Total Finance Spring 2022 by Lloydmedia Inc

TotalFinance SPRING 2022

C A N A D A’ S M A G A Z I N E F O R F I N A N C I A L E X E C U T I V E S

RECOVERY & UNCERTAINTY

❱ ESG Reporting Falling Short ❱ Supply Chain Vulnerabilities ❱ Managing Compensation Strategies

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ALSO IN THIS ISSUE:

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TALKING POINTS REGULATORY NEWS

TA L K I N G P O I N T S

Global accounting bodies have urged profession-wide commitment to reverse nature loss. The chief executives of 10 of the world’s leading accountancy institutes have joined together to support a new call to action in response to the nature crisis at the upcoming UN Convention of Biological Diversity (CBD) COP 15. Working together as part of the Global Accounting Alliance (GAA), the CEOs are signing the call to action ‘Nature is Everyone’s Business’ to signal the important role the profession plays in this crisis. The member bodies of the GAA collectively represent over 1.4 million accountants and finance professionals in over 180 countries. The call to action involves advocating for and supporting the protection and restoration of nature through finance activities and investment decisions made by the business community. It ties in closely with the expectations of investors and other stakeholders for businesses to focus on environmental, social and governance issues – expectations that will only become stronger in the longer term. The joint statement calls upon professional accountants to act now to reverse the process of nature loss by helping the organizations they work for or with to protect, restore and promote the sustainability of natural resources. The statement summarizes six key actions for professional accountants, including understanding how their organizations and clients impact and rely on nature. Professional accountants can also provide sound advice and services that contribute to an organization’s positive effect on nature. In a united statement, the GAA CEOs said: “We recognize that our planet is being impacted by a three-fold crisis of a climate emergency, dramatic nature loss and rising social inequality. Addressing these challenges will require integrated thinking as companies reallocate resources, reorient production and re-imagine their business models. We all depend on nature, but it is the poorest in the world who are disproportionately affected by its loss and impacted by climate change. Protecting nature must be a key consideration as we collectively move forward.” At the UN Convention on Biological Diversity COP15 in April/May 2022, the world has the opportunity to adopt a transformative international agreement on nature, and both businesses and governments must be included.

$$$ TD Bank teamed up with Starbucks Canada to help customers unlock more value on everyday purchases through accelerated earning opportunities and linked loyalty and rewards. Eligible TD cardholders will be able to link their TD cards to their Starbucks Rewards account and convert TD points to Starbucks Stars, through My TD Rewards, the bank’s brand-new loyalty and rewards hub. The hub is available through EasyWeb and the TD Mobile App, offering customers a convenient way to access and redeem rewards and loyalty benefits, all in one convenient spot. “We know our customers are always looking for opportunities to earn and redeem points from their favourite retailers, which is why we’re so thrilled to be working with Starbucks to offer our customers more rewards on the purchases that bring them joy – like that first morning cup of coffee,” says David Reilly, Vice President Partnerships & Loyalty, Credit Cards at TD. “This collaboration is just one of the many ways we’re bringing enhanced rewards to our cardholders, as we continue to deliver the benefits our customers want most.”

$$$ Ledn Inc., the global digital asset savings and credit platform announced the impending launch of a Bitcoin-backed mortgage product, the first product of its kind to hit the market. This mortgage will enable Ledn clients to use their Bitcoin holdings to purchase a property while continuing to benefit from potential price appreciation of both assets. Clients will be able to blend an equal amount of Bitcoin and property collateral as part of the mortgage loan. This unique collateral structure, which relies on the stability of real estate to buffer against the volatility of Bitcoin, was designed to provide clients with a generous window to service their Bitcoin collateral during times of high market volatility. Currently in pilot mode, the Ledn Bitcoin-backed mortgage is slated to be made broadly available to clients in the US and Canada in early 2022. The company already has a growing wait-list for the product, and is targeting over $100 million in Bitcoinbacked mortgage originations by the end of Q1 2022.

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SPRING 2022 • WWW.TOTALFINANCE.CA

ON THE COVER ECONOMIC IMPACT

Continued Recovery but Challenges Remain

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24 Our economic outlook for Canada

Table of Contents 3

TALKING POINTS

CFO CV

CORPORATE RESPONSIBILITY 8

PwC Canada Study Shows ESG Reporting Falls Short Across Canada’s Top 150 Public Companies

Canada’s Executives Face an Opportunity in Sustainability

Divides and Dividends Study

FINANCIAL OPERATIONS ISTOCK/ WILDPIXEL

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Canada’s Bridgegate:

Disruptions from Canada’s Protests Further Expose the Vulnerability of Supply Chains

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Spring 2022 Volume 2 Number 2 Publisher / Corporate Sales Steve Lloyd steve@totalfinance.ca Contributors Joe Brusuelas, Chief Economist, RSM Canada

Homan Chung, Senior Manager, RSM Canada

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COMPENSATION Want Happy Staff? Three Tips for Managing Compensation

PAYMENTS 16

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Three Ways to Support Earned Wage Access in Canada

Leveraging Trends to Support Inclusion

Digital Transformation of the Global Payments Market

Payment Channels Face a Distrust Deficit in the Wake of COVID-19

Four Areas to Address to Meet Digital B2B Commerce Expectations

Three Trends Propelling Digital Identity Momentum in 2022 And Beyond

EQUIPMENT FINANCE 29 34

5 Key Reasons an Equipment Dealer Needs Inventory Financing How a GEN Z Used Lending to Build a Growth Business

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CYBERSECURITY 32

Mandatory Breach Reporting:

Are You Prepared?

Jeff Collins, Vice President Operations Inventory Finance, Mitsubishi HC Capital Canada, Inc. Shawn S. Cooper, Managing Director, Board & CEO Advisory Partners, Russell Reynolds Associates Rodger Desai, Co-Founder & CEO, Prove Bob Dowd, Chief Executive Officer, Moneycorp Americas

Justin Krieger, Director, RSM Canada Daniel Oh, Country Manager (interim), Sage Canada Marco Margiotta, CEO & Founding Partner, Payfare Robert Masse, National Partner Risk Advisory practice, Deloitte Canada Tuan Nguyen, Ph.D., Economics and ESG Director, RSM Canada Yasir Riaz, Director, RSM Canada

Alafair Hotze, Director, RSM Canada

Vaibhav Tandon, Second Vice President, Economist, Northern Trust

Robert Hyde, CEO, Payment Source

Brandon Spear, CEO, TreviPay

Mark Jakovcic, National Real Estate and Construction Industry Leader, RSM Canada

Suzan Williams, General Manager, Minerva Leasing

Creative Direction / Production Jennifer O’Neill, jennifer@totalfinance.ca Photographer Gary Tannyan President Steve Lloyd, steve@totalfinance.ca For subscription, circulation and change of address information, contact: subscriptions@totalfinance.ca Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to:

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CFO CV NEWS REGULATORY Fineqia International Inc. appointed Nirosh Wijewardene as its Head of Global Distribution. Wijewardene will lead the sales of the Company’s products, capitalizing Nirosh Wijewardene on his network among international financial institutions. Wijewardene’s appointment fortifies the company’s management as it seeks to build new product streams that align with the company’s strategy to investments in or acquire companies developing and propagating blockchain-based financial solutions, adjunct to its core business of placing debt and equity securities. Fineqia Investments Ltd is a wholly owned subsidiary of Fineqia International set up to hold the Company’s growing portfolio of blockchain, fintech and cryptocurrency technology companies worldwide. Fineqia International is a listed entity in the Canada (CSE: FNQ), US (OTC: FNQQF) and Europe (Frankfurt: FNQA). Fineqia International oversees and ensures the overall success, planning and growth of the Company and all of its subsidiaries.

Northern Reflections Limited, a leading provider of women’s fashion, announced today the appointment of three new executive hires including Carolyn Coles-Devine, SVP Customer Experience & Chief Marketing Officer, Maryann Darling as SVP Planning, Allocation and Logistics and Hanspal Jando as Chief Financial Officer. The new leadership appointments reflect the continued investment towards accelerated growth across eCommerce, stores and omni-channel businesses, in addition to an ongoing commitment to an integrated customer experience. As Chief Financial Officer, Hanspal Jando’s extensive retail experience, including Indigo and Red Apple Stores Inc., will play an integral role in engineering innovative business solutions at Northern Reflections. Jando’s proven track record and strategic background implementing finance processing systems across multiple platforms throughout his career, will ensure industry best practices, compliance and enhanced sales growth through financial analysis at the leading Canadian retailer. Founded in 1985, Northern Reflections delivers stylish and comfortable women’s fashions designed with effortless versatility for every occasion. The Company’s talented in-house design team creates unique on-trend collections with exclusive prints that are produced in easy to care for fabrics with a focus on sustainability, quality and fit.

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MAS Gold Corp (TSXV: MAS) appointed Karen Frisky as the Chief Financial Officer and Corporate Secretary of MAS Gold. Frisky is a Chartered Professional Accountant and brings with her a vast array of accounting skills, earned during her 28 years of experience, including 12 years’ practice in senior management roles with professional public companies. She has a previously established history with MAS Gold, acting as Controller and Corporate Secretary since July of 2021. MAS Gold Corp. is a Canadian mineral exploration company focused on gold exploration projects in the prospective La Ronge Gold Belt of Saskatchewan. MAS Gold operates four properties in the belt, including the Preview-North, Greywacke Lake, Elizabeth Lake and Henry Lake Properties that extend along segments totaling roughly 60 kilometres of the geologically prospective La Ronge, Kisseynew and Glennie Domains that make up the La Ronge Gold Belt.

