Issue 54
It is a certainty that new roles will be created as a result of AI – we just don’t know what they are yet
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Chairman and CEO Varun Sash Editor Wanda Rich email: wrich@gbafmag.com 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
FROM THE
editor Dear Readers’ Welcome to Issue 54 of the Global Banking & Finance Review. Whether you're a longtime reader or just now stumbling upon our pages, we're thrilled to guide you through the financial labyrinth. Dive deep into Mongolia's digital landscape with Gobi Finance, an institution pioneering digital lending. As they break barriers with their CashOne platform, they're not just transforming Mongolia's SME sector but also championing the cause of women in business. Discover the insights from my conversation with Gobi Finance CEO Mrs. Zulaa Ganbat on page 24.
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Robots taking over your job? Think again! Join us on page 22, where Alice Hansen, Senior Principal at Slalome delves into AI's transformative journey, revealing unexpected shifts in the job market.
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Philanthropy took centre stage in 2021, with individual contributions reaching an astounding $326.87 billion. As Kevin McGrath, Senior Director at Ren, elucidates on page 34, the seamless integration of philanthropy in wealth management strategies is more vital than ever. From the rising prominence of Donor-advised funds (DAFs) to the allure of Charitable Gift Annuities, McGrath explores the myriad avenues for impactful giving, urging donors to sculpt a financial legacy that truly resonates.
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04 | Issue 54
At the Global Banking & Finance Review, we're more than just a magazine; we're your compass in the ever-evolving world of finance. Our mission? To bring you unparalleled insights, breaking news, and diverse perspectives. Whether you're knee-deep in the financial sector or a curious onlooker, there's something here for you. Dive in, engage, and do share your thoughts. Enjoy!
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CONTENTS
Inside... This Issue BUSINESS
08 Turning challenges into positive outcomes: Why UK’s consumer duty aims to flip the script by putting people first
ways innovation is breaking language barriers in the HR and communications industries
Adam Williams,
Benedikt Ilg,
Director of Finance, Risk and Compliance,
CEO and Founder, Flip
Capgemini Invent UK
14
32 Now you’re talking: top 5
Communications surveillance: A company-wide consideration Harriet Christie,
How businesses can use 46 intelligent pricing to navigate economic volatility and enhance resilience
Chief Operating Officer,
John Moss,
MIrroWeb
CEO, Flintfox
20 The importance of weather risk assessments in construction Josh Graham,
INVESTMENT
18 How asset managers can
CEO & Founder, EHAB
capitalise on generative AI
28 How firms can elevate their
monitoring strategy in 5 steps
Timothée Raymond, Head of Innovation & Technology, Linedata
Guy Warren, CEO, ITRS
34 Philanthropic Giving Plays
Central Role in Comprehensive Wealth Management Approach
08
Kevin McGrath Senior Director, Ren
40 Beyond money: What private equity needs to bring to ventures on the African continent By Bryan Turner, Partner, Spear Capital
Issue 54 | 05
CONTENTS
Inside... TECHNOLOGY
FINANCE
12
Is There a Way to Fix the TechSkills Gap in Banking?
10 Fear of embracing technological
Stella Ioannidou,
change is holding back the UK economy
Director of Research,
Colin Bryce,
The Josh Bersin Company
Managing Director, Cobry
36 Beyond Traditional Insurance:
The 831(b) Plan’s Response to Market Challenges
COVER STORY
22 It is a certainty that new roles
By Van Carlson, Founder and CEO, SRA 831(b) Admin
42 Lehman 15 years on: margin rules have reduced risk, but increased complexity Joe Midmore,
will be created as a result of AI – we just don’t know what they are yet Alice Hansen, Senior Principal, Slalom
Chief Commercial Officer, OpenGamma
49 Why should the financial sector
30 Battling bots in the ticketing
care about the dark web?
