Global Banking & Finance Review Issue 17 - Banking & Finance Magazine by Global Banking & Finance Review®

Issue 17

Learning to trade Greg Morgan, CEO, Learn to Trade

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Dear Readers’

Head of Distribution & Production Robert Mathew Project Managers Megan Sash, Amanda Walker Video Production and Journalist Phil Fothergill Graphic Designer Jessica Weisman-Pitts Client & Accounts Manager Chanel Roberts Business Consultants Rick Saikia, Monika Umakanth, Stefy Abraham, Business Analysts Samuel Joseph, Dave D’Costa Accounts Joy Cantlon, Mirka Maruszak Advertising Phone: +44 (0) 208 144 3511 marketing@gbafmag.com GBAF Publications, LTD Alpha House 100 Borough High Street London, SE1 1LB United Kingdom Global Banking & Finance Review is the trading name of GBAF Publications LTD Company Registration Number: 7403411 VAT Number: GB 112 5966 21 ISSN 2396-717X. Printed in the UK by The Magazine Printing Company The information contained in this publication has been obtained from sources the publishers believe to be correct. The publisher wishes to stress that the information contained herein may be subject to varying international, federal, state and/or local laws or regulations. The purchaser or reader of this publication assumes all responsibility for the use of these materials and information. However, the publisher assumes no responsibility for errors, omissions, or contrary interpretations of the subject matter contained herein no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the publisher

For those of you that are reading us for the first time, welcome. Issue 17 is filled with the engaging interviews and insightful commentary you’ve come to expect from us. Our cover story, ‘Learning to trade with Learn to Trade’ is an exclusive interview with Greg Morgan the CEO of Learn to Trade. Learn to Trade is the largest and most successful trader training organisation in the world. We sat down with Greg to discuss what it takes to be a success in the forex market, and the future of Learn to Trade. (page 72) Flip to page 10 to discover the ways FE Credit is FE Credit is supporting and redefining consumer finance space in our exclusive interview with Mr. Basker Rangachari, Chief Marketing Officer, FE Credit. See how The Thai Credit Retail Bank is leading to provide financial support to the micro business segment in Thailand on page 38. And don’t miss our conversation on page 90 with Danish Samad, Group Treasurer & Director of Investments, Emaar provides where we get e look at Emaar, The Economic City. We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook. We have gone that ve gone that extra mile to ensure we give you the best from the world of finance. Send us your thoughts on how we can continue to improve and what you’d like to see in the future. Enjoy!

Wanda Rich Editor

Stay caught up on the latest news and trends taking place by signing up for our free email newsletter, reading us online at http://www.globalbankingandfinance.com/ and subscribe to the print magazine for direct delivery.

Issue 17 | 3

CONTENTS

inside... BANKING

The Evolution of Banking in The Face of a Digital World Chris O’Connor, CEO of Persistent Systems

How technology is transforming banking for SMEs

112

Alain Vansnick, Regional Director of Benelux and Nordics, Temenos

120

Let’s get together: The future of the working relationship between banks and fintechs

Sarah Maber, Managing Consultant at World Wide Technology

BUSINESS

How to approach fintech innovation in a saturated market

David Elms, Customer Experience Director, StatementReader

How to use the most recent Instagram trends to bring business financial success Nazar Begen, Chief Marketing Officer at Crello

How to make flexible working ‘work’ for the banking and finance industry Marcus Johnson, Operating Director, Michael Page Finance

How do you pick which technology your business needs? Jules Carman, Head of Digital Transformation, Accountancy, Sage

Why mobile is key to super-charging your travel experience Michael Bayle, Head of Mobile, Amadeus

As Automakers Shift Business Models, New Tax Strategies Shift into Gear

Dr. Andreas Ball, Partner, International Tax, KPMG International

101

Can Small Firms Really Stay Compliant?

104

Civil freezing injunctions: how corporates can control litigation

Shira Rottner, Business Development Manager, Shield

Bambos Tsiattalou, founding partner of Stokoe Partnership Solicitors

106

Weighing the value of contemporary art in killer-grams David Aiu Servan-Schreiber, Artist

110

The weaponisation of personal data: how consumers can regain control Niel Bester, SVP of Products for Entersekt

114

Breaking Down the Barriers to Productivity James Herbert CEO of Hastee

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100

CONTENTS

BUSINESS

118

This is the sound of finance

Roscoe Williamson, Head of Branding, MassiveMusic

FINANCE Single Counterparty Credit Limit (SCCL) and its challenges

Deependra Kushwaha, Head - US Basel III Reporting at global large bank

The Case for Stablecoins in Growing Regions Around the Globe

John Liu, Chief Product Officer, Fusion Foundation

The LIBOR Iceberg is Dead Ahead – Now is The Time to Start Steering Clear Jeffrey Catanzaro, Senior VP of Contracts, Compliance and Commercial Services, Integreon

108

Preparing for a post-LIBOR world

126

How to navigate the uncertainty surrounding the IBOR to ARR transition

Robert Downs, Senior Principal Product Manager, Finastra

Vivek Agarwal, Partner, Securities, Wipro John Geanuracos, Partner, Commercial Banking, at Wipro

132

Are Financial Institutions Ready for the BoE’s Vision for the Future of Finance? Henry Umney, CEO, ClusterSeven

136

Accountants undergoing digital transformation: make sure you know which gaps you are trying to fix Jules Carman, Head of Digital Transformation, Accountancy, Sage

INVESTMENT

Why it pays to make finance sustainable

Investment opportunities in Emerging Markets

Jonas Borglin, CEO, The New Division

Sean Thompson, Managing Director of CAMRADATA

The socially conscious private equity leader

Rosanna Trasatti, Managing Director, Global Head of Private Equity, YSC

Considerations in the selection of share plan providers

Tom Hicks, Jersey Director of Employee Incentives, Appleby Global Services

Can voluntary corporate (in)actions lead to mandatory retribution? Matt Ruoss, CEO SCORPEO UK

Issue 17 | 5

CONTENTS

inside... TECHNOLOGY

The Pressures of Digital Transformation

Bob Mudhar, Partner, Citihub Consulting

Creating software that humans trust

Why innovating for tomorrow is one of the biggest challenges facing FS

Andy Bottrill, VP EMEA, BlackLine

Simon Hill is CEO and founder at idea management firm, Wazoku

5G and Open Banking: Explosive growth or business as usual?

Scott Johnson, Vice President, Head of Product at Western Union Business Solutions

New thinking needed – why old approaches to non-financial risk management (NFRM) and operational resilience must change

Gaspard Biosse Duplan, Product Head – Sales & Trading at Acin

TRADING

Trade wars and volatility – Can cryptocurrency become a ‘safe-haven’ currency? David Mercer, CEO, LMAX Exchange Group

124

How trusted, traceable time brings clarity and stability to Financial Trading Leon Lobo, Business Development Manager at the National Physical Laboratory (NPL)

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CONTENTS

Interviews... REDEFINING CONSUMER FINANCE IN VIETNAM Mr. Basker Rangachari, Chief Marketing Officer, FE Credit In September of this year, Global Banking & Finance Reviews Phil Fothergill spoke with Mr. Basker Rangachari, Chief Marketing Officer at FE Credit to discuss the fastgrowing consumer finance market in Vietnam and the way FE Credit is supporting and redefining consumer finance space.

10 38

THAILANDâ&#x20AC;&#x2122;S LEADING MICRO SEGMENT BANK Mr. Winyou Chaiyawan, Chief Executive Officer, The Thai Credit Retail Bank Public Company Limited Thai Credit Retail Bank provides commercial banking products and services to retail customers and small and medium-sized enterprises, the in-house training ensures that all staff are able to meet the demands of a rapidly expanding customer base. Global Banking & Finance Review spoke to Winyou Chaiyawan, CEO of Thai Credit Retail Bank about banking in Thailand, the success of the bank and the future

Issue 17 | 7

CONTENTS

Features... 90

AN INSIDE LOOK AT EMAAR, THE ECONOMIC CITY Danish Samad, Group Treasurer & Director of Investments, Emaar Earlier this year in London we interviewed Danish Samad, Group Treasurer and Director of Investments at Emaar to discuss the companyâ&#x20AC;&#x2122;s success and this exciting city development.

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CONTENTS

Cover Story... 72

LEARNING TO TRADE WITH LEARN TO TRADE Learn to Trade is the largest and most successful trader training organisation in the world, with a 13 year history of major awards for service and quality. They have trained over 300,000 people worldwide to trade the foreign exchange markets to embark upon a new and exciting career as a private trader helping thousands of emerging investors on their journey to financial freedom. The CEO of Learn to Trade, Greg Morgan, boasts diverse and demanding career achievements that span thirty years across television, not-for-profit, corporate leadership, and now forex trading, We sat down with Greg to discuss his unique background, what it takes to be a success in the forex market, and the future of Learn to Trade.

Issue 17 | 9

Asia Mr. Basker Rangachari Chief Marketing Officer FE Credit

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ASIA INTERVIEW

Redefining Consumer Finance in Vietnam Vietnam is a progressive nation in South East Asia with one of the highest GDP growth rates today. The government and central bank have a stated agenda to digitize the economy, reduce cash transactions and move towards a cashless economy. Concurrently, internet user penetration rate in Vietnam is witnessing a staggering growth and is projected to hit 75% by 2023 with the adoption of smartphones increasing multiple folds. Other positive tailwind factors like growing talent pool, rising affluence, pro-business government initiatives and market conditions only project an upward trend for players in the lending ecosystem. Growth factors like the rise in household consumption expenditure poses a VND 1 quadrillion opportunity in the consumer lending market. This has attracted several players into the market and neighbouring economies to start or diversify into consumer lending. FE CREDIT, originally founded as the Consumer Finance Division of Vietnam Prosperity JSC Bank (VPBank), has become the largest player with over 50% market share of the unsecured consumer loans & credit cards market. Since the inception, FE CREDIT strived to deliver unique financial products to customers. It identified the gap between the needs

of new-age customers and available financial products, and decided to bridge this gap. The market conditions were in favour of a digitally-enabled lending solution and FE CREDIT left no stone unturned to become one of the earliest adopters of innovation. FE Credit has approximately 18,500 employees and about 20,000 third party sales staff. It has helped over 10 million Vietnamese customers handle their financial difficulties and improve the quality of life. It has developed a suite of fast and easy consumer finance products for mass and upper mass segments, especially those who donâ&#x20AC;&#x2122;t have access to bank loans via a large team of sales advisors including telesales advisors, direct sales advisors and consultants at over 13,000 points of sales, where the customers can reach FE credit through the channel of their convenience. In recognition for its dedication and achievement in providing leadership, innovation and excellence in Consumer Finance industry, Global Banking & Finance Reviews is pleased to announce FE Credit as the Global Banking & Finance AwardsÂŽ winner for Best Consumer Finance Company for Customer Experience Asia 2019 and Best Consumer Finance Company Vietnam 2019 awards.

Issue 17 | 11

ASIA INTERVIEW

In September of this year, Global Banking & Finance Reviews Phil Fothergill spoke with Mr. Basker Rangachari, Chief Marketing Officer at FE Credit to discuss the fast-growing consumer finance market in Vietnam and the way FE Credit is supporting and redefining consumer finance space. Phil Fothergill: First of all, thank you so much for joining us on this hook-up from Ho Chi Minh City and congratulations on receiving the awards. Mr. Basker Rangachari: Thank you very much for this amazing news. We are delighted, honored and humbled to receive these two prestigious awards from Global Banking and Finance. I want to specifically thank you for this global recognition on behalf of all our teams who have worked tirelessly to put FE Credit in the number one position. Phil Fothergill: I'd like to start by discussing the business and work that you do. We know that the financial industry in Vietnam is growing continuously. What do you think are the driving forces behind? Mr. Basker Rangachari: The growth of consumer finance in Vietnam is in tandem with macroeconomic growth but it's particularly aided by a few key factors. Number one is government policy. The government in Vietnam has been very progressive, they have been very market-oriented in the way they drive the growth. Particularly they've been very successful, smart and professional in attracting foreign direct investment. Just last year they attracted over 340 billion dollars of investment into the country. The second factor that helps this is that this foreign direct investment is going into rural areas, into manufacturing industries, into process-driven, and into labourintensive driven industries. What this is creating is a vast amount of employment for people in Vietnam, those particularly in rural areas, and with lower education. This then leads to people having much better

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disposable income, more stable incomes, which then leads to better economic stability. The third factor is that a large proportion of the population in Vietnam is young. Majority of them were born post the 80â&#x20AC;&#x2122;s and therefore they have ambition and desire for a better future, they are energized and motivated to work harder and upgrade their lives. Because of the combination of continued employment, rising salaries, the aspiration for a better lifestyle is at its peak and that consumerism is driving the growth of consumer finance. Phil Fothergill: What do you think about the future of the consumer finance industry? Mr. Basker Rangachari: Personally, I think the future for consumer finance is really bright. As the economy continues to grow, as people's aspirations grow, the prospects for consumer finance continue to grow. Why is that? It is still a largely cash economy in Vietnam consumer finance penetration is only around 11% which means there is a lot more upside for Vietnam to become a cashless society. So far, the growth of consumer finance has been driven largely by the expansion of the physical distribution network and therefore reach into rural areas has been crucial. The next wave of growth, however, will ride on the fact that a large proportion of Vietnamese are digitally savvy consumers. The other factor that makes consumer finance industry attractive is that today in the business the yields are attractive, the interest margins are good, loan losses are relatively low, and the economy is growing. And this has attracted many foreign players and many competitors particularly from Japan, Korea, and rest of the region to come into the Vietnam market and become our competitors. While there is increased competition what this means for the consumer is there's a lot more choice and beyond the consumer having choice it also raises the industry

standard and makes sure that the best players continue to grow. Lastly, I see the growth of consumer finance as very positive because we have a very supportive marketoriented regulator in the State Bank of Vietnam. They have been prudent and yet progressive in the way they deployed new policies in order to enable the growth of the consumer finance industry in a sustainable and equitable manner. Phil Fothergill: Well having said that, looking forward to the next decade, do you expect the market consolidation to continue? Mr. Basker Rangachari: Well it's a bit difficult to say whether the market will consolidate but certainly the market is transforming with the entry of new players and new styles of competition are coming in. With increasing digitization new capabilities are coming into the market. So certainly, it's transforming and with the increased competition we do expect a degree of survival of the fittest. Of course, if there are external changes in the economy for example if there's a global economic slowdown that would definitely affect Vietnam since it is a big export-oriented economy and that could have a domino effect in local sentiment in people's ability to borrow and therefore consumer finance companies. Inevitably, I don't expect it to consolidate in the short term in an organic manner, but rather more natural shakeout could happen if there is a slowdown in the marketplace. Which will then mean the better, faster, nimbler, and the more wellorganized companies will continue to grow in the future. Phil Fothergill: We're looking at Vietnam itself. What will you say are the challenges and indeed opportunities concerned with the consumer finance industry at this particular moment?

ASIA INTERVIEW

Mr. Basker Rangachari: I think one of the first challenges is a geographical challenge, so far the growth of consumer finance has been predicated on the growth of physical distribution network physically Vietnam is a very longish country and therefore access to rural areas is already partially a challenge. For consumer finance companies to set up a physical network it may not make commercial sense, the business case won't stand up to set up in every small village and therefore the inability to bring consumer finance to organize credit access to people in those places. The second challenge is black credit is still prevalent especially with the lowerincome segments. What is black credit? It's basically unorganized finance it could be illegal money lending at exorbitant rates. The challenge is for many of the people in these rural areas such credit is provided by a friendly neighbourhood lender who has no forms to fill. He makes cash available almost instantly and they simply have to pay back at the end of the day, or at the end of the week. So the entire process ease makes credit black credit still an attractive option for these consumers, although the interest rates could be more than double than that of a consumer finance company. And especially when we are looking at lower-income segments say, noodle seller, a factory worker, a motorbike rider who does delivery, for them time is money. So, the moment if the application process or the waiting time becomes longer than what they desire, they tend to go back to black credit. This is also the reason for consumer finance companies to make the entire process faster, easier, and simpler. The third challenge is credit scoring, because the credit bureau in the country is still relatively new. It's only been around for about four or five years. Consumer finance companyâ&#x20AC;&#x2122;s ability to lend based on bureau data gets limited by the quality of that information.

Issue 17 | 13

ASIA INTERVIEW

And finally, there are also collection challenges because it's a geographically a vertical country and many people work well outside of their hometown. The ability to track and collect from a customer who has gone delinquent can be a challenge. While these challenges exist, they are addressable and solvable. We at FE Credit have actually solved for them. The basic solution comes down to fast process, easy application, and quick credit decisions and we've been able to successfully do that using digital technology and digital apps on the mobile. There has been an aversion to borrowing to some extent because as with most typical Asian cultures Vietnam is a savings-oriented culture. However, more and more people especially in the lower-income segments understand that in order for them to have the lifestyle of the future they need to manage their cash flows and hence borrowing for the short term be it you know twelve months, six months, 24 months is not a bad thing in order to be able to afford a lifestyle for their family which is better than what it otherwise would be. As the market leader, we also have a duty to educate customers that there is something called good debt and bad debt. Good debt is when you borrow and you manage your finances so that you are disciplined in making the repayments and that way you can afford a lifestyle that probably would have been only available 24 months later you can afford it today. So this is something that we need to educate the consumers more and more about.

region across several countries through several economic cycles. One of the things I admire and I like is the fact that the State Bank of Vietnam is prudent yet progressive. They take a very measured approach to how they issue new regulations and they have growth caps on various consumer finance players, they monitor it on a regular basis, they issue new growth caps every year and therefore every player is only allowed to grow within a certain range. While that's great for the economy, of course, putting on a commercial hat we would love to have a higher growth cap. Now do I see the need for regulations to evolve? I think that there is an ongoing dialogue between the players and the State Bank of Vietnam will evolve regulations as the landscape changes. For example, as the country digitalizes more, we will see more electronic applications, electronic processing, electronic disbursements and some of the old regulations may no longer apply. As an example, when we launched our digital lending platform SNAP, we approached the State Bank of Vietnam to approve E-Signatures, whereas the earlier regulations required web signatures. Through dialogue and constructive feedback, we were successful in actually getting their support to launch E-signature and therefore make customer convenience significantly better. It's just an example of how regulations evolve in Vietnam, but this constructive progressive feedback and conversation is the way to go.

Phil Fothergill: Well you touch upon some of the issues concerning regulation in Vietnam at the moment? Would you personally like to see some deregulation or changes made?

Phil Fothergill: Well you mention quite a bit about some of the technological developments that you as an organization have invested in. Can you tell me what sort of things they are, why did you do it and indeed what were the results?

Mr. Basker Rangachari: I've been in banking for 22 years and worked across six geographies and therefore I've seen the boom-and-bust credit cycles in this

Mr. Basker Rangachari: To understand the technological developments and investments we've made one has to look back at the history since the

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beginning of FE Credit. FE Credit started in 2011 in almost a small room inside VP Bank as a division with four people, and since then it grew quite dramatically. Within the first three years, it became the market leader and by 2015 it was spun off as a separate company under the brand name FE Credit and under the legal operating name as a VP Bank Finance Company. Since then the growth momentum has continued. However, the management did not rest on its laurels. The management recognized that while the first wave of growth happened on the back of expansion of physical distribution, the next wave of growth is going to happen on the back of digitalization. The management made a big decision to invest in digitalization. This wasn't just about putting on a cool new website or a cool new app that made the front-end experience feel nice, it was actually about an end to end digital evolution program. Many of the front- end apps, for example our digital lending app, our card management app, our insurance apps, which are called SNAP, FE Card Mobile, and Shield, were all evolved and developed in a manner that was an end to end platform to enable a customer to deal with their finances without ever having to talk to our staff. In addition to that, many of the backoffice processes were automated using robotic process automation, using new technologies. What is really admirable is the way in which the digitalization was approached, it wasn't just about going and buying a big goliath core banking solution. In fact, the management took the approach of working with a multitude of Fintech's finding the best solution for each problem area and then putting them together. In our digital lending platform SNAP, the OCR (optical character recognition) capability, the face recognition capability, the identity verification capability, the instant credit decision capability, all of these were put together by bringing the best

ASIA INTERVIEW

of different FinTech solutions and assembling them together. And this wasn't just stopped at the front- end as I mentioned. Even the back-office processes were also automated and digitized to make sure that a customer who used to wait for a loan for anything from five to seven days could get an instant loan approval decision within 15 minutes after they complete their application. The benefit to business has been quite significant, when we launched SNAP in August 2018 as a pilot, we were getting around 500 downloads a day, as of last month we were hitting a peak of as high as 8,000 downloads a day by customers. So, one could see that if you put out a great solution the consumer adoption rate is pretty high, we are now even more bullish and will be pursuing digitalization with even more fervour than before. Phil Fothergill: Yes, all that sounds very exciting and was so very futuristic it does mean one thing, Vietnam like many other nations in the world is moving towards a cashless society how soon unlikely do you think that will start to occur? Mr. Basker Rangachari: As the market leader, every innovation that every credit launch will have an impact on the market. We are very supportive of the movement towards a cashless society. How are we helping? Firstly, our loans used to get disbursed in cash at various points of sale at post offices. Now we have increasingly migrated many of these consumers to get direct bank credits and to get cash into their electronic wallets and this is just one example of how we are supporting a cashless movement. Secondly, for payments, we have been promoting the use of credit cards and cross-selling them to many of our consumers so that at merchants they no longer need to pay with cash but instead use their credit line which is available ondemand both in physical plastic as well as a digital card in their mobile phones.

Phil Fothergill: Well following up from that of course, it is quite clear to see that your portfolio continues to grow very impressively. Can I ask you what you attribute that to and what your plans are for growth in the future?

Phil Fothergill: Well yes and that's been a big initiative for you. What would you say would be the other initiatives that you'd be looking for as you take the next stage forward in the development of FE Credit?

Mr. Basker Rangachari: Our portfolio continues to grow on the back of two key strategies. Historically there's been a huge focus on new to Bank, acquiring new to Bank consumers. But in the last year, year and a half we've been increasingly focussing on deepening wallet share with our existing customers.

Mr. Basker Rangachari: As mentioned our historical growth has been on the back of an expansion of physical distribution network. Our next wave of growth is going to come from digital transformation and the entire digitization of the customer experience. From initial acquisition to onboarding, through to disbursements.

Why? With existing customers, we have a deep understanding of their payment patterns, of their behavioural aspects, of their social and demographic profiles. Availability of a large amount of this kind of data enables us to do advanced analytics and prepare models which will enable us to offer these customers better credit at the time they want, in the form they want.

The other strategies which we will pursue actively and have been pursuing our alliances and partnerships. Our alliances with major Telco have given us great learnings and have been quite successful we will be pursuing partnerships in many more industries.

As a result, what we have seen is that our growth has been driven through two key engines: the new to bank customers and the deepening of the existing to bank. Because of this, the overall portfolio credit quality keeps on improving because the more we get to know our existing consumers the better we can serve them and the better we can help them manage their debt and collections. The other product that has helped us drive better portfolio quality is credit cards. Today when we cross-sell a customer on a credit card and they accept we're almost instantly able to issue them a digital card which then allows them to transact almost immediately with their mobile phones. Over time what this gives us is far better behavioural profiling, spend patterns, etc. This again helps feed better credit positioning, enables us to make the right offer at the right time at the right place. Overall, it's a good story and a good path to improving portfolio performance.

Finally, FE Credit as a brand is very well known with over 90% of people having top-of-mind awareness. We can do a lot more by creating brand engagement and building brand love and brand presence. Eventually, this should lead us to be able to make absolutely the perfect offer in a customized manner to the customer when they want it, where they want it, essentially a CMOâ&#x20AC;&#x2122;s dream. Phil Fothergill: Exciting and fastgrowing times ahead. Thank you so much for joining us today from Ho Chi Minh City and once again congratulations on the award from Global Banking and Finance. Mr. Basker Rangachari: It's been a pleasure chatting with you today on behalf of the team at FE Credit. I want to say a big thank you to Global Banking and Finance for these two prestigious awards. We are proud of receiving the award for delivering the best customer experience in Asia and the best personal finance company in Vietnam.

Issue 17 | 15

ASIA INVESTMENT

Why it pays to make finance sustainable In September 2019 more than 45 CEOs together with the UN SecretaryGeneral launched the Principles for Responsible Banking. Already incorporating more than 130 banks from 49 countries, representing more than $47 trillion in assets, these Principles aim to provide the framework for a sustainable banking system, and help the industry to demonstrate how it makes a positive contribution to society.

For retail funds an even greater impetus comes not from portfolio performance, but from investor demand. According to the recent EY report ‘Sustainable Investing: The Millennial Investor’, the value of assets under management in funds that focus on sustainability as a key selection criterion has grown annually by 107.4% since 2012. With millennials set to inherit more than $30 trillion, sustainable investments will continue to grow in demand.

It is the latest step forward by a finance sector that is rapidly gaining awareness of firstly how capital can be a driver for sustainable transformation, and secondly of how making more sustainable investments can be a significant source of competitive advantage for their funds.

This is a market opportunity that few fund managers can afford to ignore. Furthermore, developments at the highest level of government are making action in this area increasingly visible and are therefore hard for funds to avoid.

Portfolio performance and investor demand

European transparency and the Asian transformation

Partly this is an issue of portfolio performance, Fund managers need to mitigate the risk of being left with an investment that falls foul of increasingly stringent laws around environmental impact, supply chain conditions, performance in sustainability areas, and so on. However, for most the calculation ought to be around the greater value that investments in sustainable projects and organisations are likely to yield.

In March 2018 the EU Commission launched its Sustainable Finance Action Plan which has since led to the creation of an EU taxonomy for sustainable activities, which will provide increasing consensus on whether an economic activity is to be classified as environmentally sustainable. It also created the EU Green Bond Standard which will encourage market participants to issue and invest in EU green bonds. Finally, the EU Climate Benchmarks will enhance disclosure requirements, and so make benchmarking information more transparent and comparable.

Recent research from Morningstar examined the net return of funds domiciled in Europe to see if this theory holds true in practice. It found that more than 34 per cent of sustainable funds appeared in the top quartile of their category in the year to June and about 63 per cent made it into the top half.

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It will not be long before funds that continue to ignore these issues are rejected by investors, and investments that have neglected these issues lose

their value. Already this happening, most notably in the infrastructure investment in Asia. Population growth and increasing urbanisation in Asia will require between $20tn and $30tn in infrastructure investment over the next 15 years. Perhaps in recognition of the fact that around 70 of the 100 most polluted cities in the world are in Asia, the Asian Infrastructure Investment Bank has a mandate to screen its bond investments based on ESG investment principles. Enhanced decision-making There is a final driver here: a focus on sustainability will make the financial services industry better at making decisions. Today many investment managers look at annual reports to understand risk, but when it comes to sustainability strategies, technologies, opinions, impacts, and possibilities the move is so rapid that this retrospective look is rendered largely irrelevant. What an organisation has done in the past to mitigate its environmental impact is no real indication of what it will do in the future. This is a significant shift in mindset for fund managers. The decision is not which of a range of possible investments can demonstrate the best track record in sustainability; it is which has the potential for the greatest impact through transformation. This is not about investing in green businesses, it is to a large extent about picking brown business that can change and then exerting influence to encourage that change and create positive impact.

ASIA INVESTMENT

This will involve fund managers building their skills at asking questions and spotting which actions will ensure sustainability becomes a source of competitive advantage rather than a risk. Importantly, losing the dependence on historical report aggregators, and developing their questioning skills will bear fruit far beyond the sustainability agenda.

is still new, but there is no longer any time to wait and see. The pressure is on from customers, policy makers and other stakeholders to act. Furthermore, if the traditional players in this sector donâ&#x20AC;&#x2122;t act then new fintech rivals will â&#x20AC;&#x201C; and will start taking market share.

Success stories

So, how to get started? Begin by getting your own house in order. Credibility is very important for success and awareness. Review your own sustainability programs and make sure they are working to limit your own impact. Then make the case internally, build consensus, identify impact areas, and build partnerships. Be transparent about challenges and set targets. This is a major shift in mindset and activity, and it will take time to convince everyone of your case.