IsoEnergy Ltd. (TSXV: ISO) (OTCQX: ISENF) appointed Graham du Preez to the position of Chief Financial Officer. du Preez will be taking over the role from Janine Richardson who has resigned from the position. Graham du Preez has more than a decade of experience as Chief Financial Officer with several public mining companies in a variety of commodities and at various stages along the mining cycle. Most recently, he served as Chief Financial Officer at Harte Gold Corp. Prior to that, he spent several years working in the uranium industry, with Uranium One, Inc., including as Chief Financial Officer. du Preez has gained significant experience contributing to a wide range of functional areas. This has included closing various financings, identifying and participating in mergers and acquisitions, interacting with regulators, investors and analysts, undertaking strategic planning, managing public filings, developing and managing operating budgets, and overseeing large finance teams with broad responsibilities including accounting, payroll, tax, treasury, insurance and external reporting. du Preez has been granted 400,000 incentive stock options exercisable at a price of $4.96, vest in three equal annual instalments commencing on the grant date and have a term of five years. IsoEnergy is a well-funded uranium exploration and development company with a portfolio of prospective projects in the eastern Athabasca Basin in Saskatchewan, Canada. The Company recently discovered the high-grade Hurricane Zone of uranium mineralization on its 100 percent owned Larocque East property in the Eastern Athabasca Basin.The Company was

founded and is supported by the team at its major shareholder, NexGen Energy Ltd.

BTB Real Estate Investment Trust (TSX: BTB.UN) named Peter Picciola as BTB’s Chief Investment Officer. Picciola is a top performing real estate executive with more than 24 years of experience in development, management, and the Peter Picciola advancement of multi-billion-dollar real estate portfolios. He started his career in 1997, as a real estate broker at Devencore. He then joined Canderel in 2003 where he became Vice President of Leasing & Development and worked successively on complex transactions across various asset classes while maintaining investor relationships in Europe and in North America. In the spring of 2014, Peter joined Ivanhoé Cambridge, a subsidiary of la Caisse de Dépôt et Placements du Québec, as Vice President Office Leasing for the Province of Québec with the mission of overseeing leasing activities for the $2B Québec market. His team’s performance led to the successful disposition of assets valued in excess of $700M. More recently he was notably involved in the $200M upgrade and repositioning project of Place Ville Marie as an urban and thriving campus in downtown Montréal. Peter currently sits on the Board of Directors of St. Mary’s Hospital Foundation and was a director of the Urban Development Institute of Québec from 2013 to 2019. BTB is a real estate investment trust listed on the Toronto Stock Exchange. BTB is a property owner active in eastern and western Canada and owns 73 properties, representing a total leasable area of approximately 5.7 million square feet and a total asset value that surpasses $1.1 billion.

IGM Financial Inc. (TSX: IGM) announced a series of leadership changes with an emphasis on strategic continuity and succession. After more than 35 years in the industry in Canada and the United States and nearly six years leading Mackenzie Investments, Barry McInerney is retiring as President and Chief Executive Officer effective June 30, 2022. During his time with Mackenzie, Barry has driven the company forward to become a leading Canadian asset manager, with presence in Boston, Dublin, Hong Kong and Beijing and a growing strategic relationship with ChinaAMC. With Barry’s retirement, Luke Gould, presently

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CV REGULATORYCFO NEWS Chief Financial Officer of IGM Financial will become the President and Chief Executive Officer of Mackenzie Investments effective July 1, 2022. He was also appointed Chief Financial Officer of Mackenzie in 2013, becoming Chief Financial Officer of IGM Financial in 2018. “I am very honoured to be taking over this role from Barry, who has been a strong and effective leader in growing Mackenzie’s asset management capabilities and cementing its prominent position in the marketplace,” said Gould. “I look forward to continuing on this successful path and furthering Mackenzie’s investment capabilities, distribution and global reach.” Succeeding Luke Gould as Chief Financial Officer of IGM Financial will be Keith Potter effective July 1, 2022. Keith joined IG Wealth Management in 1994 and earned a broad range of experience in internal audit, strategic initiatives, strategic investment planning, products and treasury before being appointed Senior Vice-President & Treasurer of IGM Financial in 2014. This appointment creates a smooth transition in CFO accountabilities with Keith’s experience in a senior finance leadership role under the established approach that Luke has led. Keith has an excellent understanding of the business, the financial operations of our companies and has extensive experience engaging with capital markets. Kelly Hepher will be joining IGM Financial as Chief Risk Officer effective April 1, 2022. Kelly comes to us from Canada Life where she had more than 20 years of experience, including enterprise and operational risk management, strategic planning and special projects. Most recently, she served as Senior Vice-President and Canada Chief Risk Officer for Great-West Lifeco, where she was responsible for risk management operations across the Canadian operating segment. In addition to leading IGM’s enterprise risk management program, Kelly will also be responsible for corporate sustainability and will have administrative responsibility for the firm’s internal audit function, which were previously under Luke Gould. IGM Financial Inc. is one of Canada’s leading diversified wealth and asset management companies with approximately $271 billion in total assets under management and advisement at January 31, 2022. The company provides a broad range of financial planning and investment management services to help more than two million Canadians meet their financial goals. Its activities are carried out principally through IG Wealth Management, Mackenzie Investments and Investment Planning Counsel. IGM Financial is a member of the Power Corporation group of companies.

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Globalization Partners, the leading global employment platform that simplifies remote team building by making it fast and easy for companies to hire anyone, anywhere, Simone Nardi within minutes, today announced the appointment of Simone Nardi as Chief Financial Officer following the recent promotion of Bob Cahill to President. Nardi brings extensive experience in strategic planning, capital markets, investor relations, M&A, business development and change management with companies of various sizes, industries, and complexities across the U.S. and internationally. Reporting to Bob Cahill, Nardi will play a key role in Globalization Partners’ strategy to create value across financial functional areas including planning and analysis, financial reporting, treasury, investor relations, capital markets, accounting, tax, insurance, and risk management. In addition, as part of the executive leadership team, Nardi will engage on corporate strategy as G-P expands its employment platform to new markets and languages while ensuring world-class legal, HR and compliance standards. Prior to Globalization Partners, Nardi served as CFO at fuboTV successfully transitioning the organization from a private to a public company. Previously, he served as SVP and CFO, international for Scripps Networks Interactive, where he was responsible for all finance and strategic planning for the company’s international business across Canada, Europe, the Middle East, Africa, Asia Pacific, and Latin America. Globalization Partners’ global employment platform provides unmatched technology and support that enables customers to hire talent anywhere they find it, quickly, securely, and easily. As the world’s largest and most established fully compliant employment platform, G-P has seen surging demand for its solution, with approximately $1 billion in annual recurring revenue.

Freshlocal Solutions Inc. (TSX: LOCL) (OTC: FLOCF) announced the appointment of Monika Russell as Chief Financial Officer and Corporate Secretary of the Company, replacing Ms. Adrienne Uy who is stepping into a new role with the Company as Executive Vice President of Transformation. Russell has over 18 years of public company experience, most recently as Chief Financial Officer of a TSX Venture Exchange listed technology company offering currency authentication and brand

protection products and services. Ms. Russell will be responsible for the financial strategy, overall operating budget and the finance team. “Freshlocal’s core eGrocery business is on a trajectory toward consistent healthy cash flows as we concurrently ramp up deployments of FoodX”, said Russell. “I look forward to working with Simon and the team to deliver on the Company’s financial and operational transformation.” Freshlocal is a Vancouver-based company that is building a leadership position in the provision of end-to-end grocery eCommerce solutions. The Company operates two primary businesses, FoodX and eGrocery, both of which support its corporate mission to innovate food systems for people, planet and prosperity. The Company’s consumer eGrocery business has expanded into one of Canada’s largest online grocery companies, with a focus on delivering fresh, local, organic produce and groceries, along with exceptional customer experiences. Freshlocal serves the main urban markets in Alberta and British Columbia through its brick and mortar store locations operating under the Blush Lane and Be Fresh banners, as well as through SPUD.ca which is the Company’s awardwinning online eGrocery platform.

Sandra Lau

James Barber

Alberta Investment Management Corporation (AIMCo) appointed Sandra Lau to the role of co-Chief Investment Officer, Head of Public Investments, and James Barber to the role of co-Chief Investment Officer, Head of Private Investments. “After screening over 60 qualified candidates from around the world, it became clear that the best choice for our clients is to appoint Sandra Lau and James Barber as co-Chief Investment Officers of AIMCo,” said Evan Siddall, Chief Executive Officer. “Their combined expertise will serve our clients best, striking an ideal balance that no other candidates were able to match.” As co-Chief Investment Officers, Barber will serve as Head of Private Investments, responsible for Real Estate, Infrastructure, Private Equity and Private Debt and Loan. Lau will serve as Head of Public Investments.

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wC Canada unveiled its inaugural Canadian ESG reporting insights study, analyzing the current and trending challenges Canadian organizations face with their ESG reporting practices. This comprehensive analysis explores ESG reporting maturity across 150 of Canada’s top organizations. Relying exclusively on publicly available information, PwC assessed elements such as strategy, materiality, metrics, assurance and other key components of ESG reporting. The data collected will help companies improve where they fall short, and strategize to successfully include ESG, considering the growing significance it holds with investors and stakeholders.

Value Creation and ESG Reporting In a PwC Global ESG Investor Survey, nearly 80 percent of respondents said ESG was an important factor when making investment decisions. Employees, lenders, customers, regulators and other stakeholders are also using ESG information to inform their decisions. And yet, more than half (59 percent) of the organizations reviewed are not including sustainability-related information in their annual report beyond a dedicated corporate social responsibility section. Leaders of Canadian organizations need to understand that transparency and accountability are critical for stakeholders in today’s evolved business environment,” said Sarah Marsh, Partner and National ESG Report and Assurance Leader, PwC Canada. “Organizations must address the true value of ESG as soon as possible. As stakeholders look for leadership on climate change, social justice and other pressing challenges, Canadian companies that demonstrate how they’re creating value for everyone will gain an edge on several fronts.”

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Climate as a Priority Momentum is building in the wake of COP26 and the growing recognition that climate change affects virtually every business, government organization and investors in Canada. But current reporting is falling short of stakeholders’ expectations. More than one-third (35 percent) of companies have a formal netzero commitment, but just 17 percent of them have committed to reaching net zero by a specific date.

Inclusion and Diversity PwC’s analysis revealed that stakeholders are increasingly looking for companies to disclose long-term inclusion and diversity strategies, targets and report progress against their targets. However only half (51 percent) of the top companies provide short-, medium- and/or long-term timelines for their ESG targets. Of the top 150 Canadian organizations reviewed, about half are disclosing their policies around cultural diversity. 68 percent disclose a gender diversity policy that’s set and reported against measurable targets. “Individuals and organizations are dealing with a growing trust deficit, due to fundamental economic, environmental and societal changes in the world,” said Mike Harris, Partner and ESG Practice and Net Zero Leader, PwC Canada. “Organizations that take a more holistic view of incorporating ESG in their business strategies will be able to build brand value and long-term trust, as they look to deliver sustained outcomes.”

