with responsibility for coordinating the implementation of the insurance programmes of global accounts throughout the region.

In 1997, the insurance brokerage firm Aon purchased A&A and although Aon maintained relations with other brokers, it appointed LR Ducruet and Sons as its exclusive representative for Panama, keeping the firm as its Global Business Unit for Central America.

To increase its portfolio of personal customers, LR Ducruet and Sons merges with Seguros del

Summer 2016 Issue

Rio in 1999. In 2002, the firm merged with Stuart & Associates, reinforcing the presence of the organisation in Colón Free Zone. The company opened an office to serve customers in this important area of the country.

In 2008, after several months of negotiation with Darby Overseas, part of the Franklin Templeton Fund, the investment firm takes a stake in LR Ducruet and Sons along with Ricardo Hill, president and founder of Servicios Técnicos en Seguros (SETESSA) of El Salvador. This is the beginning of the holding Unity.

In 2010, it was decided to merge Promotores de Seguros SA which operates in Guatemala since 1978. This is how, since 2010, three companies are working in the region under the name of Unity, creating a competitive regional structure and adopting the best practices of each country within the same corporate framework, technological backbone, and standardised processes – for the sole purpose of providing better advice and service to its customers.

The relationship with Darby Overseas provides the capital for Unity to go out and buy leading insurance brokers in their respective countries. Thus, Promotores in Guatemala was acquired and a new company was set up in Costa Rica with the help of two experienced local partners, Luis Guillen and Guillermo Ramos.

At the end of 2013, the current Partners of Unity bought out Darby Overseas. The following year, they decided to begin operating in Nicaragua and received authorisation to do so a short while later.

Unity is in the process of investing in Honduras which will complete the original project of being present throughout Central America.

THE MEANING OF UNITY Unity comes from the Greek word enótita.

This is why our logo in a semicircle represents the unity of all countries to make a single regional company.

“Unity thoroughly knows the market in each Central American country where it operates. The company has a unique methodology that allows it to design appropriate and customised solutions and plans that fit local culture and meet the requirements of individual clients.”

Unity thoroughly knows the market in each Central American country where it operates.

The company has a unique methodology that allows it to design appropriate and customised solutions and plans that fit local culture and meet the requirements of individual clients. The company’s core value remains: The customer comes first. The main asset, the team.

KEY FIGURES • More than 500 employees in the region • Over 200 million premiums • Over 80,000 claims processed annually • Insurance advice offered to more than CFI.co | Capital Finance International

5,000 regional companies • More than 270,000 policyholders served throughout the region NEW LOGO AND BRANDING The brand’s new image combines two colours. This is due to the local presence of the company operation region-wide. Since the regional presence is much stronger, the logo of Unity is also larger and more visible.

The logo carries a clear local presence defined by different cultures and realities.

The point is formed by two circles which together form the essence of unity – a balance between regional business and personal service within a local context. This union of local efforts, corporate strategy, and regional knowhow, mean that Unity is best positioned in the market as a pioneer and expert in risk analysis and insurance.

Working with a broker at the regional level, such as Unity, gives customers added value. This is especially advantageous to companies with operations across the region. Knowing each market of each Central American country where it operates allows Unity to design appropriate strategies for each culture without creating false expectations. The firm can also offer the widest scope to address all needs of its customers.

Unity offers all types of insurance: corporate insurance, group health and life insurance for companies to look after their employees’ interests, and individual insurance needs such as car, medical, life, and residential insurance amongst others. Unity group developed a bespoke state-of-the-art IT platform that is used throughout the organisation and ensures the seamless integration of all the group’s business units and operational processes.

Unity’s portfolio has more than 7,900 insured companies and over 70,000 individual clients. The total number of insured clients in the region tops 350,000.

Of these, more than 400 are multinational corporations.

Unity is committed to its customers and aims to provide the best coverage through comprehensive advice that is focused on the firm’s customer-centric core values.

To that end, Unity maintains a highly trained team of professionals. Its advisory system PRO (personalised risk overview), is aimed at knowing the company’s clients in detail, which is necessary in order to offer and design an insurance programme and risk management process that fits their needs. This allows for a close relationship with customers. Thus, Unity becomes a strategic partner for all insurance needs. All companies of the Unity Group fully comply with ISO:9001-2008 norms. i 191

> The UN’s Principles for Sustainable Insurance (PSI):

A Pioneering Global Framework & Collaborative Initiative

By Butch Bacani

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nvironmental, social, and governance (ESG) issues—also known as sustainability issues—are posing a shared risk to the insurance industry, business, government, and society at large, and are undermining sustainable development. Examples of ESG issues include climate change, increasing vulnerability

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to natural disasters, natural resource degradation, water scarcity, environmental pollution, lack of access to insurance, widening social inequality, violations of human rights and labour standards, ageing populations, emerging health risks, trust and reputation issues, corruption, and lack of accountability and transparency.

CFI.co | Capital Finance International

INSURANCE’S TRIPLE ROLE The insurance industry, a $5 trillion market in terms of world premium volume, represents more than 6% of global GDP, and has more than $30 trillion in global assets under management.

The industry is uniquely positioned to promote sustainable development through its triple role

Summer 2016 Issue

THE PRINCIPLES FOR SUSTAINABLE INSURANCE Principle 1: We will embed in our decisionmaking environmental, social and governance issues relevant to our insurance business.

Principle 2: We will work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions.

Principle 3: We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues.

Principle 4: We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles. as risk managers, risk carriers, and institutional investors.

As risk managers, insurers help communities understand, prevent and reduce risk through risk research and analytics, catastrophe risk models, and loss prevention measures. Insurers also advocate proper land-use planning, zoning and building codes, and promote disaster preparedness.

As risk carriers, insurers protect households and businesses by absorbing financial shocks due to natural hazards such as cyclones, floods, droughts, and earthquakes. They are also helping the transition to a low-carbon and resourceefficient economy through green insurance solutions such as insurance for renewable energy, green buildings and energy efficiency, and usage-based insurance (e.g. pay-as-youdrive insurance). Furthermore, insurance pricing provides risk signals and rewards risk reduction efforts.

Finally, insurers are major institutional investors. Insurance for and investments in renewable energy, green buildings, lowcarbon transportation, sustainable agriculture, and climate-resilient infrastructure promote sustainable development.

UN PRINCIPLES FOR SUSTAINABLE INSURANCE From 2006-2012, the work of the UN Environment Programme Finance Initiative (UNEP FI) with the insurance industry on sustainability issues led to the development of the Principles for Sustainable Insurance (PSI).

“The industry is uniquely positioned to promote sustainable development through its triple role as risk managers, risk carriers, and institutional investors.”

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Through the PSI, insurers have a shared view that the “world is facing increasing environmental, social, and governance (ESG) challenges” and that “ESG issues are increasingly influencing traditional risk factors and can have a significant 193

impact on the industry’s viability. Therefore, a resilient insurance industry depends on holistic and far-sighted risk management in which ESG issues are considered.” These insurers have the common aspiration “that better management of ESG issues will strengthen the insurance industry’s contribution to building a resilient, inclusive and sustainable society.”

Endorsed by the UN Secretary-General and insurance CEOs worldwide, the principles were launched at the 2012 UN Conference on Sustainable Development in Rio de Janeiro (Rio+20). They serve as a global framework to address ESG risks and opportunities.

The principles are structured according to the spheres of influence of an insurance company, from core business strategies and operations (e.g. company strategy, risk management and underwriting, product development, sales and marketing, claims management, investment management), through to business partners (e.g. clients, agents, brokers, reinsurers, suppliers), governments, regulators, and other key stakeholders. Furthermore, the principles promote accountability and transparency. For example, each insurer that signs the PSI is required to publicly and annually disclose its progress in implementing the principles.

Since their launch in 2012, the principles quickly became part of the criteria of the Dow Jones Sustainability Indices, FTSE4Good, and Brazil’s BM&FBOVESPA Corporate Sustainability Index.

TURNING THE PSI INTO PRACTICE Many insurers are showing leadership and innovation in implementing the principles, in varying degrees and scales. For example, Allianz and Swiss Re’s respective sustainability risk frameworks seek to better manage ESG risks in insurance and investment transactions. Munich Re has developed an insurance underwriting tool to assess ESG risks in engineering projects.

AXA has joined the African Risk Capacity, an insurance pool to protect African countries from extreme weather events.

AXA has also committed to divest from companies most exposed to coal-related activities, totalling €500 million, and to triple their green investment to over €3 billion by 2020. Similarly, Aviva has committed to invest over $3.8 billion in lowcarbon infrastructure over the next five years.

Allianz has announced that it will stop financing coal-based business models, saying it will no longer invest in companies that derive more than 30% of revenue from coal mining or generate over 30% of their energy from coal.

Beyond being a global framework to be implemented by insurers, the principles have led to the largest collaborative initiative between the UN and the insurance industry— the PSI Initiative. Today, nearly 100 insurance and stakeholder organisations worldwide have adopted the principles, including insurers 194

representing more than 20% of world premium and $14 trillion in assets under management.

As a global initiative, the PSI Initiative has become a strong platform for thought leadership and collaboration. In the past decade, average economic losses from disasters were about $190 billion per year, while average insured losses were about $60 billion per year. This century, more than one million people have already lost their lives to disasters. In this context, IAG led the PSI Global Resilience Project, a multi-year collaborative initiative to help communities and governments develop effective approaches to reduce disaster risk and to drive greater investment in disaster risk reduction.

By 2030, 60% of the world’s population will be living in cities, which will be at the core of the climate conundrum. This is why AXA and the PSI Initiative produced the first global study of how cities and SMEs are building climate resilience, based on a survey of more than 40 city leaders and 1,100 SMEs. Meanwhile, Munich Re and the International Finance Corporation are leading a global project by the PSI Initiative and the World Bank to develop guiding sustainability principles for underwriting surety bonds and infrastructure projects.

On investment, Aviva engaged the PSI Initiative and other stakeholders in developing a roadmap for sustainable capital markets, and has put forward calls to action to mobilise the $300 trillion of capital in financial markets to help realise the UN Sustainable Development Goals.

In Brazil, the Brazilian Insurance Confederation (CNseg) and Brazilian insurers have produced sustainability goals for their entire insurance market based on the four Principles for Sustainable Insurance. In Africa, starting in 2016, Santam, the PSI Initiative, ICLEI—the global cities network, ClimateWise and partners are creating City Innovation Platforms for African infrastructure resilience, with Dar es Salaam as the pilot city. The PSI Initiative and ICLEI are also collaborating on how insurers and local governments can work together in building resilient and sustainable cities.

In China, with the PSI Secretariat as the insurance lead, the PSI Initiative contributed to ground-breaking policy initiatives to green China’s financial system led by the People’s Bank of China, the Development Research Center of the State Council, the UNEP Inquiry into the Design of a Sustainable Financial System, and the International Institute for Sustainable Development.

This year, the PSI Secretariat is continuing to support sustainable insurance policy initiatives, including insurance elements of the non-G20 developing countries work stream of the G20 Green Finance Study Group convened by China under its 2016 G20 presidency. In Italy, the PSI Initiative is playing an active role in the Italian National Dialogue on Sustainable Finance.

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Summer 2016 Issue

THE GROWING RELEVANCE OF SUSTAINABILITY Insurance regulation and supervision will be critical to guide actions on sustainable development. The key role of regulators is recognised in Principle 3 of the PSI: “We will work together with governments, regulators and other key stakeholders in promoting widespread action across society on environmental, social, and governance issues.” In this context, insurers have committed to work together with governments and regulators to, for example, “support prudential policy, regulatory and legal frameworks that enable risk reduction, innovation, and better management of ESG issues.”

Insurance regulators, such as those of California, Washington State, and the Philippines, have publicly showing their leadership and commitment to sustainable insurance aims by signing the PSI themselves.