Sustainability is no longer a marginal interest; it is right at the core of some of the most significant investment decisions in the world. And there is a growing number of funds that can point to a strong sustainability position and impressive returns. Look at start-up Trine, which is really gaining momentum thanks to its sustainable approach. It is giving clients opportunities to invest directly into solar energy projects in developing countries. Or SPP where a certain percentage of each fund is invested in renewable energy. Then there is Summa Equity that invests to solve global challenges using the UN Global Goals as its compass, both as investment strategy but also for impact measures. These and others are all giving sustainability values the same priority and attention as financial values. Sustainability is part of core business in the investment portfolios. Getting started For funds that are keen to emulate this success, the time to act is now. This is a risk averse sector, and the idea of looking at a triple bottom line

Beyond, that, as you pivot, your investment strategy, communicate what you are doing. A growing number of organisations are tying their investment strategies to an international agenda such as the UN Global Goals. These enhance the strategy and deliver more widespread recognition. However you do it, find a way to present what you are doing on these complex issues in a way that is simple and engaging, it will attract support and investment. Not only will your position on sustainability become a source of competitive advantage, but your capital investments will be driving a positive transformation in the world.

Jonas Borglin CEO The New Division

Issue 17 | 17

ASIA BUSINESS

How to approach fintech innovation in a saturated market Innovators launching products to the fintech market have always faced huge pressure to demonstrate what is it about their products that makes them inherently unique and game changing. But as more and more brands continue to emulate one another’s USPs, creating a saturated market of similar platforms and services which have the same attributes at their core, those with smaller budgets and limited resources are finding it harder to stand out than ever before.

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So, what can fintech businesses of all shapes and sizes introduce to their R&D processes to create a fair market of competition that is underpinned by customer-focused – rather than revenue-focused – innovation? Embed, learn, build, challenge To do so requires a deep analysis and understanding of your audience’s core market and the challenges they face every single day. This, followed by an open process of testing, feedback and sharing of insights, will identify the ways in which your product can not just solve problems, but can present

the user with new tools they never even realised they needed. As a qualified accountant, I’ve long been drawn to the logical structure and varied applicability of Excel, particularly in the area of data analysis. Every accountant must learn the basics in exporting, manipulating then importing data to a range of software applications. However, seeing the needless repetition in data entry, manipulation and analysis tasks prompted me to innovate, using my passions for data analysis – and the ways in which technology can be developed

ASIA BUSINESS

to support it – to create my own intuitive and elegant software which wouldn’t just aid analysis but would upskill Excel users at the same time. For an innovation to work, it must be designed to fit a mass culture, change a user’s mindset and seamlessly integrate into their existing habits. Doing so is more likely to encourage early users of your programme to inform their peers about how it has fundamentally changed their job role. In turn, a well-thought out innovation which is based on extensive user knowledge will PR itself, saving you money in the long term.

Build new assets – and be prepared to fail While every new innovator believes their product is going to change the world, each will face challenges. For StatementReader, it was gaining market-wide acceptance of how the product fits within professional firms’ innovation strategies, combined with how to efficiently raise awareness of the product to a huge market and then effectively manage our clients’ expectations within the limited resources of our small business.

Any company in a similar situation will quickly realise the benefit of building on their existing assets to extend networks and open new pathways. To ensure your innovation stays on track, consider your stakeholders during the ongoing development and finessing of your product. Every stakeholder’s perspective has a place within conceptualising and implementing innovation, so identify the value each might bring to your product’s future, then source people within their networks with the relevant skillset, experience, goals and passion and find ways of collaborating with them.

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The best innovators will curate an attitude that promotes learning, development and partnership, and there are a huge wealth of external teams and networks you can harness to add a broader spectrum of possibility to your innovation. However, to move forward successfully, all parties should stay alert to the end goal but also accept that it could, in its first few iterations, fail. To get past this stumbling block, apply a suitable timescale in which you accept a failure has happened, rather than continually promoting something which is demonstrating it simply isn’t right for your audience. Take a step back, reassess, then reinnovate, perhaps changing the very model that underlies your original approach. Apply all your learnings and changes in perspective to ensure your product is right the next time. Explore and reflect You can never take your eye off the future, so before your product or platform even has chance to enter its comfort zone, identify some simple methods for exploring the effectiveness of it within new, unexplored markets. The NHS, for example, has tested product innovation by introducing doctors to upcoming technology which isn’t yet applied or available in hospitals, to gauge reaction and engagement.

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Innovation means different things to different people, so you should also aim to see it from these alternative viewpoints to prepare for your future. Consider how you could change your business model, marketing or product capabilities to gain a deeper understanding of your customers’ behaviour when using your product to gain clarity on where your next steps should take you. Channel your inner behavioural analyst, applying a user-centric focus from a diversity of perspectives. And stay aware of changing tools and working processes – particularly in the B2B space – to remain tuned to new integration and collaborative opportunities. Hindsight often teaches innovators to not be afraid of cannibalising or disrupting existing business models; the tech giants have little regard for this, and we should all take a leaf

from that book. Innovation – no matter the size of your business and your future scope – requires bold instincts and the confidence to be a challenger. Whether you’re creating a mainstream or niche innovation, make best use of client relationships and your networks to gain the insight and tools available to change your target audience’s daily challenges, in order to create a self-supporting model that continues to feed your innovation.

David Elms Customer Experience Director StatementReader

ASIA INVESTMENT

Investment opportunities in Emerging Markets In the past when investors considered Emerging Markets, they have been wary because things like pot holed roads, cheap plastic toys and corruption have often sprung to mind. However, this mind set is changing. Economic growth in some Emerging Markets is faster than growth in many advanced economies and, more billionaires are being created in emerging economies than developed ones. With most of the world’s population housed in emerging markets, most of which are very rapidly becoming consumers, we are probably on the cusp of a high octane new industrial revolution on a scale the world has not yet experienced.

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Asia has a major role in the emerging spectrum, powered by the twin powerhouses China and India but healthy growth in smaller economies has also contributed to Asia’s surge. Nevertheless, historically many investors have favoured a homecountry bias, tilting their allocations towards what’s familiar. However, through greater education and opening of minds and borders, this bias is shifting and enabling opportunities for investment because companies are no longer being viewed purely on their current status, but how they might look in five to 10 years from now. Emerging market countries are potentially better positioned today to withstand

increasing funding costs of debt, as a result of improved external imbalances and a more stable debt profile. Furthermore, public debt levels in some emerging market countries could be said to look more favourable when compared to developed markets. But how can investor’s best enhance investment opportunities across the equity, debt and small cap spectrum?

Economic growth vs stock market returns Firstly, it’s important to consider the relationship between economic growth and stock market returns. This can throw up many questions

ASIA INVESTMENT

Anomalous classification Investors need to consider the anomalies in classifying Emerging Markets too. Samsung is a popular example of the anomalies in classifying Emerging Markets. South Korea is ranked the 11th biggest economy globally but somehow not a Developed Market according to index providers. This puts the relationship between GDP and stock market returns back into focus. Analysing the likes of Samsung does not involve political risk but instead very much the dynamics of the relevant global industry. On the other hand, looking at a Frontier Market like Rwanda, where there are potentially only two stocks to invest in – a brewery and a bank – then the macro conditions account for at twothirds of the influence on stocks. on the foundations of strategic asset allocation; how managers (and consultants) derive expected returns; and country versus company influences. Many managers claim to be benchmark-agnostic, but often Emerging Markets managers are making mere tilts away from the benchmark index rather than genuinely independent portfolio construction. The index benchmark is the opportunity cost regardless of whether the manager likes the index or not. When it comes to addressing the question of stock markets’ relationship with economic growth, generally stock market wealth has

followed emerging economic growth, with the notable exception of China. For post-industrial, rich nations, the theory is no longer relevant. But even in emerging markets, there are complicating factors. For example, over the last ten years the GDP of Emerging Markets has doubled but investors could be robbed of years of bountiful returns by currency falls overnight. One way to better align investments with GDP was to cast aside the benchmark and concentrate on countries and companies that followed the “well-trodden path” of secular socio-economic improvement.

The smaller the stock exchange and its constituent stocks the more the influence of macro- economics. However, one myth that no longer stands is that foreign investors need to be in the market to make it investable. A far more relevant criterion is local bank rates. For example, if locals are getting 15% for money on deposit, then there is not much incentive to equity investing. But as rates come down then equity markets re-rate upwards. This this is why debt can be a more attractive way to play Emerging Markets. Over time, Emerging Market equities and debt have delivered similar returns but said there is a

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compelling entry-point to Emerging Market equities today after a decade of poor returns relative to developed markets.

Buying in China Despite a recent slowing down of the Chinese economy, China continues to have one of the fastest rates of economic growth in the world, adding the equivalent of “another Australia” each year 1 . But investors need to be aware that China is an anomaly. It’s a country where equity investors have not enjoyed great returns commensurate with its economic growth. The narrow Chinese equity index performance has been lacklustre because the Chinese government has only permitted foreign investors to buy into a select, few State-Owned Enterprise stock, not the guts of the economy. This is a market where appointing local specialists is key, as local knowledge is essential to invest wisely in China and avoid the pitfalls. Local retail investors dominate en masse and even mutual funds,

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supposedly run by professionals, behave like retail. This makes for a momentous market. Some predict that the future for China is select – but perhaps not with those companies currently investable. Looking at FANGS (Facebook, Amazon, Netflix and Google, now Alphabet, Inc.), they have drawn capital from Emerging Markets. Only China can follow that U.S. model. In the future it is possible that about ten companies, championed by the government there, will draw all the money. China, like Japan before it, is therefore likely to then merit its own allocation (and index) within capital markets in the future. Whatever the future holds, no other country is poised to have as much impact on the global economy over the next two decades according to the World Bank 2 who suggest that even if China’s growth rate slows as projected, it would still replace the United States as the world’s largest economy by 2030.

Sean Thompson Managing Director CAMRADATA

https://www.mckinsey.com/featured-insights/china/chinabrief-the-state-of-the-economy

https://www.worldbank.org/content/dam/Worldbank/ document/China-2030-overview.pdf

Sibos 2019 – A first for London and a first for Zhejiang province, China This year at Sibos 2019 a trade delegation from Zhejiang province in China arrived in London, marking the first time a department of commerce from the region had attended an overseas trade exhibition. In what has been declared as the most ambitious Sibos yet, it is also the first time the financial conference was hosted in London, at the Excel centre in the city’s docklands area. Therefore, Sibos became the first overseas host to a trade delegation from the department of commerce of the Zhejiang Trade Service in China. This demonstrated a monumental shift in strategy from China’s financial services sector, with Zhejiang leading the way. Zhejiang is a province in eastern China, along the East China Sea. The capital, Hangzhou is only 170km from Shanghai. The Zhejiang delegation at Sibos 2019 consisted of Zhejiang-based financial technology companies and two banks Tongdun Technology, BangSun Technology, Yunrong Innovation Technology, Hangzhou Sunyard Fintech Technology and Hangzhou WEIEASE Information Technology.

These Zhejiang-based financial technology enterprises headlined by Tongdun Technology are domestic professional service providers for smart risk control and analysis and decision-making. They deeply combine AI with business and provide smart user analysis, smart risk control for credit loans, smart anti-fraud, smart operation and other smart decision-making products and services to customers. These pervade through the government and finance, Internet, logistics, medical services, retail and smart city industries. Vice President of Tongdun Technology, Mr. Daliang Chen attended the exhibition and enthused: “We chose SIBOS to mark our first foray in to the international commerce arena as it is a well reputed financial summit which has the greatest influence and decisionmaking power in the world of finance. “It provided a great opportunity for Tongdun Technology to exchange ideas with and learn from global financial technology enterprises. Meanwhile, it also deepened my understanding of the current world financial industry and how to direct innovation integrating finance and technologies."

During the event, TONGDUN Technology presented their unique AI core technology, AI solution and shared the financial smart risk control and analysis & decision making service solution. The demonstration was a huge success with many blue chip international companies set to work with TONGDUN by 2020. Alongside Tongdun Technology, the other financial technology enterprises such as BangSun Technology, Yunrong Innovation Technology, Hangzhou Sunyard Fintech Technology and Hangzhou WEIEASE Information were delighted to demonstrate the financial products and trends of Zhejiang enterprises on a global stage. “The participation of the delegation formed by Zhejiang-based enterprises has shown the world the financial strength of Zhejiang and have opened an important window for overseas people to know the development status of Zhejiang financial services and the charm of the Zhejiang economy,” summarised Mr Chen.

Brought to you by Burr Media

ASIA TECHNOLOGY

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The Pressures of Digital Transformation A firm can have a thin veneer of a digital transformation perhaps by a new website or a mobile offering. Behind this can be a mixed bag of legacy and current systems with inconsistent approach to technology management and operations. Businesses can be content with this approach as the public image is of a firm that has transformed itself digitally. However, in Citihub Consulting’s experience, a digital transformation will deliver more for a business and be more sustainable if it is backed by the transformation that goes throughout a technology organisation. This means ensuring a software development lifecycle is fully aligned to the digital offering. The use of development toolchains ensures automation at every step and eliminates any need for manual intervention in the build, test, and deployment of software. Technology services should become automated and self-service. For developers to request development servers, the process should be automated, servers are hosted in the public cloud and then controls must be put in place to ensure they are taken down when finished. A digital transformation is

much more effective when it sweeps through an organisation and aligns everything to the more public image of many transformations. Why are relationships straining between different c-suite decisionmakers? Traditional technology representation at C-level is breaking down. It was common for all technology and related services to be represented by a single C-level person – be that a CTO, CIO. Underneath that title would be technology infrastructure, internal applications, IT security, data, and a firm’s external-facing client or internet operations. With the importance of technology as a whole to many top tier organisations (regardless of industry); the C level may now have many representations aligned to specific areas. A Chief Data Officer may exist alongside a Chief Information Security Office, with perhaps a Chief Technology Officer. Each will have their own objectives and agenda. They will no longer have a unified reporting below the CEO. Each set of objectives and agendas will naturally cause tension.

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ASIA TECHNOLOGY Why is it that this divide between finance and IT is particularly bad, and is worse in the UK than elsewhere? Technology is historically a cost centre. It is a cost for the front office businesses to bear. Commercial organisations are increasingly more like technology firms with a shop front. Hence, the business is actually a technology organisation and the traditional roles between business and technology are reversed. However, finance does not always follow this logic and continue to view all technology spend as a cost, as a burden, or as an overhead to an organisation. This leads to behaviour, such as cost allocation, where technology costs are spread over businesses as a tax. It leads to missing the value of technology investment to lead to revenue growth. In the UK, many firms are still dominated by finance backgrounded types rising to C-level. Tensions are created between finance and technology when there are entrenched and out-dated perceptions of technology in a modern top tier enterprise. How can decision-makers help to create bridges that can improve collaboration and smooth the process of digital transformation? Key decision-makers need to be the enabler of technology investment for their digital transformation. They should look at FinTech firms and start to understand the potential agility and reduction in time to market through modern technology practices. Leaders should shift to working with technology teams to understand what investment is needed to achieve FinTech levels of business alignment. It is unreasonable to expect a large enterprise to be a Fintech, but it is entirely possible to take a version of the best practice and see a real difference in an organisation.

Bob Mudhar Partner Citihub Consulting

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Creating software that humans trust We put our lives in the hands of software more and more every day. From business applications that help us to do our jobs, to the operating systems of our handheld devices, software is now an essential part of most people’s day-today lives – both in the workplace and at home. We live in a world where AI and automation enabled technology are becoming the norm. Deep learning algorithms are shaping innovation across a range of sectors, from oil and gas to financial services. Meanwhile virtual assistants and smart speakers have become commonplace in consumer homes. This surge in

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technology and our reliance on it means that software in various forms has become ubiquitous – but not necessarily trusted. The truth is humans are naturally bad at software: it’s not visible and it’s not tangible, so our natural reaction is often suspicion. For most, it’s difficult to grasp exactly what software is, what it does and, importantly, why it acts the way it does. Software is also powerful. This combined with its abstract nature can make it seem intimidating, even dangerous.

ASIA TECHNOLOGY

So how do we create good software that humans understand and want to use? What is ‘good’ software anyway?

environments, operations and policies. Ultimately, any software company worth its salt should be transparent about the procedures that safeguard your data.

Purity of purpose Purity of purpose, or doing one thing really well, makes software easier to market, but also easier to use, understand and relate to. If its function is clear and it fulfils a specific need, then humans can more easily imagine adopting it – especially if it’s going to make our lives easier. Of course, doing ‘one thing’ doesn’t mean it should only address one process or job. Software is more complex and capable than that. Intelligent automation can streamline a whole host of processes that collectively contribute toward one much larger task or goal. For example, in finance, using software to automate a number of manuals, routine tasks can significantly improve the entire close process. Connectivity Another important facet of ‘good’ software is connectivity. With so much software layered across different functions in an enterprise, a certain level of integration is vital. If solutions don’t work together, you may be forced to choose between best of breed software that doesn’t ‘play’ well with other tools; or a solution that works with your other applications but isn’t necessarily fit for purpose. Traditionally software brands have been insular and non-collaborative, attempting to force customers into only using their products. However, this mindset needs to change. In a more crowded and competitive software landscape, if it won’t integrate, customers will simply find an alternative that will.

While companies are undoubtedly more aware of IT security risks than they were ten years ago, it’s important to remember that good software can play a key role in managing this and many other forms of risk. For example, in the past, as a company neared the financial close, accountants reconciling accounts might find an error requiring them to reach out to coworkers for answers. This could culminate in a dead end – a colleague couldn’t find the relevant document or had failed to preserve a physical hard record. Automation software, on the other hand, provides architecture that enables accountants to track workflows across even the largest global enterprise – significantly improving visibility and accountability. Transparency When it comes to trust, transparency is perhaps the most important factor. Humans are curious, we want to know how and why something works. If confronted with a mysterious ‘black box’ that spits out recommendations or results, our natural response is often skepticism or caution. Unfortunately, with technology like machine learning, there is still an inclination to ‘hide the magic’ but explaining to users how this process works helps them to place trust in its final output. Finally, being able to trust the people behind the software is absolutely vital. It is much easier to place faith in a product, be that hardware, software, or something we use as consumers, if we have faith in the company that makes it. Again, this is where transparency comes in to play – customers want to work with companies that are honest not only about what they do, but also why and how they do it.

Ease of use Just like good hardware, software that is intuitive and easy to use is by far the most successful. If it’s easy to engage with, from initial set-up to day-to-day usage and ongoing maintenance, then it’s easier for a workplace – and its employees – to get behind it. Companies won’t have to waste valuable time working out how to get the best from their purchase, and workers will be better able to recognise the benefits. Security and risk In today’s world, it also is extremely important to work with software vendors that prioritise security, particularly when it comes to sensitive financial data. Businesses shouldn’t be afraid to scruitinise their partners’ security

Andy Bottrill VP EMEA BlackLine

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ASIA INVESTMENT

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The socially conscious private equity leader The days of the ruthless ‘barbarian at the gate’ and unscrupulous “corporate raider” are being replaced with a more thoughtful, more sophisticated and more socially conscious investor. The proof points are seen in the ever-rising trends in environment, social and governance (ESG), impact, and socially responsible investing. Like most marked behavioural and cultural shifts, this trend is driven by both internal and external motivating factors. Pressure from limited partners (LPs), brand management and an increased chance of returns sit highly among these reasons. However, it’s not enough to simply look the part of a socially conscious PE leader to reap the rewards. If PE firms want to seriously strike the balance between doing good and doing well, they’ll need to have these concerns entwined in how they operate, and they will need appropriate leadership in order to do so. The limited partners push and social positioning Broadly speaking, the move to socially conscious investments and practices in PE has been spurred by the requirements of limited partners. With monies from pension funds, universities, governments, etc, LPs are often representing the interests of average citizens. As such, these LPs need to be sure this money is being managed by people who have ethical standards that reflect those of their constituents. This requires PE firms to consider the current social environment in which we live. Diversity and inclusion, environmental sustainability and labour practices take a more prominent position in the public consciousness than

ever before. Much of this is reflected in the values of millennials, and research 1 has shown that millennials will spend more money on a product when it has social or environmental sustainability as part of its benefits. This transition, coupled with the increasingly public interest in private funding means that equity investment is now a spectator sport where the audience can play a shaping role– with a rotation of its thumb or a click of its keyboard – in determining whether the leader has earned the right to continue his/ her quest. Companies with shaky diversity and inclusion practices, questionable environmental sustainability or unethical employee practices present a substantially riskier investment proposition. One need look no further than the resignations of Miki Agrawal of Thinx fame or Adam Neumann, WeWork founder, to see this interaction effect. The public plays the role of moral arbiter. Or take the gig economy debate and the various companies which operate within it as an example. An attractive investment opportunity at first blush, but when public concerns around zero hours contracts and workers’ rights rise, valuations can tank. Drive for value and drive for values With all these factors considered, it’s clear why impact investing has risen to the fore in PE investment strategy. Many large PE firms have set up their own separate funds for impact investing. Bain Capital for instance has ‘Bain Double Impact’, focused on helping “mission-driven companies scale and drive meaningful change.” And, a whole new class of

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firm has emerged dedicated to positively changing the world. Harlem Capital is a NYC minority-owned firm whose focus is to “change the face of entrepreneurship by investing in 1000 diverse founders over the next 20 years”. And in the wake of its bold and purpose-driven mission it has attracted praise and support from the public, the media and large cap PE firms (e.g., KKR, TPG). Ostensibly, this looks like a perfect scenario. Businesses, PE Firms, LPs and society at large benefit from this more conscious and responsible flow of money. However, this scenario can only be truly achieved if this social conscience is an inherent, inextricable part of a PE firm’s culture, rather than reflexive attempt to respond to an emerging zeitgeist. To fully realise the potential of impact investing, PE firms must shift not only where they deploy their money but also become more sophisticated in how they build an investment thesis that deeply connects to the psychology of all company constituents and the public. No small feat. What leadership skills and culture change are needed? If PE Firms are to see the double benefit of impact funds, leadership needs to be beyond reproach, and they must dually promote a drive for value and values. The DNA and mindset of PE cultures and their leaders must evolve in order to rise to the challenge of a rapidly changing landscape. This mindset and cultural shift, like any other, is a leadership challenge. Our model of Inclusive Leadership highlights the keys to making the real difference. We have found that Inclusive Leaders focus on:

Curiosity – creating the conditions for learning, creative thinking, and openness to new ideas;

Courage – embracing the uncomfortable, taking risks, and empowering others; all crucial for leaders who will have to work to evolve a system that has historically produced great results in its previous mode of operating; and

Connection – deeply understanding self and others and building bridges for meaningful engagement; a nonnegotiable for investors to understand how to build a value-generating investment thesis that ignites public belief rather than ire

Our data shows that PE leaders score low on the 3Cs of the Inclusive Leadership model with a notable dip in Connection. This is not surprising given the rigid metrics that determine success or failure within the PE sector. Internal rate of return, and multiple of money will always have a high place on the agenda. However, in this brave new world of impact investment and heightened public scrutiny, leadership strategy and talent management approaches need to evolve to drive all the relevant success behaviours in its leaders. PE has the opportunity to rewrite its own history. Once seen as a value destroyer, stripping companies of assets for profit, the stage is now set for it to balance driving value and driving values. PE leadership needs to deeply embed the values they seek to espouse and create a leadership culture that is open to ideas and investment not solely from a financial returns perspective. Doing good and doing well are not mutually exclusive.

1 Koch, Lucy. “Do Millennials Care About Brand Social

Responsibility?”EMarketer, EMarketer, 28 Jan. 2019,https:// www.emarketer.com/content/millennials-want-brands-to-besocially-responsible.

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Rosanna Trasatti Managing Director, Global Head of Private Equity, YSC

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Why innovating for tomorrow is one of the biggest challenges facing FS The emergence of the cloud, mobile and other digital technologies over the past decade has meant that barriers to entering a market have lowered. It’s now possible for a new market entrant to come up with up with faster, better and more efficient ways of doing things than traditional providers – in broad terms, applying an innovative approach to familiar challenges and even creating new products and services entirely.

different financial services. Traditional banks and other FS providers have for the most part upped their game, adopting a more innovative approach and applying that to as many areas of the business as possible.

retain customers. They had to become more innovative themselves in terms of products and services to protect market share and they have achieved this – to an extent – by embracing innovation and turning to the crowd.

But much of this innovation is focused on the here and now. How do FS firms retain this focus but also keep an eye on innovating for tomorrow?

This is more applicable to Financial Services (FS) than almost any other sector. Not that long ago, both consumers and businesses would manage much of their financial matters through one main provider – banking, credit cards, loans, transfers, currency exchanges and more.

A need for innovation

If they canvassed the thoughts of a range of stakeholders - employees, customers, partners, local communities and more – and provided them with a platform to submit, discuss and develop ideas, banks can gradually become more innovative, thanks to the shared insight, requirements and feedback of the people who know their business best. Given the fact that many banks are not really structured to innovate, this is no mean achievement.

It’s an entirely different situation now, with a whole host of more agile and innovative challenger brands entering the market and many other consumerfacing brands such as supermarkets and ISPs also offering a number of

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FS firms have not generally enjoyed the best of reputations when it comes to innovation. In many countries, a small group of banks have dominated the market for decades and in many cases, centuries. But an influx of FinTech start-ups, offering services that were cheaper, more flexible, quicker and crucially more innovative, changed the FS market forever. It meant that banks could no longer rely on inertia, apathy and lack of choice to

Innovating for today and the on-going improvements that result from that, are hugely important in FS. But no organisation can afford to take their eye off the future either.

ASIA TECHNOLOGY

Innovating for tomorrow This is important because change can occur so rapidly in modern business. When Metro Bank received its full UK banking license in 2010, it was the first one to do so in a century but there have been another eight at least since then. People often cite Lehman Brothers as an example of a company that didn’t innovate for tomorrow and suffered the ultimate consequences. That’s true, but an overlooked element in its demise is that just a few years before it crashed, they had some of their best financial figures ever. When the end for a tired and jaded business comes, it can come quickly. Similarly, powerful new organisations could emerge into FS. There have been persistent rumours about Amazon entering the FS market for example. If a company with such a focus on innovation and customer experience could bring those attributes to banking or insurance, then the impact on the customer bases of traditional providers would be huge. Alongside the day-to-day improvements that many banks and FS providers have already tried to address, there must be provision for bigger and more transformative ideas to grow and take shape. This really comes down to changing the business structure to

ensure that innovation is front of mind in everything the organisation does. Making the change Specific measures that FS firms should look at, would include: a genuine senior level commitment to cultivate and support innovation; encouragement for people to engage and collaborate; the right method to manage ideas; a broader group of stakeholders from which to crowdsource ideas; and the overall establishment of a culture that fosters and embraces innovation. That last measure is especially important. A bank could be set up to deliver a more innovative approach but if the company is not brave enough to implement or even consider some of the bigger and more ambitious ideas, then there is little point in putting a system in place that unearths them. The purpose of innovating for tomorrow is not to necessarily nail the most ground-breaking idea ever but to ensure the organisation is ready to discover it. Game-changing ideas are popularly presented as coming to someone in a flash of inspiration, but this is rarely the case. Rather, it’s the culmination of previous discussions, half ideas and older innovation that combine to provide the spark. To have that a bank needs to have been committed to innovation in the long-term.

It’s about building the right mindset and processes to be more changeable. Banks must become nimbler and more experimental, and steer what the future business will look like, aligning innovation to the strategic direction and goals of the organisation. Doing so will make them sustainable in the long-term and truly future-ready, capable of surviving no matter how the market changes.