ESG Reporting and the Future Although in Canada, ESG disclosures are currently voluntary, there are already signs and trends indicating changes on the horizon, like the Canadian Securities Administrators’ proposed climate-related disclosure requirements. There are several

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PwC Canada Study Shows ESG Reporting Falls Short Across Canada’s Top 150 Public Companies foundational steps that organizations can take to prepare themselves to meet future regulatory requirements as well as create value through their sustainability reporting. In an era evolving faster than ever before, organizations preparing to meet future requirements of ESG reporting can begin with developing a roadmap that will drive how they will reach their targets. To have confidence in your ESG reporting, stakeholders need to see the full story. All organizations will benefit from strong execution in their reporting and access to the right data through appropriate tools and technology. Canadian business leaders must ask themselves if their organization is prepared to grow into a more sustainable, transparent and innovative business with a strong brand value. Earlier this year, PwC Canada launched its Trust Roadmap, which includes ESG reporting as a part of the firm’s holistic approach to address the growing trust deficit.

Canadian ESG reporting is falling short, leaving organizations at risk of missing opportunities for increased long-term value creation and goodwill for their brand. ◉ Stakeholders want to know what non-financial items are critical to a company’s success, but only 41 percent of companies have ESG reports showing how sustainability is a fundamental part of their core strategy. ◉ Of the companies reviewed, only 18 percent benchmark KPIs against competitors or other external sources. ◉ 73 percent of global investors say it’s important that ESG-related metrics are independently assured, however only 20 percent of Canadian organizations have some type of assurance over their ESG information.

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Canada’s Bridgegate:

Disruptions from Canada’s Protests Further Expose the Vulnerability of Supply Chains BY VAIBHAV TANDON

eyond economic and public health upheaval, the past two years will also be remembered for mass protests in several parts of the world. Some were sparked by familiar themes like democratic liberties, climate change, and racial justice, while others arose against government lockdowns, vaccines and mask mandates. The trend continues into 2022, with Canada at center stage. Canada’s capital, Ottawa, has been disrupted for the past three weeks by blockades and protests over COVID-19 restrictions. The demonstrations began over a mandate directing truck drivers returning from the United States to be vaccinated, and broadened to include other pandemic restrictions. Canada has taken a much stricter approach to public health, which challenges cross-border commerce. Since early February, the protests have snarled traffic, disrupted daily life and hurt the Canadian economy. The economic toll on businesses in the national capital has mounted, and earlier this month, that toll became an international burden. About $1.7 billion worth of goods and services flow daily between the United States and Canada, across the longest border in the world. The week long blockade of the Ambassador Bridge connecting Windsor in Canada and Detroit in the United States was a rude interruption of transport between the two countries. The bridge is the busiest international land border crossing in North America, with over $300 million worth of material passing between the two nations every day. Goods ranging from food to steel and aluminum are involved; the passage is

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particularly vital to the supply chains of the global automobile industry. With the bridge closed, auto factories on both sides of the border had to either shut down or cut production, leading to delays in deliveries. The bridge obstruction came at a time when auto makers are struggling with semiconductor and component shortages amid lasting supply chain disruptions. North America is already witnessing truck driver shortages, and with protests keeping truckers off the road, supply chain problems could be exacerbated. Worried over the impact on the economy, the Canadian government took the rare step of invoking a national emergency to end demonstrations. Goods are flowing again, but the consequences of the blockade are still being felt. The situation could aggravate the current bout of inflation: vehicles were forced to detour to other crossings, in some cases hundreds of miles away. This created delivery delays that will only add to cost pressures.

Disruptions from Canada’s protests further expose the vulnerability of supply chains Smaller auto parts suppliers and workers are likely to be most affected. These businesses lack pricing power and their employees typically receive no compensation for lost hours. At big carmakers, workers have protections to preserve a percentage of their regular pay even when production halts, which can be a substantial expense.

Commerce has been flowing seamlessly between the two economies for decades. Though the blockade has been cleared for now, renewed disruptions could dent Canada’s status as a reliable trade and

supply chain player. In the longer run, as supply plans are made for electric vehicle production, more auto makers could choose to “Buy American” if uncertainty prevails in Canada. The last two years have brought the complexity and fragility of supply chains to the fore, illustrating how problems at even minor suppliers can create major disruptions. The Canadian protesters certainly knew that their actions would inflict economic discomfort; the worry is that other discontented groups may use the same tactics in other places. Just remember this simple rule: when the placards come out, prices go up. VAIBHAV TANDON is Second Vice President, Economist, Northern Trust. Within the Global Risk Management division of Northern Trust, Tandon briefs clients and colleagues on the economy and business conditions, supports internal stress testing and capital allocation processes, and publishes the bank’s formal economic viewpoint. He publishes weekly economic commentaries and monthly global outlooks.

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Canada’s Executives Face an Opportunity in Sustainability C

BY SHAWN COOPER

anadians have seen their communities change drastically in the last few years due to the COVID-19 pandemic and heightened worry about climate change and social justice, motivating them to make sustainable changes in their everyday lives. Employees, customers, and investors are starting to expect more from the companies they buy from and work for. They are increasingly seeing businesses as an important contributor to the greater community and economic ecosystem of Canada. Our Divides and Dividends research set out to find out how much progress Canadian corporate leaders are making towards sustainable business. We surveyed three groups of people — C-suite executives, next-generation leaders, and employees — to understand what a crossExistence of Sustainability Strategies Percent indicating the re is a sustainability strategy in place that has been acted upon and clearly communicated

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section of Canada’s workforce thinks about their organization’s sustainability efforts and the readiness of leaders to advance the agenda. We found bright spots of progress, as well as opportunities for Canadian business leaders to do more to accelerate their sustainability actions. First, the good news: Overall, 41 percent of C-suite leaders say their organization has a sustainability strategy that has been acted upon and clearly communicated. This is broadly in line with the global average (43 percent). Notably, however, this optimism is not shared by others across the organization: just 24 percent of employees and 33 percent of next-generation leaders agree that their organization has a clearly communicated sustainability strategy. The fact that senior leaders are more optimistic than nextgeneration leaders and employees is a concern. A compelling vision and expert communication will be critical to mobilizing employees and fostering an authentic enterprise-wide culture of sustainability. Our research also indicated that Canada is at the early stages of its sustainability journey. When we asked C-suite leaders why their organization was taking sustainability action, 42 percent cited brand management concerns — they wanted to be seen as socially responsible or reputable. By comparison, just 14 percent said value creation motivated their sustainability activities.

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CORPORATE RESPONSIBILITY

CEO Commitment to Sustainability Percent indicating the CEO is personally committed to advancing sustainability and progress has been made

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C-Suite Perceptions of the Driving Force Behind Company’s Approach to Sustainability?

Actions For a More Sustainable Future Radical transformation — including the kind required to transition to sustainable business — is tough to deliver. There is no pre-established playbook, and it involves many complex trade-offs. Yet those who succeed stand to unlock myriad financial and non-financial dividends — from faster top-line growth to more engaged employees, more loyal customers, and more supportive investors. To achieve change at the scale and pace needed, it is important that leaders make sustainability a central strand of business strategy, motivating the transformation of operations and business models, and ensuring all opportunities are evaluated through a sustainability lens. Realizing the shift to sustainable business will come down to one thing: leadership. Updating selection frameworks to ensure top executives possess sustainable leadership potential is a critical first step. Beyond this, rewarding those who lead sustainably, such as by tying sustainability outcomes to the remuneration of the CEO and executive team, can also help accelerate action on the ground. Ultimately, executives who have the freedom — and vision — to completely rethink strategy, business models and operations, and the humility to bring others along on their journey, will likely have the biggest impact on sustainability.

Next-Generation Leaders who have taken on 3+ job responsibilities to improve environmental and social outcomes

Anticipated Progress by Driving Force of Sustainability Strategy

SHAWN S. COOPER is Managing Director, Board & CEO Advisory Partners at Russell Reynolds Associates. Shawn advises Canadian and international corporate and governance leaders on talent management and culture transformation, strategic succession planning, ESG and sustainability, and board composition and effectiveness. Shawn has served in several firm leadership roles, including the Global Executive and Operating Committees.

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CORPORATE RESPONSIBILITY

Divides and Dividends Study IT IS NO LONGER business as usual. The long-held belief that companies exist solely to serve the needs of shareholders is being challenged. Employees, customers and investors increasingly see private enterprise as a vital player in a much wider sociological, ecological, and economic system—and business leaders are now expected to not only create value for their companies, but also for the communities in which they operate. Countries are at different starting points in their sustainability journeys. With Canada’s emissions exceeding the G20 average, organizations are under pressure to make sustainability a top business priority. Many are seizing this opportunity to transition, with countless leaders pledging their commitment to net-zero targets and other sustainability goals. The challenge will be how to translate this goodwill into action. Radical transformation — including the kind required to transition to sustainable business — is an arduous task. There is no pre-established playbook, and it involves many complex tradeoffs. Yet those who are able to drive concerted sustainability action will unlock myriad financial and non-financial dividends — from faster top-line growth to more engaged employees and more loyal customers. Against this backdrop, Russell Reynolds Associates set out to understand how much progress organizations are making towards sustainability across 11 countries — and map a path forward. By surveying three distinct groups — C-suite executives, next-generation leaders and employees — we were able to identify what a cross-section of the global workforce thinks about the maturity of their organization’s sustainability strategy and the ability of their leaders to advance the agenda. In Canada, three key themes emerged: 01. Macro, Micro and “Me” There is an opportunity for Canadian C-suite leaders to better understand the issues that their employees care about. When asked about the top challenges affecting the future of society, C-suite leaders zeroed-in on economic