Independently, insurance regulators have been taking action in response to sustainability challenges such as climate change adaptation and mitigation, disaster risk management, and financial inclusion. In the US, the US National Association of Insurance Commissioners (NAIC) has required insurers to disclose to regulators the financial risks they face from climate change since 2009, with several states implementing mandatory disclosure.

At state level, the California Insurance Commissioner is implementing a comprehensive climate action plan spanning underwriting, green insurance products, investment, land-use planning, and building codes. Meanwhile, the Washington State Insurance Commissioner is encouraging insurers and key stakeholders to become involved in efforts on land-use regulation and building code requirements in order to prevent or reduce problems due to climate change.

In the UK, in 2015, the Bank of England’s Prudential Regulation Authority (PRA) completed the most in-depth assessment done to date of the risk of climate change to insurers and policyholders, across physical, transition, and liability risks.

In the Philippines, the Philippine Insurance Commissioner has championed financial inclusion through micro-insurance, which has led to the Philippines having the highest microinsurance coverage ratio in the Asia-Pacific.

Current efforts include developing disaster insurance mechanisms across the individual, local, and national levels.

THE SUSTAINABLE INSURANCE POLICY FORUM From 2014-15, the PSI Initiative and the UNEP Inquiry into the Design of a Sustainable Financial System (the UNEP Inquiry) carried out a first-ever global consultation on how insurance policy and regulation could better support sustainable development. After convening a multi-stakeholder global roundtable with CFI.co | Capital Finance International

Swiss Re in May 2015, the PSI and the UNEP Inquiry launched in June 2015 the global report Insurance 2030: Harnessing Insurance for Sustainable Development, which recommended, among others, the creation of a Sustainable Insurance Policy Forum (SIPF) to scale up policy progress through enhanced collaboration across jurisdictions.

The UK PRA’s climate change adaptation report in September 2015 also concluded that a “network for insurance regulators and associations interested in sustainable insurance policies, guidelines, and practices” may be worthy of further consideration. Furthermore, the report highlighted the importance of leadership and insurers’ role in driving a wider societal response to climate change by, for example, “becoming a signatory to the Principles for Sustainable Insurance.”

The PSI Initiative and the UNEP Inquiry are now working with insurance regulators in creating the SIPF, which would provide a practical arena for regulators to share experience and practices and to develop effective approaches.

The PSI Initiative contributed to major UN global policy frameworks for sustainable development that were agreed in 2015—namely, the Sendai Framework for Disaster Risk Reduction, the UN Sustainable Development Goals, and the Paris Agreement on Climate Change.

In March 2015, the PSI Initiative launched the United for Disaster Resilience Statement, a global commitment by insurers to work with governments and other stakeholders in implementing the Sendai Framework for Disaster Risk Reduction.

At the Climate Finance Day in May 2015, the PSI Initiative launched an online global platform for insurers to exercise leadership through voluntary commitments that support the aims of the 3rd UN World Conference on Disaster Risk Reduction, 3rd International Conference on Financing for Development, 2015 UN Sustainable Development Summit, and 2015 UN Climate Change Conference (COP21).

Furthermore, the PSI Initiative is contributing to a range of United Nations-backed initiatives and forums. Examples include the UN SecretaryGeneral’s Climate Resilience Initiative (A2R), the Paris Pledge for Action, the work of the UN Framework Convention on Climate Change’s (UNFCCC) Standing Committee on Finance (SCF), the Warsaw International Mechanism for Loss and Damage, the UN Development Programme-backed Climate Vulnerable Forum (CVF), and the Vulnerable Twenty Group of Ministers of Finance (V20).

Finally, the PSI Initiative is exploring the development of a set of Insurance Development Goals (IDGs) to help realise the 2030 UN Sustainable Development Goals (SDGs). This agenda-setting idea was recognised by the UN 195

“The Principles for Sustainable Insurance provide a global roadmap to develop and expand the innovative risk management and insurance solutions that we need to promote renewable energy, clean water, food security, sustainable cities and disaster-resilient communities. The United Nations looks forward to working with all sectors of society towards the global embrace of this important new initiative as we shape the future we want.”

Ban Ki-moon, UN Secretary-General

Global Compact and KPMG in their 2015 report SDG Industry Matrix: Financial Services, and by The Economist in their Insurance Summit 2016: Guardians of the Future.

In just over three years, the PSI Initiative has shown how the UN and insurers can work together in building a risk-aware, resilient, and sustainable society. In the words of UN Secretary-General Ban Ki-moon, “The Principles for Sustainable Insurance provide a global roadmap to develop and expand the innovative risk management and insurance solutions that we need to promote renewable energy, clean water, food security, sustainable cities, and disaster-resilient communities. With world premium volume [of more than $5 trillion] and global assets under management [of more than $30 trillion], insurers that embed sustainability in their business operations can catalyse the kinds of financial and investment flows and long-term perspectives needed for sustainable development.” i

To learn more about the PSI Initiative, please visit: www.unepfi.org/psi ABOUT UNEP The United Nations Environment Programme (UNEP) is the leading global environmental authority that sets the global environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system and serves as an authoritative advocate for the global environment.

ABOUT PSI Endorsed by the UN Secretary-General and insurance industry CEOs worldwide, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities. Developed by the UN Environment Programme Finance Initiative (UNEP FI), the Principles have led to the largest collaborative initiative between the United Nations and the insurance industry— the PSI Initiative. As of March 2016, nearly 100 organisations have adopted the Principles, including insurers representing more than 20% of world premium volume and USD 14 trillion 196

in assets under management. The Principles are part of the insurance industry criteria of the Dow Jones Sustainability Indices, FTSE4Good, and Brazil’s BM&FBOVESPA Corporate Sustainability Index.

the expert group working with the Chinese government on policy initiatives to green China’s financial system and, in 2016, became part of the expert group for the Italian National Dialogue on Sustainable Finance.

The vision of the PSI Initiative is of a risk aware world, where the insurance industry is trusted and plays its full role in enabling a healthy, safe, resilient and sustainable society. Its purpose is to better understand, prevent and reduce environmental, social and governance risks, and better manage opportunities to provide quality and reliable risk protection.

Butch advises and contributes to various initiatives and forums relevant to sustainable insurance. Examples include the Paris Pledge for Action, the Vulnerable Twenty Group of Ministers of Finance (V20), the Agricultural and Climate Risk Insurance+ Initiative of GIZ, and the Environmental Stress Testing Pilot Project of GIZ and the Natural Capital Declaration. At the UNEP Finance Initiative (UNEP FI), Butch led the global research, consultation and drafting process that produced the PSI. From 2006-10, he led both UNEP FI’s insurance and investment programmes, including its activities with the UNsupported Principles for Responsible Investment Initiative. Butch has authored pioneering studies on global sustainability issues for insurers, the first global sustainability survey of the insurance industry, global research and insurance industry statements on climate change and disaster risk management, and a legal roadmap on fiduciary duty and responsible investment. Prior to the UN, Butch was based in Asia as the Head of Reinsurance of the Pioneer Group where he spent over a decade working with leading insurers and reinsurers worldwide.

ABOUT THE AUTHOR Butch Bacani’s role is focused on developing and executing the global strategy and work programme of the UNEP FI Principles for Sustainable Insurance (PSI)—a global framework to address environmental, social and governance risks and opportunities. Endorsed by the UN SecretaryGeneral and insurance industry CEOs, the PSI was launched at the 2012 UN Conference on Sustainable Development (Rio+20). The Principles have led to the largest collaborative initiative between the United Nations and the insurance industry—the PSI Initiative. The vision of the PSI Initiative is of a risk-aware world, where the insurance industry is trusted and plays its full role in enabling a healthy, safe, resilient and sustainable society.

Butch is leading PSI activities supporting key UN global policy frameworks that were agreed in 2015—the UN Sustainable Development Goals, the Paris Agreement on Climate Change, and the Sendai Framework for Disaster Risk Reduction— and is championing the idea of producing “Insurance Development Goals”. Together with the UNEP Inquiry into the Design of a Sustainable Financial System and insurance regulators, Butch is leading the creation of a Sustainable Insurance Policy Forum. From 2014-15, he led a global consultation on insurance policy and regulation and industry practices, which delivered a 2030 global roadmap to harness the full potential of the insurance industry for sustainable development. He is a member of the expert group that developed the UN SecretaryGeneral’s Climate Resilience Initiative (A2R).

In 2014, he became the insurance lead of CFI.co | Capital Finance International

Author: Butch Bacani

Summer 2016 Issue

> CFI.co Meets the President and CEO of Unity:

Louis Robert “Tito” Ducruet Hepburn

P

anamanian businessman Robert Louis “Tito” Ducruet Hepburn is an experienced business administrator with an established and wellrespected name in the community for reliability and confidence. He is known for his impeccable ethics, strong character, and instantly likable personality.

Scion of a family long involved with the insurance business, Mr Ducruet in 1991 founded, jointly with his brothers Roger and Jean, LR Ducruet and Sons, which started operations with an important client base.

In 2008, Mr Ducruet Hepburn’s vision led him to create the largest network of insurance brokers in Central America. After several months of negotiation with Darby Overseas – part of Franklin Templeton – the firm takes a stake in LR Ducruet and Sons. So did Technical Services Insurance (SETESSA) of El Salvador, which ultimately resulted in Unity.

Mr Ducruet Hepburn is currently president and CEO of Unity Holdings which comprises Ducruet-Panama Unity, Unity PromotersGuatemala, Unity Setessa-El Salvador, Unity Costa Rica, and Unity Nicaragua.

During his long and distinguished career, Louis “Tito” Ducruet has maintained strong relationships with national, regional, and global companies in which he was granted many roles as founder, partner, or management such as: • Director of American Insurance Managers • Founding member of Ocean Re in Barbados • Founding member of primary care medical clinics Mini Med • Founding partner of Capital Bank Financial Group with operations in Panama • Founding partner of Optima Insurance in the Republic of Panama • Board member of FESA, a company dedicated to printing and management solutions for credit and debit cards • Founding partner and chairman of Telemetrix, a company related to measurement technology solutions.

Mr Ducruet Hepburn also works with a number of business associations and charitable organisations such as: • Member of Panamanian Executive Association • Representative of the American Chamber of Commerce • Member of the British-Panamanian

President and CEO: Louis Robert “Tito” Ducruet Hepburn

Chamber of Commerce • Founding member and former director of the Panamanian Association of Risk and Insurance • Trustee of the Ronald McDonald Foundation Mr Ducruet Hepburn has participated in various committees in the insurance industry related to insurance law.

CFI.co | Capital Finance International

Mr Ducruet Hepburn’s main objective has been the creation and design of insurance and reinsurance programmes for local and global customers. These achievements are the result of more than three decades of experience in a highly dynamic industry where constant training, development, and the pursuit of excellence form the cornerstones of success. i 197

> North America:

US Elections - Truth? How Stupid Is That?

By Tony Lennox

One contrast between the UK and the US versions of the television show The Apprentice is that the British programme takes place in a brightly-lit boardroom of glass and steel whereas in the USA the set is dark and sombre.

Washington DC: US Capitol Building

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I

ts wood-panelled walls and deep carpets portray the archetypal image of American big business. And sitting at the polished oak boardroom table is Donald Trump, the epitome of the big American businessman – in the eyes of some citizens at least.

The Apprentice, on both sides of the Atlantic, is entertainment, of course. But Mr Trump has used his role to good effect, presenting himself as the man with the credentials to “Make America Great Again”. In 2010, he fired a contestant for cheating. Mr Trump told him: “This is why the country has gotten into such trouble. This is the kind of thinking that we have been witnessing on Wall Street for the last five years.”

Nearly 45% of American voters put the economy as their number one concern as the country heads towards November’s presidential elections. The electorate’s anger and resentment at the USA’s financial institutions following the 2008 crash, still simmers. Wall Street is terrified that this antipathy will result in a Trump presidency.