Simon Hill CEO and Founder Wazoku

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Thailandâ&#x20AC;&#x2122;s Leading Micro Segment Bank Thai Credit Retail Bank provides commercial banking products and services to retail customers and small and medium-sized enterprises, the in-house training ensures that all staff are able to meet the demands of a rapidly expanding customer base. The Bank offers products such as deposits, housing loans, SME loans, Micro Finance loans as well as promotes financial literacy to the community and Thai society. This large range of products continues to expand and grow Global Banking & Finance Review spoke to Winyou Chaiyawan, CEO of Thai Credit Retail Bank about banking in Thailand, the success of the bank and the future Philip Fothergill: Let's find out a bit more about what you've been doing at Thai Credit Retail Bank in recent times. I suppose the obvious question is what do you think has led to the success of this latest award Winyou Chaiyawan: I would like to give the credit to all of my team who have been working very hard throughout the year and we try to maintain our focus on what we can do and can deliver best and everyone is passionate to be, to build ourselves to be the best micro finance bank in Thailand. I think this is very important for our success Philip Fothergill: So, it is a success story and obviously a great team effort. Let's talk a little bit more in general terms

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about what the banking opportunities are actually in Thailand at the moment, how would you describe that? Winyou Chaiyawan: I think the banking landscape in Thailand will change quite a lot in the next few years, and we see that digital banking and online service will be the next thing and the country is also promoting the cashless system, so I think in the next few years we will see that the society is moving towards cashless payment, and there will be less and less use of cash, although the question, the big question is how fast the customer can change that behavior and adopt into the new system Philip Fothergill: But you certainly feel that your society is moving to a cashless operation at the moment? Winyou Chaiyawan: Yes Philip Fothergill: And looking at that you know because it uses a lot of Technology, how would you see the digital strategy of your organisation operating at the moment, I know you've been working on that, how is it developing now? Winyou Chaiyawan: Yes, in the past year we have developed the digital platform and the first one that we will offer to the client will be on this cashless system, that we will offer the e-wallet to the customers whereby the customer can use this as a payment without cash and we also see that the country as a whole is developing

the digital ID platform and this is going to be the platform for all the banks, so it will help the banks to verify the customer through the electronic KYC Philip Fothergill: So, quite exciting times, obviously how much investment, I don't mean the exact figures, but what sort of investment actually has been involved in bringing this system to operation satisfaction? Winyou Chaiyawan: Yes, we have invested quite a lot on this, I mean not only on the money but also time and resources of our team Philip Fothergill: Yes, I can understand that. What about other products that you have planned for the future? Winyou Chaiyawan: Apart from the e-wallet that we offer to our loan customers, we also will launch the new loan product which is the fast approval loan and this will basically target informal employee who need emergency cash, so basically with this product, the customer can get approval of the loan within 30 minutes Philip Fothergill: So obviously, speeding things up a huge amount and is this something that you've actually seen a need of people said I really wish you could be faster or is it something you just want to offer as a new service?

ASIA INTERVIEW

Mr. Winyou Chaiyawan

Chief Executive Officer The Thai Credit Retail Bank Public Company Limited

Winyou Chaiyawan: It's going to be a new service and it's going to be through the digital platform because with the current process, we will not be able to do the fast approval, so everything has to move into the digital platform in order to speed up the process Philip Fothergill: Well, another one of your priorities is to build strong relationships with your customers and obviously new facilities will help. Tell us a bit about how you actually concentrate on keeping that going Winyou Chaiyawan: Yes, we will continue to build a deeper relationship between our branch team and our customers, what we have new this year is we have the Learning Center, so fundamentally it's a place to educate our customer on the financial literacy and we also have the scholarship program for the children of our customer. You know this is our contribution to the community that we would like to promote the financial literacy to our customers and being part of the community Philip Fothergill: And obviously, one tends to think of customers as being individuals, but I know that you do concentrate a great deal on SME small to medium enterprises and micro SMEs, how do you actually open up to encourage them to be more involved?

Winyou Chaiyawan: Actually, all of our customers are micro SME, they borrow the loan from us for the business purpose only and not for the consumption, so the loan is used either for business expansion or working capital and actually 60% of our customers also borrow from the informal lender and 50% of them never borrow from the bank, so I think we are making the big impact to the community in terms of providing the financial access to these group of people, so basically we are promoting the financial inclusion in the system

Philip Fothergill: Excellent! Final question for you really, how do you see the next three years looking into the future and future gazing, what you think the bank will develop or how will the bank develop?

Philip Fothergill: And you feel that is effective at the moment?

Philip Fothergill: Obviously exciting for you, lots of things to look forward to, in the meantime congratulations on your award. Thank you so much for coming

Winyou Chaiyawan: Yes, we are doing more and more. We have more and more customers of this type, that have never borrowed from any bank before, so we are bringing them into the banking system

Winyou Chaiyawan: I think we just maintain on two principles, the first one is we're going to continue to grow in this micro finance segment in Thailand and second, we have to transform ourselves and our services to be on the digital platform, I think this is the two principles that we will maintain in the next years

Winyou Chaiyawan: Thank you very much

Issue 17 | 39

Americas 40 Issue 17

AMERICAS BUSINESS

How to use the most recent Instagram trends to bring business financial success When Instagram was launched in 2010, it was viewed by most as yet another social media platform that the online community could use to share photos with their followers. At the time, no one could’ve predicted that the platform would reach 1 billion active monthly users, over 25 million registered business accounts and approximately 2 million monthly advertisers by 2019. With such impressive figures, it comes as no surprise that Instagram is now viewed as a crucial component of marketing and financial strategies of many businesses worldwide. One trend that has come to light in recent years and continues to grow in strength is influencer marketing. Partnerships with large, micro, and the more ‘niche’ nano-influencers, are predicted to become an $8 billion industry by 2020. According to surveys 1 , 39% of marketers spend more than half a million on influencers relations, while 17% have an annual budget of over $1M for influencer marketing.

But despite the compelling evidence, only 5% of startups and small businesses 2 have embraced Instagram as a marketing channel, which is something we’d strongly encourage. At Crello, we have taken these figures to heart and view the platform as an essential tool for our business development and financial growth. With trends and tool developments continually shifting and changing, it’s crucial to keep an eye out for all that’s new. This year alone, we have noted 5 key trends that took the platform by storm. Sophisticated Design One trend that we have noticed on Instagram is the continuous improvement in the visual quality of content published by brands and influencers alike. Whilst striving for perfection and exceeding audiences’ visual expectations, more attention than ever is being dedicated to ensuring that the quality bar remains high.

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AMERICAS BUSINESS

A number of new design features and functionalities were launched earlier this year to accommodate the need, giving brands and influencers the opportunity to enrich their content and use the developments to encourage engagement with their audience. A perfect example of this is the growing collection of stickers for Instagram stories or the option to add music and lyrics. Instagram collages are another top trend that has been utilised by brands to introduce products to their busy audiences more quickly and efficiently. While big brands tend to spend their budgets on graphic designers and photographers, smaller businesses can use online design tools like Crello to create and customise branded, professional visuals for Instagram and cut design costs without having to compromise on the quality of the content.

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Social Activism

Shoppable Posts Over 70% of Instagram users think of the platform as a useful tool for finding products or discounts and discovering new brands. New features such as the option to add product tags to posts or product stickers to stories as well as an Instagram shopping feed, were introduced to address this growing trend. Now users can purchase products directly through the in-app checkout feature, making the selling and buying process more convenient. Instagramâ&#x20AC;&#x2122;s top influencers also have access to the feature and can tag products sold by brands participating in the checkout programme. In light of this, we highly recommend linking product catalogues and Instagram accounts to any brands planning to engage in influencer marketing in the future.

With sustainability and social responsibility becoming such a hot topic this year, conscious consumption and social activism practices are being promoted by regular social media users and companies who wish to be viewed as eco-friendly by their customers alike. According to a recent Global Web Index study 3 carried out in the UK & America, more than half of digital consumers pay attention to a brand's mission and social concerns when deciding if they want to buy their products. Also, the study highlighted that Millennials and the Gen Z generation are the main cohorts of consumers making purchases that reflect their beliefs and values. Utilising Instagram as a platform to demonstrate awareness and support for important causes such as Pride month, anti-violence movements or

AMERICAS BUSINESS

environmental issues is a definite trend employed by brands to increase customer loyalty and grow their customer base. Although the trend itself isn’t necessarily new, it has taken the platform by storm this year, which was recognised by Instagram with a new way to support charitable causes. Now, brands can add a donation sticker to their stories and collect the funds for non-profit organisations. Interactive Stories and Ads Instagram stories and ads have been classified as the two most popular features 4 businesses use in their marketing strategies. Given that they attract more than 500 million daily viewers and can also act as a way to integrate and expand Instagram campaigns on to Facebook, this comes as no surprise. In our highly digitalised world, Instagram stories should be eyecatching and memorable, and a clear trend in that regard are brands aiming to make these as interactive as possible. Features like polls, countdowns, questions or the chat option are used to generate more engagement while simultaneously making the story more enticing and colorful for the viewer. To support these efforts further, Instagram enabled its users to create their own augmented reality filters earlier this year. The feature means that businesses can showcase their creativity with branded augmented reality experiences and allow their followers to use filters featuring products in their stories for added visibility and brand awareness. With 83% of Instagrammers using this platform to discover new services and products, and 72% being active online shoppers, Instagram is certainly worth investing advertising budget. The extent of financial investment

in the tool by major brands is significant, with some spending millions on the platform every year. The Rise of Authentic Influencers Influencer collaborations have been an ongoing trend for quite some time. The level of such partnerships has reached an all-time high in 2019, with new tendencies emerging within the trend itself. One such development is authenticity and more marketers beginning to understand the benefits of choosing to work with smaller, more niche influencers. What sets such nano-influencers apart from the crowd are their smaller following and a highly engaged audience. In effect, this means that such partnerships don’t require a high budget and their product or service recommendations seem as natural and credible as advice from a friend. Similarly, micro-brands are often viewed as more authentic than business accounts with millions of followers, and usually attract higher levels of engagement. Conclusion 2019 showed us that Instagram marketing is no longer about how many followers we have. Instead, it’s about bringing authenticity to the table by talking about social issues as well as populating our feeds with influencer generated content and high-quality, engaging visuals. As entrepreneurs and brand strategists, we need to monitor and keep up to speed with all social media developments as well as adapt our marketing strategy accordingly. We have to ensure that our Instagram feeds are creative and engaging, our content compelling and authentic, and our customers satisfied with our activities and products. Otherwise, we risk losing out on loyal followers and even the company’s financial gains.

Nazar Begen Chief Marketing Officer Crello 1

Koch, Lucy. “Do Millennials Care About Brand Social Responsibility?”EMarketer, EMarketer, 28 Jan. 2019,https:// www.emarketer.com/content/millennials-want-brands-tobe-socially-responsible. https://linqia.com/wp-content/ uploads/2019/04/Linqia-State-of-Influencer-Marketing2019-Report.pdf

“Instagram Marketing Statistics 2019.”99firms.Com, 24 Aug. 2018,https://99firms.com/blog/instagram-marketingstatistics/.

“Consumers GoingGreen: Everything You Need to Know.”GlobalWebIndex Blog, 11 July 2019,https:// blog.globalwebindex.com/chart-of-the-week/greenconsumerism/.

Hutchinson, Andrew. “The State of Instagram Marketing 2019-Part 1: Current Use of Instagram byMarketers.”Social Media Today, 24 June 2019,https://www.socialmediatoday. com/news/the-state-of-instagram-marketing-2019-part-1current-use-of-instagram-by/557396/.

Issue 17 | 43

AMERICAS INVESTMENT

Considerations in the selection of share plan providers Long ago I lost count of the number of times that I had heard employees referred to as a company’s greatest asset. The importance of the ability to attract, motivate and retain employees will not be lost on anyone; the challenge is often how best to maximise that ability in an increasingly competitive market.

base, jurisdictional reach and, ultimately, what the company wants to achieve from its share plans. It is important that a company understands this and tailors its policy accordingly. To those less familiar with share plans, this is where things can start to become particularly daunting.

It is not uncommon for employee share plans to form a key element of a company’s remuneration strategy, often an efficient way of engaging staff whilst aligning employees’ interests with those of the shareholders.

Different jurisdictions have differing mechanisms for the facilitation of share plans, but broadly the concept of engaging third parties to assist remains constant.

As the sophistication of the plans develops, and the population to whom they are made available extended, not only does the potential reward to the employer of issuing the plans increase, but so too does the complexity of their management. There is no “one size fits all” approach to the adoption of share plans and the types of plans will be influenced by a number of factors including the size of the company, nature of ownership (particularly around whether the company is listed or not), financial sophistication of the employee

44 | Issue 17

Typical parties that a company may engage with in the facilitation of their share plans are legal and tax advisors, trustees and administrators. Consideration should also be given to brokers, albeit these parties are appointed by the trustee and administrator in the case of listed companies adopting share plans. Selecting the right providers in relation to a company’s share plans can be a complicated process, particularly when it comes to selecting a trustee and an administrator. The consequences of selecting the wrong partners can cause significant expense,

AMERICAS INVESTMENT

from both a financial and a time perspective. Likewise, engaging the right partners can really maximise the value of your companyâ&#x20AC;&#x2122;s employee incentive proposition. Advisor In most cases, law firms and accountancy firms will be in a position to provide advice on your share plans. They will initially guide you in determining what types of plan are most likely to help you achieve

the companyâ&#x20AC;&#x2122;s goals. The adoption of share plans can be a significant investment, in terms of both time and financial cost, and it is important to ensure that you maximise the return of your investment through the adoption of the most appropriate plan(s) initially. Whilst considering what plans best achieve your share plan goals, your advisors will also be ensuring that plans are compliant from both legal and tax perspectives. The global reach

of the issuerâ&#x20AC;&#x2122;s employee base will have an impact on the advisor they seek to engage. Some advisors have a particular focus in certain jurisdictions, whilst others will have a global reach that can match that of the employee base you are seeking to incentivise. Unfortunately, a plan that is compliant and efficient in one jurisdiction may not be in others and it is therefore important to ensure that your advisor has the local knowledge, or access to local knowledge, in each jurisdiction that you intend to issue your share plans.

Issue 17 | 45

AMERICAS INVESTMENT

Once the right plan(s) have been agreed, your advisor should then be in a position to assist in the drafting of the relevant documentation. This can include plan rules, trust deed, linking agreements, funding agreements and in many cases communications with employees. By this time you should be considering trustees and administrators. Ongoing compliance is important and something that your advisors should also be able to assist with. Changes in legislation, lately most notably around reporting requirements, continue to increase and it is important to have a relationship with your advisor whereby this is actively managed.

46 | Issue 17

Trustee Employee Benefit Trusts (EBTs) have for a long time been the vehicle of choice in assisting with the facilitation of share plans for UK companies and their flexibility has seen their popularity spread globally. How the EBT is used will vary depending on the nature of the company and the share plans adopted but in any situation the engagement of a specialist, independent, professional trustee with specific knowledge and experience in employee incentive arrangements, will add significant value in the overall provision of a company’s share plans.

Whilst the concept of a one-stop shop for the provision of share plan services still exists, we have seen the market shift away from it in recent years. It’s not to say that the onestop shop should not be considered, however, it seems that share plan issuers are more frequently adopting the approach of engaging the most appropriate, “best of breed” provider of each element of the required services. This is particularly important when selecting your trustee, as the EBT can underpin your share plans offering. Furthermore, when you consider the importance of trustee independence, where is the value in selecting a trustee based, essentially, on its lack of independence from other parties involved?

AMERICAS INVESTMENT

The engagement of an independent, standalone trustee should add a level of comfort to the share plans issuer. A professional trustee will also be able to work with other parties, such as administrators, in a manner that brings with it controls around processes and ultimately adds a level of governance to the overall share plans provision. An independent trustee will understand the roles of each party involved in the facilitation of your share plans and ensure that those lines do not become blurred. This can significantly reduce the risks associated with cases such as where the administrator, a service typically provided onshore, could be seen to be exercising discretion on behalf of the offshore trustee; the potential consequence of which is the trust being deemed to controller onshore, and taxed accordingly. If you consider that one of the primary uses of an employee benefit trust is to hedge awards and that one of the reasons, typically alongside expertise, of utilising the services of an offshore trustee is that the trust assets are sheltered from Capital Gains Tax, it is not hard to see the potential financial cost of getting it wrong. Something else to consider is the benefit of having an independent trustee who is able to step in to provide flexibility that might not otherwise exist where, in the case of a one-stop shop provider for example, the rigidness of the administration processes (often dictated by the share administration platform) dictate the flexibility of the trustee and service as a whole.

Consider then the ability of a truly independent trustee to work with the most appropriate other third parties in respect of brokerage. Typically, a one-stop shop provider will utilise their own broker or one that they may have a financial arrangement with. The trustee’s engagement of a broker should, as with all trustee’s decisions, be based purely upon what is best for the beneficiaries of the trust. The trustee should therefore be considering a broker’s ability to trade the issuer’s stock, especially where liquidity is an issue - you would often see the issuer’s corporate broker being considered - and where commission is levied at an appropriate rate relative to the market. A truly independent trustee will be in a position to make appointment decisions free from conflict, financial or otherwise. •

Whilst the uses of an employee benefit trust will vary from client to client, the key advantages will largely remain the same:

•

Flexibility – the services provided by your trustee can be tailored to ensure that the share plan issuer’s goals are met effectively;

•

Independence – the trustee’s fiduciary duty is to the employees. The use of an independent, professional trustee will provide comfort to the employees that their interests are being looked after, in turn adding value to the reward proposition;

•

Confidentiality – the trustee can be detailed as the sole shareholder of incentive shares. This is particularly useful where the trustee acts as nominee for employee shareholders.

Issue 17 | 47

AMERICAS INVESTMENT

â&#x20AC;˘

Tax efficiency - The appointment of an offshore trustee (often, as a well- regulated jurisdiction rich in EBT trusteeship expertise, Jersey is the jurisdiction of choice) can ensure that unencumbered assets in the trust are sheltered from Capital Gains.

Key to it all is that your relationship with your trustee is such that you are able to work collaboratively to maximise the value obtainable from your investment in the appointed trustee, beyond the simple hedging of awards, and avoid the many, potentially costly pitfalls, that exist. Administrator In the case of smaller companies, or where share plans have been adopted on a smaller scale, it may be that your trustee can provide the cost effective administration required to facilitate your share plans and it is definitely worth discussing this with them. Where requirements are greater, the appointment of a dedicated share plan administrator can be the most logical and cost effective route. As with the other elements, the administrator should be selected on its ability to service your requirements as an issuer with the share plans that have been adopted or are likely to be adopted in the future in mind. Again, a consideration here is flexibility and the extent that administration platforms need to be tailored to specific requirements. Some administrators are better positioned to tailor their services

48 | Issue 17

and platforms which is appealing but needs to be balanced against the flipside of increased risk of error as well as cost. As mentioned previously, the trustee will often be well placed to assist with elements of administration to provide additional flexibility. Professional independent trustees and administrators should be well positioned to work together to provide a robust and seamless service whilst ensuring that you get the benefit of the added governance of selecting the best party for each element. Broker Administrators will likely be less flexible than trustees in their ability to appoint different brokers. This is partly due to system links but also due to financial arrangements between parties. This is standard practice and widely understood to be an element of how administrators are remunerated for the services they provide. It is fundamentally different for trustees. As previously mentioned, this is essentially because, unlike administrators, the role of a trustee is such that its fiduciary duty is to the beneficiaries of the trust (broadly, the employees and former employees of the company and certain of their relatives). Trustee decisions should be based on this alone and, whilst taking advice from the share plan issuer (on the basis that they will likely have a decent understanding of the best placed broker in respect of their stock), they should engage a broker free from conflict.

AMERICAS INVESTMENT

Professional trust companies will not typically have preferred brokers that they will appoint irrespective of the stock being traded. They will also avoid other factors, such as financial reward in respect of the appointment of specific brokers - or any other party - as it can create a conflict of interest and reduce their ability to display the proper exercise of their fiduciary duties. It should also be considered whether, with such arrangements in place, they are obtaining the best commission rate available to them as trustee.

Conclusions There is no doubt that selecting partners in the facilitation of a share plans offering can be daunting. The key to success is having a good understanding of what you want to achieve from your share plans then select providers that are best placed to maximise the value of the proposition in respect of each element. The rewards for selecting the right partners to work with in respect of your share plans can be as significant as the consequences of selecting the wrong ones.

Tom Hicks Jersey Director of Employee Incentives Appleby Global Services

Issue 17 | 49

AMERICAS FINANCE

Single Counterparty Credit Limit (SCCL) and its challenges

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AMERICAS FINANCE

SCCL at a glance In an effort to address singlecounterparty concentration risk among large financial institutions, the FRB passed a final rule on June 14th, 2018, to establish single-counterparty credit limits (SCCL) for covered large US bank holding companies, foreign banking organizations, and Intermediate Holding Companies. SCCL is one of the last major requirements of the Dodd -Frank Act finalized, following two previous notices of proposed rulemaking (NPRs) in 2011 and 2016. The final rule was developed through several years of rich industry dialogue and reflects output from both industry and regulatory quantitative impact studies. This regulation has some connection points or alignment with other internal and regulatory requirements such as Basel riskbased capital, BCBS large exposure frameworks, OCC legal lending limits, internal risk limits and monitoring frameworks. SCCL impacts credit decision and prevent concentrations of risk between large banking organizations and their counterparties belonging to the same group or sharing economic interdependences. In this regulation, there is a quarterly reporting (FR2590) and daily limit monitoring compliance which financial institutions needs to comply. SCCL is an important and complex regulation that require intricate data understanding, entity linkages along with accounting and regulatory capital concepts. Over the last decade with a plethora of regulations mandated to address deficiencies in the financial systems, Financial Institutions have enhanced their data infrastructures, analytical platforms and risk management processes. However, SCCL brings its own set of unprecedented challenges even for the most prepared financial institutions and will lead to unintended consequences during implementation.

This regulation relies on data at a product and instrument level that is used to calculate the institution’s gross credit exposure and net credit exposure to each of the institution’s top 50 counterparties. The report requires that each filing contains a certification from a CFO on the data integrity of the FR 2590. The FR 2590 is confidential and will not be made available to the public.

and implementation challenges. This is where institutions will need to carefully analyze the requirements, products, and relationship with counterparties. The following figure lists some challenges that could be with SCCL.

Risk Shifting

Economic Interdepenence

Open Regulatory Items

SCCL Challenges Net Credit Exposures Calc

Control Relationships Daily Limit Monitoring

SCCL is not the first regulation of its kind, infact there exist other data collection of credit exposure at the counterparty level. Currently, the Financial Stability Board’s (FSB) has created common templates for global systemically important banks (G-SIBs) to gather consolidated data for GSIB’s largest counterparties, exposures to different sectors and markets over a series of phases to an international data hub that pool the information and share the data with national supervisory authorities. These data, are subsequently sent to the Bank of International Settlements to look for any major exposures to a counterparty and sector. However, it’s not clear how the FR 2590 will impact the FSB data collection more broadly for the US G-SIBs.

SCCL Implementation challenges SCCL has cumbersome reporting and daily monitoring requirement which is subjected to significant interpretative

Risk shifting: Risk shifting is the transfer of risk to another party and can be a complex task to assess and possibility of misstatement. To accurately assess risk shifting, any transaction that has one or more of the credits mitigants (collateral, guarantees, credit derivatives, hedges, etc.) should be carefully checked to determine whether the mitigants meets the eligibility for the SCCL rule. Also, financial institutions may face a challenge of over-collateralized transactions or netting sets with multiple issuers where the current SCCL rule doesn’t provide the guidance which part of the collateral to include for the risk shifting. A suggested remediation for financial institution to pay attention to issues like legally binding agreements, type of guarantees, and the credit derivatives. Also, in case of overcollateralized transactions or netting

Issue 17 | 51

AMERICAS FINANCE

sets, institutions may use weighted average approach or conservative approach of assigning lower haircuts to collaterals resulting higher exposures shifted to the issuer. Additionally, institutions may also consider to build the counterparty referential having unique identifier between the counterparty from exposures and issuer risk perspective. Economic interdependence and control relationship: The economic interdependence and control relationship are the most dynamic and complex components of SCCL implementation. The information require for SCCL is global in nature and at multiple level of counterparties and countries.

52 | Issue 17

Some companies may not have the knowledge or the authority to reveal such information. Also, this information is not available in the public domain and hardly any vendors who have all the information require for SCCL implementation. A suggested remediation for financial institutions must enhance their existing data sources for counterparties to capture these details but also set-up process for regular updates that reflect the ownership and economic interdependence links at any given point in time. For institutions with multiple subsidiaries, a global approach to collecting ultimate counterparty parent data from multiple, global sources, and networks are essential.

Daily limit monitoring compliance: In particular, the daily calculation of aggregate net credit exposures and their comparison with regulatory limits requires daily data availability, sophisticated credit risk calculations exposures and highly automated process with minimum room for manual adjustments. This might be challenging and huge ramp up of data infrastructure, calculations and technology will be required for the financial institutions. A suggested remediation for financial institutions to build calculations for certain SCCL components on a daily basis and for other components where challenges of daily data availability, complexity, etc., an

AMERICAS FINANCE

Aggregate net credit exposures and comparison with regulatory limits The SCCL requires complex calculation of aggregated net credit exposure which is compared with regulatory limits for the applicability and reporting. Direct and indirect exposures to counterparties across various products (i.e. banking book, trading book, and investments portfolios) and credit risk mitigants (eligible collaterals and guarantees) must be considered for the calculations. Basel III framework and calculations might provide a solid base for SCCL, especially for OTC derivatives and SFTs, where regulation allows an institution to calculate its exposure using any methodology that the institution is allowed to use under the US Basel III capital rules. Although, there are some differences between the two frameworks. For example, differences include the impact of the credit conversion factor (CCF) on the off-balance sheet portfolio, and the collateral eligibility criteria and the computation of funds and securitization.

A suggested remediation for an institution should monitor SCCL regulation ongoing basis, assess the possible impact and ready to adapt changes for implementation accordingly. Conclusion Financial institutions should not underestimate the challenges they need to address to comply with the SCCL. To comply with this regulation, financial institution should have appetite to take new regulations and implementation efforts, ability to manage the exposure calculation of complex instruments daily and monitoring of limits beyond simple regulatory reporting is required. Given the short timelines, financial institutions should consider both tactical and strategic approaches toward a successful implementation and full regulatory compliance. In other words, without losing track of the overall strategy, financial institutions can still pursue shorterterm approach to target full regulatory compliance in the little time left ahead of their deadlines.

Open regulatory items: additional policy or explanation can be provided to demonstrate limits within the prescribed thresholds of SCCL. Also for certain institutions can look for the daily limit compliance by adopting the â&#x20AC;&#x153;compliance by policyâ&#x20AC;? but it will require regular impact assessment, policy creations, setting up early warning indicators and hard thresholds, escalation process of breaches to internal thresholds, remediation plan for non-compliance (e.g. business restrictions in possibility of limit violations), and demonstration to regulators that counterparty exposures are well below the limits set by this regulation.

There are open regulatory items on SCCL such as pending finalization of FR 2590 reporting form, CUSO exemption and certification process for FBOs, US President reforms plan for GSEs (i.e. loss of Fannie and Freddieâ&#x20AC;&#x2122;s conservatorship status), etc. These open regulatory items pose implementation challenges and any material deviations from the proposal would increase operational risk and may hamper the timely delivery.

Deependra Kushwaha Head - US Basel III Reporting

Disclaimer: The views and opinions expressed in this article are my own and do not represent the opinions of any entity/employer whatsoever with which I have been, am now, or will be affiliated

Issue 17 | 53

AMERICAS TRADING

Trade wars and volatility – Can cryptocurrency become a ‘safe-haven’ currency?

As trade wars continue to gain momentum, creating more volatility in capital and currency markets, many are looking for alternative options to ensure they can maintain the value of their investments. During these times, people tend to go to the so-called ‘safe-havens’. In the past, ‘safe-haven’ status has been attributed to gold, considered as an archaic standard with no intrinsic value by many. Although still at a nascent stage, people and institutions are starting to view cryptocurrencies as a store of value. One of the benefits of cryptocurrency is that it has a limited supply, which protects the intrinsic value of the currency. This characteristic means that cryptocurrency has the potential to emerge as a new safe-haven asset. However, legislative, regulatory and liquidity issues need to be addressed before crypto achieves widespread adoption among both, retail and institutional markets.

54 | Issue 17

Strategic trade wars The world’s largest economies, US and China, have locked horns, igniting what is showing signs of escalating into a full-blown trade war. Fear of the broader ramifications of these tensions have been widely reported with real and detrimental impact predicted for global economies and investors. In order to understand the effects of the current trade war that has stricken the global economy, it is important to first understand why governments impose trade tariffs. The US is at the forefront of the trade tariff dilemma. The main strategy behind imposing these tariffs is to enact a ‘weak dollar policy’. This is a well-trodden path during times of economic distress and financial crisis, which sees governments attempt to bring down the value of domestic currency to make exports cheaper, while imposing tariffs on imports to rebalance the economy.