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CORPORATE RESPONSIBILITY

challenges, such as corruption and trade wars. Employees, meanwhile, centered on environmental threats, such as climate change and pollution. Leaders who simultaneously address business-level issues and employee concerns stand the best chance of securing buy-in for their sustainability strategies. 02. Brand Management Versus Value-Creation Canadian organizations are at risk of only engaging with sustainability at a surface level: 49 percent of C-suite leaders admit that their sustainability actions are motivated by brand management concerns, the highest proportion across the mature markets we studied. By comparison, only 14 percent say value creation sets the agenda. Looking ahead, it will be critical for leaders to challenge perceptions that sustainability is only a reputational issue to be managed. 03. Next-Generation Leaders at the Vanguard Canadian next-generation leaders are heavily involved in driving sustainability action. In the past two years, 39 percent have had three or more job responsibilities to improve environmental or social outcomes, in line with global trends. Yet there is an opportunity to expose Canada’s future executives to a broader range of sustainability experiences. For example, just 14 percent have hands-on experiences in making products or services more environmentally friendly, compared to 28 percent globally. Ultimately, pivoting towards a more sustainable future will be one of the hardest journeys that businesses will make in the next decade. Realizing this shift will come down to one thing: courageous leadership. Executives who have the freedom — and vision — to completely rethink strategy, business models and operations, and the humility to bring others along on their journey, will likely have the biggest impact on sustainability. In 2020, we worked with the United Nations Global Compact to develop a blueprint for sustainable leadership, revealing the specific competencies that CEOs and board directors will need to deliver sustainability outcomes alongside financial success. Building on this work, we now set out a three-part framework to help you accelerate your transition to sustainable business. We share practical advice on how to embed sustainability across your business strategy and leadership frameworks and how to effectively engage and build employee engagement around your vision. Russell Reynolds Associates is deeply committed to supporting its clients on this important change in the business environment. As this report shows, Canada has a sizeable opportunity to distinguish itself on this critical topic. ABOUT THE STUDY The business case for sustainability is undeniable. Leaders who bridge the divides that threaten our global societies will yield significant triple-line dividends. In a major global survey C-suite executives, next-gen leaders and employees, we reveal how leaders can grasp this opportunity: What are the environmental, social and economic divides that leaders should solve? How ready are leaders to advance the sustainability agenda? What actions should leaders take to deliver lasting value for people, planet and profit ISTOCK/ MONSITJ

The study was conducted with 9,500 employees and next-generation leaders in 11 growth and mature markets from April 16 to May 12, 2021. In Canada, we surveyed 697 employees and nextgeneration leaders and 94 C-suite leaders.

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TOTAL FINANCE

COMPENSATION

Want Happy Staff?

ISTOCK/HARBUCKS

Three Tips for Managing Compensation

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COMPENSATION

BY DANIEL OH

usinesses have faced a great deal of upheaval over the past two years, whether it’s the rise in remote work or shift to online commerce. One thing that hasn’t is their biggest and most important asset: their people. The primary way a business can show its people their efforts are appreciated hasn’t changed either: According to Sage’s Forward Together: Building a Resilient Future report, released in October 2021, 50 percent of workers are expecting an increase in financial compensation after the pandemic — yet only 27 percent of business leaders plan to do so. Finance professionals are often on the front lines when it comes to helping employees feel appreciated and valued by ensuring they are properly compensated for their work. This often requires them to keep track of several moving parts, including benefits packages, ensuring compliance, and making sure payroll is processed on time and error-free. It’s a big responsibility with very little room for mistakes — but don’t despair. Here are some tips to help your business overcome payroll challenges, remove friction, deliver insights and maintain a happy workforce.

Use benefits to recruit, retain, and reward employees

Consider your company’s benefits plan a tool to keep employees energized and performing at their best, with perks that appeal to your workforce’s interests. According to Sage’s Forward Together research, 65 percent of Canadian workers want to see an increase in self-care benefits and 64 percent want to see an increase in self-care days. Meanwhile, of the 35 percent of businesses that have implemented new programs since the pandemic, only 25 percent have increased self-care benefits and only 32 percent have increased self-care days. Instead, the majority (61 percent) have invested in mental health resources.

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Instead of taking a top-down approach, the finance team should be proactive when implementing a benefits plan, asking employees what they would prefer and aiming to offer as much as budget allows. Childcare, for example, is likely to be popular with parents with young families. Older workers are more likely to be focused on healthcare and pensions. Picking a scheme that offers some flexibility is a good idea. Once you have a list of requested benefits, research the top-rated suppliers and narrow down your choices based on where those criteria intersect.

Use software to stay on top of payroll and HR

With the capabilities offered by today’s enterprise software, it shouldn’t be the job of finance professionals to chase down and record their employees’ work activities for time sheets and expense forms. Even for small to mid-size businesses (SMBs), enterprise platforms are easier to download and install than they’ve ever been, with built-in wizards to guide finance professionals through set up and tutorials on YouTube that can help troubleshoot most problems or even help with staff training. Adopting HR software makes it easier to run through tasks such as processing new or exiting employees, keeping track of holidays, sick pay, parental leave, and bonuses, and ensuring staff are paid correctly and on time. More importantly, giving employees direct access to cloud-based, self-service time sheets and requests gives them more responsibility over their own activities, while also making it easier to review and approve requests as they come in.

Use employee feedback to ensure you’re getting it right

Monitoring issues and requesting feedback from your employees on how to improve operations has always been a best practice for companies — and this goes for financial processes too. By ensuring that employees feel comfortable sharing their concerns, finance

professionals can identify payment- or benefit-related issues before they spin out of control. They can also use software to analyze workflows and spot where errors or poor service are creeping in. In general, finance professionals and their employees should keep the following tips in mind to ensure both sides are getting compensation right: ◉ Keep accurate personal records, which can easily be done digitally. ◉ Communicate your payroll compliance plan with employees so they understand their role in maintaining compliance. ◉ Understand workplace pensions. Even if a company has only one employee, pension duties require employers to enter staff into a pension scheme to which they must contribute. ◉ Use audit trails to link each transaction that is made with supporting information, such as purchase orders and invoices, which will validate any payments that look unusual. ◉ Stay up to date with payroll legislation by attending payroll seminars, watching webinars and going to industry conferences can help to enhance your knowledge. ◉ Keep experts on speed-dial, such as an accountant or an employment lawyer. ◉ Submit payroll information on time. Tax deadlines, shifting paydays and quarterly reporting are only a few of the complexities of payroll. To help keep yourself on top of everything, create an annual calendar featuring important dates, including timesheet and invoice submissions, when payments need to be made, and payroll year end tasks such as submitting final reports to the CRA and sending T4s to employees. By reassuring workers that their employer has their best interests at heart and taking a lead role in demonstrating how, finance professionals can help ensure the employees at the heart of their business remain as happy and committed as those who lead it. DANIEL OH is Country Manager (interim), Sage Canada.

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PAYMENTS

Four Areas to Address to Meet Digital B2B Commerce Expectations L BY BRANDON SPEAR

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ooking back on 2021, the global B2B payments landscape experienced notable changes in sales channel strategies as eCommerce accelerated. As B2B customer journeys become more digitally influenced, a merchants’ payments offerings and capabilities need to evolve to better secure the sale. Recent research from Forrester Consulting revealed that 60 percent of merchants cited payment speed and security as top-of-mind concerns for customers moving forward to protect sales and customer experiences. B2B retailers face immense competition, amplifying the need to offer payment solutions that will drive revenue and support customer loyalty. Whether its through a salesperson, online or in-store, B2B buyers expect the same, seamless payments experience. Omnichannel selling has become a critical part of the customer experience and can differentiate a B2B seller from its competitors. It has also become a more successful way to prospect and secure new business than traditional, “face-to-face only” sales approaches according to McKinsey & Co. To help meet these rapidly changing customer expectations, Canadian merchants and manufacturers should address these four areas to ensure their offline and online payment processes deliver the best possible customer experience. 1. Offer more payment options: This gives buyers the freedom and choice to pay in their preferred method. According to the same Forrester Consulting research noted above, more than 90 percent of merchants expect that improving payment options for B2B customers will improve customer

satisfaction, speed up transactions, free up internal resources, and increase business success — showing an inherent need for B2B sellers to adapt payments processes. A recent industry example includes TreviPay’s one-click mobile app solution for B2B commerce which allows buyers to access their trade financing in-store via an intuitive mobile app, eliminating the need to issue multiple credit cards to numerous purchasers within the organization, which also helps reduce the risk of fraud. Our first partner to enable the TreviPay mobile app solution for B2B buyers is Staples Canada, which has been leveraging the new offering in all 305 stores across Canada with an average $6.5K CAD credit line per user since the program launched in August 2021. Without any need for POS hardware upgrades, this has allowed Staples’ authorized purchasers to shop seconds after credit approval rather than waiting on a physical card to arrive in the mail. 2. Extend buy-now-pay-later (BNPL) to B2B: The BNPL trend has gained traction amongst B2C consumers, especially for those who are interested in stretching their buying power and/or personal budgets. B2B buyers have long required BNPL-like solutions — such as trade credit and payment terms — for their large enterprise purchases. Now, B2B retailers and manufacturers must modernize those BNPL transaction experiences with digital and mobile purchasing options for B2B shoppers, or risk losing them. We can also expect growth opportunities in sales,

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value. For accounts receivable, this could include automated onboarding to save a merchant time and cost by eliminating the need to email forms, lengthy credit decisions and inefficient procedures such as creating PDF invoices or performing manual bank reconciliations. 4. Protect against digital identity theft: As a result of the pandemic and shift to eCommerce preferences, more customers are acquired online. This causes a growing risk of B2B business identity theft and other forms of fraud. Recent data from Payments Canada found that around one in five Canadian businesses reported experiencing payment fraud. The most common type of fraud experienced was ‘someone contacting the business pretending to be someone else and requesting money’ (29 percent). As B2B companies continue to expand their online offerings in 2022, supporting safe and secure payments remains a key priority in payments innovation. Leveraging data to offer instant decision processes and credit can strengthen the relationship between buyers and sellers by providing sophisticated fraud detection processes and maintaining a strong track record for risk decisions. B2B merchants and manufacturers must be closely in tune with the revolutionary changes to customer experience, engagement and convenience embraced by the rising digital generation and accelerated by COVID-19. Those that embrace digital expectations and implement supportive payments solutions in the new normal will provide a better customer experience. This can establish stickiness and loyalty with customers, and offer cost savings, increased revenue potential and better cash flow. BRANDON leads TreviPay with expertise in managing large,

cart size, conversion and loyalty for B2B sellers who adopt BNPL offerings. 3. Automate AP and AR processes: A lack of accurate, real-time data on payment flows is driving up the cost of payments. Ninety-six percent of CFOs recently surveyed by PYMNTS say they

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are digitizing AP and AR processes to benefit customers and vendors. Other digitization benefits cited from the survey include automating a manual process, as well as providing a more efficient and more transparent process to build lifetime customer

diverse global teams. His strength is discerning and focusing on the most important challenges facing an organization at a particular point in time and unifying all stakeholders behind accomplishing a set of specific goals. Brandon has a unique ability to connect across all levels of an organization, motivate staff with diverse skill sets, while ensuring a common alignment and results.