“Meanwhile, the Hillary Clinton camp is seen as the more conventional option by many on Wall Street, even though some Americans point to the deregulation spearheaded by her husband during his tenure at the White

ALTERNATIVE PLANS With the smoke from the primaries finally clearing, Mr Trump and his Democratic Party rival in the race for the White House Hillary Clinton are setting out their alternative plans for the US economy, knowing that whoever has the clearest vision will win the race.

House as a fundamental

It was Hillary Clinton’s husband Bill, after all, who coined the phrase: “It’s the economy, stupid.” He used it in his own presidential campaign of 1992 and it has become a gold-plated truism worldwide.

that raising the minimum wage would make US workers less competitive. Mr Trump’s plan to deport millions of unregistered immigrants would shrink the economy by two per cent, according to the American Action Forum – a conservative and pro-business think tank. It would trigger a GDP collapse, it says.

Putting aside his views on Muslims, Mexicans, and walls, Mr Trump has few friends on Wall Street.

He doesn’t pretend to like bankers, has a devotion to big business, wants corporate tax cuts, disdains green policies, and ridicules climate change.

While many critics believe his isolationist and protectionist leanings are foolhardy, such dogma chimes with a large section of the American public.

Having seen off his Republican rivals for the candidacy, he knows that the blustering rhetoric must now be replaced by some hard economic facts. His plans, so far, are mostly off-the-cuff and sometimes contradictory. They include easing the tax burden on the middle classes, removing barriers to US business, higher tax on foreign imports, and, of course, the expulsion of millions of unregistered immigrants.

Mr Trump proposes the introduction of tariffs on goods coming from China, Mexico, and Japan, amongst others. Market commentators say that such a move would prompt a trade war which could harm job creation in the US. He is against Obama’s Trans Pacific Partnership [TPP] and claims to be a free trade advocate, despite his pronouncements on tariffs.

TRUMP’S COMFORT He is comfortable, he says, with the minimum wage, but doesn’t intend to increase it. He argues 200

cause of the economic crash of 2008.”

But what most alarms conventional economists is Mr Trump’s reputation as a “close to the wind” businessman – and what that would mean if he had his hand on the national tiller. “I’ve borrowed knowing that you can pay back with discounts,” he told the business news TV channel CNBC in May 2016. As president, he said, he “would borrow knowing that if the economy crashed, you could make a deal.”

This attitude is mirrored by Mr Trump’s regular Chapter 11 escapades. “I’ve never been bankrupt,” he insists. Former Hewlett-Packard CEO, Carly Fiorina, disagrees. She is critical of Mr Trump’s business history. “There are a lot of us Americans who believe that we are going to have trouble someday paying back our debt.”

Describing the management of his casinos, she said: “You [Trump] ran up mountains of debt, as well as losses, using other people’s money, and you were forced to file for bankruptcy, not once, not twice, but four times.”

GOING FOR BROKE IS GOOD BUSINESS Mr Trump maintains that his use of Chapter 11 [in which a company is effectively restructured rather than liquidated], was actually an indication of good business practice. Goldman Sachs chief CFI.co | Capital Finance International

executive Lloyd Blankfein said the idea of such a man running the country “blows my mind”.

Meanwhile, the Hillary Clinton camp is seen as the more conventional option by many on Wall Street, even though some Americans point to the deregulation spearheaded by her husband during his tenure at the White House as a fundamental cause of the economic crash of 2008.

Mrs Clinton shares some of Mr Trump’s goals for the economy. She has, for instance, also promised to go easy on the middle classes. She, too, will claw back tax benefits from firms which move their headquarters and jobs overseas.

Like Mr Trump, she wants to create jobs. Her plan for employment growth involves providing incentives for companies which share profits with employees.

A New Bargain for a New Economy is her election slogan, but while she campaigns for “inclusive capitalism” Mrs Clinton must find a way of addressing income inequality without alienating the wealthy. “We need to raise pay, create goodpaying jobs, and build an economy that works for everyone – not just those at the top,” she says. “I’ll cut taxes for the middle class, raise the minimum wage, and ensure the wealthiest pay their fair share.”

PREDICTIONS The ratings agency Moody’s is predicting a Democratic Party victory in November. It doesn’t matter about the personalities of the candidates, it says. The economy is the most important factor.

The markets are openly fearful of a Trump victory.

Commentators describe him as “unpredictable and combative.” Mr Trump’s regular swipes at the bankers and hedge fund managers who, he says, are “getting away with murder” are hardly designed to instil confidence. Neither is the controversy over Trump University’s alleged tactics to part would-be entrepreneurs from their cash.

Mrs Clinton, on the other hand, has a long, if occasionally contentious, track record. The markets believe a Clinton presidency would be more of a known quantity and that big business would find her more pliable.

Trump’s unpredictability, above all else, is what gives the money men the jitters. He is apt to suddenly pick on a business over a particular issue such as his call for a boycott of Apple during the row over the tech giant’s refusal to help the FBI unlock the San Bernardino killers’ iPhone.

He demonstrated this trait during another episode of The Apprentice; a young woman interrupted him in order to come to the aid of a fellow contestant who was being savaged. Mr Trump asked her why she interrupted him. She said: “I’m being truthful; I’ll always be truthful.” He replied: “How stupid is that?” Then he fired her. i

Summer 2016 Issue

> CFI.co Meets the President & CEO of Home Trust Company:

Martin Reid

H

ome Trust recently received CFI. co’s Best Mortgages Solution Canada 2016 Award in recognition of the company’s long history of providing mortgages and other financial services to the Canadian public. Despite a move towards consolidation over the years, that saw trust firms in the Canadian financial sector assimilated by the country’s largest banks, Home Trust remains resolutely independent and is today, Canada’s largest non-bank trust company.

Home Trust has experienced tremendous growth during the 30-year tenure of co-founder and former CEO Gerald “Jerry” Soloway, but with Mr Soloway’s retirement this past May, a new skipper is now at the helm. Meet Martin Reid, Home Trust’s President who now adds the CEO title to his responsibilities; and in case you’re wondering about all the nautical references, Reid also happens to be an accomplished sailor.

Mr Reid joined Home Trust nine years ago and for the last six years has served as the company’s president. Drawing upon his extensive experience with capital markets firms, including Dundee Securities and Deutsche Bank, Mr Reid has been instrumental in positioning Home Trust for continued success.

“My first priority is to further expand on the initiatives we’ve already implemented to enhance service levels for our mortgage broker partners,” said Mr Reid in a recent interview shortly after being named CEO. “We’ve made excellent progress and I’m especially pleased with the work we’ve completed launching two new programmes that will dramatically improve how brokers interact with Home Trust.”

President & CEO: Martin Reid

The first programme, Spire, was launched in April and provides brokers with specific tools and other benefits they need to help them expand their business. More recently, Loft was released to the broker community. This innovative web portal was designed and developed entirely in-house and provides brokers with real-time status updates for all their transactions in the Home Trust pipeline and automates many of the processes brokers previously had to complete manually.

Also registering on Mr Reid’s radar is the state of the real estate market in Canada. “At a conference I recently attended, I described the Canadian real estate market as ‘a tale of two cities’. While this may be a great headline, there is much more to consider than just two individual markets,” explained Mr Reid.

The two cities in question, Vancouver on the

country’s west coast and Toronto, Canada’s largest city, have seen tremendous gains over the last several years. Some analysts worry that real estate in both cities is over-valued. At the same time, other parts of the country, particularly those areas heavily dependent on natural resources, are now showing early signs of contraction. For some, this suggests that the Canadian market itself is poised for a correction.

“While I agree that the advances we have seen in Vancouver and Toronto are not sustainable at the current pace,” said Mr Reid, “I do not believe that – to paraphrase Dickens – this marks the end of the best of times and that we are about to now experience the worst of times. Canada is a large country with very distinct local economies and while some parts of the country are indeed underperforming, when you look at the full CFI.co | Capital Finance International

picture, the Canadian economy is still healthy.”

The latest economic reports support Mr Reid’s view. The Bank of Canada is projecting that when all is said and done for 2016, GDP growth will be a disappointing, but positive, 1.7% – not bad for a year that saw a continuation of low resource prices and even a massive wild fire that, for an extended period of time, shut down a large swathe of the Canadian oil industry. Notably, the bank expects the recovery to continue and for 2017 is calling for a robust 2.4% expansion in GDP. “We always need to prepare for the worstcase scenario, but overall, our outlook remains positive. Canada continues to exhibit strong fundamentals including rising employment and this will continue to support demand in the housing market.” i 201

> Home Trust:

Canadian Mortgage Specialist Prepares for the Next Chapter In early 2016, Home Trust’s long-time CEO Gerald “Jerry” Soloway announced his retirement from the day-to-day leadership of the company he cofounded nearly thirty years earlier. This article looks at some of the key events over the past three decades that helped make Home Trust a leading provider of residential and commercial mortgages.

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he Home Trust story can be traced back to 1986 when Gerald Soloway, a lawyer who frequently worked with several of Canada’s major banks, purchased the Home Savings & Loan Corporation.

Based in a small city about two-hours west of Toronto – the heart of the Canadian financial sector – this out-of-the-way office of barely a dozen employees showed little indication that it would someday become Canada’s largest independent trust company and the country’s eighth largest financial institution.

As a real estate specialist, Mr Soloway recognised that a significant number of people struggled to meet the conditions for a home mortgage as imposed by the big banks. New Canadians with limited credit history, the self-employed, and those with previous but now resolved credit issues, were particularly disadvantaged by the banking system.

Mr Soloway believed that, for the most part, these individuals represented no greater risk than the general population. However, in order to properly assess these loan applications, he also understood that a different approach than that used for so long by the big banks would be required to adequately qualify these borrowers.

A NEW APPROACH TO LENDING Whereas the major banks tended to simply reject files requiring any special consideration, the Home Trust team – to use the Home Trust vernacular – took the time to “find the strength” in each application. This approach marked a significant departure from that of other financial institutions, but with respect to managing risk, Mr Soloway demanded that Home Trust maintain a risk management regime comparable to that of any of the major banks.

This adherence to superior risk mitigation remains central to the Home Trust methodology, and while Home Trust underwriters have the mandate to understand each borrower’s 202

“Whereas the major banks tended to simply reject files requiring any special consideration, the Home Trust team – to use the Home Trust vernacular – took the time to ‘find the strength’ in each application.” particular circumstances and look for the best ways to make a deal work, strict policies must be followed at all times. This includes a thorough review of the applicant’s credit history, verification of claimed income, observance of maximum loan-to-property value ratios, and minimum down payment requirements.

This approach has served the company well and Home Trust continues to enjoy steady growth that has resulted in an average 19% annual year-overyear increase in share value since Mr Soloway first assumed the senior executive role three decades ago. Today, the company boasts nearly 900 employees and over $20 billion in assets.

THE RISE OF THE MORTGAGE BROKER CHANNEL The mortgage broker network was still in its infancy when Home Trust first appeared on the scene. Born from the frustration many wouldbe borrowers experienced when dealing with the rigid requirements of the banks, a growing number of consumers entrusted mortgage brokers to guide them through the application process and find the best rates and the most favourable terms.

Home Trust quickly recognised the benefits of partnering with this expanding network CFI.co | Capital Finance International

of private mortgage brokers and created programmes specifically designed to support the broker community in their efforts to serve their clients. Mr Soloway credits this partnership with contributing significantly to Home Trust’s phenomenal growth and the partnership continues to flourish today.

LOOKING TO THE FUTURE There is no question that the mortgage business has changed considerably over the past thirty years and Home Trust has proven it can adapt to meet changing times. To augment its mortgage business, Home Trust has expanded its core services to include the issuing of credit cards, retail credit and payment services, as well as a new direct to consumer deposits business under the Oaken Financial banner. More recently, Home Trust acquired Canadian First Financial (CFF) Bank and is adding additional services under the Home Trust umbrella of financial products.