Dating back to the 2008 crisis, the US Federal Reserve has consistently intervened, artificially boosting the economy, with no exit plan. The idea was to further balance out the US deficit by creating a barrier to foreign imports. The US has a vast trade deficit as it is a massive consumer-driven economy and sources many products desired by consumers from abroad. In theory, the introduction of trade tariffs, coupled with dovish monetary policies, such as lower interest rates, should temporarily boost the economy. If the currency weakens, the US economy can strengthen. The race for the weakest currency causes detrimental effects The problem with this strategy is that what was meant to be a temporary boost while the economy recovered, is still ongoing. The Fed has recklessly incentivised a one-way trade into the stock market for over a decade.

AMERICAS TRADING

What is left is an inflated stock market falsely promising hope for citizens. Average disposable income is increasing due to longer working hours and rising employment levels, whilst real wages themselves have not gone up and housing prices continue to increase. This is causing consumers to lose trust in the central government intervention policies. Investors have come to expect record stock market highs in the US, leaving them over-exposed when news of a negative downside risk shock occurs. This increases the potential for radical market movements. When stabilising the economy, the US has driven many global powers into a race to weaken their respective currencies – no one wants to have currency appreciation. The European Central Bank is lashing out at the US President for threatening sanctions because they want to avoid an appreciation of the Euro; the Bank of Japan and the Swiss National Bank are

following suit to avoid an appreciation of the Japanese Yen and the Swiss Franc. The US set the wheels in motion and now all the competitive central banks are pumping money into their respective economies, in the race not to be left with the most expensive currency. Now the trade war looks to be escalating, deflationary pressures are resulting in unprecedented currency volatility and risk. The search for a ‘safe-haven’ With all this uncertainty in the market, more common in emerging economies but less so in developed markets, people are feeling the pressure and becoming worried about the lack of protection for the value of their savings. Investors are wary that the consistent equity market highs will plateau, while consumers are conscious that this economic prosperity isn’t trickling down into their pockets.

The search for a ‘safe-haven’ currency has begun. Historically, gold was always viewed as the stable currency because there is only a limited amount of it in the world and central governments cannot simply print new gold. Cryptocurrency has been built on the same principle and may provide a more legitimate option. As gold, only a limited number of coins are available for trade. However, by using blockchain technology cryptocurrency adds another layer of protection that allows for a detailed trail of all trading history. So why aren’t investors and consumers rushing to digital currencies in times like this? In order to understand this, it’s important to take a step out of the West and into the East, where consumers have been crippled by continuous volatility and have adopted cryptocurrency as a ‘safehaven’ for their hard-earned money for years.

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AMERICAS TRADING

Dating back to when cryptocurrency first entered the market in 2009, many migrant workers were reliant on sending the profits of their labour back to family members. For example, these workers would make the equivalent of £3 an hour and deposit the money into their bank. At the end of the week, when they went to send the money home to their families, they would discover that their money was worth next to nothing as the exchange rate had dipped massively. By this point they stopped trusting governments to tell them how much their money was worth and sought different options. Cryptocurrency became the obvious means to pass on their savings to family members. With a limited amount of coins protecting the value of their money, these migrant workers could take comfort in getting paid in cryptocurrency and knowing that the government could not strip them of its worth. Fast forward to modern day and cryptocurrency is now accepted widely in most Asian countries. So why is the use of digital currencies in the West not widely spread? And why would anyone choose to get paid in a currency that is ultimately controlled by a governing body and can change at any instance? What needs to change? Western societies are now becoming accustomed to currency volatility and are finding themselves in a similar predicament to the migrant workers touched on earlier. The idea that there is a currency that is uncorrelated to government intervention seems comforting, yet the mentality of western cultures still deems this as unsafe due to lack of regulation. One of the major reasons why the transition into digital currencies hasn’t

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happened quite as quickly in the West is the number of barriers blocking crypto from being readily accepted. In order to overcome these barriers, cryptocurrency has to become crystallised as an asset class and institutions will need to begin investing a portion of their portfolio in cryptocurrency as well as actively trading it on crypto exchanges. For this process to take place, an established internationally trusted marketplace needs to be in place to enable institutional cryptocurrency trading. This hinges on the provision of credit by the banking system, which is at odds with the inspiration behind the Satoshi Nakamoto whitepaper, the paper that was the precursor to Bitcoin. Credit plays an important role in providing traditional fund managers or hedge funds with the funds to execute their trading strategies.

way to efficiently mine units. As more players try to enter the industry, the funding will come, enabling proper, more efficient infrastructure to be built. The time is now The world is frustrated with government and central bank intervention and is thirsty for another way in which they can hold and maintain the value of their assets. People need a way to protect the value of their money, regardless of the level of central bank manipulation and intervention. Cryptocurrency has the framework and ideology to emerge as a ‘safe-haven’ currency in such volatile times, but there are large roadblocks in the way. If some of these barriers can be resolved to encourage institutional investment in digital assets, the world benefit from an alternative asset in which to park their money, or a ‘safe-haven’.

At the moment, credit – the oil that greases the wheels of institutional finance - is grossly absent in cryptocurrencies. The next step is the implementation of proper regulation, to both, protect the retail consumers and to get institutions comfortable to operate in this marketplace. Once consumers and their coins are protected, institutional players can self-regulate the market. It will be essential for institutions to trade digital currency according to international norms. Another barrier is the lack of liquidity. But this problem is easier to solve as institutions can resolve this issue by bringing in capital and helping create a more fluid market. Lastly, the lack of infrastructure needed for sourcing cryptocurrency is another barrier. As they stand, digital currencies are massively expensive to produce due to their energy consumption and because there is no

David Mercer CEO LMAX Exchange Group

David Mercer, CEO of LMAX Exchange Group, which operates multiple institutional exchanges for FX and crypto currency trading. LMAX Digital is the Group’s cryptocurrency exchange that focuses on institutional investors only.

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AMERICAS BANKING

The Evolution of Banking in The Face of a Digital World

How a company gained 10,000 new accounts in a matter of hours

When was the last time you went into a bricksand-mortar bank, stood in line behind real people, and waited to deposit a check? Or, cash in hand and music coming from your car’s CD player, you pulled next to the drive-up at the bank and used a pneumatic tube to transport your transaction to a smiling teller? Sounds like ancient history doesn’t it? I recently happened to pass by a local bank branch near the grocery store where I shop and noticed that the building is now a fitness/yoga facility. These types of scenarios are a reflection of the change in bank / customer interactions and how customers are turning to, and in fact expecting, digital to meet their changing lives.

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As a result, we are seeing new digital tools and technologies turning existing business models upside down – or at least knocking them on their side – across virtually every industry segment and banking is front and center. What we are seeing in the banking and financial services sector is the emergence of fintech, or financial technology institutions. Sometimes they’re referred to as startup “neobanks” or “digital challenger banks.” Without branches, they offer a 100% digital-first experience for handling day-to-day banking services using mobile apps. Some of these new smaller fintech banks launch very specific, very targeted digital offerings towards a particular customer segment –

AMERICAS BANKING

primarily millennials and Gen Zs -- and immediately start capturing customers from traditional banks. Here’s a case in point. Earlier this year, a market opening was created for the San Francisco-based digital banking start-up Chime. Because of issues some larger banks were having, Chime gained more than 10,000 new accounts in a matter of hours. It also gave them an opportunity to broadcast one of their differentiators: “Bank fees? What are those?” they cheekily tweeted out. Today’s reality is that banks are being acquired, branches are being downsized and their roles redefined. Chime is just one of the many emerging challenger banks and startup fintech banks that are disrupting the traditional financial institutions. Are traditional banks destined to ride off into the sunset, to be replaced by banking apps that give millennials the “awesome” digital banking experience they want, such as payments, deposits, loans and such?

There are important issues and concepts incumbent banks must be aware of. Advances in technologies such as natural language processing (NLP), machine learning (ML), and artificial intelligence (AI) are driving these digital changes and spurring the further evolution of banking. And remember, the digital transformation includes not only web and mobile customer interactions, but most, if not all, bank functions to make these interactions always available and immediate. I believe that just as there will always be music purists who prefer to listen to a vinyl phonograph record or still want their CDs, there will be those who want to speak to a personal banker face-to-face or require amenities such as safe deposit boxes. While not everyone, even millennials, will always choose to rely entirely on their smartphone for banking, digital options must be offered if a bank today can expect to be around in the future.

Chris O’Connor CEO Persistent Systems

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AMERICAS BUSINESS

How to make flexible working ‘work’ for the banking and finance industry

There are many misconceptions about the concept of flexible working, particularly within the banking and finance industries. It can often be associated with working mothers, or as a means of reducing the hours in the working week, but this is not the case. In practice, flexible working is a modern and dynamic tool for empowering driven professionals to deliver upon their day-to-day responsibilities whilst managing busy lifestyles. Consequently, many businesses choose to refer to this practice as ‘dynamic working’ for this very reason. When implemented effectively, dynamic working boosts productivity, supports a healthy work-life balance, and contributes towards a high trust, high performance working culture. This new way of working has emerged as a direct result of the shifting demands of the millennial generation within the workforce. For example, millennials are

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increasingly prioritising their mental health and how a job impacts this. Companies are now in a position where, in order to remain competitive in the market, they must respond to this shift and ensure their benefits package to potential employees reflects the wants and needs of a modern workforce. A failure to do so will likely result in being seen as out of touch and the best and brightest talent looking elsewhere. Larger, more digitalised companies are leading the way in this new way of working, as they have both the capacity and finances to support these setups. We often advise our clients to consider introducing a flexible working policy where possible, to boost their overall recruitment process. Not only in terms of attracting and winning talent but to also help increase retention rates. So how can companies embrace dynamic working?

Why go dynamic? The demand is there. Research conducted by Michael Page, states that 66% of those working in banking and finance industries would welcome their employer offering flexible working hours. A further noteworthy revelation was that, despite 53% of candidates listing the option to work from home as part of their top three desired benefits, only 26% of those surveyed were actually provided with the option by their employer. This demonstrates the disconnect between what candidates want and what employers are offering. In an era of low unemployment, the current job market is highly competitive; the best candidates are in short supply so can afford to be more selective when choosing where they want to work. From a hiring perspective, businesses are

AMERICAS BUSINESS

under more pressure than ever to sell the positive aspects of working for their company. Offering flexible working is one of the best ways for companies working in banking and finance to set themselves apart from the competition. Overcoming the obstacles For those businesses new to the idea or considering how such a programme might work, it is crucial to understand the challenges an organisation might face or should expect on this journey. What’s equally important is to find workaround solutions that can be implemented and applied to a business’ unique needs. Of course, sufficient coverage at key times of the finance month is a top concern. Some firms are worried that if everyone is working from home, shorter hours, or out of the office, the work won’t get done. Similarly, making such a programme work for everyone, and getting the buy-in from more established and experienced members of the team might be a daunting and perhaps seemingly impossible task.

There are a number of things companies can do to ensure any dynamic working policy is implemented efficiently and effectively: •

•

It’s important to remember that dynamic working doesn’t mean fewer working hours. Each business considering implementing dynamic working should ensure it will benefit the productivity of the team. The focus should be on the deliverables, not on the time spent sitting at a desk in the office environment. When building and determining how a dynamic set up would work it’s important to consider the needs of employees, the preferences of individual clients, the requirements of the industry, office capabilities, and the technology that available. Dynamic working will not suit every member of a team or even every type of role in a company. Employees should be made aware of a formal process for requesting dynamic working arrangements, and we would suggest this includes appropriate sign offs from line managers and guidelines for how to effectively communicate with other team members during this arrangement.

When dynamic working is introduced, this becomes increasingly important to ensure employees know what is expected of them.

How dynamic working can work in practice

Facilitate home access - the ability to work from home or a remote location can significantly improve productivity. Workers in these industries are usually comfortable with reviewing their emails first thing in the morning or responding to queries well after 5:30. In fact, the ability to sign in during a commute can amount to a lot more getting done, well before the rest of the team have even signed in. Establish flexibility champions - these individuals should be from right across the business, to demonstrate how they make it work best for them. This employee may be someone who takes a longer lunch break but comes in an hour early to compensate. Alternatively, it could be a parent who comes in later so they can drop their kids off in the mornings. Some companies have also enabled some of their employees, particularly those who live further distances from the office, to leave early as a means of making an earlier train but encourage them to log back in once they get home.

•

Highlight great performance - this should happen for both employees in the office and those who on occasion work dynamically. However, if there is a noticeable improvement in an individual’s performance after adopting a dynamic working schedule, be sure that it is known across the company.

•

Agree weekly deliverables - regardless of flexibility requirements - work from home, longer lunches, or later start times every employee needs to know their KPIs and daily responsibilities to ensure they are working effectively.

•

Consider job sharing - where it is feasible, perhaps two employees would work better on a part-time basis sharing the responsibilities of a single role on a week to week basis? Job sharing is a workable solution if two colleagues or new starters are only able to work restricted hours during the week. The key consideration for this working arrangement is to ensure each employee is effectively communicating with the person they are handing the job over to, this is so they are aligned in the requirements for the following day.

The secret to maintaining the benefits of a dynamic working arrangement is to always ensure it remains versatile rather than becoming regular scheduled time away from the office. This working arrangement should always be adaptable to the ever-changing dynamics of workers’ daily lives and should encourage employees to produce their best work whilst benefiting from flexible working arrangements.

Marcus Johnson Operating Director Michael Page Finance

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AMERICAS INVESTMENT

Can voluntary corporate (in)actions lead to mandatory retribution? Voluntary corporate actions are often considered to be an inconsequential aspect of investment management. However, given the sheer amount of money that is lost to poorly handled corporate actions decisions – and the fiduciary infractions that they may spur down the road – these activities are proving to be highly consequential. Voluntary corporate actions are bound to individual stocks or bonds and require an election or decision to be made on behalf of shareholders. Asset managers and advisers are typically tasked with making the decision for investors. Yet, acting on a voluntary corporate action often falls down the operational pecking order, handed over to the back officewithout enough due care from managers. Here’s where the trouble begins. If no proactive decision is made on a voluntary corporate action, the outcome is often decided by a default option. To give an example – in the case of SCRIP dividend in the UK, the default option is to provide cash to the shareholder, foregoing the option to take additional shares instead. By not examining and deciding upon the optimal outcome, managers may be costing their clients money. As our analysis has revealed, over $1 billion of value is being discarded annually just on SCRIP dividends alone because of sub-optimal decision making. Managers are missing the easy money, even when the option is clear as day. For example, with the National Grid dividend issue in May 2019, the stock election was significantly better than the cash option, being £0.4816 in the money. Even with the obvious value, 55% of all shareholders took the cash option – compounded, the 24 bps left on the table for these investors added up to £39,000,000 of missed value. When you consider how much more value is being missed across other types of voluntary corporate actions such as rights issues, buybacks and tenders, the amount lost to these activities is staggering.

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So why are asset managers failing to capture this value? The reasons here are multifarious but time and complexity do play a part. Regulatory and jurisdictional restrictions can also influence the decision-making process; index trackers, for example, may not be mandated to take anything other than cash to avoid weighting error. Often, an asset manager may simply consider the alternate election is too small in terms of additional value to bother with. There are approximately 130 global SCRIP dividends every year, and if each portfolio manager misses $1,000 on each event then their missed value may be considered too small to bother with at $130,000. Yet, as we saw in the National Grid issue, these small amounts can add up quickly for asset managers – especially if every portfolio manager has exposure to the same event type. Per the hypothetical case outlined, if 100 portfolio managers in the same firm make the same suboptimal elections, this adds up to $13,000,000 lost on one event type alone.

AMERICAS INVESTMENT

By Matt Ruoss CEO SCORPEO UK

Taking the default option without diligence may save time – but given that it ultimately produces suboptimal outcomes for investors, it’s arguable that failing to conduct diligence is a fundamental breach of fiduciary responsibility. Pension funds have special cause to look at this carefully, given the growing concern among trustees as to whether their financial and non-financial actions could give rise to a breach of fiduciary responsibility. When this missed value is considered in the wider context of pension fund deficits, solving for these inefficiencies is vital. New regulations are raising the risk of fiduciary breach. MiFID II has ensured that managers now need to disclose how they elect on certain events which ensures a greater scrutiny from the underlying investors in future.

In August, the SEC published guidelines clarifying investment advisors’ responsibilities for proxy voting, citing that “Investment advisers owe each of their clients a duty of care and loyalty with respect to the services undertaken on the clients’ behalf [….] the Advisers Act requires an investment adviser who exercises voting authority with respect to client securities to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser votes proxies in the best interest of its clients.” The parallels with having a formal process for decisions on voluntary corporate actions (in addition to proxy voting) are clear. In addition, with class actions tied to securities at an alltime high and continuing to increase, it is becoming more likely that action – from regulators or investors - may

be taken on lost value from suboptimal elections if fund managers fail to address this issue. The solution? Managers must put in place processes that ensure efficient and optimal outcomes on these events - not only because of the potential legal consequences, but for the obligation they have to their underlying clients. The process of examining and electing a voluntary corporate action can be mostly automated; appropriate internal controls are also attainable. A change in attitude is necessary, as a missed corporate action can no longer be seen as a minor nuisance. Investors and pension fund trustees must also become more proactive in driving this value from their asset managers to ensure they are taking this seriously and not dismissing the lost value as perhaps too insignificant. For managers, the technology to identify and maximize value is out there. Regardless of whether managers decide to buy or build, automated internal controls, safety nets and procedures will become an important element of ensuring that fiduciary duty is met – and that the full value is attained from every investment.

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AMERICAS BUSINESS

How do you pick which technology your business needs? How can accountants navigate the maze of technology that faces them during digital transformation initiatives - not to mention when to make the move? That’s the question which many practices use to start the process of transformation, but as we’ve seen over this series, it should actually come after a thorough cultural assessment and gap analysis. You need to understand the needs of your staff and the areas for improvement before you begin reviewing solutions.

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Once you’ve completed those stages, it’s time to apply what you’ve learnt with technology. Firms will reap the rewards of data insights, predictable and prescriptive trends, larger client portfolios, recurring revenues, technologies such as AI and blockchain, if they start to make changes now - the question is, where to begin, and how to choose?

AMERICAS BUSINESS

The IT market is growing at breakneck pace, and there are a thousand vendors competing for your digital transformation dollar. With that in mind, there are three key principles to bear in mind as you enter the fray. 1. Enhance what you already have Don’t rip and replace if you don’t have to – try to complement existing systems where possible. Any digital transformation project should prioritise business continuity, staff experience and customer service. With those goals in mind, by implementing technology that integrates quickly with existing solutions, you can maximise the chance of a smooth transition and a positive user experience. So, for example, a rip-and-replace option would be scrapping your database and starting from scratch with a shiny new collaboration system. However, that cliff-edge strategy is likely to cause teething problems for staff and customers. Instead, you could think about how integrating the existing system with the new technology rather than scrapping it, allowing you to gradually shift usage over. In other words, compatibility with existing technology should be a key consideration during digital transformation projects. Companies that insist on rip-and-replace should be treated with caution – it might turn out to be the right approach for your business, but it shouldn’t be your first instinct. Change is a gradual process. Be sensitive to the impact that new technology will have on people’s dayto-day lives and give them and the company time to adjust – and assess whether you have the right skill sets in place to manage the new technology. 2. Ignore the pie in the sky Ensure that you choose a technology provider that focuses on practical reality and is dedicated to serving the profession for the long term. The world is full of Silicon Valley

wannabes peddling the next big innovation, and they’ll all tell you that their particular software gizmo is the wonder fuel your company needs to achieve its goals, but the chances are that there isn’t a quick fix for issues that are worth addressing. Rather than the whizz-kids, look for the old hands – the companies that have lived through a few IT innovations and have the experience to know what goes into a successful transformation. They should also be aware of what’s coming up on the next few years that you’ll need to be aware of. You don’t just need technology, you need the expertise to help you build an implementation that works for your individual challenges. A quality IT deployment isn’t an overnight job – it takes time, care and the kind of insight that comes with long experience. Make sure you work with a partner that can bring that level of individual attention and understanding to the table. Working with an experienced IT provider will also help you to cultivate realistic expectations of your own organisation. Every business has growth goals, but it can be hard to know how to make the jump in reality. IT providers with deep experience can help you to map out that process in the best way for your operating model. For example, it might be the difference between buying wide-reaching enterprise-grade ERP straight out of the gate and instead starting by investing in really good, usable accounting software and then working on from there. 3. Whole-life partnership Finally, remember that digital transformation is an ongoing process and select technology partners that will work with you beyond the installation date and understand your strategic goals. This is partly about making sure your new solution comes with comprehensive post-sales support, but it’s more than just that.

As we’ve seen, digital transformation is essentially a virtuous circle – cultural assessment followed by gap analysis followed by investment, and then rinse and repeat. The best investments will lead naturally to the next cultural assessment. Now that we’ve solved problem A, what’s problem B, and how can our partners help us address it? That philosophy should inform your decisions about which technology to purchase. It’s important to buy the right software for the job, but you also need to think about how technology fits into the company’s more long-term vision. There’s nothing worse than a white elephant. IT purchasers need to make sure that they consult with other business departments and ensure that the tech they implement and the partners they work with will work for the company over time. In short, technology purchasing needs to be informed by the whole of the business, not just the CIO’s wish list. When digital transformation is driven by the holistic needs of the company and serves employee and client needs alike, success will be that much easier to achieve for everyone.

Jules Carman Head of Digital Transformation, Accountancy, Sage

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AMERICAS FINANCE

The Case for Stablecoins in Growing Regions Around the Globe Facebook and JPMCoin Suggest Mainstream Potential for Stablecoins Global projects like Facebook Libra and JPM Coin have captivated the world with the potential that stablecoins (cryptocurrencies pegged to assets with perceived relative stability like the USD, the Swiss Franc—even gold or silver) might move to the mainstream sooner than some have envisioned. Planned for launch as early as 2020, Libra will be backed by a reserve of real-world assets, including bank deposits and short-term government securities 1 , making it more stable than other cryptocurrencies, while giving it an instant platform. Although its fate remains uncertain considering Facebook’s regulatory and privacy probes, Libra was positioned from the start as a direct challenge to existing central banking systems: “a more efficient, low-cost and secure alternative payment tool for people who can’t afford to transfer money using traditional methods,” according to the company 2 . Also, this year, J.P. Morgan announced it had become the first U.S. bank to create and successfully test a stablecoin, saying its JPM Coin has the potential to transform global banking payment transfer for its institutional clients, 3 an alternative to less efficient legacy bank payment systems such as SWIFT. Lesser Known Challenges that Stablecoins Can Solve While Libra and JPM Coin have captured the world’s attention for its mass market potential, the real sizzle for stablecoin is a ground game of real-world local use cases that are getting surprisingly little attention. Beyond the news headlines, what lesser known regional challenges are stablecoins uniquely positioned to address?

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In partnership with the private sector, a groundswell of regions around the globe are turning to stablecoin to solve a range of problems, including digital payments, financial inclusion and infrastructure development. Whether consuming or providing services, municipalities comprise a vast ecosystem of contractors, consultants and agencies that need to interact and transact in order to maintain a region’s social infrastructure. However, the way these counterparties interact and transact – even in highly developed regions with ample resources like New York City – the provision of local services is often mired in complexity, fraud and inefficiency. An even stronger case can be made for stablecoins in jurisdictions facing a range of acute challenges, such as access to banking services, transaction pricing opacity, fraud and settlement delays. Sidestepping some of the grand global use cases like Libra that trigger contentious geopolitical issues like

AMERICAS FINANCE

monetary policy and national currency sovereignty, some jurisdictions are making early inroads using stablecoins given these factors to leapfrog local legacy infrastructure and exchange value digitally. Current Use Cases: Targeting Regional Problems in Practical Terms Blockchain initiatives dedicated to social impact around the world remain early stage. But according to a recent study by Stanford University, “Blockchain for Social Impact, Moving Beyond the Hype,” 4 more than half of social-good blockchain initiatives are expected to impact beneficiaries by the end of 2018. According to the report, blockchain’s most popular primary benefits are reducing risk and fraud (38%) and increasing efficiency (24%) – twin areas of critical need in fragile developing regions.

Regions have begun experimenting with stablecoins to solve for financial inclusion, access to capital markets, transaction transparency, costreduction and process efficiency that have the potential to help fragile developing cities be smarter and small- to mid-sized enterprises in these regions to participate in the digital economy. In the next 20 to 30 years, stablecoin could be put to the greatest test in developing regions like Lagos, SubSharan Africa, Cairo or Mumbai where populations are surging and yet the ability to provide services – even to participate in Requests for Proposals – is hampered by a lack of automation and access. Crisis conditions loom in such megacities in the absence of sustainable technology-enabled solutions to help cope with the diametrically opposed forces of growth and outdated infrastructure.

Use Case #1: for the Republic of the Marshall Island’s (RMI), current financial systems – everything from fragile paper notes, cumbersome ATMs, and centralized banking – were an extremely poor fit due to the nation’s remote location and banking challenges of island life. For instance, many Marshallese transacting with families overseas face exorbitant remittance fees of 10% or more. Last year, RMI announced it would be issuing the world’s first stablecoin that is legal tender. With the RMI SOV, Marshallese will be able to connect to the global finance network, boosting better business opportunity through vastly improved and more cost-efficient global banking connectivity and local financial service via a highly secure and auditable new national currency. 5 Use Case #2: the Philippines is already seeing an early push in blockchain and stablecoin innovation. Earlier this year, a leading Philippine bank launched its own fiat-pegged stablecoin dubbed PHX, which is pegged to the Philippine Peso (PHP). vPHX is part of a larger regional blockchain initiative launched last year by five rural banks in the Philippines called Project i2i aimed at improving island-to-island, institutionto-institution, and individual-toindividual banking, especially in rural communities. 6 Use Case #3: Fusion partner i4SD has managed hundreds of infrastructure projects with partners such as the United Nations Development Programme, the World Bank as well as these and other various national governments. i4SD is working on blockchain initiatives with a sense of urgency in relatively fragile developing countries around the world with local entrepreneurs and public organizations to ease access to electricity, water and connectivity.

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AMERICAS FINANCE

Use Case #4: Even regions of the world that have ample financial resources and much older infrastructures than the US, such as the United Arab Emirates are going all in to build blockchainbased smart-cities that rely on stablecoins to leapfrog traditional centralized banking systems. 7 Tech Transformation on the Horizon These use cases are harbingers of how stablecoins can be used to support an even broader range of financial functions, including cross-border lending and hedging FX exposures. But for stablecoins to realize their full potential, innovative blockchain technology needs to solve interoperability challenges that beset both local initiatives as well as well-funded global projects. Today, Bitcoin, Ethereum and other crypto networks operate independently, so transactions cannot be conducted seamlessly, and digitized assets cannot be exchanged easily between them. Instead, doing so requires two or more transactions in separate wallets on separate networks. To obviate this cumbersome status quo, one of the most enticing areas of innovation is a new technology called Distributed Control Rights Management (DCRM). Blockchains and other distributed ledgers built with DCRM make it possible to transact across assets, cryptocurrencies and chains seamlessly, cheaply and securely. Such technological advances will help stablecoin as it matures by removing barriers of adoption and adding a more fluid and efficient layer for business transactions and value exchange. Conclusion: Technology as the Great Equalizer As local as well as large global stablecoin initiatives continue to innovate, regions around the world that will no longer be bound by the

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limitations of legacy infrastructure. Indeed, the digital technology will be a game-changing equalizer for smaller innovative countries like the UAE. Given guidance and support, such regions can take a fair share of the digital economy unconstrained by physical limitations. Local pilots are attracting increased involvement of global authorities, as highlighted in the World Economic Forum’s white paper, “Central Banks and Distributed Ledger Technology: How are Central Banks Exploring Blockchain Today?” Pilots backed by such agencies are particularly promising because, as gatekeepers of traditional finance, these agencies can serve as agents of change by encouraging the innovation and regulatory safeguards that are needed for stablecoin’s large-scale adoption. As they continue to evolve, stablecoins can provide myriad benefits for regions around the world, particularly where traditional banking systems have fallen short. Expect to see continued stablecoin innovation that supports faster, more transparent and costefficient cross-border value exchange, especially in areas that have higher rates of fraud and difficulty accessing the digital economy.