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REGULATORY NEWS PAYMENTS

Three Ways to Support Earned Wage Access in Canada BY MARCO MARGIOTTA

round the world, employers are experiencing first-hand the impacts of what’s being called the ‘Great Resignation,’ emerging from the COVID-19 pandemic. For our neighbours to the South, 4.5 million Americans quit their jobs in November 2021, which matches a series high from last September. This trend has caused many traditional employers to review retention incentives and salary bands to retain top talent amongst competitors. While Canada is often compared to the United States, experts have shared this challenge isn’t as prevalent here. According to CIBC Capital Markets, the Canadian job changing rate remains ‘essentially unchanged’ from pre-pandemic levels, while the U.S. has seen a drastic increase in people leaving their job voluntarily. A couple of factors might be influencing this disparity — the structure of Canada’s wage subsidy program to incentivize workers to keep their current jobs, and that Canadians are not selecting early retirement as frequently as American counterparts. But, this does not mean the Canadian labour market hasn’t been impacted by the pandemic. Recent research from BDC highlights that remote work has become part of the new normal, with Canadian employees citing increased efficiency (41 percent), decreased absence rate (36 percent) and improved work quality (29 percent) as key positive indicators. The country has also seen growth in the gig workforce, as this segment of the economy became essential through the pandemic. Gig workers have become a growing share of our workforce, now representing more than one in 10 Canadian adults as per data from Payments Canada. Gig work, also referred to as contract work or independent contracting, consists of income-earning activities outside of a standard, long-term employer-employee

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relationship. This could include, but is not limited to, rideshare driving, delivery services, project-based website design or consulting. According to a recent study by Public Policy Forum, half of gig workers surveyed in Canada indicate they prefer gig work because of the flexibility it offers — a trend in line with Canadian work-fromhome preferences. To protect this growing segment and help prevent voluntary gig work resignation, talent leaders must find ways to support these workers. One key aspect is earned wage access, as income volatility can be high for this group. Here are three ways to help support earned wage access for contract workers: ◉ Pay wages on time. A Freelancers Union study found that 71 percent of freelancers have had trouble getting paid and 25 percent have not been paid at all for work completed at some point in their career. This can cause significant detriment to a person’s budget and ability to pay personal and professional bills on time. With timely access to wages, gig workers in the rideshare field can ensure a low gas tank or flat tire doesn’t derail their workday, week or month. ◉ Offer electronic, secure payments using an on-demand platform. The entire payments industry has witnessed a seismic shift in the last two years to mass adoption of digital banking, payments and financial services. Notably, the gig economy is highly engaged when it comes to digital payments options, and more likely to frequently use electronic payment methods than non-gig workers according to Payments Canada. The same research uncovered that gig workers prefer to be paid through electronic payments as this enables fast, secure and traceable payments for better financial management. A platform like Payfare facilitates on-demand and instant access to earnings for gig workers. We created a simple API integration for gig

economy platforms like Uber, Lyft and DoorDash, so that workers get instant access to their pay through a free digital bank account, as well as to rewards and discounts on things like fuel. By using Payfare, workers also have access to free in-network ATM withdrawals, online bill payments, fund transfers and more, with no minimum account balance requirements or costly monthly service fees like with some traditional banks. ◉ Treat gig workers as entrepreneurs. Every worker in the gig economy should have the opportunity to become an empowered entrepreneur with dignity and financial security. The disconnect between the gig workforce’s payment preferences and current payment methods by Canadian businesses limits this opportunity. From first-hand company research, many rideshare drivers would either get their earnings early through a third-party payment processor with fees or they would use traditional bank accounts that had slow transfers. Bank accounts can also be costly for low-balance clients, leading them to turn to predatory check cashers and payday lenders to fill the gaps. Providing gig workers with the payments tools and expectations needed for maintaining strong financial health will set them up for success in the long-term. Supporting earned wage access through on-demand payment means equipping Canadians with the financial flexibility they need to live and run their business. As Canada continues to manage the pandemic’s impact on the labour force, maintaining the recovery in Canada’s participation rate will keep the nation further away from the ‘Great Resignation’ trend. Our gig economy is essential, and we must work together to treat them as such. MARCO MARGIOTTA is the CEO and Founding Partner of Payfare

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REGULATORY PAYMENTS NEWS

Leveraging Trends to Support Inclusion BY ROBERT HYDE

he COVID-19 pandemic deeply impacted the Canadian payments industry and accelerated the migration to digital and contactless payments. Canadians continue to seek more choice and flexibility in how they make payments without sacrificing security and convenience, but the pandemic has further underscored the need for more services to help Canadians achieve financial inclusion. While 99 percent of Canadians have an account with a financial institution, approximately 10-20 percent are either unbanked or underbanked, meaning they do not have access to a wide range of convenient or everyday banking services. The gaps in the Canadian market for supporting financial inclusion will only continue to widen if businesses and governments don’t act swiftly to meet Canadians’ payments needs. This is particularly true for small merchants that have been greatly affected from the lack of in-store retail and inherent shift in how Canadian consumers shop and pay online. To support and evolve financial inclusion, we can look at the current payments landscape and find ways to close these gaps that align with Canadian preferences. Here are four current Canadian payments trends and ways we can offer increased access: ◉ Search for more payment options. In 2020, eCommerce exploded in Canada, growing by 20 percent in value compared to the prior year. According to Payments Canada, close to half of Canadians reporting using eCommerce platforms for online purchases more frequently to purchase a wider range of products compared to pre-pandemic. But businesses are not yet meeting Canadians’ payments needed at the online checkout. In physical stores, consumers have the option to use many methods of payments, such as cash, debit or credit, but as consumers moved online, they are still most commonly being faced

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with a credit card payment option. While credit cards are popular, not everyone wants to use them or has access to them, which restricts access to Canadians who would prefer to shop online. As well, credit card use is expensive, costing merchants — and ultimately consumers — more than $5 billion annually. By including non-credit based options, merchants can achieve a more balanced cost structure, allowing more payment platforms to thrive without the full expense falling on the merchant. ◉ Growth of prepaid payments. According to the Canadian Prepaid Providers Organization (CPPO), the prepaid payments industry has grown 80 percent since 2019, totaling $8.7 billion, and is expected to continue growing to $17.2 billion by 2025. Prepaid products offer a great bridging solution to deliver banking-like services to more businesses and consumers who have been marginalized by not having equal access to the payments ecosystem. One example of enabling a prepaid product to support financial inclusion would be in government payments to replace issuing and mailing cheques. In 2019, there were 30 million cheques issued by the Government of Canada to disperse funds to citizens and businesses, but more than 800,000 (valued at $370 million) went unclaimed. This highlights a clear disconnect in how Canadians are being paid and how they’d prefer to be paid. As consumers move towards a preference for more convenient, cashless, contactless payment methods, prepaid will provide both incumbent banking organizations and new fintech entrants a way to introduce more products and services while still adhering to Canadian’s stringent regulatory environment. ◉ Increase in online government payments. Government payments have some of the largest gaps in financial inclusion, as there’s often a lag in terms of innovation around payments and government. A 2021 survey by Payment Source found that more than 70 percent of Canadians

were interested in paying their 2020 taxes electronically given the newfound comfort with digital transactions stemming from the pandemic. A solution like PaySimply, an online and mobile app tax payment service, allows Canadians to make payments to government organizations using alternative payment methods or methods of payments that have not been traditionally used in government, such as credit card, eTransfer or PayPal. This secure and convenient online service enables users to pay several different types of taxes, from corporate income tax and payroll deductions, individual T1 taxes, benefit repayments and many others. With no account registration required, taxpayers simply select their tax type, enter the payment details — which include tax account number and payment amount — select a payment method and complete their payments in a few minutes. ◉ Shift to digital payments. COVID-19 has enhanced the use of digital payment technology. In regard to legacy payments trends in Canada, Interac eTransfer continues to experience explosive growth with a 43 percent increase in first-time usage last year, and it’s easy to see why: Not all debit cards are able to transact online, there are no balances to manage like with reloadable cards and no accounts to setup and manage like with digital wallets. Canada is on the cusp of finding alternative digital solutions to card solutions for the next frontier in payments. The pandemic has opened eyes in terms of needing to change and find other payments approaches to support Canadians. Our nation’s goal must be to provide inclusive choice to Canadians on how they pay and get paid. By increasing purchase utility through digitizing cash, reducing cheque volume, and finding alternatives to enable online shopping, Canadians will be to transact in whatever way suits them. ROBERT HYDE is the CEO at Payment Source.

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Digital Transformation of the Global Payments Market O

BY BOB DOWD

ur digital-first world is evolving so rapidly, we may live to see the end of paper money. In the wake of COVID-19, the accelerated digitization of payments on a global scale has changed the game in the B2B payments marketplace.

market share and improving operational performance. Driven by robust APIs, real-time payments rails have expanded into both advanced economies (AEs) and emerging market and developing economies (EMDEs) now that there is a digital, real time equivalent to physical cash.