Of course, one of the biggest changes now involves Mr Soloway himself. After serving as CEO for the past three decades, he decided the time was right to pass the torch to Home Trust’s incumbent president, Martin Reid. Noting Mr Reid’s commitment to Home Trust and the exceptional leadership skills he displayed in his tenure as Home Trust’s president, Mr Soloway made the announcement one of his final official acts as CEO during the 2016 Annual General Meeting this past May. In his subsequent address to the shareholders, Mr Reid provided key insights into the Home Trust five-year plan and how that plan would unfold under his leadership. Not surprisingly, risk management remains a top priority. In fact, 2016 ushered in a renewed commitment to risk management and the company’s leadership continues to sharpen the company’s focus on balancing business expansion with prudent lending.

To help drive growth and optimise efficiencies,

Summer 2016 Issue

“To help drive growth and optimise efficiencies, Home Trust will continue to rely on the use of technology and has recently launched several new broker-facing web applications.”

Home Trust will continue to rely on the use of technology and has recently launched several new broker-facing web applications. These tools have been developed in-house and were designed specifically to help Home Trust’s broker partners interact more effectively with Home Trust.

Mr Reid also explained why he is confident that tremendous opportunity continues to exist for Home Trust in the coming years.

Simply put, the market segments that have historically fuelled Home Trust’s growth remain relevant today and for the foreseeable future; these groups include the self-employed, new Canadians lacking an established Canadian credit history, and those with a bruised credit history.

For instance, more than 15% of the Canadian workforce is classified as self-employed and this fact alone, makes it difficult for these individuals to qualify for a mortgage with a major financial institution. The ranks of the self-employed are expected to increase substantially in the coming years as more employers look to reduce full-time positions in a bid to reduce operating costs. In addition, Canada maintains an active immigration program and new arrivals continue to make Canada a preferred destination bringing with them not only new skills to help build the economy, but the need for new family homes.

Still, there are economic challenges ahead.

Real estate prices in Toronto and Vancouver continue to accelerate at a record pace that is clearly not sustainable. Warnings are on the rise suggesting that these markets have already become overly “frothy” with the potential for a price correction increasing. At the same time, local economies in those parts of the country where energy resources make up much of the economic activity are contracting.

Nevertheless, with thirty years of experience to draw upon, there is little that has not already been seen before and true to Gerald Soloway’s initial vision, all business decisions will continue to be made based on the company’s strong risk and compliance culture. This is the formula that Home Trust has relied on since its founding and this proven approach will continue to support Home Trust in the years ahead. i

Canada: Toronto

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> Oh What a Circus, Oh What a Show:

Marissa Mayer and the Demise of Yahoo!

By Naomi Majid

Without a vision and top tech engineers, an Internet company flounders. It is hardly rocket science: Who are we? What do we do? And who do we do it for? But if there was ever a classic case study of brand confusion, it is Yahoo!

T

he struggling Internet portal, which in February announced plans to axe 15% of its workforce, was the gateway of choice to the internet for a whole generation of web users.

Once the go-to site for astronomically-priced banner ads, Yahoo! seemed to have the cyber world for the taking. In 1998, Yahoo was the most popular starting point for web searches. But its dramatic downwards spiral from cool to drool has been nothing short of jaw-dropping – for all the wrong reasons.

One look at the cluttered homepage says it all.

For users accustomed to the clear white space that you could drive a lorry through on userfriendly Google, Yahoo! assaults the eyes and the senses.

Are they a media company? A search engine? A news site? The problem of course is that they still don’t quite know.

After chewing through and spitting out four executives in three years, in 2012 Yahoo! brought in former It Girl of the tech world, Marissa Mayer, as CEO. Mrs Mayer, with no experience in managing a company of any discernible size, predictably made blunders. Under her direction, Yahoo! went on a $3 billion spending spree, but none of the acquisitions yielded significant growth.

Mrs Mayer’s early leadership gaffes included ordering home workers to return to the office – a move which generated mixed emotions.

Since then, many of her management decisions have come under fire including controversial performance-related job cuts, and her widely criticised “no cuts…this week” comment at a company-wide meeting.

Industry insiders say that Yahoo!’s brain drain problem started back in the 1990s when top software engineers headed to companies like Google where technology was enshrined at the heart of the business, not relegated to a wrap-itup-at-the-end coding function.

Dr Sami Vihavainen, designer at the UK branch of Finnish IT consultancy Leadin, says that Mrs Mayer should have applied the Five Point Rule she used at Google. “Back in her days at Google, 204

CEO: Marissa Mayer

Marissa Mayer would tell designers to count a point for every different font, font size, and colour on a page. If a page goes above five points, it’s time to redesign.”

For Yahoo!, currently a portal to confusion, it’s not so much Don’t Cry for Me Argentina as “so CFI.co | Capital Finance International

share my glory, so share my coffin.” Whether it can be resurrected or not, depends entirely on whether the company can take a step back and work out what it really is. Mrs Mayer, of course, would walk away with a large enough multimillion-dollar package to soothe the most ruffled of reputations. i

Summer 2016 Issue

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> Steve Jobs:

Genius at What?

By Tony Lennox

Americans love their heroes; the loners and outsiders who take on the meanest, most black-hearted baddies, and beat them single-handedly.

W

ho knows if Steve Jobs saw himself as a hero? He certainly worked hard on his image throughout his life, and he possessed the necessary streak of ruthlessness, combined with a splash of sentimentality, to succeed – recognisable traits in many of history’s great heroes – and monsters.

Dressed in a black gown over pale blue jeans and scruffy sneakers, Steve Jobs looked like an academic version of Clint Eastwood’s Man with No Name when he rose to address a crowd of eager undergraduates in an open-air Stanford University Commencement ceremony in 2005.

The youngsters whooped and hollered. Here, with his close cropped hair, fashionably stubbly grey beard, and wire-rimmed specs, was their Wild West Hero – inscrutable behind narrowedeyes, he was the essence of the gunslinger.

On reflection he was also, like the archetypal western hero, fatally wounded at the time, holding at bay the cancer that would kill him within a few years.

His speech to those undergraduates has been viewed millions of times on You Tube, achieving close to mythological status. In reality, it was a run-of-the-mill delivery of a standard message, given poignancy in hindsight. His own inevitable demise must have been on his mind when he told the students: “Your time is limited. So don’t waste it living someone else’s life”.

Steve Jobs’ life story even reads like the script of a Western: he is abandoned at birth, taken in and raised by a homely American family, and went on to have a troubled youth. However, the young loner wins the love of his hometown sweetheart, and achieves rapid success. When this is snatched away by the men in black hats, he goes into the wilderness where he finds the strength and courage to rebuild and fight back.

In the final act, he comes home to claim his birth right and exact revenge on the bad guys, earning the adoration and respect of the humble townsfolk. The film would end, predictably, with tears as our hero, having achieved all his goals, rides off into the sunset.

Stripped of all the complexities, this was the Steve Jobs story. But the real narrative, as always, is hidden somewhere in those 206

“Steve Jobs’ own heroes were Einstein and Gandhi – giant photographs of the pair were practically the only adornments of his famously minimalist apartment in New York. This points, perhaps, to a desire to be seen, not only as a genius, but a genius with a soul who wants to bring freedom to the world.” intricacies. There is a long cast of fellow players who might take issue with the legend.

Steve Jobs’ own heroes were Einstein and Gandhi – giant photographs of the pair were practically the only adornments of his famously minimalist apartment in New York. This points, perhaps, to a desire to be seen, not only as a genius, but a genius with a soul who wants to bring freedom to the world.

Meanwhile, Apple customers were being ushered, blissfully unconscious, into a gilded cage. Apple provided shiny trinkets which appealed directly to lovers of hi-tech fashion, and then locked them into a life-long relationship with the company. That was true genius.

Jobs has been criticised for somehow manipulating Apple customers into buying style over substance, but the whole history of the development of the personal computer has been about selling something that people didn’t know they needed. And in the 1970s, did anyone really need a home computer?

Every business has to adapt in order to survive and prosper, especially in the rapidly-changing world of new technology where nothing ever remains static. Apple’s troubles in the late 1980s appeared to begin when, having grown to respectable corporate size, it evicted the inventive but volatile Jobs in favour of John Sculley – an apparently safe pair of hands from a conventional corporate background. The company promptly went into a steep decline. It CFI.co | Capital Finance International

was rescued, and reached new heights, when Jobs returned and developed the iconic stream of gadgets that changed its fortunes – the iMac, iPod, iTunes, iPhone, and iPad. A cash injection from the friendly folk at Microsoft kept Apple afloat and allowed Jobs time to work his magic.

Jobs’ reinstatement at Apple, and his subsequent triumphs, appear to confirm the man’s status, but could anyone have done what he did? Again, he was lucky in having the inspirational British-born designer Jonathan Ives at his right hand. But was that luck, or excellent judgement?

His talent for seeing things in a different way to ordinary people was first demonstrated in his Dad’s garage in suburban Los Altos, California, in the 1970s. That ability extended to the people around him. His first business partner, the likeable nerd Steve Wozniak, was the gifted one when it came to building computers. It was Jobs, though, who saw the commercial potential – and it is the far-sighted visionaries who are ultimately remembered by history.

Apple is often described as more of a religion than a business. Its customers are dubbed Macolytes and Steve Jobs, even in death, is their Messiah. Apple stores are defined in terms which might shame a cathedral. And Jobs certainly had a spiritual side, but who knows how much of that was born of the wacky West Coast climate of drugs and mysticism in the seventies?

He spent some time in India as a young man, worshipping at the feet of various gurus. Like many fellow long-haired youngsters who followed the hippy trail to the East, he returned and soon swapped his mystical robes for the conventions of Silicon Valley. Zen and the art of world domination, perhaps?

If Steve Jobs is remembered as a heroic maverick, his nemesis, Bill Gates, is the preppy college boy who achieved success despite, according to Jobs, his “lack of imagination.”

Today, Apple and Microsoft are technology giants straddling the globe, but they’re as different as the personalities of Jobs and Gates.

Gates is the wide-eyed and friendly geek. His achievements, though they helped change the world, lack the drama of Jobs’ rise to fame. Jobs once famously launched a lawsuit

Summer 2016 Issue

Steve Jobs

against Microsoft for copyright theft. Gates, characteristically droll, described the claim as one burglar moaning that another burglar had stolen something before he’d had a chance to steal it himself.

It might be argued that the enmity between the two was rather one-sided. Jobs was an obsessive, and viewed the world in black and white. Gates, on the other hand, was a pragmatist. Indeed, Microsoft came to Apple’s rescue in 1997 with a $150 million investment which helped breathe new life into the ailing giant at a crucial period. Hardly the action of a cut-throat rival.

Steve Jobs may be remembered as the hippy who created one of the world’s biggest corporate beasts, but those gunslinger’s eyes hid a complicated human being.

His first companion, Chrisann Brennan, gave an indication of his character in her book, The Bite in the Apple: A memoir of my Life with Steve Jobs. At one fractious meeting, she recalled: “Steve touched my forehead to indicate that I was his, which I found outrageous.”

One of his designers at Apple remembers that

Jobs was difficult to work for: “He had an uncanny capacity to know exactly your weak point, know what would make you feel small.”

or worse, the world he helped create is a very different place from the one he was born into in 1955.

When Jobs worked as a teenager for Altari, its boss, Nolan Bushnell, noted that he was “difficult but valuable,” adding, “he was very often the smartest guy in the room, and he would let people know that.” Almost everyone who came across him had an opinion, good or bad – frequently bad. Fortune Magazine described him as “one of Silicon Valley’s leading egomaniacs.”