John Liu Chief Product Officer Fusion Foundation

https://www.reuters.com/article/us-crypto-currenciesexplainer/explainer-stablecoins-in-the-spotlight-asfacebook-unveils-libra-cryptocurrency-idUSKCN1TJ1T6

https://www.cnbc.com/2019/07/29/facebook-warnsinvestors-that-libra-may-never-see-the-light-of-day.html

https://www.jpmorgan.com/global/news/digital-coinpayments

https://www.gsb.stanford.edu/sites/gsb/files/publicationpdf/study-blockchain-impact-moving-beyond-hype.pdf

https://docsend.com/view/kq9tc4j

https://www.ccn.com/news/philippines-union-bankcrypto-stablecoin/2019/07/26/

https://cointelegraph.com/news/middle-east-blockchaindevelopment-primed-to-lead-the-global-industry

AMERICAS BUSINESS

Why mobile is key to super-charging your travel experience Mobile is now everywhere. In our daily lives, at work, and also when we travel. Here, its influence is growing - nearly half (45%) of travelers now say that their mobile browser is their first port of call for information when planning a trip. Travelers are using their mobile devices to discover different locations and holiday offers, with 41% of travelers also using them to book destination services, such as accommodation, transport and activities1. As mobile technology becomes more sophisticated, it is essential for travel sellers to maximize their brand presence and customer interaction through this channel. Modern travelers live ‘in the moment’, with itineraries no longer needing to be rigidly planned in advance. Both business and more leisure oriented travelers want more ‘on-the-spot’ and personalized experiences and trips. According to Deloitte2, the destination services sector grew 5% last year and is likely to continue doing so meaning that travel agents, corporate travel programs and other providers have a huge opportunity to tap into the underserved destination services marketplace to further grow customer loyalty and revenue growth. At Amadeus, we are committed to ensuring our partners are equipped with the information and tools to take advantage of this opportunity. With that in mind, our new insights paper, Get ready for Destination X, shines a spotlight on travelers’ hunger for reliable ancillary destination services and the role that mobile plays in taking advantage of the opportunities in the market around these services. Here we look at how mobile devices are the perfect channel for

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offering destination services on the move, and in turn, a smoother and frictionless travel experience. In pursuit of the perfect personal touch Consumer demand for tailor-made destination service suggestions is significant. Our research suggests that nearly 60% of travelers say they would like brands to tailor information and content based on previous preferences or behaviours. Furthermore, more than a third (36%) claim they would even be prepared to pay more for such services, which suggests that fundamentally any service that takes into account the needs of its individual travelers will be one that succeeds. In order to win travelers trust and loyalty, travel sellers must understand the context of a traveler’s trip. For instance, those who regularly travel for business are more likely to seek simplicity and convenience with a local flavour, while holiday-goers often focus on finding premium experiences for the best price. Content and push notifications must be reliable and in the right context - if information or deals are considered spam or irrelevant, travel sellers and providers will quickly lose the traveler’s loyalty. The travel industry is changing and travelers find themselves in lack of time to properly plan their in-destination activities. When seeking information, they are often frustrated by the myriad of places to look when they are in fact expecting to access everything with a simple swipe, pinch or tap. Travel sellers can begin to meet these expectations with the right mix of mobile-oriented

ancillary destination content that is intertwined within the travel purchase flow and servicing mix.

Complementary services: the new name of the ancillary travel game Whether someone is travelling to a familiar place or visiting somewhere entirely new, unexplored experiences always await the traveller. And proactive complementary services can help shape these experiences from just having a good trip, to an unforgettable one. Research from the Destination X whitepaper found that a massive 93% of respondents are receptive to receiving information about other complementary services or offers when they book their destination service, with 37% claiming it would ‘truly enhance their trip experience’. Mobile technology gives travel providers the perfect opportunity to meet and exceed customer needs before and during a journey. Well timed in-app and push notifications can provide highly relevant information to a novice or seasoned traveler in an unfamiliar city - whether it be an insider culinary recommendation, safest and most economical transport options or even exclusive deals on concert or theatre tickets. Likewise, apps and pushed content can be used to solicit customer feedback. This is then used by travel sellers to gain further insights from each individual traveler in order to enhance suggestions for complementary services on future trips.

AMERICAS BUSINESS

In-destination support: seamless access is a must Research from Google and IPSOS3 shows that 85% of people travelling for leisure only decide what they want to do once they’ve arrived at their destination. Despite the excitement of escaping the daily grind or going somewhere new, it’s clear that travelers are feeling the pressure to figure out the details of their trip and make the most of every moment Our research has uncovered frustrations that often include travelers having to look in multiple places and applications to access the information they want. Many travelers are longing for a ‘one-stopshop’ mobile access point with relevant destination services content. Having a full view of the entire trip when in-destination (or better yet prior to arrival) can offer a great deal of reassurance to the traveler and make the experience much more productive and enjoyable.

To be successful, travel sellers need to focus on providing not only the right payment methods but also ensure the payment process on mobile devices is smooth. The adoption of biometrics to authorize payments or enabling in-app payments are just two examples of the ways in which the industry is embracing the latest technology. The outlook of mobile in travel certainly is bright. Traveler appetite for ancillary destination services is only anticipated to keep growing, and mobile offers the perfect gateway to provide these services to travellers and engage with them in a highly personalized way. It is now up to travel providers to work together to super-charge travel experiences and keep travelers coming back.

With the growth of on-the-go destination driven purchases and the focus on indestination support, the travel industry is also ripe for payment innovation. The traveler experience is now more important than ever and payment plays a key part. Global fintech innovation has led to a situation where there are now more than 300 different ways to pay for travel across the world. According to our research4, consumers today increasingly choose alternative payment methods to pay for travel, such as e-Wallets and bank transfers.

Michael Bayle Head of Mobile Amadeus

Amadeus ‘Get ready for Destination X’ whitepaper

Deloitte Travel and Hospitality Outlook 2018

How mobile influences travel decision making in can’t-waitto-explore moments. Think with Google 2016

Amadeus and PPRO ‘The Travel Payments Guide’ 2019

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Cover Story 72 Issue 17

COVER STORY

Learning to trade with Learn to Trade Greg Morgan, CEO of Learn to Trade, boasts diverse and demanding career achievements that span thirty years across television, not-for-profit, corporate leadership, and now forex trading. His early career saw him travel the globe as a television cameraman and foreign correspondent. His experiences taught him invaluable life lessons— chiefly, to think critically about his actions and how his decisions impact others. This powerful personal axiom is, largely, what drives him as a successful CEO. Greg’s first foray into executive leadership was that as CEO of a global not-for-profit that provided support and relief to people affected by the issues of global poverty, endeavouring to respond to a range of local and global needs. Greg had held several CEO positions until he was unexpectedly diagnosed with life threatening cancer and given a life expectancy of only six months. Not for the first time, Greg was staring death in the face.

During his time spent filming in war zones, he dodged bullets on the daily, as well as the myriad of other dangers wrought by war and violence. Now, however, he was facing death on an entirely new level. Despite his grim prognosis, his fortitude, self-belief, and mental strength and resilience saw him not only survive cancer but thrive. After two years out of work and a strenuous battle with cancer, Greg decided the rest of his life would happen on his own terms. Deciding to try his hand at forex trading, he enrolled with a forex education company called Learn to Trade. Just twelve months into his foray in trading, Greg was named Trader of the Year. Global entrepreneur and business leader Mr. Gregory Secker, arguably the world’s best forex currency trader and the owner and founder of Learn to Trade, offered Greg a role with the company as their Unlimited Wealth Program ambassador. One year later, Greg became the Chief Executive Officer of Learn to Trade, a position he loves, saying, “it gives me an opportunity to change people’s lives through trading.”

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COVER STORY

Learn To Trades trader mentor team

We sat down with Greg to discuss his unique background, what it takes to be a success in the forex market, and the future of Learn to Trade. To begin, can you tell me a little about your work history, how you began your trading journey and your new position as CEO of Learn to Trade? My career spans a few decades, but I started off working in television in the news department as an assistant cameraman. Fascinated with having a front-line view of the world, covering local, national, and global news stories, I quickly turned my attention to becoming a full-time cameraman. Headhunted by the BBC, I moved to Southeast Asia to head up the International News Bureaux in Hong Kong.

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After twelve years abroad, travelling the world as a television foreign correspondent, reporting from warzones and shooting films with Jacki Chan, I decided to go the next step in my career and claim an executive position in the corporate sector. Several CNN television executives asked me to relocate and set up a television production house in Kuala Lumpur, Malaysia. I ran that company as Managing Directing for five years, from start-up to over $10M in revenue. I found my niche as an executive leader, continually educating myself in leadership, business, negotiation, and finance. Moving back to my hometown of Melbourne, Australia, I won a prestigious CEO role with a global not-for-profit, turning that business from a $7M deficit to a profit within three years.

Post chemotherapy, I attended a business seminar in Australia to scope out the next chapter in my business life. The headline speaker at the event was the one and only Tony Robbins, who was the reason I went to that particular seminar. After all, he changes peopleâ&#x20AC;&#x2122;s lives, right? But, it was another speaker who captured my attention: Mr. Greg Secker. He was on stage discussing how to create wealth by trading the forex markets. What I learned from Greg Secker in his two-hour presentation on forex currency trading struck a chord with me. As it happened, I had produced numerous stories on stock markets, traders, and world financial markets for CNN financial news when I was a TV producer and cameraman working in Hong Kong. I recalled those memories while I was listening to Greg Secker on stage and the penny dropped.

COVER STORY

This is it, I thought, this is going to be my new career. I enrolled in Greg Secker’s Learn to Trade program and I never looked back. Since then, I have completely transformed both my life and my family’s life— all thanks to forex trading and Learn to Trade. Twelve months into my education with Learn to Trade, I was awarded Trader of the Year. By following Learn to Trade’s trading strategies and rules, I traded my account to 213%. Greg Secker himself asked me to take a part-time role with Learn to Trade as an ambassador to their flagship professional forex trading program called the Unlimited Wealth Program. Of course, I jumped at the opportunity. It’s a forex education program that just works. I’m a product of the product so to speak, and I wanted to help and mentor new students coming into the program. I absolutely love my role; I get to share my journey, the steps I took through the program that led me to become a successful forex trader, and I can pass on my trader tips and knowledge. It is wonderfully rewarding to help others move their life forward to financial freedom. It’s an amazing feeling and it’s what gets me out of bed every morning. Twelve months later, Greg Secker asked me to become the CEO of the company. Again, I jumped at the opportunity. My appointment as the CEO of Learn to Trade is a testament to the vision of Greg Secker, shaping Learn to Trade into a trader’s hub: a trading education company for traders run by traders. Greg Secker’s mandate is and always has been to train as many people he can around the world and turn them into great traders to achieve financial freedom, to be able to live life on their terms by following his personal and highly-developed trading strategies. So far, we have trained over 300,000 people around the world

and turned them into traders, many of whom have quit their jobs to trade full-time as a result of what they have learned at Learn to Trade. In your opinion, can anyone trade? The short answer is yes. Absolutely. Whether you're completely new to trading or have traded other markets before, the volatility of the forex market is a very unique environment that takes time to understand. However, anyone can trade forex if they develop their trading knowledge, build a forex trading strategy, and gain experience trading the market. I’ve found that now I’m a trader, the most important aspect of success in trading is education. If you want to get an edge or to really make money trading, education is crucial. Like anything in life, if you want to move forward— financially, physically, mentally— you need education. The beauty of Learn to Trade is that you get access to the most profitable traders in the forex market, who trade live, their own money, and that’s what gave me confidence in trading with Learn to Trade. We have had all types of people go through our program, from those who found school unsuitable for them to retirees, all living life on their terms because of what they have learned through trading forex currencies at Learn to Trade. All you need is one hour a day and you can profit from trading. The forex market is open 24/5. With $5.1 Trillion traded every single day, it is the most liquid market in the world. There’s always an opportunity in the market to make money and you can tap into a potentially lucrative income with extreme ease and flexibility. Is it really possible to make a living trading?

Yes, it is absolutely possible to earn a living trading. You just have to know how— and, again, that comes down to education. Knowledge is everything in the context of trading. Trading forex currencies is not a get-rich-quick scheme. It takes time, knowledge, and an ability to master your emotions— especially impulse. Many people make a good living trading and have done so for many years. Some people actually do sit on a tropical beach, or on an A380 on the way to London making money trading like I have, armed with only a laptop and an internet connection, carving out a living from the market. That is the allure of trading for a living: freedom. Freedom to be your own boss, to work where, and when you want, and to be financially secure. I know traders who have been through our Unlimited Wealth Program who frequently make $16,000 to $18,000 per trade in two hours. It’s not uncommon. So, what does the work week look like for a full-time trader? Being a full-time trader does not mean you work every day. It simply means that your trading is paying for your lifestyle. This is a very important distinction and one I recommend potential fulltime traders consider. Trading is about creating a lifestyle supported by trading, not making trading your lifestyle. Full-time trading just means your total trading profits over one year need to equate to $100,000. Looking at trading in an objective way will make a dramatic difference in your mindset, or trading psychology, and how you trade the market. It all depends on your “why” and then you attach your financial goals and trading targets. Once you establish targets, you set out the time needed to trade to achieve your financial goals, whether on a daily, weekly, or monthly basis.

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Some traders I know who have been through our programs, trade three to four hours a day, three days a week and make the same amount of money as they were working full-time, if not doubling or tripling their income. Learn to Trade offers a variety of educational support to those wanting to be successful in forex trading. Where should those interested in trading begin? To trade effectively, it's critical to get a forex education. You can find a lot of useful information on our websites or our YouTube channel. As you will learn, nothing beats experience, and

if you want to learn forex trading, experience is the best teacher. To get started, you need to understand what it is you're trading. New traders tend to jump in and start trading anything that looks like it moves. They usually will use high leverage and trade randomly in both directions, usually leading to loss of money. Understanding the currencies that you buy and sell makes a big difference. For example, a currency may be bouncing upward after a large fall and encourage inexperienced traders to try to “catch the bottom." The currency itself may have been falling due to bad employment

reports for multiple months. Would you buy something like that? Probably not, and this is an example of why you need to know and understand what you buy and sell. That’s where Learn to Trade excel with their trading programs. To get started with Learn to Trade all you need to do is attend one of our free seminars, which you can find on our website, or you can sign in and watch Greg Secker’s webinar. Learn to Trade offers a number of different seminars and courses, what do the seminars cover?

CEO Greg Morgan and Owner/ founder Greg Secker Are not only leaders of Learn To Trade but great friends

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All our trading courses, programs, seminars have one goal in mind: to change your life. We teach risk management, trading strategies, advanced trading strategies, goal setting, trading psychology, technical, fundamentals, news trading, the list goes on. We teach our own bespoke successful trading strategies that have been independently audited by Wellers Financial in the UK. Using our strategies and proprietary charting software, SmartCharts, our trading floor team will help you embark on a new and exciting career in currency trading. •

• •

•

Every week we host live trading webinars where we help you understand the live market setup Up to 27 live webinars are available per week. We share our trade analysis and let you know about what we trade and explain all our setups Every Unlimited Wealth student receives their own private forex trading mentor We explore all Forex pairs, indices, commodities to trade, and different time frames in order to find the best trading opportunities. We always look over our shoulder and you learn to trade like a pro!

What are the Benefits of Coaching? You could see a 100% return on your investment and save years and thousands of dollars of trial and error. Trading coaches tell you what you need to hear. You do what star traders do. You'll have more positivity in your life. In my opinion, the reason why over 90% of traders never make it is that they are uncomfortable asking for help with their trading challenges, or they try to learn to trade on their own without the support that is needed. I made this exact mistake myself— trying to learn how to trade on my own, buying online forex courses, watching YouTube videos, trading on my own trying to get a return on my investment. But I didn’t know what I was doing. It was a bit like tossing a coin. I lacked the knowledge and discipline required to trade successfully. My trading coach put a stop to the mess I was in.

Our trader mentors at Learn to Trade have a positive influence on your trading performance because they are your advocate for change. Chances are that your family and friends are opinionated and biased about you and your trading; a trading coach will look at you objectively and strive to empower you to take the necessary actions to achieve your trading and financial goals. In short, while the people in your life tend to tell you what you want to hear, your trading coach will be honest and tell you what you need to hear to make your trading goals a reality. Some professional trading institutions (banks, proprietary firms, money managers) will pay as much as $5,000 a day for a particular trader coach. When you join our Unlimited Wealth Program, you get enough coaching sessions to last you a year, where your personal trader coach will hold your hand every step of the way to ensure you are consistent, profitable, and on course to reach your financial goals. Does being a successful trader mean never losing? I actually get this question a lot. There is no such thing as a 100% win rate in trading. That’s simply impossible. If any trader, educator, broker, or forex company tells you this, then walk away! You will get losses, it is inevitable, even for master traders. Successful trading is all about taking profit off the table day by day, week by week to grow your account. All you need in trading to be profitable is six out of ten winning trades. Risk management is key to survival as a forex trader, as in life. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect your capital. As your capital gets depleted, your ability to make a profit is lost. Our trader mentors and coaches have worked on trading floors around the world, worked for global banks and financial institutions so they know how the “big boys” trade and protect their money. That knowledge of proper money management techniques gets passed on to you in our trading programs.

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I caught one of your recent podcasts where you gave traders the tip to “never trade when they are tired or not focused.” Can you tell us about the podcasts and some of your other top tips for traders? I produce a number of podcast and trader tips. Here are ten of my forex trading tips that you can use to avoid disasters and maximize your potential profits in trading the forex currency market. 1. Know yourself, define your risk tolerance carefully, and understand your needs. 2. Plan your goals and stick to your plan. Always Use a Trading Plan. 3. Focus on a single currency pair, expand as you better your skills. 4. Keep your risk low. 5. Restrain your emotions. 6. Always use a Stop Loss. 7. Study the markets, fundamentals, and technical factors leading the price action. 8. Don’t trade when you’re exhausted, angry, upset, or intoxicated. 9. Treat Trading Like a Business. 10. Don’t give up - EVER!

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Greg Morgan

Greg Secker

CEO Learn to Trade

Owner/Founder Learn to Trade

What trends do you see taking place in the market that investors should take note of? When it comes to trading forex currencies, or rather capitalising on profitable opportunities in the market, a trader must always look at the fundamentals of trading. Those are the trends that we can bank profits from. The Foreign Exchange is one of the fastest-moving most liquid markets in the world. Currency price can change in minutes due to market reactions to macroeconomic and political data. For example, if a country reports lower-thanexpected economic growth, the currency markets react, and that country’s currency value could decline in mere minutes! If we look at the current economic climate, we have US elections next year, we have Brexit still ongoing, the USChina trade war, negative interest rates in Europe, inflation, and the cost of living. Financial experts and forecasters are predicting a market correction, which is normal, but we are headed for a recession. As a trader, we say bring on these events, it’s where and how we make money. Forex trading is recession-proof. You can make money in an up market and a down market.

COVER STORY

Successful Forex traders understand the impact these market fundamentals can have on currency price, which is why traders trade— they make money from these events. In Forex trading, understanding the market fundamentals is essential for your success. Recognising these four major factors can put you in a position of power as you trade: 1. Interest Rates Interest rates, especially interestrate changes, can have a significant and immediate impact on currency valuations. An increase in a country’s interest rate typically results in rising values for that currency. The opposite would be true if a country reduced their interest rates. 2. Employment There are a number of economic factors that can affect currency valuations, but employment is one of the most important in Forex trading. Employment is particularly significant because it influences consumer spending. Unexpected shifts in employment, whether positive or negative, can cause volatility in the Forex markets. 3. Economic Growth There are numerous indicators that traders use to measure economic growth. For example, an increase in consumer spending indicates relative confidence amongst consumers that the economy is healthy. In many cases, an economic report that shows evidence of an improving housing market or increases to consumer spending and wages can boost a currency’s valuation. 4. Commodity Prices The price of commodities like oil or iron ore can have an impact on currency prices depending on how the country uses the commodity. In

many cases, countries that are netexporters of a particular commodity experience declining currency values as commodity prices drop. For example, as a net-exporter of petroleum, Canada’s dollar tends to rise as petrol prices rise. The United States, on the other hand, is a netimporter of oil. Rising oil prices cause US consumer spending to fall, which can result in a weaker US dollar. 5. Other Trends Technology is another trend greatly enhancing the forex trading industry. Learn to Trade has developed their own charting software called SmartCharts, a powerful and user-friendly trading platform with built-in, easy-to-follow trading strategies to maximise trading opportunities in any market condition. It’s a true cloud-based trading system for maximum performance. SmartCharts was created by professional traders to make online trading and investing as accessible as possible for everyone, regardless of their background or experience. For the beginner, we provide a caring and supportive trading environment that blends the highest standards of education with intelligent trading assistance. For the intermediate and professional trader, we provide a feature-rich, highly portable time-saving system which dramatically speeds up your ability to find and take advantage of trading opportunities. Our purpose is to provide you with the knowledge and tools you need at every step of your trading journey. Learn to Trade has rapidly grown and expanded over the years. Will you be expanding into any new markets? What does the future hold for Learn to Trade?

global offices in London, South Africa, Sydney, Manilla, and the Middle East, we are now expanding further into Asia, having recently set up a trading floor in Vietnam. One thing’s for sure: the cost of living is rising on a global scale. That gap between the cost of living and monthly income is widening. One job doesn’t cut it anymore. You need to take control of your own financial future; you cannot rely on banks or the government to help you. That’s where forex comes into play. We are finding all types of people from all walks of life are looking to take control of their financial destiny themselves and are turning to new ways of doing so. Learn to Trade gives retail investors, mums and dads, retirees, people like myself, a way of tapping into a potentially lucrative opportunity with flexibility and ease. As well as providing high-quality systems, at Learn to Trade, we believe that trading is about people. We connect our experienced professionals Forex traders with private traders of all levels, to share our knowledge, experience, and views on the markets. We have been committed to building a worldwide trading family since our inception in 2013 and we will continue to bring a human side to trading to all our students, users, and graduates around the world. This is an amazing, exciting space to work in. At Learn to Trade we are a passionate, dedicated group of people. We are a trading education company built by Greg Secker, built by traders for traders, for people like you and me, to offer us a vehicle to live life on our terms— financially free.

Our mandate is to train as many people as we can around the world using trading as the vehicle to create financial freedom. So far, we’ve trained in excess of 300,000 people. With

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EMEA 86 Issue 17

EMEA TECHNOLOGY

5G and Open Banking: Explosive growth or business as usual? We are entering a new era of increased connectivity and lightning fast data transfer. As the final rollout of 5G draws closer with each passing day, it provides us with an exciting opportunity to explore how it might impact our industry. With the advent of regulatory developments such as PSD2, the landscape is already experiencing explosive growth. Fintechs, challenger banks and mainstays of the financial services world are all looking for more opportunities to meet the demands of their customers, who are increasingly expecting more seamless user experiences. The implementation of 5G represents a further opportunity for businesses to capitalise on Open Banking-inspired technology and PSD2 regulations. It will help drive adoption of Open Banking in a few ways through its increased bandwidth, leading to improved services in several key areas including CX, FX, and security. 5G and Open Banking: Opportunities Significantly, at a time when experience is everything, 5G presents an opportunity to improve the customer journey. This is primarily because it will be easier to build data-intensive applications that rely on a two-way feed

of information between the customer’s device and the company’s server. A good example of this would be using customer inputs alongside Open Banking data to feed a conversational AI bot that could provide advice on investment strategies, risk management, or other complex decisions. Furthermore, 5G’s superior bandwidths will also improve the speed of execution for a number of time-sensitive processes. This has the potential to be hugely impactful for certain areas of the financial services sector. An example of this is in FX transactions where markets are incredibly dynamic and a lag time of just a few seconds can change the economics of a transaction significantly in times of volatility. During periods of political and economic uncertainty, ensuring reliable, timely execution is of express importance and gives customers the confidence that the markets won’t shift before their transactions are made. Finally, the increased bandwidth from 5G also opens the door to more complex authentication patterns requiring higher levels of data passing between the user’s device and the authentication server. This is going to become increasingly important as quantum computing becomes more mainstream and older forms of cryptography become easier to crack.

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EMEA TECHNOLOGY

In essence, if deployed correctly 5G has unbridled potential to increase the speed and the security of financial transactions, improving the user experience that has already benefitted from Open Banking regulations. Open Banking and 5G in Action In reality, it is still too soon to make concrete conclusions about how 5G will impact the financial services sector in Europe. Nevertheless, it is clear that several markets are already well equipped to adopt the technology and immediately reap its benefits. In particular, those that already possess fairly advanced mobile networks such as the United States, the UK, Australia, and China are primed to make the switch. Despite this, many institutions in Europe are still scrambling to meet compliance benchmarks for pre-existing Open Banking technologies, meaning that they may not be able to benefit from all the opportunities mentioned above.

Open Banking has increased competition and pushed companies to create better user experiences, strive to reduce friction, and focus more on their customers. From Monzo’s pots feature, to Yolt’s painless current account switching, it is certainly an exciting time in financial services. When coupled with the improved bandwidth and speed offered by 5G, these technologies will open up new ways for the industry to help its customers make better decisions, from personal budgeting to building a risk management strategy for a small business. I’m personally excited to help Western Union take advantage of these industry-wide innovations to help our customers solve problems efficiently so that they can ultimately focus more on their core businesses.

The September deadline for PSD2 Open Banking compliance continues to be an obstacle for many and there remains a lot of work to be done. Earlier this year, a survey run by Tink 1 showed us that a large portion of FIs in Europe missed the regulatory deadline for having an API sandbox available for testing, so many players in the industry are playing catch-up. However, one country that has welcomed Open Banking with open arms is the UK. Here, more than 100 financial services companies have enrolled to offer open banking services since its introduction over a year ago, with another 100 already slated to join according to the Open Banking Implementation Entity. It is not a coincidence that there has been an explosion of innovation in digital banking services in this market, with a number of incumbents and challengers using data sourced from multiple financial services providers to help consumers track their spending and budget for the future.

Scott Johnson Vice President, Head of Product Western Union Business Solutions

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Team, Editorial. “41% Of Banks Missed PSD2 Deadline Says Survey.”Finextra Research, Finextra, 21 Mar.2019,https://www. finextra.com/newsarticle/33569/41-of-banks-missed-psd2deadline-says-survey.

EMEA INTERVIEW

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EMEA INTERVIEW

An inside look at Emaar, The Economic City Earlier this year in London, we interviewed Danish Samad, Group Treasurer and Director of Investments at Emaar to discuss the company’s success and this exciting city development.

art Golf course that speaks volumes of the success of KAEC.

Philip Fothergrill: Danish Samad, welcome to London, thank you so much for coming here today. Congratulations on your award-winning success. It's a very exciting project, the Emaar Economic City. I'd like to know more about it and of course what initiatives you took to create the success.

Danish Samad: It has always been to cater to the KAEC vision. KAEC is focusing on four strategic sectors with drivers to generate revenues and they are already achieving their objectives, including logistics and industrial services, tourism and leisure, quality of life (Coastal Communities), and the growing business sector.

Danish Samad: Emaar Economic City is the legal entity and master developer of King Abdullah Economic City, a budding metropolis north of Jeddah. It is the only private city in the world and is almost the size of Washington D.C. Philip Fothergrill: What initiatives do you feel led to the success of EEC? Danish Samad: Thank you. When King Abdullah Economic City (KAEC) was conceived, it was a stretch of undeveloped land that eventually shaped up to what it is today. The pillars of development and success were thoughtfully planned and crafted; 1. Having an Economic Hub, 2. Having Residential Communities, 3. Having Commercial & retail mix, and then to have the lifestyle necessities such as hospital, school, places of social needs and leisure. Down the road, we have managed to achieve all of them. And let me tell you, it didn’t take us very long to have one of the fastest growing ports flanked by a bustling Industrial valley, six residential communities, A 5 and a 4 star hotel, Babson Global MBA through MBSC, an American curriculum secondary school, a multispecialty healthcare facility, and a state of the

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Philip Fothergrill: What are the core areas of focus for Emaar Economic City?