Growth of RTP Digital payment providers are slowly eclipsing banks since Payment as a Service (PaaS) competitors working within the fintech ecosystem offer more cost-effective digital realtime payment (RTP) solutions. FIS Global reports that ‘real-time’ is quickly establishing itself as the standard for all payments, both on the consumer and business side. In the B2B marketplace, global expansion of payment rails has been transformational, from building trust and strengthening alliances, to capturing higher

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Meeting market demands With the increasing need for rapid payment solutions in small and medium enterprises (SMEs), it should come as no surprise that this market is booming. A year ago, Ernst & Young Global predicted cross-border payment flows would reach US$156t in 2022. This trillion-

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dollar estimate represents all cross-border payments between people or businesses and gives us the big picture of change in progress. For business leaders, the global B2B payments market size was valued at $870.42 billion in 2020, and is projected to reach $1.91 trillion by 2028, growing at a CAGR of 10.6 percent from 2021 to 2028, according to Allied Market Research. This research indicates that the key driving forces of the global B2B payments market include an increase in usage of technology in B2B payments and rapid development of the domestic SMEs & medium-sized companies engaging into massive trades. These new, tech-forward payment rails fall outside of the traditional SWIFT network historically used by banks and payment providers. They meet customer demand by increasing transparency, eliminating lifting fees and correspondent bank fees, and enhance the speed of delivery to the end beneficiary, providing

an optimal customer experience. They enable B2B, B2C and even C2B transactions payments to be initiated and settled nearly instantaneously, with 24/7/365 accessibility, including weekends and holidays. Real-time payments (RTP) offer the quick turnaround that is top priority for many businesses, especially for organizations that rely on accelerated cash flows to make payroll, vendor payments, and more.

B2B Clients Enabling expansion into new markets Hard-to-reach jurisdictions have long been one of the sector’s unique challenges. In addition to access, hurdles have traditionally included cost, speed, security and transparency — all of which can be addressed with tech-enabled, digitallyforward solutions. Robust APIs also allow for expanded in-country payment capabilities by offering access to alternative payment rails in AsiaPacific, Latin America, and Africa. This fortified infrastructure will extend into hard-to-reach jurisdictions where the full value of payments can be received within an hour. This offers businesses a growth path. In an industry that is complex and ever-evolving, it’s crucial to stay a step ahead with simpler, secure tech-enabled solutions.

Meeting stakeholders needs Any organization with foreign vendors or suppliers knows the value of seamless cross-border payments, for B2B clients, vendors, contractors, offshore payroll, foreign offices, and more.

Vendors

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For merchants, that means better cash flow and transparency — since payer and recipient both receive immediate confirmation of payment — and potential added value includes integration with invoicing to facilitate automated payment processing.

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whether through a satellite office or freelancers who share digital platforms to connect, have historically faced the same problems with payroll as multinational organizations do. Robust API payment rails offer businesses the capability to pay freelancers & contractors in their local currencies faster, more efficiently and more cost effectively.

Contractors/Employees According to Entrepreneur, the pandemic also amplified the gig economy. Companies who have outsourced work or employ contract employees in other countries,

Advanced cross-border RTP capabilities also allow businesses to pay B2B clients in foreign markets, in their own currencies. These re-imagined global payment solutions offer considerable advantages over traditional, cumbersome procedures. For example, a business owner no longer has to worry about when a cheque will clear. In addition to eliminating the stress of waiting for cash flow, cross-border payments are more cost-effective. Real-time payments transact at a fraction of that cost than the standard bank process.

What’s next for global digital payments? Although about 60 percent of overall payment transaction volumes are still paper based, credit card and cell phone payments have already disrupted the physical cash market. B2C led the charge with demand for real-time payment solutions, then the B2B market followed suit and we’re closing the gap. The global cross-border payments market will continue to be disrupted by specialized, new players that can solve long-standing pain points. Eswar Prasad, Professor of Economics at Cornell University and author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance, says the world is approaching a tipping point where cash phases out and digital currencies reign supreme. Industry pundits agree that cash systems and the high-friction, costly and cumbersome payment processes of central banks will continue to be displaced. We’re already witnessing displacement. This is the Digital Revolution. It’s already here. BOB DOWD is Chief Executive Officer, Moneycorp Americas.

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ECONOMIC IMPACT

Our economic outlook for Canada

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Continued Recovery but Challenges Remain AUTHORS: The Real Economy Winter 2022 Report is written by Joe Brusuelas, Chief Economist; Mark Jakovcic, National Real Estate and Construction Industry Leader; Homan Chung, Senior Manager; Justin Krieger, Director; Tuan Nguyen, Ph.D., Economics and ESG Director; Alafair Hotze, Director; and, Yasir Riaz, Director; RSM Canada.

anada’s economy in the past year had a bumpy ride, as the promise of mass vaccinations was followed by supply chain disruptions, a global energy crisis and rising inflation. Looking ahead, we see a Canadian economy continuing to recover, even as businesses and consumers contend with challenges that now include the Omicron variant of the coronavirus. Here’s what we forecast for the economy this year: ◉ Gross domestic product: Growth will be just under 4 percent on the year, with gross domestic product surpassing the pre-pandemic level early in the year. ◉ Inflation: Expect inflation to hit 5 percent this year before approaching 3 percent by the year’s end. ◉ Employment: The job market will continue to contend with the dual challenges of a tight labour market and high long-term unemployment, as the unemployment rate declines to just above 6 percent. While the omicron variant presents a threat to all these areas of the economic outlook, we do

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not expect its impact to significantly derail the recovery. The housing market, which broke records this past year, might hit a plateau and cool this year, but a major correction is not yet in the picture. After an uneventful election in September that left the federal government virtually unchanged, we can expect federal spending to follow its budget from last April. Broad-based COVID-19 government support programs ended this year, and more targeted support programs will also be phased out in place of economic stimulus programs before the budget is tightened next year. The year ahead will also have substantial federal investment in developing a net-zero economy and boosting a green recovery. Business opportunities lie in energy efficiency, carbon capture and storage technology, natural infrastructure, and climate resiliency. Still, there are considerable risks to the outlook some that cannot be predicted. The omicron variant is a case in point. Canada will need to adapt to a new world in which we learn to live with an endemic, a

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ECONOMIC IMPACT disease that is ever-present but can be managed. It’s a world in which vaccinations and physical distancing remain important to maintaining public health while the economy hums on. As millennials enter management and Gen Z workers join the labour market, the digital economy will only continue to grow. Hybrid work arrangements and flexible schedules will solidify their footing in the new normal. Up-skilling and re-skilling the workforce and innovation to increase productivity will be critical.

The baseline scenario We expect the Canadian economy to grow at a rate of 3.8 percent next year. This baseline is subject to risks including persistent high inflation, supply chain disruptions, the omicron variant and an aging workforce. Any and all of these could cause a drag on the recovery. Household savings increased during the pandemic, fuelled by government support programs like the Canada Emergency Response Benefit and a lack of spending avenues that put the savings rate at an elevated 11 percent. This cash cushion will allow households to comfortably spend into this year, although the effects will wane with high inflation and the omicron variant posing a risk to consumer confidence.

The Bank of Canada is walking a fine line between promoting economic recovery and anchoring inflation. It signalled an end to quantitative easing in October while maintaining its holdings of securities. Our RSM Canada Financial Conditions Index stands at 0.6 standard deviations above normal levels of risk, indicating an accommodative climate for investment. The market has priced in two full rate hikes by the middle of this year, suggesting that the central bank will soon be taking action toward policy normalization. Still, monetary policies will err on the side of prudence because the pandemic remains a threat to public health and economic activity. The strong economic outlook in the United States spells good news for Canada’s exports. But uncertainty regarding the pandemic in the international markets could extend the disruptions to the supply chain and hamper trade. Thanks in part to oil prices the Canadian dollar is projected to stay relatively strong around US$0.80. Strong oil and gas demand, with production and jobs picking up, will provide Alberta with a much-needed boost for growth, although the effect will unlikely be as vigorous as in the oil boom in 2014. As the Omicron variant unfolds, we do not expect it to have the same effects that the delta variant did. More than 75 percent of the

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Canadian population is fully vaccinated, which may provide some protection although much about the variant is unknown. Looking abroad, more than half of the world has been vaccinated. Still, the omicron variant could undermine consumer confidence and strain global supply chains as restrictions tighten. This uncertainty could exacerbate the impact of the coronavirus on hard-hit sectors like tourism, and arts and entertainment. The recovery is pushed further into the second quarter as the omicron variant has led to shutdowns and restrictions around the country.

Inflation Inflation in Canada, as with other nations, hit the highest level in 30 years. While high inflation came about in part because of baseyear effects, or the comparisons to the low price levels of 2020, the actual number is even higher than expected. Supply constraints and surging demand are primarily responsible for high inflation. Natural gas and oil production, which had been falling for years, could not keep up with the release of pent-up demand in a reopening economy.

The current increase in inflation is being driven largely by volatile sectors like gasoline, food, shelter, utilities and transportation. Excluding food and energy, inflation looks much more moderate, at 3.4 percent. While inflation remains a primary risk to growth and can lead to rising wages, which further increases businesses cost of operation, it is projected to return to the 2 percent target toward the end of 2022. The new RSM Canada Supply Chain Index currently stands at 2.17 standard deviations below zero, indicating stress in the supply chain, but is up from the lows of last year. Though much can still change, there are signs that the worst of the supply chain bottlenecks might soon pass. The manufacturing outlook is optimistic, buoyed by strong demand and a smoother supply chain. The resolution of the supply chain disruptions will depend on many factors, including increasing energy production, vaccinating workers in global manufacturing hubs like Vietnam and India, resolving logistics, and addressing the shortages of important workers like truck drivers in the supply chain.

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ECONOMIC IMPACT The labour market The signs of an uneven recovery are the most jarring in the labour market. Employment has surpassed the pre-pandemic level and will continue to rise steadily this year. Similarly, the labour force participation rate has returned to or has surpassed the prepandemic level for most age groups. But a closer look reveals a much more complicated picture: We are in a tight labour market with many vacancies in highly soughtafter jobs while long-term unemployment persists.