In 1985, Jobs invested in Pixar, a fledgling graphics company. It was probably one of his simplest and shrewdest bits of business, and it earned him billions of dollars. The company was filled with creative minds, a fact which Jobs recognised with his renowned ability to spot a potential no-one else could see. Pixar subsequently evolved into a globally successful maker of blockbuster animated films – including Toy Story.

And yet, at times his modesty could be glimpsed. “There’s many things in life I don’t have the faintest idea what I’m talking about,” he once admitted. In Brennan’s frank memoir of her life with Jobs, she remembers the moment their daughter, Lisa, from whom Jobs had been estranged, decided to change her surname to incorporate his name. “Steve told me that he could hardly believe that she wanted to take his name. Very plainly relieved and honest, he said, ‘I am just so happy that she does.’”

By dying at the height of his triumph at the pitifully young age of 56, Steve Jobs has guaranteed his place in history. And, for better CFI.co | Capital Finance International

Did Steve Jobs get lucky, being in the right place at the right time, with the right friends?

Or did he really know what he was doing when he created, was rejected by, and then restored Apple to its position at the top of the pile?

Nearly five years after his death, that question is still being asked.

The folk singer Joan Baez, who had a two-year relationship with Jobs, said: “Steve had a very sweet side, even if he was erratic.” So, a little bit of the good, the bad, and the ugly - part Pale Rider, and part just loveable old Woody from Toy Story. i 207

> Asia Pacific:

Japan - A Uniquely Successful Model

By Tony Lennox

Ernest Hemmingway once said that going broke happens very slowly – and then all of a sudden. The world has been waiting for more than twenty years for Japan to go broke and yet, despite the doomsayers, it hasn’t happened yet.

Red pagoda with Mt. Fuji in the background

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A

ccepted economic wisdom suggests that Japan has been doing everything wrong for years – since the devastating stock market crash of 1990, which, in the eyes of the West, brought the first and mightiest of the Asian tigers to its knees.

Commentators point to Japan’s lack of growth as a serious problem, and frequently refer to the country as a “basket case”. They list numerous reasons why Japan is failing: the declining birth rate; its traditional hostility to immigration; the fact that the country is on poor terms with its Asian neighbours; the high debt-to-GDP ratio of 220%; and the ageing baby boomer generation whose pensions are sucking the lifeblood out of the economy.

In his recent book Japan in the 21st Century: Environment, Economy, and Society, Pradyumna Karan, a professor of Japan studies at the University of Kentucky, says: “In the early 1980s Japan’s growing economic strength was a source of concern in the USA and Europe.

Now, there is concern about an economy that is slow to reform and grow.”

“Fundamental problems, such as banks overburdened by bad loans, a dangerous ratio of national debt to gross domestic product, a rigid labour market, a highly regulated economy, and an ageing population and shrinking labour force have eroded Japan’s ability to play a larger global role.”

Japan’s precarious coexistence with nature is also repeatedly cited as an economic handicap.

The country, sitting on a fragile Pacific Ocean fault line, is rattled by frequent earthquakes which disrupt industrial production and cause social upheaval. The tsunami which battered Japan in 2011 not only claimed 16,000 lives, it caused untold economic damage, wiping out whole towns and destroying the Fukushima nuclear power plant.

Modern Japan and calamity, in the eyes of the rest of the world, walk hand-in-hand. If Godzilla turned up in Tokyo Bay, no-one would be surprised.

“In recent years, both Japan’s assets and liabilities have grown – but crucially, asset growth has outpaced the increase in liabilities, leaving the country in a much healthier financial condition with more than 300 trillion yen in net assets – more than enough to wipe out all of its debt.” competitive. And salaries for those jobs that still exist, eclipse wages in the rest of Asia, Europe, and the US. There is even an argument that Japan’s population decline is actually planned. The premise is that Japan realised in the 1950s that it couldn’t feed itself and that the country was over-reliant on food imports which exposed it to threat. The counterintuitive nature of the Japanese character maintains that constant growth isn’t necessarily the only gauge of a nation’s health.

One measure of economic wellbeing which is often overlooked by commentators is a country’s net international investment position (NIIP).

This is a measure of the difference between external assets and liabilities (governmental and privately-held). As recently as 1960, the US was the world’s largest creditor nation. It has now become its largest debtor. And since the 1960s its place as the world’s biggest creditor nation has been taken over by none other than Japan.

This gloomy view, however, fails to acknowledge that Japan does not, and has never, fit into the economic model to which most western commentators adhere. Economic ruin is predicted constantly, yet it never happens.

Sooner or later, the pundits will figure out that maybe it’s the model which is wrong – not Japan.

In recent years, both Japan’s assets and liabilities have grown – but crucially, asset growth has outpaced the increase in liabilities, leaving the country in a much healthier financial condition with more than 300 trillion yen in net assets – more than enough to wipe out all of its debt.

Japan is still the third largest economy in the world. Unlike many other advanced nations, its manufacturing base is in good shape. Even during the so-called lost decades after 1990, the country maintained and modernised its manufacturing sector. Its motor industry, for instance, still dominates the world. Automation has removed many traditional manufacturing jobs, but this only makes Japan more

There are those analysts who suggest that Japan’s apparent weaknesses constitute, in fact, a sort of giant smoke screen put up by the Japanese to deflect foreign aggression. The theory goes that when Japan was performing economic miracles in the sixties and seventies, the country was besieged by foreigners eager to snatch a piece of the action; third world countries held out begging bowls, industrial

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competitors became more vociferous, and those seeking reparations for Japan’s war crimes stepped up their demands.

The hypothesis may be fanciful, but there is no doubt that Japan has been treated with kid gloves since the crash. Before 1990, there were global demands from Japan’s competitors for the country to dismantle its trade barriers and open up its markets to the world. These demands subsided after the crash.

Japan’s markets benefit still from a level of protectionism unknown in the rest of the world.

Japan’s prime minister, Shinzo Abe, swept into power nearly four years ago vowing to revive the country’s fortune with a mix of policies centred on central bank monetary easing, targeted government spending, and a programme of deregulation.

So-called Abenomics have failed to set the world on fire. Some say they are just a diversion to prove to the world that Japan is attempting to use traditional methods that fit the accepted economic model. Its true and counterintuitive course is masking Japan’s underlying economic strength.

Chief among these commentators is Eamonn Fingleton, an Irish-born journalist and author, and significantly, a long-time Japan watcher.

He has maintained, since he first published the theory in his book Blindside in 1995, that Japan is very far from a basket case, and that the western press has wilfully misunderstood the culture and philosophy of Japan.

William J Holstein, the American author and journalist, has spent 35 years analysing global business issues. He recently visited Tokyo for the first time in years, and was surprised at what he found – a shining hi-tech city with a modern and efficient transport system and a clearly affluent population.

He was struck by the display of relaxed wealth and luxury; a plugged-in, high communication society, and the obvious levels of free time enjoyed by the Japanese. He recalled a Japan of chronic hard work, and people who frequently died in harness – such deaths even had a name – karoshi. Modern Japan, he discovered, is a very different country.

“One has to be profoundly humble about what we can really understand about Japanese society and economy,” he says. “It is a very complex country that operates on the basis of different values from our own. It is easy to project American values and therefore make basic mistakes about what is happening. But of this much I remain convinced: the obituaries that are being written about Japan in the Western media are simply not based on what is happening on the ground.”

Those waiting for basket case Japan to go broke may be best advised to not hold their breath. i

Summer 2016 Issue

> Bangkok Insurance:

Aiming for the Top Aiming to be the most preferred non-life insurer in Thailand, Bangkok Insurance adheres to a customer-centric approach to fulfil client needs and ensure maximum satisfaction. The company focuses on continuously developing business strategies to help improve its service products and operational processes. The company places a strong emphasis on innovation. An up-to-date IT system has been implemented to facilitate prompt and effective decision-making processes. Equipped with modern technologies, Bangkok Insurance was able to enhance the quality of its underwriting and claims services.

O

ne such innovation is BKI Telematics, a first in Thailand, which employs telecommunication and informatics technology. Raw data is collected and compiled in order for an analysis to be performed that establishes a driving pattern and scoring system for each policyholder. The scoring system is then used to determine the renewal premium.

With the goal of keeping the premium low at renewal, the policyholder becomes a more mindful driver. This also promotes an overall safer driving environment. In addition to the aforementioned scoring system, BKI Telematics also features vehicle location reports and out of area alerts which sends out notification to assigned receivers

“During the past several years, the company has extended its footprint by opening more branches across the country.� once the insured vehicle has travelled out of a specified area.

For added convenience, Bangkok Insurance offers e-Policy, which features swift service by submitting approved insurance policies to customers via e-mail. The e-Policy can immediately be used by

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the customers for reference or to submit a claim.

This service also reduces the use of paper which helps save the environment.

In order to better serve customers and cater to their different needs, Bangkok Insurance places great importance on expanding its service channels.

In addition to the website, bangkokinsurance. com, the company has service counters at various leading shopping malls across the country. The BKI iCare application, accessed via smartphones or tablets, is yet another place where customers can find general information on products and claims processing.

Recently, new features have been added to the app such as accident alerts which notify the

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company’s surveyors of the accident location.

With BKI iCare, customers can also perform car inspection and purchase compulsory motor insurance online. With this technology, the company can ensure quicker issuance of a motor insurance policy as well as allow the customers to quickly track the status of their policy.

Bangkok Insurance continues to create confidence in its services for customers and partners alike by adhering to universally accepted industry standards. In 2016, the company was awarded the ISO27001 Information Security Management Version 2013 certificate for its supporting insurance business operation including the IT system, network, infrastructure, and data centre.

During the past several years, the company has extended its footprint by opening more branches across the country. In addition to the 34 branches in Thailand which provide complete insurance services, the company has also partnered with over 1,500 7-Eleven stores to offer personal accident insurance and compulsory motor insurance. Furthermore, Bangkok Insurance has recently joined forces with frank.co.th, an online partnership, to establish a stronger presence in the digital marketing front. Customers can now buy motor insurance online with greater convenience.

Apart from Bangkok Insurance’s efficient management and secure financial status and the company’s well-established record of minding the interests of all stakeholders (customers, 212

partners, shareholders, and employees), the firm also provides support to both public and private sector community service initiatives.

Entering its 70th anniversary – and following the philosophy espoused by company Chairman Chai Sophonpanich “we are committed to being considerate and thoughtful” – Bangkok Insurance helps develop mindfulness, concentration, and wisdom. The company is organising various social activities to give back to the community.

Mobile Medical Unit Service Since 1988, Bangkok Insurance, together with Bumrungrad International Hospital, has continuously provided a mobile medical service free of charge for residents in remote and povertystricken areas. In addition to medical check-ups, the mobile medical service also distributes basic necessities such as dry food and clothing.

Clean Drinking Water for Students in Rural Area Project The company, in collaboration with the Bangkok Insurance Foundation, has engaged in the Clean Drinking Water for Students in Rural Area Project by installing water filtration systems at schools.

The company plans to have the system installed in a total of seventy schools by 2017.

Clean Toilet Project The company has been upgrading the standard of school toilets in remote areas. The project aims to improve cleanliness and safety of the toilets and to promote sound hygiene practices. The project aims to cover seventy schools by 2017.

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Support for the Sirindhorn National Medical Rehabilitation Institute The company has supported the Sirindhorn National Medical Rehabilitation Institute through a donation of Baht 7 million. The donation goes towards giving patients access to extensive and comprehensive rehabilitation equipment.

Blood Donation to National Blood Centre, Thai Red Cross Society Since 1988, the company’s executives and employees have consistently donated blood to the National Blood Centre and the Thai Red Cross Society. On the special occasion leading to its 70th anniversary, the company has also invited its customers, partners, and people from every part of the country to participate. The aim is to get 7,000,000 cc collected in total.

Support the Construction of the Cardiac Centre Building The company has donated Baht 35 million for the construction of the Cardiac Centre Building at Sakonnakhon Hospital in Sakonnakhon province.