Foremost is to create jobs in the city, which is being done through the Port and Industrial valley. The Port is growing at a rapid pace and so is the Industrial valley which is next to the port complementing each other. One of the other areas of focus is Leisure & Entertainment. In addition to that, EEC is committed to offer unmatched facilities to the society – from a Golf course to Motor Sports Park and from prime hospitality to pristine beach resorts, camp sites to sports complex and much more. Some of them are up and running and few are expected to come online shortly. Philip Fothergrill: What are some of the programs and policies you have put in place? Danish Samad: We have strategic collaborations and partnerships with different government entities such as: the Ministry of Housing, the General Entertainment Authority, the General Sports Authority, the General Authority of Culture, the Saudi Water Sports and Diving Federation (SWSDF), and the General Authority of Small Medium Enterprises.

Through our partnership with the General Sports Authority (GSA) and the Saudi Golf Federation we hosted the first ever European PGA Golf Tournament, held this year with huge success at KAEC’s world class Royal Greens Golf Course; the partnership with the Saudi Water Sports and Diving Federation to host the Fishing Championship in 2019, a partnership agreement with the General Entertainment Authority to build a tourist and entertainment zone to be named ‘Juman Carnival’; and partnership with the General Authority of Culture to support local talents and host cultural events and projects. In the business sector KAEC has initiated an innovative Corporate Relocation program (CRP) that offers financial and logistical support to national companies and Saudi entrepreneurs. Also, the city has partnered with the General Authority of Small Medium Enterprises to enable Saudi entrepreneurs to establish their ventures in a supportive and encouraging environment, founded a venture fund worth SR75 million to finance Saudi entrepreneurs, and provided offices to entrepreneurs in KAEC. Philip Fothergrill: How do you maximize shareholder value? Danish Samad: KAEC is a unique destination for living, visiting, and investing. The city was one of the pioneers of diversifying the economy by focusing on non-oil production and we have succeeded in attracting more than SAR 30 billion in investments. There are more than 60 projects under development, close to 12K jobs have been created, and since 2015 we have received close to a 1M visitor’s to-date.

EMEA INTERVIEW

Danish Samad

Group Treasurer & Director of Investments EMAAR

As this is a unique business model, the only privately funded city in the world, if I may say so; we manage everything in the city which leaves us in a very commanding position. Our ability to have built and managed a city of this magnitude without any Government spending and our future growth plan has made us an inspiration to many designs that intend to embark on the same path. Our current valuation of the city is roughly close to USD 15 Bn that gives a huge intrinsic value from Market Cap’s point of view. Philip Fothergrill: What does the year ahead look like? Danish Samad: This year our focus is on tourism and entertainment, and we are implementing more projects in this fastgrowing sector to make KAEC the most attractive tourism destination on the Red Sea, In line with the Kingdom’s Vision 2030 to meet the growing demand on tourism and entertainment in Saudi.

In the business sector we are building on our success to provide unique opportunities for entrepreneurs and Saudi youth to operate and work in KAEC, hence, the city has initiated an innovative Corporate Relocation program (CRP) that offers financial and logistical support to national companies and Saudi entrepreneurs. And we are in the process of securing attractive regulations for new business sectors. Philip Fothergrill: How do you see the inflows in Saudi? Danish Samad: In 2018, Saudi Arabia was added to the MSCI EM Index and in March, 2019 the process of including Saudi companies in the FTSE Russell Index started. This is a recognition that the Kingdom is an important and beneficial market in the investment world. EEC is part of these indices. There are huge expectations of massive inflows that will benefit the

Saudi benchmark index. I expect the investments to come not only from ME countries, but also, on the back of these indices, will funnel in from Western and Asian markets too. Saudi Arabia is a very safe and structurally sound EM market with immense business potential. You may have seen Saudi Aramco’s results. Saudi Aramco is probably the most valuable company on Earth and the recent bond issue was heavily oversubscribed and was priced circa 20 bps inside sovereign. We have not seen anything like that before. This is a reflection of trust in the company, in the country and its rulers, and the strategies that aim to give the Kingdom a quantum leap forward. Philip Fothergrill: Well, obviously a confident future ahead, very exciting. Thank you so much for telling us about the economic city project. Thank you for coming to London.

Issue 17 | 91

EMEA FINANCE

The LIBOR Iceberg is Dead Ahead

– Now is The Time to Start Steering Clear

The Titanic’s sinking is one of the most tragic accidents of all time. In finance, we are faced with a transition of titanic proportions that will occur at the end of 2021 as LIBOR ceases to exist as a reference rate and is replaced by SOFR/SONIA or other alternatives. Fortunately, unlike the Titanic’s iceberg, we can see this transition coming in advance, but we can only avert disaster if we heed the warnings and begin to plan now to safely navigate away from LIBOR. Over $350 trillion (240+ trillion GBP) financial contracts reference LIBOR and unfortunately, more continue to be ill-advisedly created to this day. Many authorities, governing bodies and thought leaders will continue to

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admonish financial institutions that LIBOR will cease to exist at the end of 2021. The ARRC as recently as September 15th issued a battle cry to Wall Street to act now and not wait. An incalculable number of financial instruments, contracts, and automation processes have LIBOR embedded as a reference rate, so those who have not prepared properly may crash into their own version of an iceberg. One of the most challenging parts of the LIBOR transition is to understand its full impact and reverberations before-thefact. There are many unknown variables, ranging from the effect on balance sheets, potential stress scenarios resulting from new reference rates, not to mention client reaction and pushback. Many

contracts and legal documents contain fallback provisions if LIBOR becomes unavailable. However, since LIBOR is generally for floating rate transactions and SOFR, SONIA and others apply to fixed rate transactions, there is a wide variety of potential financial and reputational damages. An ill-executed transition, or lack of one, can have catastrophic impact to financial institutions. Without a standardized, planned and comprehensive transition away from LIBOR, the risks of litigation are nearly infinite. A spate of lawsuits and cautionary tales will inevitably follow in 2022 and beyond, pummeling those who have not taken it seriously and done their due diligence.

EMEA FINANCE Law firms and alternative legal service providers (ALSPs) are gearing up today to support the LIBOR transition in some major financial markets (NYC, London, Hong Kong). These firms will supplement inhouse teams and contract with partner providers to keep costs manageable while delivering value to their clients when the floodgates open. Firms aren’t always able to assess the financial risk implications of reference rate transitions and the long term impact of the rate change from a dollar/ value perspective. However, they can be instrumental in working with their clients to manage the onerous amount of documentation (contracts, prospectuses, and other legal documentation such as marketing collateral and product details) that requires remediation. Mentions of LIBOR as a reference rate must be replaced with new language. Using a traditional law firm typically comes with enormous cost and these firms are not miracle workers for institutions which procrastinate too long. ALSPs which are accustomed to automating processes efficiently will provide an operational edge. A technologyenabled solution can provide scale to deal with the Herculean task that the Libor transition will present. But more importantly, leveraging technology can help mitigate risk and provide budget predictability. The best defense for banks is to assemble a LIBOR Task Force leveraging internal stakeholders and retaining outside assistance that can seamlessly provide both the focus and expertise to manage the plan. Leadership buy-in and prioritization of this Task Force will be crucial. The Task Force will definitely need a Program Manager and multiple project managers to ensure a transition initiative is effectively

Banks preparing for the LIBOR transition can consider this 4-part plan:

is achieved. The initiative/transition team must be able to pivot as new risks come to light. For example, new analysis of bank balance sheets could alter the risk profile of certain transition action). Transition activities will need to be re/de-prioritized on the fly. Throughout execution, a strong communication function and rigorous calendar must be maintained to keep stakeholders informed and hold all participants accountable.

Assess: Estimate the expected difficulty and risk for each task. Using Artificial Intelligence (AI) tools and experienced personnel, scope out what must be transitioned/developed (documentation, systems, fallback provisions, standard operating procedures, limiting new transactions, training, etc.). This is not only a repapering project but is a complex process requiring both human and technology resources. Analysis and metadata should be provided by producers in a user-friendly format. AI and enhanced machine learning technology is incredibly helpful for identifying active and active agreements and pinpointing their contents.

Financial institutions still have more than two years to prepare for LIBOR’s discontinuation. In the volatile, unforgiving world of finance, it’s fortunate to have so much notice to prepare for an upcoming regulatory change. That advantage cannot be squandered with delay and neglect. Though the sheer enormity of the LIBOR transition is formidable now, imagine how much more daunting it will be six months or one year from now. The iceberg still seems far away, but it won’t be for long. By getting the best crew on board now and mapping out a sound and strategic path, financial institutions can avoid disaster.

Prioritize: Determine risk profile, order and priority. Identify potential pain points and bottlenecks so they can be eliminated preemptively. Six Sigma principles can be enormously helpful throughout this process. Clear priorities will then dictate what to assign internally and what external help will be needed from ALSPs or law firms.

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implemented within the remaining days of LIBOR. An experienced Program Manager can manage several projects simultaneously, hold teams accountable, and drive activity. Communication is the most critical linchpin. Institutions without a Program Manager in place today need to find one - yesterday.

Strategize: Map out a detailed and strategic roadmap for success, complete with specific steps, stakeholders, vendors, resources, order and procedures. A transition initiative this massive will live or die by its strategy. Create standardized approaches/playbooks for legal document drafting, remediation, amendment and outreach. Execute: Execution is everything. Deploying the strategy in a streamlined, sensible and diligent way is the final step toward transition. Track your strategic plan to ensure all milestones are met and compliance

Jeffrey Catanzaro Senior VP of Contracts Compliance and Commercial Services Integreon

Jeffrey Catanzaro recently joined Integreon as Senior VP of Contracts, Compliance and Commercial Services. He is spearheading a new LIBOR Transition Readiness Task Force for the large global ALSP (Alternative Legal Services Provider), as well as driving other initiatives and partnerships.

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EMEA TECHNOLOGY

New thinking needed â&#x20AC;&#x201C; why old approaches to non-financial risk management (NFRM) and operational resilience must change.

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EMEA TECHNOLOGY

The risk management discipline is in real danger of failing to see the forest for the trees in the way it talks about non-financial risk management. The debates – often on the “how” and “where” of risk frameworks – are usually grounded in an artificial construct such as organisational structure, lines of defence or regulatory requirements. The reality is that while some individual risks have not changed fundamentally, new risks are emerging all the time, and changing shape. For example, inappropriate conduct risk-related behaviours were observed as early as the 17th century in tulip trading during the “Tulipmania”. On the other hand, most of the IT-related risks, including cyber risk, did not exist 40 years ago. Within ecosystems, risk scenarios evolve organically and develop new relationships with other risks. Risks do not obey the false boundaries that are created to define and manage them.

Instead, the risk discipline should be focusing on the best way to manage NFRM. This involves thinking about non-financial risk in a more connected, innovative and practical way – both within firms and between them – through new, collaborative approaches. A usefu l e x a m ple of the way the di scipline ha s c re a te d f a lse bounda rie s is the Ba se l Committe e on B an k ing Supe r v ision’s (BCBS’s) defi ni tion of ope ra tiona l risk , whi ch i s: " the risk of loss re sulting from i n a de quate or f a ile d inte rna l processe s, pe ople a nd sy ste ms or from e x te rna l eve nts. This defi ni tion inc lude s le ga l risk but excl udes stra te gic a nd re puta tiona l ri sk .” This e xc lusion of stra te gic ri sk and re puta tiona l risk , more than 15 ye a rs a go, was unde r ta ke n because both of the se risk s were co nside re d too “f uz z y ” to quanti fy, whe n supe r v isor y a nd

industr y f oc us wa s on meas u r i n g ope ra tiona l risk f or re gula t o r y c a pita l c a lc ula tion purpos es . In 2019, both regulatory and industry focus have shifted away from advanced modelling of operational risk losses for predictive purposes. Now, the discipline is beginning to understand that the relationship between these two risks and all other non-financial risks is very important. In the wake of social media and other online forms of communication, the potential for a reputational risk loss event has grown significantly – social media not only makes reputational damage instantly visible, it also accelerates the growth of the size of the original risk event loss impact. There is also increasing acknowledgement of the tight interlinkage between levels of non-financial risks and the ability of an organisation to deliver on its strategic goals.

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EMEA TECHNOLOGY The same holds true for a rapidly developing regulatory focus, operational resilience. The UK’s Financial Conduct Authority (FCA), Bank of England, and Prudential Regulatory Authority (PRA) published a joint discussion paper on this topic, Building the UK financial sector’s operational resilience 1 , in July 2018. To follow up on this, the regulators expect to jointly issue a consultation paper in October. This will include both the regulators’ new policies in this area, as well as their approach to supervising operational resilience. Other regulatory bodies are also looking at the issue of operational resilience. The BCBS is expected to include material on the topic in its forthcoming update to its 2011 Principles for the Sound Management of Operational Risk. And the US Federal Reserve is also drafting a new document on operational resilience, although the timeline for its publication is not known. Operational resilience impacts, and is impacted by, all forms of nonfinancial risk. It’s important for firms to think about operational resilience — the impact that a loss event may have, and how well a firm responds — in relationship with the likelihood of risks materialising. All non-financial risks, such as OpRisk, strategic risk, and reputational risk, should be considered.

outage resulting from a cyberattack) could impact a firm’s capital position and liquidity. This is an operational risk loss event morphing into reputational risk via social media. This then transforms into strategic risk and business risk, as well as financial risks such as liquidity risk. The ability of the initial IT outage to roll into other kinds of risks depends on the strength of the operational resilience at the firm. It is all connected, and this is why Acin is calling for the industry to adopt further the term nonfinancial risk. Firms need to look at the entire risk picture in a more joined-up way. The risk management discipline needs to turn away from debates about what risk fits where, and instead put its energies into understanding how risk and resilience interconnects, within firms and between firms. This is why we also believe that now is the moment for firms to embrace collaboration. To truly understand non-financial risk and resilience, financial services firms need to share experiences and best practices with each other.

Certainly, the regulators are thinking in this connected way. Many of the operational resilience issues that are under the spotlight — such as responding to an IT outage or a data privacy breach — are issues that all firms face and are a source of potential systemic risk. Regulators are connecting the dots.

Regulators are keen to encourage more industry collaboration. For example, in a recent speech, PRA deputy CEO Lyndon Nelson indicated that financial services supervisors would like to see banks collaborate more to protect IT systems and data from either accidental or deliberate damage. Emphatically underscoring the new importance of collaboration was Nelson’s revelation that the Bank of England would be shortly publishing a report that will highlight the importance of collaboration among financial services firms around resilience issues.

For example, at recent hearings in the UK parliament about IT failures at financial services firms, UK regulators talked about how they are now looking at the way in which reputational damage inflicted by social media (say, for example, an IT

Regulators are also looking at resilience metrics. For example, in the BCBS update to its 2011 Principles for the Sound Management of Operational Risk, the body stated it is planning to include a set of metrics for

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operational resilience around IT outages. In the UK, Nick Strange, the Bank of England’s director of supervisory risk specialists, has said regulators are thinking about demanding that firms set a specific “tolerance for disruption – in the form of a specific outcome or metric” to strengthen approaches to operational resilience. Examples include “the proportion of payments made; the number of customers affected; [and] the maximum allowed time for restoration of a business service.”

EMEA TECHNOLOGY

Clearly the majority of non-financial risk – and especially operational resilience – is not a source of competitive advantage for firms – the regulators are implying this through their calls for increased collaboration. Their belief – as well as ours – is that proactive collaboration among firms would strengthen the entire financial system, potentially making all collaborating firms more resilient and benefitting the industry as a whole. Getting industry-led collaboration right will make all firms stronger and enable constructive dialogue with the regulators about operational

resilience, as well as nonfinancial risk management. Acin is committed to enabling the industry to collaborate through its unique Networked Defence Model, which is bringing the industry together into a growing network of firms who work together to enhance their risk and control environments. Through the Networked Defence Model, financial services can be transformed from a control ecosystem within each bank that is only as strong as its weakest link, to one that is as robust as the Community’s strongest link.

Gaspard Biosse Duplan Product Head – Sales & Trading Acin

Acin is the leading risk and control data standards, benchmarking and controls data analytics company

“Building the UK Financial Sector's Operational Resilience Discussion Paper.”FCA, 5 July 2018,https://www.fca.org. uk/news/press-releases/building-uk-financial-sector’soperational-resilience-discussion-paper.

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EMEA BUSINESS

As Automakers Shift Business Models, New Tax Strategies Shift into Gear Static business models are no longer fit to serve the interests of modern international companies. Technological disruption and a dynamic competitive environment mean that many businesses are continually adjusting their business models in order to retain a competitive advantage. For automotive tax teams, implementing the digital integration required to keep pace with evolving business models in an everchanging tax environment, the pressure is increasing. Technological disruption As technology becomes more integral to both our professional and personal lives, forward-thinking businesses are adapting to digitise their practices. According to a recent survey, more than half of global companies already have a digital strategy, with a third of those currently without one working on developing one. 1 This is especially apparent in the automotive industry, which has faced huge disruption in recent years. Incumbent manufacturers are competing with technology giants who have entered the arena and developed products such as smart cars or ride-sharing applications that challenge the existing market. Traditional automotive manufacturers, and the large original equipment manufacturing (OEM) industry more widely, have been adapting their

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business models in response to this disruption. Many are branching out to offer services and software alongside their traditional physical products. These vary between driverspecific apps, such as those which find and pay for car parking spaces, and time-limited digital service subscriptions for cars which allow you to use certain car functions, such as heating, only when needed. However, the move to digital business models creates complications for OEM tax teams as new business models require new tax strategies, As new product innovations move OEMâ&#x20AC;&#x2122;s towards selling services directly to consumers rather than on a B2B basis, tax teams must adapt quickly to avoid tax risk and uncertainty. As OEMs move towards businessto-consumer models, their tax teams face several issues. Income tax payment and compliance obligations may change as the multi-jurisdictional transitions alter the organizationâ&#x20AC;&#x2122;s permanent establishment status. Fees for connected services might result in withholding tax issues, the rules for which again vary depending on whether a transaction is B2B or B2C.

The changing tax environment The tax environment is constantly shifting. Traditional local tax systems do not accommodate for modern, digitised business models; legislative discussions of a common global tax base are continually happening, led by the Organization for Economic Cooperation and Development (OECD). As they move towards servicing consumers across different borders, automotive industry tax teams must also work to ensure they have a global understanding of the tax costs and consequences in all relevant jurisdictions.

EMEA BUSINESS

Automotive tax teams new to operating across multiple jurisdictions should follow the lead of other industries that are more experienced in operating with multiple services across different borders. For example, by applying for a tax ruling in advance of business roll-out to be certain of the tax impacts of business model changes. Tax teams advising their companies should advocate for delaying new business launches until necessary rulings have been secured in all relevant jurisdictions.

Not only must they understand these constant changes but, in an age of increased transparency, tax compliance and responsibility are coming under heightened scrutiny on all sides, placing further pressure on tax teams. Effective tax teams not only need to balance these factors, but all the while optimise the company’s tax position and function. A balanced approach Simultaneous changes in both business strategy and the tax environment have the potential to cause serious issues for tax teams. These teams must keep up with both sets of changes while ensuring that the businesses they work for remain tax compliant at all times.

Dr. Andreas Ball Partner, International Tax KPMG International

For this to be possible, tax teams must be brought in early to the business planning process in order to ensure that new models are designed with tax requirements fully embedded. There needs to be greater integration between the business development or strategy teams and the tax teams. As the automotive industry evolves, tax teams will need to balance the two changing spheres of tax regulation and business models, remaining up to date and aware of the changes occurring in both. How tax rules and regulations will evolve and adapt is uncertain, but by observing or actively participating in tax policy debates internationally, tax teams can be as prepared as possible. By doing this, and advocating for increased involvement in the planning stages of business model changes, tax teams can help ensure that the tax strategy of their organization not only manages the myriad potentials for risk, but builds the foundation to optimise and improve.

Andreas Ball is an experienced attorney at law and certified tax consultant. He advices multinational clients in international tax affairs. He has a broad experience in automotive business both supplier and OEM’s as well as in software and technology industry. A growing focus of his activities is on the tax challenges of the digital transformation. He executed several projects regarding the tax impacts of cross border digital business models. He is a member of the Institute of Chartered Accountants (IDW), Group “Digitalization and Taxation” and member of other Business Federations.

Harvey Nash / KPMG–CIO Survey 2018

Issue 17 | 99

Recognized for Providing a State of the Art Smart Branch Most Innovative Digital Banking Initiative - Kuwait

AUB Kuwait is delighted to be awarded the Most Innovative Digital Banking Initiative (Smart Branch) Kuwait 2019 by Global Banking & Finance Review through judging panel, for our dedication to providing leadership and excellence in digital banking.

www.ahliunited.com.kw

EMEA BUSINESS

Can Small Firms Really Stay Compliant? Whether you are the biggest banking conglomerate or the smallest financial business, there is at least one thing you have in common – the legal and moral obligation to adhere to financial regulations. Well written and conceived regulations are designed to ‘level the playing field’ for competing businesses, as well as protecting them and clients from potential breaches and the punitive and reputational issues associated with these. However, falling foul of the regulator is arguably an even greater risk for Small to Medium Sized Enterprises (SMEs). Many large businesses can ‘cover’ the cost of a hefty fine (and survive the reputational damage in the long-term), but for a smaller firm it can prove fatal. If the fine itself

doesn’t cripple the business, the reputational damage to a ‘challenger brand’ may well strike the fatal blow. Same issues, different resources Being under the same regulatory requirements, financial firms of all sizes face very similar challenges in terms of the way they must meet regulatory requirements. However, in the real world we all know there are considerable differences in the compliance resources of an SME firm compared to a Tier One bank for example.

In fact, many smaller businesses are unable to do much more than the minimum with regards to compliance monitoring. Regrettably for many this means taking a certain level of risk and hoping they do not draw the regulator’s attention. If you speak to many small financial business (as I do) you start to learn that many don’t have specific compliance monitoring at all, often due to confusion and ignorance of the risks. Tightening regulations

Most larger enterprise businesses will have a compliance department, team or function of some description. Inevitably a small business (with perhaps a handful of employees) will struggle to find the resources to dedicate solely to compliance.

Naturally all financial businesses will face the need to address their compliance monitoring abilities at some point and that culminated recently for many SMEs when they received the ‘Dear CEO 1 ’ letter from

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EMEA BUSINESS

the FCA. This was sent to UK brokers outlining the focus points it will enforce and encouraging the firms to actively take measures to prevent breaches if they wish to avoid fines. To add further stress to all financial businesses (and SMEs in particular), the Senior Managers and Certification Regime (SMCR) comes into effect on 9th December 2019 and increases personal accountability of senior people in the financial services industry. This will create a ‘perfect storm’ that could be very dangerous for underprepared firms and the individuals that run them. SME struggles The risks are clear, but SMEs obviously must juggle these with the realities of the resources available. Many of these businesses have their compliance function as part of their operations or risk departments and therefore must share the same resources. Many SMEs have a number of very specific struggles to overcome as well. There is the practical difficulty of keeping up with regulatory changes (sometimes on a monthly or even weekly basis). The IT resources are another area of frequent limitation, many SMEs don’t have a dedicated IT team (or even individual) and choose to outsource this for convenience and cost. Linked to a limited IT resource is the issue of data silos and the difficulties this causes in accurately monitoring compliance. Often small businesses struggle to update their systems and consequently end up running ‘legacy’ systems for extended periods to recoup maximum ROI. All these factors combined make the challenge of compliance monitoring even harder!

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Reliable compliance monitoring on a budget Despite these apparently insurmountable challenges, it is completely possible to manage effective compliance monitoring – but it means looking closely at your business, its processes and IT systems and investing in the right automation technology to tackle it. The first stage is to accept that a manual process of compliance monitoring and investigation simply doesn’t work anymore. This approach is expensive but also unreliable and completely inefficient. It is all too easy to save compliance data on a spreadsheet or on a

designated platform, but this adds to the problem of siloed storage and makes investigating data very difficult and time-consuming. Unfortunately, many smaller organisations don’t fully understand their data requirements or even appreciate they have a data issue at all, so this needs to be addressed first. For organisations that do understand their data requirements the issue of siloes can be overcome, but it requires the automated collection of data to be effective. Moving forward, all data needs to be stored in a central location to make compliance investigation more efficient and prepared for future data requirements.

EMEA BUSINESS

Shira Rottner Business Development Manager Shield

It’s also very tempting to ‘rip and replace’ legacy systems straight away, but actually if you look to upgrade and migrate the data immediately, you are just creating another big project! By all means invest in new systems when the budget allows but ensure there is a smooth transition between the old and new. Equally, don’t be tempted to just hire yet more people to compliance team. Many firms have found themselves feeding a sort of compliance ‘arms race’, continually adding more resources which can’t keep pace and aren’t sustainable. Turning to technology

In my biased point of view, I believe that ultimately SMEs need to choose a suitably powerful, reliable and affordable RegTech solution which draws a line under all the previous issues. These systems have been designed to deal with all the major pain points (keeping up with compliance regulations, breaking down data silos and processing huge amounts of unstructured information), all at a manageable and predictable ongoing cost. In an increasingly uncertain world (with the likes of Brexit adding further uncertainty) regulations are set to continue evolving rapidly and data processing needs will only continue to increase.

SME financial firms need to ‘take the bull by the horns’ which means investing in the right RegTech solution so they can get on with their core business duties, safe in the knowledge that their investment has got their back, protecting them and their customers.

“Dear CEOLetter–Financial Promotions.”FCA, 9 Jan. 2019,https://www.fca.org.uk/news/news-stories/dear-ceoletter-financial-promotions

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EMEA BUSINESS

Civil freezing injunctions: how corporates can control litigation Freezing injunctions are commercial litigation’s blitzkrieg tactic. Before a defendant has had time to blink, they can find themselves on the back foot, with their assets and bank accounts frozen, as they face into protracted litigation. They are a highly effective weapon in litigation – one which can provoke swift settlements. However, given their draconian nature, the courts invariably insist that strict criteria are met before a freezing injunction is granted. Freezing injunctions are ideal in a situation where a commercial dispute has arisen, and you have good reason to believe that the party is about to dissipate their assets, or move them overseas, in order to avoid payments. Bank accounts can be frozen and sales stopped overnight, pending the dispute being fully heard. A freezing injunction is an equitable remedy, which means that it is one which the court may impose in the interests of justice, or fairness, depending on all the circumstances of the case. Equitable remedies are granted at the court’s discretion. The “rules

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of equity” apply. These require that applications should not be delayed in a way that is prejudicial. Similarly, an applicant must have behaved properly in the matter, since it is a rule of equity that those seeking equitable remedies must seek equity from the court “with clean hands.” An applicant must clearly show the court that they have a good, arguable case as regards their cause of action. The risk of the assets being dissipated or moved out of the jurisdiction must also be real. The court will then consider whether it is “just and convenient” to grant the injunction, in view of all these factors - and the potential impact of the injunction on third parties. It is common for freezing orders to be sought before proceedings have been brought as regards the actual claim itself. Applicants for freezing orders must, however, explain the basis of their claim, or prospective claim, and provide supporting evidence. On the basis of these submissions, the court will decide whether the applicant has a good and arguable substantive case.

This threshold is higher than that required for other injunctions, which typically only require that there is a “serious issue to be tried.” A freezing order can be applied to a wide variety of assets, including real property, land, shares and bank accounts. The applicant must show the court that these assets exist. It is not enough for an applicant to demonstrate a mere likelihood that particular assets exist. While applicants need not know the detail of all the relevant assets, they must show good grounds for believing that particular assets exist. Applicants musts also put forward evidence which suggests that, unless an injunction is granted, the respondent will dissipate the assets. The applicant’s own suspicions or concerns are not sufficient. Factors which a court may deem relevant include whether a defendant has mobile or liquid assets, or if there is any evidence of an imminent sale or transfer. If a respondent is not based in the jurisdiction, and has few business ties here, the court

EMEA BUSINESS

may reasonably conclude that there is a higher risk of assets being moved overseas, when compared to a company with a longstanding presence in the country. Applicants must give an undertaking to pay damages to the respondent, if it is ultimately decided that the injunction was not warranted. Applicants may also have to provide security against such damages. They must also pay court fees for the initial hearing, the return hearing and the substantive claim. A freezing injunction therefore carries significant costs and risks for applicants and should not be undertaken lightly. It is vital that applicants give the court full and frank disclosure of all the relevant information regarding the case â&#x20AC;&#x201C; including information which is not supportive of their application. Such disclosure is made under the penalty of being held in contempt of court. Where a freezing order is granted, it is common for applicants to also seek a disclosure order. This will typically compel the respondent to disclose all its assets.