Despite a hot labour market, unemployment remains above the pre-pandemic level because of a skills mismatch. Those with a postsecondary education or above have benefited. At the same time the number of jobs for those without a postsecondary education have yet to return to the level of February 2020, before the pandemic. This exacerbates inequality between the two labour markets: one serving the struggling traditional economy versus one that rides the rising wave of the digital economy. Those with skills in demand will see their wages increase as businesses seek to attract and retain talent. As millennials reach leadership positions and Gen Zers enter the labour market, the fundamental demographics of the workforce are shifting. A workplace that values mobility, flexibility and digital skills — not to mention sustainability — will become mainstream.

The housing market

The gains over the past two years have been entirely in sectors that were able to pivot to remote work, and in government and public administration. Jobs in professional services, for example, jumped by nearly 10 percent, outpacing any other sector. These sectors are projected to remain strong, though with less aggressive growth rates. In contrast, sectors that have taken serious hits include those that rely heavily on in-person services like accommodation and food services, and in goods-producing sectors because of supply chain disruptions. With easing pandemic restrictions, these hard-hit sectors might bounce back this year, constrained by a limited supply of labour and uncertainty surrounding the pandemic. A lasting challenge for Canada lies in its aging workforce. For years, Canada had relied on immigrants for a steady labour supply. But in 2020, Canada’s population growth dropped to the lowest rate since 1916 because of the pandemic-induced border shutdown. With immigration projected to increase in 2022 as borders open, the labour market might see some easing. The simple truth is that Canada does not have enough young people to replace its retirees. Significant investments in productivity and automation will be required to reduce the labour shortage.

The residential housing market in Canada skyrocketed in 2021 as households shifted spending from services toward housing, aided by generous federal support. The current housing crunch comes after more than a decade of restricted building, leading to chronic undersupply. Though investors play no small part in heating up the market, 2022 may see a market plateau or cool down rather than a burst. Construction is slowing because of a shortage of materials and labour, but it is projected to pick up again next year. Since there is a lag between housing starts and sales, it will take a couple of years for the current construction boom to meet strong demand. The upcoming years will see the real estate industry adapt to an endemic COVID-19 world. Demand for residential real estate will remain elevated, and construction will shift toward more residential and fewer commercial projects to accommodate the changing demand.

The takeaway This past year has been characterized by an uneven recovery that is slower than expected. Next year, Canada will transition from living with a global pandemic to coping with an endemic. The movements of COVID-19 will still cause fluctuations in the economy, though with less severity. Through it all, we expect a year of strong growth as demand at home and abroad remain robust. As government support wanes, challenges remain in making the investments to increase productivity and innovation to stay competitive in the global market. ABOUT RSM CANADA. RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment. RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. RSM Alberta LLP is a limited liability partnership and independent legal entity that provides public accounting services. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit rsmcanada.com

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SPRING 2022

PAYMENTS

Payment Channels Face a Distrust Deficit in the Wake of COVID-19 P

CI Pal has been examining Canadian consumer confidence in payment security, driven by a survey they conducted. As a global provider of cloudbased secure payment solutions, their research uncovers Canadians’ sentiment towards and behaviours around data security and payments following the COVID-19 pandemic. “With all this in mind, Canadian businesses need to consider how best to not only maintain, but grow trust among a cautious consumer base that needs to feel secure when making a purchase.” As a follow up to its 2019 report, the new This is Canada: The State of Security in the Eyes of Canadian Consumers surveyed more than 1,000 Canadian consumers and found that trust in the ability of organizations to protect personal information and ensure secure payment processes is of the utmost importance to buyers following a national increase in fraud during the pandemic. In fact, an overwhelming 85 percent of respondents said trust in a company’s corporate security impacts their spending with that organization, with 78 percent of Canadian shoppers saying they will stop spending with a company that was subject to a security breach, either forever (23 percent) or for at least a few months (55 percent). The survey shows trust can be rebuilt with consumers following a breach, but only if that organization can show that it has taken measures to address the vulnerabilities, such as admitting responsibility and investing to improve security (42 percent), announcing PCI compliance / PIPEDA compliance (25 percent), or engaging a third party to confirm that the company’s payment system is safe (25 percent). But Canadian consumers continue to proceed cautiously after the pandemic significantly reduced the number of card

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present transactions. Over a third (36 percent) of all Canadian consumers surveyed say they vet a company’s security practices before handing over personal information. An additional 51 percent are aware this is a practice that should be part of their shopping process, which is an indicator of shifting behaviours in the future. Even though thorough vetting may not be a regular practice of many consumers, there are certain red flags that can decrease trust and stop a buyer from proceeding with a purchase. A disjointed, or unfamiliar payment process, for instance, would lead 31 percent of consumers polled to refrain from checking out. This factor was reported to be the number one reason for cart abandonment, ahead of shipping costs, slow delivery, and the actual cost of the product. Further, it was surprising to see that while 42 percent of Canadian consumers felt retail was the least-trusted industry, there was no significant difference in levels of trust between paying in-store vs. online. That said, in addition to social media, in-store and online were the least trusted payment channels, while relatively new money sharing apps like PayPal, Venmo and Zelle were counter-intuitively more trusted. “Based on the patterns we’re seeing among Canadian consumers, it is evident that trust in a brand is exceptionally important, particularly due to the increase in understanding around security best practices of late,” says PCI Pal CISO Geoff Forsyth. “With all this in mind, Canadian businesses need to consider how best to not only maintain, but grow trust among a

cautious consumer base that needs to feel secure when making a purchase.” PCI Pal made the strategic business decision to open an office in Toronto, further expanding its successful array of trusted payment security solutions into Canada’s extensive pre-existing contact center market. The company is further focused on helping Canadian businesses safeguard customer trust by providing true cloud secure payment solutions. If you’re interested in the full findings of the survey and insights into what these trends mean for Canadian businesses navigating compliance requirements and secure payments, download the full report at the company’s website. PCI Pal is a leading provider of SaaS solutions that empower companies to take payments securely, adhere to strict industry governance, and remove their business from the significant risks posed by noncompliance and data loss.

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TODAY, THE RIGHT RELATIONSHIP CAN

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PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). Equipment fi nancing and leasing products are provided by PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank. In Canada, PNC Bank Canada Branch, the Canadian branch of PNC Bank, provides bank deposit, treasury management, lending (including asset-based lending) and leasing products and services. Deposits with PNC Bank Canada Branch are not insured by the Canada Deposit Insurance Corporation or by the United States Federal Deposit Insurance Corporation. Lending and leasing products and services, as well as certain other banking products and services, require credit approval. ©2021 The PNC Financial Services Group, Inc. All rights reserved. CIB EF PDF 0321-014-1798101

EQUIPMENT FINANCE REGULATORY NEWS

5 Key Reasons an Equipment Dealer Needs Inventory Financing E

quipment dealers face financing challenges from two sides: acquiring the assets they need to grow; and helping their clients find flexible financing programs. Inventory financing can help dealers meet both needs, efficiently and effectively. Inventory financing, at its core, is a form of asset-based lending in which the amount borrowed is determined by the value of your inventory. Typically, it will be a short-term loan or a line of credit; lenders will lend a percent of the inventory’s value. There’s usually no need for collateral since the inventory secures the loan. Here are five key ways in which dealers can benefit from smart, strategic use of inventory financing. 1. Purchase equipment. To survive, thrive and grow, dealers need assets to sell. Simply put, inventory financing lets you make the purchases you need when you need them. With inventory financing, dealers may be more able to buy in volume and earn volume discounts. The pandemic has reinforced the importance of inventory planning, with many dealers looking to carry more inventory than they would otherwise (when it’s available). Inventory financing can give them the ability to do so. 2. Purchase equipment for different industries. Inventory financing may be relatively common among traditional transportation companies. But it also can fill vital needs for other industries and equipment, such as forestry (chippers), construction equipment, electric vehicles, fire trucks, industrial equipment and material handling equipment ( forklifts). 3. Increase sales. Manufacturers supporting inventory finance programs help a dealer

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stock inventory and dealers which have inventory on hand will benefit from increased sales. In many industries, a customer won’t wait if the dealer does not have the inventory in stock when needed; that customer will simply find a dealer that has it. And, as the cost of vehicles — both new and used — and other equipment in every industry continues to climb, the vast majority of customers will need to finance their purchases. The ability to offer financing programs can often mean the difference in getting a sale or not. The ability to offer flexible programs to meet a customer’s needs can you seal a deal quickly. 4. Improve cash flow. Emerging from the pandemic, companies are watching and guarding cash flow in a way they have not before. Especially in a fluctuating economy, it can be smart to use funds from inventory financing for capital expenditures – and use cash for staffing and other expenditures needed to grow the business. 5. Improve customer relationships. When a manufacturer can help dealers acquire the equipment on terms that work for them, that manufacturer will realize stronger customer relationships for the short and long term. Offering financing options lets customers know you are putting them first. Results include greater brand loyalty and repeat business.

Additional benefits of partnering with an inventory finance company Today, with supply shortages fuelling pentup demand, the ability to partner with a reliable, solid inventory financing company is critical. Beyond the base reasons we’ve outlined above, dealers may realize some additional benefits. When you have the need for speed: Getting quick-turn credit decisions and expedited funding can be challenging. An experienced, customer-centric inventory

ISTOCK/ YOZAYO

BY JEFF COLLINS

finance partner can make things happen fast, often even providing same-day funding. When you need to finance used equipment: Not every inventory finance provider will do this, but the ones who do can be invaluable. When you need individualized financing programs: Some manufacturers partner with rigid lenders offering a “one size fits all” type of package. A lender who is truly an inventory financing partner, however, will be able to develop programs that work for your customers and their situations. Customers who may have considered purchasing elsewhere may decide to purchase from a manufacturer on a regular basis if they know financing options that meet their terms are available. Smart business in the transportation industry calls for smart use of assets — from vehicles to cash. Finding and working with an inventory finance partner can go a long way toward improving a dealer’s cash flow, inventory position and customer satisfaction. JEFF COLLINS is Vice President, Operations, Inventory Finance for Mitsubishi HC Capital Canada, Inc. is a wholly owned subsidiary of Mitsubishi HC Capital Inc., formed in 2021 through the merger of Mitsubishi UFJ Lease & Finance and Hitachi Capital.