Support the Moral School in Collaboration with the Foundation of Virtuous Youth The company has provided support to the Foundation of Virtuous Youth through a donation of Baht 1 million to be used in the operations of Moral School. The foundation aims to develop teachers’ potential with regards to learning innovations and integration of knowledge in order to help develop students’ morals and ethics.

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Donation of Ventilators to Hospitals in Remote Areas Because the company realises that a number of hospitals in remote areas are facing a shortage of essential medical equipment, especially the ventilators which are very important in supporting a patient’s life in critical conditions, the company has set up a project to donate ventilators to provincial hospitals across Thailand.

Cancer Insurance Policy The company has created a special cancer insurance policy package to celebrate its 70th anniversary. Part of the proceeds from the sales of this package will go to the National Cancer Institute.

Buddhist Ordination for 29 Executives and Employees The company encourages employees to study Dhamma, practice meditation, and contribute to the preservation of Buddhism. As the company enters its 70th anniversary, a Buddhist ordination is held for the company’s 29 executives and employees.

CHAI SOPHONPANICH Chai Sophonpanich started his career at Bangkok Insurance as an investment manager in 1968 after he graduated from the University of Colorado in the United States. Mr Sophonpanich rose to the position of president by 1976 and became chairman of the company two years later. He has been at the helm of the company ever since.

Under Mr Sophonpanich’s leadership, Bangkok Insurance has grown from strength to strength. The company was listed on the stock exchange of Thailand in 1978 and today boasts a market capitalisation of Baht 40 billion ($1.3bn) – double that of five years ago.

Mr Sophonpanich led the company to achieve many firsts. In 1997, Bangkok Insurance was the first general insurance company in Asia to obtain ISO 9002 certification for motor vehicle insurance. He also drove the company to its present position at the very apex of the Thai insurance industry, garnering more awards than any other firm. Since the turn of the century, the Office of Insurance Commission awarded Bangkok Insurance repeatedly – and more than any other insurer – the top ranking in the Most Outstanding Non-Life Insurance Company category.

Bangkok Insurance has grown under the stewardship of Mr Sophonpanich by emphasising the importance of building with its clients. The company prioritises financial stability which, in turn, earns it the confidence of clients. By consistently promoting good corporate governance, Bangkok Insurance ensures fairness to all its stakeholders. Bangkok Insurance achieved its greatest recognition in 2004 when His Majesty King Bhumibol Adulyadej awarded the company the Royal Garuda – the royal warrant of the company’s trustworthiness.

Mr Sophonpanich has also been active serving the wider industry. Over the past three decades, he was president of the Thai General Insurance Association for ten years. He also helped found the ASEAN Insurance Council which he has served several times as both chairman and vice-chair. i

Chairman: Chai Sophonpanich

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> Azizi Bank:

A Product of Afghan Vision and Enterprise Azizi Bank is a commercial bank set up in Afghanistan in June 2006. The bank is a product of Afghan vision and enterprise and an initiative of Mr Mirwais Azizi of the Azizi Hotak Group & Family.

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he bank’s owners are committed to building a sound financial institution and launched the bank with a paid-up capital of $7.5m – fully 50% more than the minimum stipulated by the Central Bank of Afghanistan. As per the end of 2015, the bank’s capital amounted to $78.49m. With a capital adequacy ratio (CAR) of 19.87, Azizi Bank is more than sufficiently capitalised. At the close of last year, total deposits and advances stood at $330.99m and $191m respectively. Net Profit over 2015 was $0.32m while total accumulated profit rose to $3.95m.

Azizi Bank has become the premier domestic lender, contributing to almost 35% of loans disbursed. The bank is particularly strong in the structuring of financing deals for infrastructure projects. Azizi Bank also proactively pursues financial inclusion and is ranked first in terms of number of depositors.

The management team at the bank comprises a mix of youth and experience. It is well supported by a young and well-trained operating team that aims to transform the banking Afghan scene by offering a truly professional and pleasurable experience to the customers. Currently, the bank has a strong team of over 1,200 employees.

Women represent fully 15% of the workforce with Azizi Bank playing a quiet but effective role in gender equality and female empowerment. The bank has made large investments in its physical infrastructure and technology with a view to providing the right ambience and latest facilities to customers.

In 2009, Azizi Bank achieved a milestone in the banking history of Afghanistan by purchasing the Development Bank of Afghanistan from Da Afghanistan Bank (Central Bank of Afghanistan).

The entity was relaunched as Bakhtar Bank with a network of fifteen branches which has since

“Azizi Bank has become the premier domestic lender, contributing to almost 35% of loans disbursed. The bank is particularly strong in the structuring of financing deals for infrastructure projects.” grown to 59 offices plus three extension counters.

Azizi Bank is in the process of converting its subsidiary bank into a full-fledged Islamic bank.

This is expected to further financial inclusion.

The Central Bank of Afghanistan also approved the acquisition of the Afghan operations of Punjab National Bank (PNB) India by Azizi Bank which became the only bank in the country to have bought two full-fledged banks within a decade after commencing operations.

Azizi Bank is the major shareholder of the Afghanistan Payment System (APS) – a project of national importance that aims to connect all member banks in order to ensure interoperability for electronic payments. APS will act as national switch allowing improved interoperability, transparency, and convenience to member banks’ customers.

Azizi Bank also introduced the Green Channel which facilitates cash withdrawals using POS terminals. This constitutes a quick, convenient, and paperless way of conducting business. Azizi Bank serves all of Afghan society and aims to cover all provinces of the country. The bank imposes no charges for the opening or maintenance of accounts, the issuance of statements, or the collection of cheques. There is also no minimum balance requirement for salary accounts.

President & Chief Executive Officer: Mr Inayatullah Fazli

Today, the bank has 82 branches including seven extension counters – 33 branches in Kabul and 42 branches in the provinces. Azizi Bank also operates 21 ATMs spread across the capital city and major provincial towns. Together with its wholly-owned subsidiary Bakhtar Bank, the group boasts more than 145 branches – the largest banking network in Afghanistan.

Azizi Bank will install 50 new ATMs in 2016 and another 150 ATMs by end of 2017. With this initiative, Azizi Bank will also emerge as the clear market leaders in Afghanistan on the ATM forefront. i

“In 2009, Azizi Bank achieved a milestone in the banking history of Afghanistan by purchasing the Development Bank of Afghanistan from Central Bank of Afghanistan.”

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> CFI.co Meets the Founder and CEO of Avant Garde Innovations:

Arun George

Founder and CEO: Arun George

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run George is a young entrepreneur who has lived and worked both in India and Australia after completing Dual Masters with an MBA and Masters in Dispute Resolution & Conflict Management from James Cook University (JCU), Australia.

He is the founder and CEO of Avant Garde Innovations, a distributed renewable energy start-up established in India with the goal of tackling energy challenges in growing economies through innovations in the field of Renewable Energy and Cleantech. Avant Garde Innovations has developed a patent pending technology for affordable small wind turbines which was shortlisted as a semi-finalist amongst the Top 20 clean-tech innovations in India for the Global Clean-Tech Innovations Programme 2015 organised by UNIDO, Clean-Tech Open USA (the world’s largest clean-tech accelerator based in Silicon Valley), Global Environment Facility (GEF), and the Indian ministry of micro, small, and medium-sized enterprises (MSME).

Mr George is a passionate advocate of promoting environmental sustainability which has led him to be chosen as the inaugural president of the Indian chapter of the US based non-profit International Dark Sky Association (IDA) – a global organisation campaigning against the hazards of light pollution and for reducing carbon emissions. He is also the inaugural chairman of Emerge Alliance South Asian Industrialising Region (EASAIR), representing the South Asian regional group as part of the Emerge Alliance – a US-based nonprofit promoting the sustainable and energyefficient use of DC power in buildings.

In 2013, Mr George was selected as the first Indian to win the prestigious Dark Sky Defender Award instituted by IDA for his contributions towards spreading awareness about the hazards of light pollution on ecology and attaining outdoor lighting energy efficiency.

As a recognition to his various sustainability and clean-tech initiatives in India, Mr George was invited in September 2015 to attend CFI.co | Capital Finance International

the watershed announcement of the new UN Sustainable Development Goals by the UN Secretary General Ban Ki Moon at the United Nations headquarters. He was amongst a group of 150 select invitees from across the world which included the German Chancellor Angela Merkel, Facebook CEO Mark Zuckerburg, U2 lead singer Bono, and others. Mr George was later chosen as the coordinator for the Energy Working Group at the Conference of Youth (COY) held in conjunction with the COP21 Climate Summit in Paris.

In 2016, Mr George was nominated by the UN Global Compact India Network to the inaugural class of Sustainable Development Goal (SDG) Pioneers Award held at the UN headquarters in New York. Mr George is now the UN Global Compact’s inaugural chapter leader for Kerala State. In recognition to his growing widespread impact towards raising awareness on the benefits of clean energy, Mr George was recently acclaimed nationally in July 2016 by the country’s leading newspaper ‘Times of India’ as the ‘’Newsmaker of the Week’’ in India. i 215

> CFI.co Meets the Director of Century Insurance (PNG) Ltd:

Murray Mclachlan Murray Mclachlan has been resident director of Century Insurance (PNG) Ltd since December 2013. Mr Mclachlan’s career started in New Zealand with State Insurance. Initially working in Wellington, he moved to Whakatane to become an assistant branch manager. During his time there, Mr Mclachlan experienced an earthquake with a magnitude of 6.5 on the Richter Scale. Mr Mclachlan rose to the challenging occasion, effectively managing resources, liaising with local authorities, and handling the large volume of claims that resulted from the quake.

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rom Whakatane he moved to Perth, Australia to join Royal Sun Alliance (RSA) in their Claims Department. Two years later, Mr Mclachlan transferred to Sydney joining RSA’s Large Claims Division which was set up to handle any loss in excess of $250,000. During his time there, he was involved with two of Australia’s largest disasters: a devastating hailstorm of 1999 that affected Sydney and the 1998 explosion at Essos’s Longford natural gas plant. Damages from both events ran well in excess of $100m.

From Sydney Mr Mclachlan moved to Papua New Guinea taking up the role of country manager for Mitsui Sumitomo Insurance Co. from 2002 to 2007. During his time there, revenue increased from K6m to just under K15m when he left the company.

Rather than move back to Australia, Mr Mclachlan elected to take up the position of general manager at Willis Saudi Arabia Company in Al Khobar on the country’s eastern seaboard.

During his time in the Kingdom of Saudi Arabia, he managed to significantly increase revenues and succeeded in obtaining one of the first Insurance Licences issued under the provisions of the 2004 Insurance Law. Before the license was granted, the company served its Saudi clients through the offices of the Arabian International Management Company.

Due to family concerns, Mr Mclachlan decided to leave the Middle East and return to New Zealand / Australia.

Century Insurance Group is pleased that Mr Mclachlan has joined its operation in Papua New Guinea. It is felt that with his previous experience in the region, plus his list of contacts, Mr Mclachlan will be a valuable asset to the group.

Upon returning to PNG, Mr Mclachlan has noticed considerable changes to the country,

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Director: Murray Mclachlan

fuelled mainly by the resources boom and the recent completion of a large-scale LNG (liquefied natural gas) project.

that this number may be reduced in future with the possibility of acquisitions or mergers taking place as the sector is consolidated.

Most noticeable has been the significant increase in the number of participants in the insurance industry with twelve licenced companies now vying for business. This has resulted in fierce competition amongst companies. It is anticipated

Mr Mclachlan believes that Century Insurance (PNG) is well placed to continue to develop and grow in the current market environment, especially with its focus being on client service and meeting customer needs. i

CFI.co | Capital Finance International

> Century Insurance:

From Humble Beginnings

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entury Insurance, a Tan Holdings company, was established in 1988 as an agent for several multinational insurance companies. Anticipating the growing insurance needs of the region, in 1990, Century converted from an agency to an insurer, becoming the first domestic

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insurance company in the Commonwealth of Northern Mariana Islands (CNMI).

the America’s to Hong Kong, Taiwan, Indonesia, and mainland China in East Asia.