A freezing order will usually be limited to the estimated value of the claim, together with an allowance for interest and costs. The terms of the order will usually allow the respondent to continue their ordinary trading, including paying other debts as they fall due and paying for ordinary business expenses, legal advice and personal expenses. However, in certain cases, freezing injunctions can prevent a defendant from using assets for living expenses or funding their legal representation. Freezing orders can be made with worldwide effect. This is vital where a respondent has assets outside the jurisdiction, or where they have already moved some assets overseas. Where assets are overseas, different jurisdictions will take different approaches to the enforcement of an English court order. Some will enforce the English freezing order, but in some countries it may be necessary to obtain the local equivalent of a freezing order.

overseas. When a freezing order is made at the initial hearing, the court will fix another hearing date - known as a return hearing - to ensure the respondent has the opportunity to make their case. At the return hearing, the respondent will have the opportunity to seek to have the order overturned. Alternatively, the order may be altered, which can sometimes be achieved by the respondent giving formal undertakings as regards the relevant assets. Freezing injunctions can be rapidly obtained and have proven to be a remarkably effective tool in commercial litigation. However, before seeking a freezing injunction, itâ&#x20AC;&#x2122;s wise to ensure that all the relevant criteria are comfortably met â&#x20AC;&#x201C; and that an injunction is a practical necessity - since they also carry with them significant costs and financial risks for applicants.

Once granted, freezing orders can be immediately served on banks or other third parties, to prevent assets being dissipated or transferred

Bambos Tsiattalou is the founding partner of Stokoe Partnership Solicitors, a criminal litigation practice which specialises in defending very serious and corporate crime.

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EMEA BUSINESS

Weighing the value of contemporary art in killer-grams Picasso didn’t post, Richter never regrammed and Titian wasn’t on Twitter.

summer exhibition, the Zari Gallery, and Rosewood Hotel in London.

If you were to compile a list of industries that people associate with the social media age, I suspect that art would feature somewhere near the bottom. It is a sector steeped in history and tradition and has been one of the most lucrative markets for centuries. But for all of the prestige and class associated with the art market, it is not a sector synonymous with technological advancement nor transparency.

This is the direction art is heading in. Galleries are still crucial for the industry, but two in three galleries in the UK are losing money. The future of art is taking artworks to people rather than waiting for people to come to the art. This is changing the way we experience art and increasing the importance of tools like social media to engage new audiences.

Determining value in the world of art has never been easy, often due to a perception that one requires insider expertise. Even now with the full power and access to information online, outsiders can feel intimidated by the $67bn global art market. Investors have looked on art as an opaque sector and investment into it as the subjective and emotive preserve of the wealthiest people in society. The rise in social media might be the catalyst to change that. The art market is democratising and the profile of people who collect and invest in art is changing dramatically. I am represented by MTArt Agency, the world’s first talent agency for up and coming visual artists. They do a fantastic job building my profile in the art world and diversifying my revenue streams by placing my works with collectors, auction houses, and galleries, as well as, securing brand partnerships. They have secured partnerships with Pomellato jewellery stores, placed my work in Sotheby’s

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The visual and immediate nature of an online platform such as Instagram suits art perfectly. For an artist, it creates a relevant window through which to exhibit your work to people who may otherwise not see it. This is something that my agent, Marine Tanguy, and I try to capitalise on. There is a new generation of artists, artenthusiasts and collectors emerging. They are typically millennials who are technologically literate, consume their news online and are socialmedia savvy. Art investment has not traditionally been associated with younger people, but there is now an opportunity to tap that market and target younger potential collectors. In the case of Instagram, 600 million people are on the platform and 60% of them use it to seek out and discover new products. Of those 600 million people, 90% are under the age of 35. This is a demographic of people hungry for visual content and keen to acquire new things. Now consider the way people are organized on social media platforms: people exist in online communities where they share their passions and

views with their followers and network. It’s fair to assume that if they find and buy a product they like, they will share that with their network who will see it and are likely to also appreciate it. What is particularly exciting for me is the opportunity to find likeminded people of a similar age who will appreciate the message behind my artworks and connect with them directly. My work addresses the importance of preserving and protecting the environment and through social media I can quickly find networks of people who care about the same causes and share my values. In contrast, most galleries will not make the introduction for collectors to artists, leaving a void in the ability to forge a relationship. Social media has created a digital word-of-mouth effect for the art industry. If the right person invests in me and purchases a piece of my art, and in turn puts a picture of it on their feed, there is high potential for it to be seen by other people who will be interested in my work as well. Artists are increasingly seeing the possibilities of social media. The days of waiting for people to come into a gallery, view your art and then buy it are becoming a way of the past. Now I can directly target people who I know are interested in art and care about the environment. This means I can sell my art to more people and it also means that as I make more sales the value of my artworks increases. Joining MTArt Agency and exploring this gap in the market has led to me selling 34 paintings in eight months and the average value of my sales to appreciate by more than 400%.

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While this is exciting for an artist, it is also creating an entry point to the market for prospective collectors. Many have become frustrated about the lack of transparency through traditional avenues of purchasing art and they can now search for an artist they like online, message them directly to develop a relationship with them and get an idea of their personality and work rate. Through Instagram, it is also easier to get a sense of an artist’s success. In a gallery there is no way to “scroll” the history of the artist and see their exposure. Through social media, an interested buyer can discover their background and how much work they are being commissioned for. This transparency facilitates the ability to gauge whether an artist’s work will continue to increase in value and judge if the artist is a viable investment which evokes trust. Social media builds this trust and has enabled me to see great success as an artist. For the first time in history, the power in art is now in the hands of the artists and the collectors directly through their online social media profiles.

David Aiu Servan-Schreiber is represented by MTArt Agency, the world’s first talent agency for upcoming visual artists. https://www.mtart.agency/artists/david-servan-schreiber/

Issue 17 | 107

EMEA FINANCE

Preparing for a post-LIBOR world The London Inter-bank Offered Rate, or ‘LIBOR’, is often referred to as the “world’s most important number”, being deeply ingrained in lending markets worldwide. It dictates the interest rates for a huge percentage of consumer, commercial and syndicated loans, and is hardwired into financial derivatives internationally. LIBOR was first established in 1986, and today 97% of syndicated loans reference LIBOR in the US alone, with an outstanding volume of approximately $3.4 trillion. To top it off, LIBOR serves seven different maturities and is based on five currencies: USD, EUR, GBP, JPY, and CHF, meaning there are 35 different LIBOR rates published each business day. As we move closer to the phaseout deadline of LIBOR in 2021 announced by the FCA back in 2017, its omnipresence in the market means the transition away from LIBOR could be extremely disruptive if banks and financial firms aren’t prepared. In this article, I will outline some key considerations and preparations for banks moving into a post-LIBOR world. What’s next? Multiple ‘risk-free rates’ (RFR) will take LIBOR’s place, comprised of benchmark rates originating from the US, the UK, Europe, Switzerland and Japan. Each has unique characteristics in currency, posting timing, security and underlying sources of data. Ultimately, this will lead to a high level of complexity for banks that have various loan instruments on their books. Depending on the jurisdiction, these RFRs may be any of the following: •

Pound Sterling (£) SONIA (Sterling Overnight Index Average)

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•

US Dollar ($) SOFR (Secured Overnight Financing Rate)

•

Swiss Franc (CHF) SARON (Swiss Average Rate Overnight)

•

Japanese Yen (¥) TONAR (Tokyo Overnight Average Rate)

Moving away from LIBOR to these overnight RFRs will create multiple financial and operational challenges for borrowers, lenders and agents. For example, an overnight RFR does not compensate the lender for bank credit or term risk, whereas LIBOR includes a premium on longer-dated funds. Additionally, moving to an overnight RFR would require treasurers to keep extra cash reserves to respond to movement in the interest rates. Banks must prepare for a period where some deals remain linked to LIBOR while others will have transitioned to a new RFR, depending on the jurisdiction of the instrument. This challenge will be particularly applicable to commercial and syndicated lenders that operate cross-border. It will also be vital that banks and participants familiarize themselves with the publication timings of each rate. Today, LIBOR is published as of 11:00 GMT across each currency; however, other RFRs are published at different times throughout the day, which may cause complications. Multi-currency complexity preparation Cross-border lenders will need to consider potential operational impacts of using RFRs denominated in different currencies. The most convenient element of LIBOR is that it is quoted on the same basis for each LIBOR currency, whereas RFRs are generally currency-

specific. Therefore, there is potential for issues in the loan market when drawings in different LIBOR currencies under the same facility are priced at the same margin. If different RFRs are used for different currencies, it may require a different margin per currency, which could create added complexity for borrowers and lenders. This can be particularly true for syndicated loans, which are often structured using multiple currencies. A closer look at fallback language Familiarization of existing fallback language and a proactive approach to addressing the way it will be updated to reflect a post-LIBOR world will be essential for lenders and borrowers. While there are fallback clauses in place within loan contracts, if there is an underlying benchmark unavailable for temporary technical reasons, existing fallback language may no longer be suitable long-term. In line with this, agent banks and lenders will need to review existing fallback language and make necessary adjustments in anticipation of variables stemming from new benchmark rates. Contract fallback language should allow for a spread adjustment to minimize valuation changes. Suggested contract fallback language should also include specific triggers that enact the shift to successor rate(s). It will be vital that the choice of a new benchmark rate, spread adjustment and the timing of the transition is clearly communicated to all borrowers and lenders involved. There will need to be considerations of time and cost implications associated with amending and renegotiating each individual loan agreement to a new mutually agreed upon benchmark. It will also be important to consider how new clauses and potential wording

EMEA FINANCE

can be operationally managed without introducing additional overhead and processing costs.

is high. It will therefore be essential to haveÂ risk mitigation strategies and communications plans in place.

Engaging with lenders and borrowers

Looking ahead

During the transition, minimizing business disruption should be a top priority. Agent banks should aim to anticipate any potential communication issues with syndicated lenders and create a cross-functional plan to avoid any disruption. Each loan agreement linked to LIBOR may need to be redrafted and agreed upon by the borrower, agent, and lender(s). It is critical that this communication is efficiently managed and documented, because if the new rate being adopted is higher or lower than LIBOR, there will be winners and losers in any renegotiation. This raises the potential for costly disputes and business disruption. If the new rate differs substantially enough from LIBOR, the likelihood for disagreement

The global lending market will undoubtedly face significant disruption over the next 36 months and beyond. The disruptive nature of the LIBOR transition is further amplified by the fact that several key elements are missing: a centralized coordination of currency working groups around the rollout, the adoption of forwardlooking term rates, standardized fallback language and proactive communication. Though many institutions are already taking a proactive approach to making the shift before LIBOR completely phases out, this wonâ&#x20AC;&#x2122;t be as easy as simply flicking a switch. Banks will need to work proactively and efficiently to streamline operations ahead of the changeover to ensure a smooth transition for itself and all loan participants.

Robert Downs Senior Principal Product Manager Finastra

Issue 17 | 109

EMEA BUSINESS

Without being fully aware of the potential privacy and security ramifications, consumers have been wilfully providing companies with the asset they most desire: personal data. This has strengthened the hand of big business while reducing the autonomy that consumers have over their data and how it’s used. According to a recent study1, 78% of UK consumers believe that businesses benefit disproportionately from data exchange, while a mere 8% think that consumers benefit more.

The weaponisation of personal data: how consumers can regain control

Otherwise known as the ‘weaponisation of data,’ a term first coined by Apple CEO Tim Cook, corporations store and share personal consumer information with one another to increase convenience, drive sales and boost profits, often at the expense of consumers’ privacy rights. Knowingly or unknowingly we consumers have been complicit in this erosion of our personal privacy and security. But when we rely so heavily, and often unconsciously, on the convenience that companies and social networks provide in storing our data and validating our identities, how do we go about regaining control? The issue of convenience culture The key problem is that convenience has become customary in our consumer culture. Not simply do we want every good and service to be at our fingertips, we unconsciously expect it. In this sense, convenience has become so ingrained in our everyday lives and psyche that we don’t take time to consider the potential costs attached to it. Social media (SM) networks and big tech companies don’t endow us with seamless user experiences simply to benefit us; they do so that we place trust in them, and rely upon them, so that in return, we enable them greater and greater access to more and more of our data: our likes, interests, transactions and future desires.

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LinkedIn and Facebook for instance, have access to swathes of personal user information: your place of work, your familial, social and professional connections, your political inclinations, your career history, where you go to eat, where you shop and infinite other pieces of data. This data becomes even more valuable to companies when they can piece it together, or “connect the dots,” with the personal data they gather from other sources. For instance, if you use your Facebook login to sign into the website of your favourite clothing retailer, whether for convenience, security or both, you invariably grant Facebook access to that aspect of your life and behaviour. With this access, it will learn even more about you: how often you order t-shirts and trainers, where you like to order them from and, through this information, begin to develop an idea of how much disposable income you have and when you get paid. Equally, the retailer will have access to your age, date of birth, where you work and who you friends are even before a transaction has been made. This coopetition, which many of us fail to recognise as anything more than a mere security measure, facilitates the amassment of data, which paints an increasingly comprehensive picture of each user/ customer. On an industrial scale, they can learn from this data to project future trends, influence behaviour and develop business models accordingly, ensnaring us inside the ecosystems of Internet and tech giants. Do these companies really need all of this information to verify a customer’s identity? Of course not. The cost Legislation, in the form of GDPR, has started to hold big corporations accountable for the way they collect, store and use our personal data. Prior to GDPR enactment, companies and organisations only had to inform consumers that their data was being collected and used under the Data Protection Act (DPA). Under GDPR, they are now mandated to request users for their clear affirmative consent

to access and use their information and inform them on how it is being used. While the majority of companies adhere to these regulations, they hide requests to access our data in plain sight; in the depths of long and complicated terms & conditions that most consumers, in the eternal pursuance of convenience and speed, agree to without reading or considering. These Ts & Cs are constantly changing, and while we are notified of these changes, we rarely have time to read and interpret new protocols and legal amendments. Instead, without thinking about the implications to our privacy, most of us passively click ‘accept’ and give companies consent to access more and more of our lives and behaviours. Besides the many privacy implications, the correlation of all this personal data can also jeopardise the online safety of consumers and their families. For instance, simply by scrolling through a user’s Facebook or Instagram account they can find revealing details about that person: their favourite food, their mother’s maiden name or the name of their first family pet; information that we typically use to answer a security question when we have forgotten our password. With minimal research, the adversary now has access and control of medical records or an online bank account.

other personal information that is extraneous to the transaction in question. This kind of ‘proxy identity’ would simply contain the data required when completing a transaction or signing in to a personal account. Who could be a trusted custodian of such an identity? One prospect is banks. Renowned for their trust and ability to navigate the complexities of changing financial and legal regulations, banks could prove the most well-suited guarantors for managing and validating proxy identities. In essence, your bank would become your identity wallet. Through your online banking portal, you would be able to access other websites, accounts and records without the need for another password or disclosing any other personal information to the site in question. Many banks already possess the necessary infrastructure to facilitate the development of a more secure authentication process. We also trust them more than any other type of company or organisation that we interact with. It seems then, at a time that consumers value online security and privacy more than ever, that the foundations are already in place.

The solution It’s fair to say that most consumers wouldn’t wittingly disclose their personal data if they were aware of how it might jeopardise their privacy and security. However, the unconscious expectation of convenience, and a lack of cyberliteracy, means that we continue to do so en masse. How then, do we prevent companies from gaining access to data they don’t need access to, and from connecting personal information back to the individual user?

Niel Bester

One prospective solution is the creation of an online identity, which we can use to verify ourselves when buying things and logging into websites that can’t be linked back to us or analogised with

SVP of Products Entersekt

https://dma.org.uk/uploads/misc/5a857c4fdf846data-privacy---what-the-consumer-really-thinksfinal_5a857c4fdf799.pdf

Issue 17 | 111

EMEA BANKING

How technology is transforming banking for SMEs For years, banks have struggled to deliver a truly engaging digital experience for their customers. However, we now find ourselves at a crossroads – one where data, advanced analytics and artificial intelligence are opening the doors for banking to become more personal and tailored than ever. The impact of this will be felt across many sectors and it’s exciting to consider the implications this will have for SMEs in particular.

Alongside trends like these, comes a greater need for borrowing and the types of services that banks provide. According to recent statistics from the European Commission, bank lending accounts for 75% of all SME funding in Europe 2 .

As economies grow, there is an opportunity and need for SMEs to scale their business adequately. In the Nordics for example, increasing demand in the domestic market has been creating many opportunities for the growth of SMEs, as have other factors such as the better availability of highly skilled labour and greater digitisation 1.

The truth is that SMEs require a specific style of banking compared to larger businesses – one that caters to their specific needs and individual personalities. A small business owner may find that he has all the skills, products or services to succeed but may then run into problems with regard to the admin, bureaucracy and management needed to run a

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At the same time, around one in five SMEs report that they are struggling to get the funding they need to further develop their businesses. So, what can banks do to address this issue?

business. And it’s precisely here where banks can leverage AI, data and analytics to help boost SMEs along their journey as the evolve from small firms to larger corporates. Once banks are able to get a clear view of the business data, as well as the human needs of the owners, they can in turn obtain key information on the unique requirements and potential of small businesses. The power that data has to unlock the potential of SMEs is massive, given that it helps banks understand what they need and when they need it. A data-driven approach enables banks to make decisions which are in line with the aspirations of SMEs, helping them make recommendations that are better aligned to their goals and aspirations.

EMEA BANKING

Banks can analyse data from the SME, as well as from other businesses with a similar profile, to enable decisions which are based on previous successes. Using the latest cloud technology, banks can also get their information in real time, enabling them to deploy the right advice and services when it matters. After all, SME owners lack the time and resources to analyse data effectively and it’s here where banks can add significant value by doing the work for them. Through a smarter analysis of cash flow, banks can help SMEs project future positions and identify pressure points, foreseeing moments when working capital may run low. Other key ways that banks can add value is by tailoring activities specific to the SME’s needs which are based on future expected commitments and revenue data. This may include highlighting which payables could be deferred, providing discounts to customers who pay early and offering short term credit options – and all of this ranked in terms of which options other customers found most helpful to their business. The best part of this data-driven approach is that everybody wins. On one hand, the customer gets to grow a successful business and the bank also continues to get revenue from that customer, who may have otherwise had to file for bankruptcy. It also allows business owners to focus on what really matters, which is building and scaling up their company; not worrying about how to survive. The banking sector is beginning to realise that cloud-native, API-first technology can deliver this tailored experience that SMEs require. This is further supported by recent research conducted by Temenos and the Economist Intelligence Unit (EIU), which shows that data and AI is becoming a vital part of the new technology mix, improving personalisation and enabling more tailored offerings. 61% of banking executives worldwide think AI will create better value for customer by 2025.

But the path will not be without its challenges, stemming mainly from legacy systems and a lack of skills to apply insights effectively. Banks in the Nordics, for example, have always been at the forefront of technology but now find themselves in a position where they might find themselves left behind if they don’t make the shift to the cloud. It’s not a question of if – but a question of when they make this move. The rest of Europe faces a similar situation. Over the last few years, SMEs have evolved from a position of struggling to survive, to one where they are legitimately challenging the larger players in their markets. As a result, today banks are competing more than ever for the attention of SMEs. Those that succeed will be the ones that deliver the tailored service they need – one that meets the disruptive, customer-focused, data driven nature of their own business. Banks must craft an offer that meets the challenges of an SME’s growth cycle through embedded data and peoplefocused engagement technology.

Alain Vansnick Regional Director of Benelux and Nordics Temenos

Contributor MarketInsite. “SME Growth Markets: EU's Long Term Solution to SME Funding.”Nasdaq,https://www.nasdaq. com/articles/sme-growth-markets:-eus-long-term-solutionto-sme-funding-2019-09-10.

Contributor MarketInsite. “SME Growth Markets: EU's Long Term Solution to SME Funding.” Nasdaq,https://www.nasdaq.com/articles/smegrowth-markets:-eus-long-term-solution-to-smefunding-2019-09-10.

Issue 17 | 113

EMEA BUSINESS

Breaking Down the Barriers to Productivity The UK is in the throes of a productivity crisis. It’s time to break down the productivity barriers and reinvigorate the nation’s workers says Hastee CEO James Herbert Productivity in the UK is in steep decline. A recent report from the Office for National Statistics shows that between June and April this year productivity dropped at its fastest annual pace in five years. And the worrying part is, it’s been flatlining since the economic downturn of 2008.

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Naturally, business leaders should be worried. If more than a decade’s worth of low productivity wasn’t scary enough, this latest drop shows things really can get worse. It’s not complete doom and gloom – the UK isn’t heading to a grinding halt, but things could be better, much better. For business leaders, it’s about getting the best possible performance out of your people in order to achieve the best business results. So, what can be done? By exploring some of the common barriers to productivity, businesses across the UK can identify and implement

solutions that will help to reinvigorate the workforce and help them fervidly perform to the best of their abilities. 1. Absenteeism and presenteeism Reducing absenteeism is a key objective for HR managers, as well as an ongoing challenge. But too much time at work and working late into the night at home can also impact productivity in a negative way. This is known as presenteeism and – while the occasional bit of overtime can be a good thing – employers need to ensure their people are getting the right work-life balance.

EMEA BUSINESS

According to recent figures, workers regularly brush aside physical and mental health issues to show up for work. As many as 83% of respondents in the CIPD’s Health and Well-Being at Work Report have observed presenteeism in their organisation and a quarter said the problem had become worse over the preceding 12 months.

For business leaders, presenteeism might feel like something that should be rewarded but it should be tackled with the same vigour that businesses address absenteeism. Encouraging or allowing workers to continually work longer hours or come to work when they’re suffering from poor physical or mental health, will inevitably lead to poor productivity and burnout. It’s also likely to make those poor physical

or mental conditions worse. Employers need to ensure their workers are striking the right balance. But both absenteeism and presenteeism can be exacerbated by the next barrier in this article… 2. Financial stress Financial wellbeing is something business leaders probably don’t think about when they think about the barriers to productivity. They don’t think about it because they’re not aware of it, and that’s not their fault. The reality is, money is one of those awkward subjects that we as a nation feel uncomfortable speaking about. Yet research shows financial stress is a widespread issue in UK workforces – an issue that directly impacts productivity. Hastee’s Workplace Wellbeing Study 2018 found a fifth of workers admit to wasting working hours dealing with repayments. In 2019’s instalment of the study, respondents confirmed that financial stress impacts their work, as well as their health, sleep, social lives and relationships – all factors that can undoubtedly impact their performance at work. Those figures could be set to rise considering the 2019 study found 82% of workers across the UK (all salary levels) source additional funds between pay days, including high cost credit options such as credit cards, overdrafts and the worst, payday loans. What’s more, only 21% of workers say they are able to budget and live within their means. It’s clear that borrowing to get by is rife within UK businesses. Not only is this distracting people at work – in some cases it has prevented them from getting to work with 39% admitting they have been unable to make it to work due to financial difficulties.

Issue 17 | 115

Transforming the concept of Service Leadership hinges on the ability to understand customer needs, quicker and better than the competition. At SegurCaixa Adeslas we are constantly reinventing ourselves to offer the best experience to our trusted customers, responding to their demands and transforming the concept of service into: flexibility, convenience, accessibility and excellence. That is why we keep leading the Spanish Health Insurance market, with the highest growth among the Top 10. Also, for the third consecutive year, we have proudly been recognised with the Best Insurance Company award. One more reason to keep working and become the leaders of tomorrow.

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3. Poor working environments Financial stress doesn’t just affect those directly coping with it. It’s impact on behaviour can create a demotivating environment for the people around them. When you’re stressed, working relationships can become strained. Challenging tasks or tight deadlines can add to that stress, creating a ticking time bomb that can all too easily erupt into an unpleasant and unprofessional scenario. This brings us back full circle to absenteeism and presenteeism. A poor working environment can lead to people taking more sick days, waking up and feeling like doing literally anything other than facing their hostile working environment for another day. On the other hand, if they’re dealing with an environment that makes it difficult to concentrate, they might work longer hours to get work down when the office is quieter, or they might choose to take their work home. This doesn’t mean productivity is increased. It just means they’re working later to finish tasks that should have been completed during

standard working hours, and they’re burning themselves out in the process. Breaking down the barriers It’s clear that all three of these barriers are related. The silent financial struggles UK workers face are weaving a thread of poor productivity throughout our workforces, but employers can tackle this head on. By implementing a financial wellbeing solution that is free to implement with seamless integration and enables workers to access their earned pay as and when they need it, employers can provide workers with much-needed respite from financial stress. Hastee’s research found workers value digital money management tools with 66% saying they help them be more productive. In the same survey, 54% of workers said digital money management tools have helped them become more engaged. But such solutions must also provide users with the financial education to ensure they’re managing all aspects

of their finances effectively – not just improving the way they smooth their incomes but how they manage debt, mortgages and other important aspects. The UK is currently in the throes of a decades-long wealth boom and workers across all sectors deserve a fair chance to live up to their potential, both inside and outside of the workplace. Digital money management tools paired with financial wellbeing solutions will help them do just that, and in doing so productivity can be improved.

James Herbert CEO Hastee

Issue 17 | 117

EMEA BUSINESS

This is the sound of finance A bank account maybe marks the beginning of adulthood and allows access to booking events and gigs online, contactless payments and independence. Having access to a current account seems much more critical today and more people in the UK than ever before now have accounts. However, as customer numbers rise, the number of established bank branches are declining, whilst digital only, challenger banks such as Starling and Monzo offer banking only via an app and at your very fingertips 24/7. Both of these changes mean that more customers, from more banks, are spending much less time interacting with their money in a face-to-face environment, and now pay a bill, make a transfer or increase their overdraft limit without the help of a human. If our regular interaction with banks is little more than an experience with some UI and UX design, powered by an algorithm used across the sector, how can this dehumanisation of banking be overcome, and a positive value attributed to our banking brand of choice? Digital only challenger brands like Tide, Monzo, N26 and Starling have attracted new customers with distinctive payment cards, in ‘hot coral’, ‘vertical’ or ‘metal’ instead of ubiquitous plastic; as well as offering free gifts like socks or chocolate and greater functionality. But as the legacy banks respond to increased competition, rapidly improving their apps and service online, the services customers receive are efficient, yet perhaps all similar.

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As banking becomes remote, with foreign currency transfers taking place on the toilet, and credit card limits being raised on the couch, an audible reminder of the company providing a needed and trusted service can embed loyalty in customers and a sense of distinctiveness in the bank brand. But what really is the difference between one bank to the next? Interest rates, maybe. Perks and benefits, probably. All banks have their own unique offerings that ultimately separate them from their rivals, but essentially they all offer the same service. They are all online, they are all available to assist their customers at any waking moment. So, getting ahead of the game is not something that is easily done in this racket. Sometimes, it is not the perks and treats that sell us on a bank’s service, but it is the way they make us feel about their service and about our choice to bank with them. Sometimes, something as subtle as a simple sound, or noise, can make us all feel better about our financial decisions. Every banking brand from Coutts to Tide could exploit and explore the value of sound for their business, brand and customers. Ensuring there is consistency, recognition and recall - be that on the app, in branch, within a sports stadium or on hold. This is something which HSBC have implemented on a recent project with Jean-Michel Jarre, whilst at MassiveMusic we worked on a music strategy for UBS to define their values, heritage and aspiration to be

EMEA BUSINESS

Roscoe Williamson better. We are also seeing fin-tech brands begin to use sound, for example eBay notifies users of a sale with the sound of a cash register, generating a feel-good, satisfying notification of a credit. That sounds good, that’s my money, can also be; that sounds good, that’s my bank. A recent study by VISA has added some backbone to this discussion as well, with 81 percent of participants in a study revealing they would have a more positive perception of a business that utilises the “sound of VISA” or its animation cues, with a common response resonating the short sound with speed and convenience. Brand consistency, delivered through the creation, application and use of sound across brand touch points, reinforces that this is an interaction with your money and your bank rather than an experience which is perhaps, disconnected, generic, alienating or bland. So much of our time, energy and emotion is dedicated to the acquisition of money, that the management of its use (via our bank) should ideally transcend the functional. Sound can add experience, and emotion to the daily and practical, reinforcing the surprise and delight of colourful debit cards and socks. Nobody really wants the experience of banking to be a return to lunchtimes paying bills in branch, completing directdebit forms - and the sound of banking being an electronic voice beckoning us to ‘cashier number four please’. Gone are those days though. We are moving into a world where companies - not just banks - are realising that they can choose how they sound, and how they appear to their current and potential customers. For example, the sounds of the Skype app are also being used to bumper their digital content and Apple have utilised their smartwatch ringtone as a centrepiece in a TV spot. Brands are thinking more holistically about the sounds they are creating and the opportunities to knit together different points of customer experience. The way we experience money and how we feel about our transactions is central to our faith in those that look after our finances - and sound can be a growing influence in this sphere.