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PAYMENTS

BY RODGER DESAI

s we increasingly rely on mobile devices to engage in payments and banking activity, the applications for digital identity technology are continuing to evolve in order to secure these transactions. With the digital payments industry expanding exponentially each year, digital identity technology now plays a key role in making digital financial transactions a quicker, safer, and more streamlined experience for both customers and merchants. With the ongoing and unpredictable COVID-19 pandemic, the digitalization of payments and eCommerce transactions is rapidly increasing, with a projected growth rate of 15.4 percent worldwide, expected to grow to $180.2 billion by 2026. As retailers migrate towards primarily conducting business online due to the ever-changing pandemic and resulting eCommerce swell, the opportunity for transaction and payment fraud continues to grow in tandem. With new and increasingly advanced cyber fraud attacks arising seemingly daily, retailers and financial institutions are turning their attention towards fully securing digital transactions, and looking towards identity verification technology to enhance safety, speed, and overall experience for businesses and customers alike. With these developments in mind, retailers and financial institutions are faced with considering where the future of digital identity technology lies in 2022 and beyond: ◉ Biometrics Technology Becomes Mainstream: As mobile technology and capabilities continue to exponentially advance, the capacity to verify identity utilizing biometrics technology will become more mainstream and widespread. While applications such as face scanning technology exist in our smartphones today, the next wave of biometrics technology will be streamlined and

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integrated into every step of the payments process to ensure the highest degree of security and efficient automation in identity verification, while also protecting consumers’ privacy. For example, verifying users and individuals based on behavioral metrics such as voice, the way we walk, and measurement of different behavioral metrics will become more widely used as a method to thoroughly identify users. ◉ The Growing 5G Market: With 5G technology being integrated into a majority of new devices entering the market, this improved functionality will further increase the number of digital transactions that consumers make. In the payments sector, 5G will transform the speed and ease of transactions, while providing merchants with more informative insights and data about their customers, markets, and products. With the market for 5G services expected to reach $115.4 billion by 2026, consumers will increasingly expect a secure, efficient, and convenient way to authenticate their identity and complete their purchase. To meet this growing demand, companies and merchants must embrace phone-centric technology and tap into 5G data-driven insights to provide secure identity verification across all channels. ◉ Advancing Financial Inclusion: With a history of preventing marginalized consumers from accessing affordable credit and establishing a financial record, financial institutions have perpetuated the exclusion and instability of many people. For far too long, many consumers have been left out altogether from the financial system, preventing them from establishing economic progress and inhibiting mobility. For example, in the U.S. a staggering 11 percent of the adult population (26 million people) doesn’t have a file at the major credit bureaus, and 8.3 percent of the adult population

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Three Trends Propelling Digital Identity Momentum in 2022 And Beyond

(19 million) has too little credit history on file to even generate a credit score. To remain both equitable and relevant, companies need to meet this financially invisible population by creating fair and safe identity verification alternatives to credit scores. Moving forward, the early adoption of growing digital identity technologies will be the key to success in establishing more secure and advanced digital payments. As the digital payments market continues to experience exponential growth over the coming decade, companies and institutions will need to look towards the next generation of identity verification technology, as it will help create a futureforward financial landscape that is more accessible and secure. RODGER DESAI is Co-Founder & CEO of Prove. Rodger is a mobile and digital identity expert who has been quoted by publications such as The Wall Street Journal, Forbes, CNBC, TIME, and the MIT Technology Review. Rodger is passionate about how technology can solve human and societal issues. In addition to his work at Rave Wireless, his business ventures have ranged from using mobile phones for microfinance village programs in emerging markets to enabling financial inclusion by leveraging Prove’s mobile identity technology to allow underbanked and credit-invisible consumers to access financial services. Rodger graduated from RPI and attended Harvard Business School.

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CYBERSECURITY

Mandatory Breach Reporting:

Are You Prep O

BY ROBERT MASSE

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rganizations that manage customer information — such as retailers, banks, airlines, marketers, and private businesses — may soon be at higher risk for privacy classaction lawsuits and face increased costs to manage data breaches. That’s because mandatory breach reporting is expected to come into effect in the fall of 2017. First introduced in the Digital Privacy Act of 2015, when the Canadian government amended the existing federal private-sector privacy law (PIPEDA), mandatory breach reporting will require organizations to notify affected individuals, as well as the Office of the Privacy Commissioner of Canada, of any data breach that creates a “real risk of significant harm to the individual.” They must do so “as soon as feasible” or face fines of up to $100,000 or — worse — reputational damage, if an affected customer complains or news of the breach leaks via a security reporter, like Krebs. “Significant harm” can include humiliation, damage to reputation or relationships, and identity theft. While businesses will be left to determine how quickly to report, report they must. They must also provide the privacy commissioner with a record of all security breaches upon request. If organizations fail to comply, the privacy

commissioner has the power to post breach notifications, raising the spectre of class-action lawsuits. Given the stakes of non-compliance, organizations both large and small are now considering the steps they must take to implement and test an appropriate

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CYBERSECURITY

pared? breach-tracking, response, and notification program.

Hope is not a strategy, so prepare today

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While every organization’s needs are different, the first step toward compliance is to take stock of assets to assess what information may be at risk in a breach. The second step is to evaluate current cybersecurity capabilities to see where they stand with respect to the new requirements.

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While the requirements won’t change a company’s core cybersecurity needs, they will increase risk for those whose systems are not already sufficient. That should be encouragement enough to make the necessary changes now. Small- and medium-sized businesses with strained resources should seek advice from an expert to assess their data assets and develop an appropriate security framework and breach response plan. For more mature or larger organizations, cyber liability insurance may make sense when overall breach-response costs are considered. As the availability of actuarial data related to cyber breaches grows, such insurance becomes increasingly feasible. Already, roughly one-third of US companies have some form of cyber insurance coverage. Canadian insurers are also offering several policies, such as coverage for network extortion and a data breach fund to cover expenses to retain a computer forensics firm in the wake of a breach. That said, insurance alone is not enough. Businesses of all sizes should also take preventative measures before mandatory reporting comes into effect. These include: ◉ Gaining an understanding of their online profile and which groups might target them through social media or other digital channels ◉ Using technology to uncover potential risks, which could include: threat intelligence, multi-layered endpoint security, network security, and reputation-based monitoring tools ◉ Retaining a third-party firm for crisis management/incident response ◉ Running practice drills to ensure the

organization has the skills necessary to respond effectively ◉ Implementing and maintaining both tracking and reporting mechanisms to document all attacks in order to comply with the strict new record-keeping requirements ◉ A coordinated response strategy As the cyber threat landscape evolves, so too must an organization’s breach-response strategy. To effectively mitigate today’s complex cyber risks, organizations need a proactive approach that is seamlessly orchestrated and executed — one that transforms a multifaceted process into one cohesive response. To build this type of “one-response” strategy, organizations must coordinate the responses of their various teams, including legal, privacy, insurance, cybersecurity, and forensics. Working cohesively, these teams should be able to address the full spectrum of cyber risks their organization may face, including cyber incident management, evidence preservation, and breach response. With a proactive and coordinated approach, organizations can take mandatory breach reporting in stride instead of on the chin. ROBERT MASSE is a national partner in the Risk Advisory practice of Deloitte Canada. With over 20 years of experience in cybersecurity, he’s built a reputation as a pragmatic security executive. He helps clients develop security programs like incident response, cyber intelligence and information security management. A thought leader in his industry, Robert has extensive experience in strategic and operational security domains with a focus on incident response and advanced threat actors.

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EQUIPMENT FINANCE

COURTESY MINERVA LEASING

How a GEN Z Used Lending to Build a Growth Business

BY SUZAN WILLIAMS

ometimes my idea of what a business will look like is totally wrong. When John Chrzanowski approached me to finance his mobile power-washing business, I envisioned he’d be spraying down houses and storefronts. He didn’t make fun of me, despite really having a much bigger vision. I read John’s business plan and was impressed — and stroked his first Minerva lease for a 2012 Kenworth steamer truck. The lease was also our first one to a Zoomer, also know as Gen Z: John, now 23, was barely 20 years old at the time. How did that go? I’ll let you decide. John has since leased a potable water hauling truck, followed by another steamer truck. The water truck enables him to use water for various purposes like dust control and filling cisterns, but mostly helps keep the steamers run without downtime in remote locations. Smart guy. John’s business, JC Mobile Services, has succeeded for the reasons most smart enterprises do. He plans carefully, works his tail off, and never leaves a job until it’s

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done exceptionally well. That sometimes means a 12-to-14-hour day pressure washing a 64,000 kg Caterpillar rock truck or de-icing rail cars in -40C, which takes 20 to 24 hours. (I might also have been wrong to guess John’s business would slow down for winter: because of the defrosting component and cleaning opportunities due to equipment downtime, cold snaps are even busier than summer days.) One huge commercial building took John’s team a full week to wash, and another assignment required washing 600 wooden rig mats. JC Mobile Services washed nearly 100 pipe hauling trucks for the Trans Mountain pipeline expansion, plus decontamination of heavy equipment like excavators, loaders, side booms and all the equipment that handles large-diameter pipe. So lots of really big, ultra-dirty stuff. Not only is it gruelling work, but it requires thought and understanding of the physics of cleaning greasy equipment, John says. “You need to wash properly, with the right detergents and degreasers or you’ll just throw grease back and forth. It’s about being diligent and doing really good work, every time.” One of John’s favourite stories (he’s got

way too many for his age) is of pressure washing passenger railcars for Warren Buffet to ride in on his Canadian tour. And it seems John has business acumen as well as work ethic in common with that train’s celebrity passenger. He says leasing is perfect for growing his business because it enables him to preserve capital and pay for equipment as he uses it, the same way he’d pay an employee. Being able to fully expense the payments is huge, and he loves that he can own the equipment at the end of each lease. It might have taken him years to save in advance for the same equipment, but cash flow and progressively proving his business model made growth less risky. “I didn’t know much about leasing, and Suzan explained it all to me,” John says. “She made it easy and completely painless.” And I can assure you the learning has been mutual. One of the greatest joys of my job is watching an entrepreneur take a great idea and run with it. But something even greater is the hope I see for John’s generation, with confidence that others share his drive and ambition. SUZAN WILLIAMS is General Manager of Minerva Leasing in Edmonton, AB.

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Total Finance Spring 2022

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