Its parent company, Luen Thai International Group, in turn has interests and operations in various parts of the world, from the Philippines in Southeast Asia and the US and Guatemala in

CORPORATE MILESTONES Since 2002, CIC (Century Insurance Company) is licensed to operate a branch in Guam, a United States territory. Two years later, CIC

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Summer 2016 Issue

appoints Aon Insurance Micronesia as general agent. Aon is appointed as CIC’s general agent in both the CNMI and Guam. CIC also appoints Pacific Insurance Underwriters as general agent in the CNMI. In 2005, CIC obtained its first rating from AM Best Company: B+ (good) with a stable outlook. Next year, the authorities of Guam relicensed CIC as a domestic insurer. In 2007, Century Insurance (PNG), CIC PNG, is organised as a domestic insurer in Papua New Guinea, with its office in Port Moresby – the capital city. CIC Guam is now rated

by AM Best as B++ (very good) with a stable outlook.

Since its humble beginnings, CIC (PNG) Ltd is now turning over just under K20m.

The company is proactively looking to focus on areas that it feels CIC can add value to.

MISSION Century Insurance provides its policyholders with the most practical property and casualty insurance solutions to manage their risks. CIC builds value for its stakeholders by consistently producing optimum results through professional insurance practices, technical competence, excellence in customer service, and stable and sustained business growth. The company strives to be a good corporate citizen and an active corporate contributor to the communities where it operates.

Even with tough economic times ahead, plus a challenging market, Century Insurance (PNG) is exceptionally well positioned to keep growing and develop its business further. Since inception, Century Insurance (PNG) Ltd has been evolving into areas that allows the company to add value and provide tangible benefits to its clients. Currently, there are twelve licensed insurance companies operating in Papua New Guinea.

“Even with tough economic times ahead, plus a challenging market, Century Insurance (PNG) is exceptionally well positioned to keep growing and develop its business further.”

CFI.co | Capital Finance International

Having finished its transition successfully, CIC now believes that the company is well positioned to tackle any challenges ahead. The majority of its business is sourced through intermediaries with the bulk coming from Aon Risk Services (PNG) and Marsh PNG. Primarily, the products on offer are public liability, motor, commercial property, domestic risks, amongst others.

The relationships with intermediaries have been forged over time. CIC considers partnerships such as these crucial to its future growth. i 219

> IFC:

Why Corporate Governance Is Crucial to Myanmar’s Growing Private Sector

By Chris Razook

Emerging from decades of isolation, Myanmar is undergoing major reforms to become a more market-driven economy. Many are hoping for a meteoric rise of the country’s economy over the long term. The numbers certainly point to such potential, as Myanmar’s gross domestic product per person stands at about $1,200 compared with neighbouring Thailand’s $5,778 and an overall average of about $3,800 (World Bank) amongst the members of the Association of Southeast Asian Nations (ASEAN).

D

eveloping a strong private sector is critical to unlocking Myanmar’s economic potential and attracting much-needed foreign direct investment, which stands at less than one-third of Thailand’s by comparison. The country’s capital market is at a nascent stage of development and its main listing board, the Yangon Stock Exchange, was only established last year; securities trading began on March 25 with a single firm debuting on the exchange.

Raising market awareness on the importance of good corporate governance is therefore of particular importance.

Numerous studies show that investors have greater confidence in companies with good governance and in markets that are backed by sound legal and regulatory regimes. For example, one regional study showed that both firm-level governance improvements and country-level investor protections in Asia could reduce the cost of capital (University of Hong Kong, 2003). Thus, Myanmar companies need to raise their corporate governance levels to become more competitive and attractive to investors.

In February, the International Finance Corporation (IFC) launched its Corporate Governance Programme in Myanmar at a forum that attracted more than 400 participants including senior government officials, regulators, and business executives. Since then, demand for corporate governance improvement has grown substantially.

IFC has been partnering with the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), a national-level nongovernmental organisation representing the interests of Myanmar’s private sector, to provide corporate governance training to Myanmar companies. In addition, IFC is exploring cooperation opportunities with other 220

“IFC’s experience in Myanmar has revealed that many local companies struggle with underdeveloped boards of directors, illdefined director duties, poor transparency, rudimentary control frameworks, and inadequate shareholder practices.” partners including the Securities and Exchange Commission of Myanmar to further promote corporate governance.

IMPROVING GOVERNANCE IFC’s experience in Myanmar has revealed that many local companies struggle with underdeveloped boards of directors, ill-defined director duties, poor transparency, rudimentary control frameworks, and inadequate shareholder practices. This is partly due to the absence of a robust legal and regulatory framework that includes basic governance provisions and investor protections. Poor governance not only undermines a company’s overall performance and market competitiveness, but also fuels trepidation amongst investors, creditors, business partners, and other stakeholders.

That said, there has been much progress on strengthening Myanmar’s regulatory framework and governance-related provisions. For example, the new Banks and Financial Institutions Law, which introduces additional governance measures to improve board functioning and risk governance in banks, just took effect on January 25. Efforts are also underway to update the antiquated 1914 Companies Act, which will impose additional requirements on director duties and shareholder rights, amongst other things.

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Companies, however, need not wait for new regulations and can start strengthening their governance practices right away. As an investor in Myanmar, IFC believes companies should focus on improving levels of transparency, particularly the disclosure of financial, non-financial, and beneficial ownership information. They need to enhance the functioning of boards, such as by increasing their level of independence, strengthening their stewardship and oversight roles, reinforcing director duties, and adopting more effective procedures.

To improve their risk management, internal control, and audit functions, formal structures should be put in place with appropriate levels of independence. Companies need to manage conflicts of interest and related-party transactions better through fair and transparent processes.

In addition, shareholder rights and practices should be strengthened by including more formal shareholder meeting procedures and stronger protections for minority shareholders.

BANKING SECTOR CRITICAL Good governance is perhaps most critical in Myanmar’s banking sector. Banks possess a significant degree of public trust since they manage a large portion of the country’s wealth in the form of savings and facilitate a large percentage of the financing to Myanmar companies. At the same time, banks have unique governance challenges since they are essentially in the business of risk, necessitating sound and sophisticated risk management and control frameworks.

The collapse of a single bank will not only affect that particular institution, but can have immediate effect across the entire Myanmar banking sector.

A particular challenge for Myanmar banks is to implement strong risk governance practices to safeguard against under-reported nonperforming

Summer 2016 Issue

Corporate Governance Forum: Organized by IFC and the UMFCCI in Yangon, Myanmar in February. Chris Razook is pictured second from the left.

loans, manage concentrated exposures, and ensure sound credit and collateral procedures are being used.

Similarly, while Myanmar’s new stock market is a landmark development that will tap new sources of capital to help fuel the expansion of the country’s private sector, there is a similar public trust element that needs to be safeguarded with sound governance and transparency. Based on IFC and the World Bank Group’s experience in working with capital market authorities in emerging markets globally, creating efficient yet prudent governance rules for listed companies is a continuous process. In Asia alone, there are ongoing or planned efforts to update listed company rules in China, Indonesia, the Philippines, and Vietnam, amongst others.

Myanmar should glean much learning from these efforts.

Governance will also play a crucial role in the corporatisation of Myanmar’s state-owned entities. State ownership remains high in the country, particularly in the infrastructure sector; without commercially oriented reforms including corporate governance, this can hinder overall market efficiency and drag economic growth.

reforms in Myanmar will bring opportunities to many SMEs, including expansion possibilities requiring capital to fuel their growth. Thus, efforts should be made to help SMEs adopt basic standards of governance, which will facilitate their access to finance and improve their chances of survival in the long run.

With such big challenges ahead, IFC and the World Bank Group, with support from the UK and Australian governments, are committed to working with various market actors in Myanmar to continue strengthening corporate governance practices and help it build a vibrant and sustainable private sector. i

Fortunately, Myanmar can learn a lot from its ASEAN neighbours who have made significant progress on harmonising corporate governance practices in preparation for the launch of the ASEAN Economic Community last year. One notable example is the ASEAN Corporate Governance Scorecard Initiative – first introduced with support from the Asian Development Bank and now also backed by IFC – which provides benchmarks for individual companies to rate and improve specific governance practices.

In addition, Myanmar can leverage a strong network of governance practitioners, including representatives from ASEAN capital market authorities and institutes of directors, to its advantage as the country continues to reform.

ABOUT THE AUTHOR Chris Razook is IFC’s corporate governance lead for the East Asia Pacific Region.

Mr Razook has more than fifteen years of experience in the area of corporate governance and supports IFC investments by working with companies to strengthen their governance frameworks. He has also supported central banks, capital market authorities, and other regulatory bodies in drafting corporate governance laws, codes, and listing rules to help develop stronger investment climates. Mr Razook has an undergraduate degree in Engineering, an MBA in International Finance, and an LLM in Corporate Law.

SMEs At the other end of the spectrum, small and medium-sized enterprises (SMEs) are the backbone of the Myanmar economy and comprise more than 95% of all firms. Continued market CFI.co | Capital Finance International

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> UNCTAD:

A Policy Compact to Get Investment Flowing Again

By James Zhan

J

ames Zhan suggests world leaders make a joint effort to formulate effective investment policies to help build investment firepower to face 21st Century development challenges.

Forecasts of deeper global economic gloom are tumbling one over the other. The global economy has been treading water for almost a decade now, and no manner of intervention since the start of the financial crisis seems to get us closer to turning the tide. The path to balanced, stable growth remains elusive, and while advanced economies have borne most of 222

the brunt, more recently the woes have started spilling into emerging economies.

UNCTAD data show foreign investment zigzagging its way through the last nine years, with the best of the peaks still well below the height scaled in 2007. Unlike post-crisis trends in GDP growth and trade, international investment flows are still below pre-crisis levels. While preliminary data for 2015 show an upswing in foreign direct investment (FDI) flows, this was largely attributable to merger & acquisition activity, with greenfield investment in productive assets only CFI.co | Capital Finance International

contributing modestly to the growth. Some of the flows were also related to corporate reconfigurations involving large values in the financial account of the balance of payments but little movement in actual resources. In other words, the positive figures are a veneer which masks deep investor skepticism and lack of confidence in economic prospects.

What is more, plummeting commodity prices are now biting deep into the investment flows to commodity-dependent countries, with the investment flows to Africa and Latin America faltering. And 2016 is marked for another decline by forecasters.

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THE APPETITE HAS GONE A multitude of adverse factors has converged to unhitch the carriage from the growth locomotive. Steeped in debt, demand has slumped to chronically weak levels in highincome countries. At the same time a sharp deceleration is now evident in several large emerging markets, which has ushered the end of the commodity super-cycle. On the political front, pernicious inequality, regional conflict, security concerns and the migrant crisis have provoked further instability and uncertainty. The result: global economic and political gloom that has choked off FDI. This matters because investors operating across borders have become a significant force in the global economy. Just over 90,000 multinational enterprises (MNEs) have some $27 trillion of FDI stock invested in over 1 million foreign affiliates worldwide, UNCTAD statistics show. Together, these MNEs account for more than a quarter of global GDP and are behind one-third of private sector value-added. Their investments in productive assets overseas account for up to a third of capital formation in the productive sector in developing regions. Their global production networks drive as much as 80% of global trade, and they generate a sizeable share of formal employment in developing countries: foreign affiliates alone employ more than 80 million people, and that is without accounting for their impact on suppliers, contractors, service providers and other so-called non-equity forms of international production. And these affiliates contribute some $730 billion annually to government coffers in developing countries.

BASHFUL WHEN THEY’RE NEEDED MOST Investors’ reluctance to invest should deeply trouble policy makers. What is more, the international community last year announced the Sustainable Development Goals (SDGs) to advance global development objectives.