Head of Branding MassiveMusic

About Roscoe Williamson A keen futurist with a vision for establishing an innovative brand sound, Roscoe recently worked with Samsung to develop their latest voice assistant, Bixby. Within his repertoire, he has also overseen sonic branding projects for the Premier League, UBS bank and produced mmorph, an FWA winning interactive audio project. Roscoe has appeared as a guest speaker on BBC Radio4 and at conferences worldwide such as Transform, Rebels and Rulers and Dubai Design Week. About MassiveMusic MassiveMusic is one of the leading music agencies in the world with offices in Amsterdam, Berlin, London, New York, Los Angeles, Tokyo and Shanghai. The agency helps brands find their voice and tell their story through music. MassiveMusic produces and composes for the advertising, broadcast branding and interactive worlds. They develop music strategies for global brands, provide music search and licensing services, create innovative activations, scout new talent – and throw a mean party every once in a while. The company is proud to have sprinkled its melodic magic on many of the world’s biggest brands.

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Let’s get together: The future of the working relationship between banks and fintechs Our world today is entirely unlike the fantasy world of Harry Potter, where a goblin-controlled cart takes you through miles of tunnels under the City of London to your personal vault. No, we’re in a far more complex place now. The banking system is now based around services and digital connections. Recognising this, our laws are also changing. Open Banking and the Second Payment Services Directive (PSD2) are upending the culture of financial services. While consumer choice in banking has never been better, traditional banks are scrambling to keep pace. Established banks operating with legacy infrastructure must essentially transform into softwarebased service providers. It’s no small task for the banks, and one which is leading to some uneasy alliances with their challengers.

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The Open Banking opportunity Open Banking compels banks to make customers' financial data shareable with trusted third parties via secure application programming interfaces (APIs). While it’s easy for fintechs to realise the benefits of Open Banking on their businesses, there’s a tendency for more established banks to view it as an inconvenience – yet another regulation to comply with. However, rather than posing a threat to traditional banking, PSD2 is an opportunity for longer-established banks to provide customers a wider portfolio of complimentary services, opening up partnership opportunities with fintechs like Yolt and Viber. In order to make this a reality, bank needs to set themselves up to be tapped into as and when consumers want to access their financial data.

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The fintech advantage Consumersâ&#x20AC;&#x2122; desire to adopt challenger banks and apps usually comes down to three simple reasons: functionality, a focus on mobile and branchless banking, and a certain ineffable cool factor. The way fintechs are able to operate free from the weight of legacy systems is the key to delivering such indemand features, building new processes and products by rapidly iterating on their APIs. Open Banking has enabled a proliferation of apps, start-up banks, insurance policies, mortgages and more throughout the established financial ecosystem. For example, digital-first banks have leveraged open APIs to build their products and are growing rapidly 1 . Monzo built its own architecture 2 from the ground up and is able to develop platform updates at a rapid pace. Ultimately the fleet-footedness of these fintechs allows them to quickly adapt to customer demand, pushing out more regular product feature updates and slicker user experiences.

However, relatively few people are completely switching over from their larger, legacy banks. Consumers still recognise the value of mainstream banks and still keep most of their funds out of the challenger banks. With greater resources, trust built over decades, a broader range of services and higher-tiered banking licenses, the established banks offer a sense of security and stability which fintechs do not. Instead, most consumers run multiple bank accounts alongside each other, attempting to have the best of both worlds. This is an opportunity for both cohorts: for agile platforms to rapidly deliver new features and tools based on what consumers want, and for established institutions to deliver longerterm, higher-value financial products such as mortgages and investments. With Open Banking it is not necessary to see these businesses as in direct competition with each other, but rather forming part of a larger, more collaborative ecosystem.

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EMEA BANKING For example, a new app called VibePay allows friends to pay each other in a simple way rather than dealing with complex payee details. This leverages APIs across multiple banks, but it is not in direct competition with banks, and the app facilitates the easier flow of money.

A clash of cultures Collaboration and close working relationships between banks and fintechs is clearly the future, but with their divergent operating models, it is no surprise there is a culture clash. Frictions can arise when changes that may take fintechs a week take incumbents six to eight months.

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New working cultures cannot be created overnight, and tensions are likely to crop up while banks transform internally. Consumersâ&#x20AC;&#x2122; expectations are also now heightened, piling more pressure on the banks struggling to keep up. The introduction of Open Banking was intended to increase collaboration, competition and innovation. Ultimately, this way of working will allow fintechs to tap into traditional banksâ&#x20AC;&#x2122; loyal customer bases, while traditional banks will be equipped to provide better customer experiences.

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The way forward With Open Banking and PSD2, banks are becoming software-based service providers. To truly ensure that the legislation is a success, banks’ employee culture must become more like fintechs’ – agile and collaborative. It is essential that banks, financial institutions, and fintechs invest in the right people, development teams, and partnerships. Moreover, all legacy applications need to be refactored to fit with the new agile API infrastructure. Many banks currently use private APIs to improve internal communications between legacy systems, so they already have experience of this kind of development work. But the technology and security implications of open APIs are far greater, and they must meet the highest standards of consumer and developer trust.

This confidence and trust is a foundational part of the banks’ appeal, so they must be more cautious than their challengers, and ensure that all technology that they deploy is done so securely, seamlessly, and in a way that doesn’t negatively impact their customers. Established banks are unlikely to become as nimble as a start-up, and nor should they seek to be. However, leaders should look to set tangible objectives which will be achieved as a result of compliance with PSD2, such as increasing their customer base of 24-35 year-olds. This will help banking CIOs create a real business case for adopting new technology, which will ultimately foster the gradual cultural and technological change needed to ensure a successful, collaborative future.

Sarah Maber Managing Consultant World Wide Technology

“5 Things We Learnt from Monzo's 2019 Annual Report - AltFi News.” AltFi, https://www.altfi.com/article/5484_monzoannual-report-2019-5-things-we-learnt-tom-blomfield.

2 Targett, Ed. “Monzo Infrastructure: What's Powering the Surge to 2M Customers?” Computer Business Review, Https://Www. cbronline.com, 21 May 2019, https://www.cbronline.com/ news/monzo-infrastructure.

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How trusted, traceable time brings clarity and stability to Financial Trading Financial traders should be aware of the importance of time for their industry. Operating on a precise, traceable time can lead to enormous benefit in the financial sector, not just for an individual firm, but across a whole economy. Everyone uses time in some capacity, and each financial trade has a time assigned to it, known as a timestamp. These timestamps have to be accurate and traceable to a common reference, UTC (Coordinated Universal Time). In the EU, banks and brokers are now required to ‘timestamp’ all reportable events to exceptional accuracy, recording exactly when the trade itself took place. Specifically, trading actions for High-Frequency Trading (HFT) market participants have to be recorded to the 100-microsecond level (one microsecond is equal to one-millionth of a second), and nonHFT algorithmic participants must meet a one-millisecond standard (one millisecond is equal to onethousandth of a second), traceable to UTC. Reaching this level of accuracy is possible through a number of time distribution services, such as GPS and Galileo, which provide a ‘common clock’ for traders. Although as these systems rely on a network of satellites orbiting the earth, they are vulnerable to phenomena such as jamming, spoofing and other disruption. One example of this is the recent outage of the European Union’s satellite navigation system, Galileo 1 . GPS as a time distribution service is completely halted by outages such as these. As such, there has been considerable

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interest in an alternative time distribution service. Achieving a common clock at the timestamp level across the financial sector will enable a step change in financial trades, as well as allowing us to pre-empt financial crashes before they have happened, to optimise systems more effectively, and to maintain the stability of the market. One of these alternatives is NPLTime® 2 , which uses a fibre optic cable that physically connects the

UK’s National Timescale, UTC (NPL), from the National Physical Laboratory (NPL) to the City, where it is then further distributed by partners. Firstly, NPLTime® helps firms achieve the MiFID II traceability requirements. Unlike GNSS, which requires additional resources to meet these requirements, it is a managed service, which includes full monitoring and auditability. Furthermore, NPLTime® is directly traceable to UTC, certified and auditable, with time traceable to +/- 1 microsecond to UTC.

EMEA TRADING

As the UK’s National Measurement Institute, NPL is an adviser on global timekeeping standards and manages the national timescale, (UTC) NPL, from its location, outside central London in the Borough of Richmond. Making the UK the perfect candidate to develop a system of this kind, which proved extremely successful. Shortly after launch, more than a dozen banks and institutions signed up for the NPLTime® service, including the Intercontinental Exchange (ICE) 3 , demonstrating the demand for this technology in the financial sector. The service is unique in that it provides a time signal that cannot be disrupted by the same outside interferences. It is, of course, still vulnerable to different attacks, such as cutting the fibre optic cable, although even this is mitigated against with a failsafe atomic clock, based in the City. As well as meeting MiFID II timing traceability requirements, it can be implemented rapidly over the dedicated infrastructure. Services like NPLTime® and GNSS enable a common clock for financial traders. Railway users in the Victorian Age underwent something similar to what the stock market experiences with shared time. Before Standard Time was approved, people would rely on the local position of the sun to determine the time. The time in Bristol, for example, was different from the time in London. Therefore, a train heading from Bristol to London would leave at "Bristol time", and then arrive at “London time” – consistent with the position of the sun. These times would differ by a few minutes, causing confusion for both travellers and train stations.

NPLTime® is a means to achieving a common clock at the timestamp level across the financial sector. This trusted, traceable time distribution service will have a huge impact for the sector. It will enable linking of the improved datasets produced with precise time tracing systems. Currently, firms in the stock market receive data from multiple stock exchanges, each with a different time service, and then send the information from one venue to another. Accurate, traceable time delivery makes it easier to make decisions on the incoming data and act accordingly. Importantly, it brings clarity, an invaluable feature for markets.

pre-empt when these crashes may occur before they have happened. The Foresight Annual Review of 2012 4 expressly recommended accurate, high-resolution, synchronised timestamps to help analyse financial markets. Uncertainty in the trading sector is an evergreen. With reliable timestamping, the City can secure a spot on top of the EU regulators’ whitelist, while revolutionising the way we understand the markets and drive efficiency in trading.

This commonality also facilitates a thorough analysis of the market, and better measurement capability, helping understand network performance and optimise systems better. This brings with it a wave of new products and services, such as algorithm optimisation, entirely new algorithms and improved network performance and optimisation. As the time uncertainty improves, this will enable yet more confidence in the data. A traceable standard time, if applied at the timestamp level, enables time itself to be taken out of the equation. With it, causality and order of financial transactions are clear, and irregularities or patterns can be easily identified. This synchronisation enables regulators to understand the markets better, be confident that the market is operating as it should, and be aware of when it isn’t. Trusted, traceable time can even shed light on the factors that cause financial crashes – potentially being able to

Leon Lobo Business Development Manager National Physical Laboratory (NPL) 1

“What Happened When Galileo Experienced a Week-Long Service Outage.”GPS World, 25 July 2019,https://www. gpsworld.com/why-galileo-experienced-a-week-longservice-outage/.

“NPLTime.”NPLWebsite,https://www.npl.co.uk/npltime.

“ICE.”Market Data Connectivity | NPL Timing Services,https:// www.theice.com/market-data/connectivity-and-feeds/npltiming-services.

https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/276503/13-p91foresight-annual-review-2012.pdf

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How to navigate the uncertainty surrounding the IBOR to ARR transition

Current literature around IBOR to ARR transition is increasingly taking an ominous tone. In many ways it is scaring readers into believing that events such as LIBOR phaseout at the end of 2021 will, plunge the into chaos. There is no doubt that the elimination of quoted Interbank Offer Rates (IBOR) implies substantive changes to existing and future IBOR based products, contracts, processes and IT for financial institutions and their customers. However, dealing with the impacts needn’t be as problematic as initially expected. By knowing what remedial actions need to be taken and what pitfalls to avoid the impact of the changes can be minimised. By following a detailed step-bystep roadmap, it will help demystify the problem and allow a smooth transition to ARR. What is IBOR Transition? The Inter-Bank Offered Rate (IBOR) is an interest-rate average calculated from estimates submitted by the leading banks. LIBOR and EURIBOR are the primary benchmarks used to establish short term interest

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rates across a range of financial products including bonds, loans, mortgages, derivatives and a number of asset back securities. IBORs are set in a range of currencies (including but not limited to US dollar, Pound Sterling, Euro, Yen and Swiss Franc) and across a range of tenors. In 2012, the UK Financial Conduct Authority (FCA) shifted supervision of the index to the Intercontinental Exchange Benchmark Administration (IBA). Both the UK and US plan to phase out IBOR and move to a new benchmark – known as alternate reference rates (ARR) – by the end of 2021. Many other countries are planning to do the same. This means the availability of reliable IBOR beyond 2021 is highly unlikely making transition even more complex.

This is in part due to the difference in calculation methodologies between ARRs and IBORs. No ARR will be equivalent to the related IBOR because of structural differences between the two, potentially giving rise to basis risk during the transition. Additionally, there is a tenor mismatch, with replacement market-based rates only for overnight transactions. Longer term benchmarks have yet to be identified. If replacements for longer tenors are not agreed by end 2021, these longer rates will need

EMEA FINANCE

to be inferred, negotiated and agreed by market and contract participants. The likely staggered introduction of ARRs also implies that financial institutions will need to account for transactions across both rate regimes. Finally, the fact that IBORs are embedded in so many aspects of the operational process makes the transition increasingly complex as all have to be identified and assessed.

What next? With the 2021 deadline looming and with little clarity from regulators on the full scope of IBOR replacements, financial institutions canâ&#x20AC;&#x2122;t wait to act. Because of the uncertainty and breadth of impact a multi-tier approach to dealing with the transition is recommended. This approach should have the following features:

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1. An expert, senior internal transition board. Banks should seek to set up a cross-institution programme board to drive discovery, evaluation and action plans for IBOR transition. The programme board should have sufficiently senior representation and expertise to enable difficult choices around rate tenor construction, contract negotiation and potential internal contention for resources and capabilities. Impact assessments and execution plans require careful orchestration to ensure institution-wide execution co-ordination. 2. Clearly articulated scope. As the impact of IBOR transition runs across business lines and functions, banks should undertake a rigorous centrally driven discovery and design phase. Business lines impacted by IBOR should be identified in the first instance, followed by an in-depth analysis of impacted products; customers; processes applications and data. This evaluation should clearly identify impacts by currency and tenor and should drive the action plans for remediation and risk reduction. Firms should consider early running of and end-

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to-pilot across a single domain/ currency/ tenor/product/ process/application/ data cluster to identify pain points and drive early solutioning. 3. Contract focused. Institutions will have created a large number of contracts with customers and counterparties referencing IBOR. These need to be reviewed quickly and at scale to identify option and basis risks. Contracts may include a fall-back option risk- which allows the customer to switch to a fixed rate equal to the last fixing of the discontinued index. Alternatively, contracts may include an early, penalty free redemption. Basis risks are particularly likely if IBOR and a successor index co-exist for a certain period. In this case benchmark indices referenced in the hedged contract and the hedging instrument may not match with a potentially large variance opening between the two. Regardless, institutions need a contract by contract analysis to determine the extent of exposure, a tedious, labour intensive errorprone exercise that can expose a ďŹ rm to legal and ďŹ nancial risks. In this context, firms should

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consider using an AI driven solution, particularly one which offers Natural Language Processing (NLP) to rapidly analyse legal language across data formats. The identification of contract exposure should be linked to modelling capabilities which can simulate a representative portfolio under a contract with negotiated terms. This simulation can drive insights to identify contract changes that have the biggest expected economic impact and should also drive recommendations of optimal IBOR–ARR spreads. 1.

Attention to bespoke transactions needs to be paid as these will be less likely to have industry standard references in their documentation, hence also less likely to take advantage of industry wide agreed remedies. In these instances, depending on the saliency of the exposure, banks will need to carefully consider negotiating strategy and tactics. Dedicated tools used to model hedging and ARR transition scenarios. One of the biggest impacts associated with the transition is on an institution’s overall rate exposure and hedging strategy. Firms will need to model the impact of alternative scenarios and simulate prospective and retrospective hedge effectiveness after switching from IBOR to ARR across all affected portfolios. Firms will also need to stress test adversarial interest rate scenarios and quantify changes required to existing hedges and new hedging requirements. To guard against ARR tenor uncertainty firms will need to construct synthetic tenors, so as to support back testing, model calibration and validation. Compressed portfolio. While the implicit contract and basis exposures of IBOR transition

are daunting, firms can also take advantage of the event to eliminate redundant trades via a multilateral portfolio compression exercise. By so doing, firms can optimise capital, leverage and margin and minimise the number of IBOR contracts that need an expensive renegotiation exercise. 4.

Operations and technology refreshed. Technology domains should assess for re-coding and/ or reconfiguration requirements. Applications may need to be repointed to new data sets, which themselves may need to be re-formatted. End-user and third-party applications will also need to be included in scope and will require thorough engagement strategy.

Open multilateral lines of communication. In the current environment firms can’t wait for regulators and working groups to carry on with the existing process as timelines are too short. The best risk reduction strategy is for certainty on chosen ARR regimes and tenors. Financial institutions should work together to drive that certainty and establish clear lines of communications with government bodies and working groups to determine IBOR transition pathways. But governing bodies are only one side of the story. Banks need to move quickly to determine their most impacted customers and contracts and develop communication strategies that drive open discussions designed to foster understanding and transparency on the IBOR transition path ahead.

contention. But Bank CEOs ignore the market move at their own peril. The impact on banks’ customer relationships, operations and bottom line can be significant. And given its wide ranging and variable impact across business lines and products, charting the transition course will be difficult. Fortunately, advances in technology can help firms understand impacts and develop mitigation strategies. Now is the time to reach out to internal SMEs specialist providers to develop the transition roadmap.

Vivek Agarwal Partner, Securities Wipro

No time to waste Alongside other initiatives, both technology and regulatory, IBOR transition will compete for resources and create an environment for

John Geanuracos Partner, Commercial Banking Wipro

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Are Financial Institutions Ready for the BoE’s Vision for the Future of Finance? To meet the demands of the ‘new economy’, the Bank of England’s (BoE) key priorities include embracing developments in world-class RegTech, ‘big data’ strategies, the continued adoption of cloud computing capabilities, as well as other emerging technologies. These evolving technologies will provide scope for the BoE and financial institutions to completely re-think their business operations and operational resilience – from the way they manage and consume data to devising new business models that can perform on a global scale. Ultimately, the Bank’s objective is to ensure that the UK banking sector is robust and thriving, and capable of meeting the very different environment that will doubtless emerge in the coming years.

though only a discussion paper has been issued thus far. Unusually, there is no standard to comply with the initiative per se, currently.

Some developments are emerging faster than others, creating intriguing situations. Operational Resilience (OpRes) continues to resonate, partly in the context of Brexit, but influenced by issues in the wider economy, such as the significant disruption caused by recent outages in the National Grid network. However, OpRes is already becoming an important compliance issue for regulators, alongside Brexit preparations and stress testing, even

Integrity of data in financial institutions is critical to the success of the BoE’s vision. This means that institutions need to continue to pay attention to their enterprise IT systems, given the vast number of business processes supported by these systems. In addition, driven by issues like OpRes and the Senior Managers & Certification Regime (SMCR), there are equal levels of expectation surrounding the due

Other developments are more long term, such as the BoE’s exploration of integrating multiple data sources for market monitoring and automating parts of the authorisations process for new firms. It also wants to make the Prudential Regulation Authority’s Rulebook machine-readable over the next three to five years. The question is: how well are financial institutions positioned to embrace the BoE’s vision 1 in how they operate in the future? Data is key to BoE’s vision

diligence of processes supported by tools and applications that are implemented and supported by the end users themselves, rather than IT – often referred to as Shadow IT. The processes may feature applications such as Excel spreadsheets, MATLAB, Business Objects SAS and others. They are popular with end users, because they are quick to deploy, powerful, and can quickly address important business issues often involving business management, portfolio management, product development, management & regulatory reporting, as well as mergers, acquisitions and disposals. While enterprises systems are already well supported, these usermaintained applications are typically uncontrolled and unmonitored, posing a significant threat to organisations’ operational resilience and indeed their ability to adapt to evolving economic and regulatory landscapes. For instance, poorquality data, entered directly or acquired from a linked spreadsheet can significantly impact the quality and value of a model or calculation, materially affecting the availability or performance of a business service or offering.

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Artificial intelligence and machine learning capabilities, amongst others, are being considered as key RegTech capabilities. While offering enormous potential benefits, the issue of data quality will continue to be key in the use of these technologies, ultimately deciding whether their adoption is successful or not. Where spreadsheets feature in the processes that feed into the RegTech environment, there will be a premium on ensuring the integrity and accuracy of the data they contain. Flawed inputs will skew the outcome, resulting in compliance breaches or impacting decision-making would negate the value of these leadingedge technologies to organisations. Mitigating Shadow IT risk with automation The BoE’s Future of Finance strategy clearly demands that compliance encompasses endto-end business processes and requires financial institutions to take into consideration the processes managed by third parties. Given the vast Shadow IT environments in financial institutions, automating the management of spreadsheet and other end user computing applications, offers a fast, proven way forward for many institutions seeking to adopt the BoE’s principles.

An automated approach can also help institutions realise significant efficiency savings as well as the value of their investment in the shadow IT environment more quickly too. For example, scanning the IT infrastructure to locate shadow IT applications can provide visibility on the extent of the processes they support, where they reside, and when they were created and modified. Data lineage can be exposed to show the relationship between data sources. This transparency helps to identify issues faster, monitor risks more effectively, help address compliance more quickly, and respond to business changes more effectively. While the principles underpinning the Bank’s ambitions for the future are both exciting and challenging, the core principles of banking operations, as defined under the SMCR and OpRes, will remain of critical importance. They provide valuable guidelines for developing an institution’s core capabilities but having solid management and operational processes will be essential in fully grasping future opportunities.

Henry Umney CEO ClusterSeven

Henry Umney is CEO of ClusterSeven. He joined the comp any in 2006 and for over 10 years was responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements. In July 2017, he was appointed CEO and is strongly positioned to take the business forward. He brings over 20 years’ experience and expertise from the financial service and technology sectors. Prior to ClusterSeven, he held the position of Sales Director in Microgen, London and various sales management positions in AFA Systems and ICAP, both in the UK and Asia.

1 https://www.bankofengland.co.uk/-/media/boe/files/

report/2019/response-to-the-future-of-finance-report.

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Accountants undergoing digital transformation: make sure you know which gaps you are trying to fix

In the first blog in this series, we discussed the fact that any digital transformation project should begin with a cultural assessment to make sure that the technology serves people’s real needs. Once you’ve spoken to your employees and made sure that you understand their problems and concerns, the next step is to carry out a thorough gap analysis to determine what’s causing those problems – and how they can be fixed. A good guiding sentiment for this step in the process is: what one thing could you fix that would make everyone’s lives easier? Similarly, and crucially for accountants, how are you going to improve the service you offer clients? As we outlined previously, digital transformation initiatives should be led by the goal of discovering and solving inefficiencies and bottlenecks

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in existing workflows – not just bolting new technology on left, right and centre. With that in mind, accounting firms that are looking to move towards a digital way of working, need to take the time to review the systems they have in place to identify where change is needed most – and what practical steps can be taken towards fixing them. Moreover, remember that new technology isn’t always the answer – training and process redesign can be just as important. Identifying day-to-day operational inefficiencies The first priority should be to review existing systems with the lens of your cultural review and find out where growth potential is being limited. It might be something obvious, like a

system that repeatedly crashes or runs slowly. Alternatively, it might be an application that doesn’t integrate with the rest of the workflow, leaving essential information locked in a virtual box and getting in the way of joined-up thinking. Accounting firms’ IT landscapes tend to evolve organically over time – particularly among longstanding companies that have made the full transition from pen and paper to the cloud over many years – which means that often they don’t operate smoothly as one system. Over time, you add an application here and grow a deployment there, and although each addition may address a particular need, the whole can become siloed if the holistic needs of employees and clients aren’t properly considered.

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During the gap analysis stage of a project, the goal is to define where these siloes have appeared. Are there two applications doing the work of one? Is it possible to consolidate multiple workflows onto a single system, or a single provider, to allow freer information flow between them? By asking these questions, accountancies can save themselves time and money, while improving employee experience. The analysis may well uncover areas where new technology is required, however. Where new market requirements or regulations demand it, there may be a need for a capability that existing systems can’t provide – in which case, it’s essential to approach the implementation with an understanding of how the new

deployment will work alongside existing technology. Don’t play it safe However, identifying these gaps and siloes is not always straightforward. Your employees might not be that keen on having their problems fixed. Why is your practice avoiding change for the sake of it rather than pushing for maximum value? People get used to certain ways of doing things, and can end up perceiving change as a greater burden than their current inefficiencies: better the devil you know. The simple fact is that most often, that approach is shortsighted and stubborn rather than pragmatic. Accounting firms that don’t grow are likely to end up regressing. If staff

resist digital transformation simply because they don’t want to go to the trouble of learning how to use new systems, the upshot will be that they have to deal with increasingly inefficient systems as time goes on – which helps nobody. The question is not whether your practice will need to undertake a certain amount of work to improve efficiency – it’s why and then when. So better the devil that futureproofs the practice rather than the one that traps it in the past. In practice, that means that, just like cultural assessments, gap analyses should always be run with one eye to your people. Education and accountability should be part of any gap analysis, helping employees

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Jules Carman Head of Digital Transformation, Accountancy, Sage

to understand the benefits of undergoing change. That might mean running pilot schemes and collecting detailed feedback, providing detailed explanations of what’s going to change and why, and making sure to listen to concerns and worries throughout the process. Crucially, though, planning for digital transformation should be conducted with the overall good of the practice in mind. If ingrained inefficiencies get in the way, it’s essential to find a workaround that works for everyone. Adapt to new expectations That’s particularly important because the drive towards digital transformation in accountancy is coming from clients first and foremost. Accountants need to improve their practice’s systems to ensure they can meet growing desires an employee-centric, client-centric, datadriven service. Modern firms need to be more than just accounting experts (although the core skills are still important). They need to be able to provide holistic, consultative strategic business advice.

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For that reason, it’s essential to review your client-facing systems for gaps as well. Where are there siloes which could be broken down to provide a deeper understanding of client processes and business models? How can you join the dots so that employees can add value to clients beyond the balance sheet? Technology should be an enabler for these changes, giving practices the analytical tools and data visibility they need to step into a more advisory role. In short, new technology deployments should be about solving people’s problems, both internal and clientside. Take the time to hone in on specific problems and inefficiencies – only then can you make an informed decision about which technology to implement. The future is digital – but people are still at the heart of accountancy.

A winning streak Not once. Not twice. But actually, three years in a row, HBL Investment Banking has been awarded the Best Investment Bank in Pakistan. We dedicate our success to our stakeholders, partners, and customers. Best Investment Bank Pakistan 2019 Best Investment Bank Pakistan 2018 Best Investment Bank Pakistan 2017 Best Sukuk Deal 2019 Global Banking & Finance Awards

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Global Banking & Finance Review Issue 17 - Banking & Finance Magazine

Articles inside

Breaking Down the Barriers to Productivity

The Weaponisation of Personal Data

The Case for Stablecoins in Growing Regions Around the Globe

The Evolution of Banking in the Face of a Digital World

How to use the most recent Instagram trends to bring business financial success

The Socially Conscious Private Equity Leader