The goals seek to arrest poverty, flatten out inequality, universalize basic services, preserve environmental integrity and ultimately create a safer, more prosperous world.

Geneva: United Nations Office

“UNCTAD data show foreign investment zigzagging its way through the last nine years, with the best of the peaks still well below the height scaled in 2007. Unlike postcrisis trends in GDP growth and trade, international investment flows are still below pre-crisis levels.”

By UNCTAD’s count an average $3.9 trillion needs to be invested in SDG-related infrastructure development in developing countries if these highly ambitious development objectives are to be met. But current levels of investment in these sectors are at only a third of the required level, leaving an annual investment shortfall of some $2.5 trillion, outstripping the combined mettle of public investment, international aid and remittances. The crux is that private sector investment will be indispensable if the international community hopes to make a dent in poverty and the other global development challenges.

The incongruous present circumstances, CFI.co | Capital Finance International

however, set up a veritable conundrum: if delivery proves meaningful, the SDGs can be a tool to soften political tension and ease economic anemia; but economic and political conditions need to be more conducive to unlock more investment in the first place if the goals are to be achieved.

Clear and coherent policies will therefore be absolutely pivotal to overcome the blockage, unlock investment and funnel these flows to meet development objectives.

In reality, however, investment policy suites around the world are not tailored for this purpose. Developments in investment policies in recent years have exposed an accelerating, clashing dichotomy: while the bulk of national investment policy measures implemented tends towards investment liberalization, facilitation and promotion, the overall share of restrictive measures has been on the rise (from an average of 5% in the early 2000s to an average of 27% in the past five years). What is more, a significant number of investment protection measures are hidden in the administrative processes applied at and behind borders.

MEASURES DO NOT MATCH INVESTORS’ NEEDS On the investment promotion and facilitation side, UNCTAD analysis has also exposed structural weaknesses in the strategies governments most commonly choose to try lure investment to their shores. That is, instead of easing out and culling administrative and regulatory requirements in the operating environment to help investors get on with their business more easily, most governments opt to try coax them through incentives — and leave the obstacles unhindered for investors to muddle through.

A recent UNCTAD survey of FDI policies shows more than 1,100 new investment policies were set up over the past decade.

Yet, for the 323 investment promotion and facilitation measures, the overwhelming majority was related to investment incentives or special economic zones-type benefits.

Only 24% were measures that are truly facilitatory in nature.

This means a range of inexpensive, yet potentially valuable, policy fixes go unheeded: opaque legal or administrative requirements faced by investors, cumbersome operating environments, and costly business requirements. Rather than handing out incentives, fixing these constraints would be a far more compelling key to unlock investment flows in the first place, and create a business environment that would keep investors invested.

Interestingly, the same deficiency marks investment policies at the international level.

In most of the existing 3,300 international investment agreements (IIAs) concrete investment promotion and facilitation 223

actions are either absent or weak. UNCTAD analyzed 1,200 IIAs and found that only 22% of these treaties contain some sort of investment facilitation provisions. And even in those agreements that deal expressly with investment facilitation issues, many of the adopted measures are poorly designed and doomed to be ineffective. Far more work would need to be done to win over cautious investors.

Beyond the inability to effectively promote investment, the broader international investment policy regime also needs fixing. It is widely acknowledged that IIAs contain flaws that hold risks and uncertainty for signatory countries and benefiting investors alike. The IIA regime — with its almost 3,300 bilateral or regional treaties — as a whole is incoherent and fragmented, making it difficult and burdensome to implement and navigate. Another priority area for redress is the IIA regime’s compatibility with the development agenda. To an extent, investment treaties lock-in a country’s legislative environment for foreign investors. This puts the treaties at odds with evolving sustainable development objectives. Also under scrutiny is the regime’s dispute settlement mechanism, which exposes governments to costly legal action by aggrieved investors when they adjust their laws. What is more, the inefficacy of the investment mechanism has plunged it into a legitimacy crisis: arbitral findings, for instance, are sometimes inconsistent, which means divergent legal interpretations of similar provisions exit, undermining the predictability of the system. And no well-functioning appeals option is available. The investment policy diagnostic is unpropitious: the regime does not effectively serve the purposes for which it is intended and needs fixing.

A POLICY COMPACT TO DIRECT THEM TO DEVELOPMENT UNCTAD has long been advocating for more suitable and harmonized investment policies precisely to improve policy firepower to oil investment flows, particularly towards sustainable development objectives. The best way to achieve this would be for countries to formally join efforts and build a coherent set of national and international investment policies: something like a Global Investment Policy Compact, containing a set of guiding principles for investment policy making in the 21st century.

International coordination to global investment relations would be a stellar approach to stimulate investment for growth and jobs, to make investment contribute to sustainable development, to avoid protectionism, and to get investment policies to work in tandem with other policies such as those for competition, tax, trade, social and environmental policies, which can mean even more firepower to bolster the global economy.

Unfortunately, this is unlikely to happen because — unlike for international trade and 224

finance respectively governed by the World Trade Organization and the International Monetary Fund — there is no global governance equivalent for international investment. This means the systemic problems that exist are addressed in a piecemeal way, mostly by individual country action in a kind of a trial-and-error approach, which is really the last thing one would want to see as a governance system for one of the central pillars holding up the global economy.

The governance vacuum has prompted UNCTAD to explore alternative ways to facilitate collective action. The organization has developed a diverse set of policy frameworks, with guiding principles and policy recommendations to address various aspects of investment issues.

These policy instruments are intended to help prop up countries’ policy-making capacity and function like a toolbox, giving countries the policy options to address their particular national concerns and development prerogatives. The main components of UNCTAD’s comprehensive investment policy frameworks and capacitybuilding package are: • The Roadmap for Reforming International Investment Treaty Regime was developed to guide the reform of the highly fragmented investment treaty regime and remedy commonly perceived problems and concerns. Elements include safeguarding the right to regulate, improving investment dispute settlement, promoting and facilitating investment, ensuring responsible investment, and enhancing systemic consistency.

• The UNCTAD’s Investment Policy Framework for Sustainable Development (IPFSD) is mainstay in UNCTAD’s advocacy to evolve a 21st century generation of investment policies. The framework accompanies the guiding principles and proposes concrete national and international policy options, aligned with sustainable development objectives. The framework has the potential to guide policy coherence and has already proven a strong impulse for international cooperation in the area of investment with the potential to prompt incremental multinational economic coordination in the long run. More than 105 countries are currently using it to reorient their policy suites.

• The Global Investment Facilitation Action Menu complements the IPFSD and comprises a set of policy options and actions to boost crossborder investment in productive assets, in parallel with and reinforcing analogous actions on trade facilitation, and remedying the systemic gap in international investment treaties, which insufficiently addresses actual investment promotion and facilitation measures.

• The Action Plan for Investing in SDGs is a comprehensive plan containing six sets of transformative policy actions aimed at governments, but also suggested measures for private sector action to promote and facilitate investment in low-income countries in line with the Post-2015 Development Agenda and its set of Sustainable Development Goals.

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• The Entrepreneurship Policy Framework and implementation guidance supplements UNCTAD’s investment policy tools in support of the development of a strong, vibrant entrepreneurial sector to boost job creation and incomes. The framework consists of six policy components and forms the basis for a comprehensive, coordinated and inclusive approach to promoting entrepreneurship and the formulation and implementation of national entrepreneurship strategies and policies.

UNCTAD is also uniquely placed to facilitate consensus-building among countries through its intergovernmental convening power. This means while no formal multilateral negotiating mandate exists, an UNCTAD-facilitated investment policy conversation can give further impetus to comprehensively deal with the systemic policy concerns of the FDI regime in a manner approaching multilateral collaboration. Such an approach will reach much further than the fragmentary national and regional efforts that currently characterize investment policy making and reform.

UNCTAD’s World Investment Forum, which takes place in Nairobi, Kenya from 18-21 July 2016 will provide the next opportunity for exactly this kind of debate and key government leaders and investment stakeholders have already confirmed their participation in this dialogue. For the SDGs to gain traction, investment will be key. And for the right kind of investment to materialize, a common response to today’s shared ambition to promote investment in sustainable development is needed. The international community cannot afford to ignore the policy vacuum that characterizes the investment domain. i ABOUT THE AUTHOR James Zhan is Director of the Investment and Enterprise Division at the United Nations Conference on Trade and Development (UNCTAD). He leads the team that produces the World Investment Report.

Author: James Zhan

Summer 2016 Issue

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225

Hail to the Maintainers

By Wim Romeijn

About ten years ago, leftist firebrand satirist Freek de Jonge, the grand old man of Dutch stand-up comedy, turned to conservative newspaper De Telegraaf to deliver a startling thank you message to all the conformists and traditionalists who had vilified him in its pages: “Were it not for you, our generation of rebels and dreamers would have destroyed the nation. Thank you for holding firm and keeping your feet on the ground.”

N

otwithstanding its ageless appeal, disruption more often than not causes great harm. World history is littered with failed disruptors: Lenin, Mao, and even Hitler aimed to replace the despised old with their version of the brave new world. Countless millions perished as disruption was hailed as an end, instead of a means.

The hippies of the Flower Power Era preached peace and free love as a disruptive antidote to all evil, before moving on to become the Me Generation of the 1980s – appropriating the collective wealth for personal gain. Never before had greed received such adulation. It soon turned into yet another disruptive force.

Final Thought

As Winston Churchill, the anti-disruptor par excellence, once remarked: The road to hell is paved with good intentions.

All disruptors adhere to the best of intentions – it is their common ground, though its shifts frequently. Whilst political and social disruption only improves society when applied sparingly and thoughtfully, economic and corporate disruptors have established a significantly better track record.

The insights of Adam Smith and Thomas Malthus allowed Charles Darwin to develop his theory on natural selection which enabled humanity to understand its place in the grand 226

“So disrupt we must. As disruptors are merrily whirling about peddling the Next Big Thing, society may want to consider a less sycophantic approach to the innovators. Elon Musk may be a moneyed dreamer and innovator; is his quest for space travel really that much more useful than, say, sliced bread?” order of all things and laid the groundwork for other disruptors – Einstein, Freud, Sartre et al – to introduce new thoughts and solve mysteries.

However, while disruptors ply their trade, others – the maintainers – must tend to the more mundane business of day-to-day life, using whatever unimaginative means at their disposal. The world is held together by janitors, hamburger-flippers, nurses, teachers, cabbies, and countless others who go about their less-than-glamorous and illpaid business without much ado – or recognition.

This army of unsung heroes only seldom grabs the headlines, yet they are regularly made to pay for disruptions gone awry. Such as when CFI.co | Capital Finance International

financial disruptors caused banks to collapse and corporate gurus came up with zero-hour contracts as a novel way of decreasing the cost of labour.

Disruption is a tricky concept: too much of it guarantees mayhem and while too little ensures stagnation – and regression. Those that fail to innovate will be overtaken – and left behind – by the inexorable march of time and history.

So disrupt we must. As disruptors are merrily whirling about peddling the Next Big Thing, society may want to consider a less sycophantic approach to the innovators. Elon Musk may be a moneyed dreamer and innovator; is his quest for space travel really that much more useful than, say, sliced bread? Is it necessary to celebrate the resourceful nerds who facilitate online shopping, payment, or music streaming?

As is usual with societal fads, disruption has become a buzz word that now includes almost everybody and the proverbial dog. Perhaps it would be wise to limit the concept to truly revolutionary discoveries to the exclusion of those that merely add convenience to the daily grind of the maintainers. Airbnb may have upset the hospitality industry, but the underlying product is still a rented room – one that needs to be tidied up by cleaners without whom the disruptive service would soon cease to exist. Hail to the maintainers then – the people who empower the disruptors and are sometimes even made redundant by them. i

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