industry: how best to stymie the scalpers
Dr Gareth Owenson,
Antoine Vastel,
Co-Founder and CTO,
Head of Research,
Searchlight Cyber
DataDome
38 Safeguarding data in the hybrid era
Ian Jones, Director of Operations, Matrix Booking
49 06 | Issue 54
CONTENTS
This Issue Interview
Read it on page
24
Gobi Finance CEO on Digital Lending, Mobile-Based Innovation, and Supporting Women in Business Mrs. Zulaa Ganbat, CEO, Gobi Finance
Issue 54 | 07
BUSINESS
Turning challenges into positive outcomes: Why UK’s consumer duty aims to flip the script by putting people first Creating a customer-centric culture shift
Adam Williams Director of Finance, Risk and Compliance Capgemini Invent UK
Financial firms in the UK are banking on cultural change and putting people before profit Honesty. Transparency. Compliance. For the financial-services sector, these three words have highly charged definitions. Together, it leads to good outcomes for consumers. And that’s the goal of the new Consumer Duty advisory introduced by the UK’s Financial Conduct Authority (FCA), which “sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first.” There is plenty of opportunity – and urgency – for improvement. The FCA’s recent Financial Lives survey of more than 19,000 respondents found that fewer than half (21.9 million) of UK adults had confidence in the UK financial-services industry, and only 36 percent agreed that most financial firms are honest and transparent in the way they treat them.
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Obligations under the Consumer Duty involve improving customer outcomes related to four areas: products and services, price and value, consumer understanding, and consumer support. To meet these requirements, banks and financial firms need to shift their priorities from products and profit to people. But how can they develop data-driven strategies around seemingly abstract concepts and then deliver qualitative and quantitative evidence to satisfy the FCA? Financial firms need to embed the tenets of the Consumer Duty within every element of their business, supported with an iterative practice of continuous improvement. That starts with getting a deep understanding of existing processes to pivot toward a customer-centric transformation. Most firms will also need to engage in a complete culture shift – considering their purpose, ensuring executive oversight and governance, earmarking champions for change, and providing training – with the goal to deliver good short- and long-term outcomes for customers. Focusing on longer-term outcomes For many financial firms, this new mindset is a departure from the traditional yield model that prescribes certain steps for selling specific products. Now, the focus is on the actions taken up front and the impacts they have, both on improving customer outcomes and avoiding harm. As part of this culture shift, financial firms need to recognise that customers, especially vulnerable ones, have diverse needs at different times of their lives.
How can data deliver on those expectations, while providing clear, transparent communication, especially when the customer journey is nonlinear? Like most complex organisations, financial firms typically have silos across product lines, along with technology silos and data silos. For instance, many customers have multiple profiles delineated by product line (e.g., mortgage customer, credit card customer), so communications can be fragmented and frustrating. To get a deep understanding of the holistic customer journey, such silos need to be broken down with a single source of data truth. This transparency ensures these customer insights can be accessed and analysed by all teams, whether financial advisors, data scientists, or marketers.
BUSINESS
Using data to build a 360-degree view of the customer is not the end point of providing personalised services; it’s the start. Despite best intentions, treating all customers the same is not synonymous with delivering equitable services. A frictionless banking experience, for example, is often considered the ideal in digital transformation, but sometimes resistance can be revealing – if you stop to question why such a conflict exists. One case in point: the FCA reported that in 2022, 88 percent of people (42.9 million) chose to bank online or use a mobile app. The trend is clear. The flipside, though, is that the FCA also found six percent of people (3.1 million) still use cash and rely on faceto-face engagement. A customer-centric approach recognises that removing such banking options could put vulnerable people further at risk. Unsurprisingly, the FCA expects firms to meet all their customers’ needs, including access to cash, mandated under the Financial Services & Markets Act 2023. Using data to generate customer insights at ongoing increments, like in the example above, reveals an opportunity to develop nearterm solutions while improving long-term outcomes. Rethinking performance and risk through a fiduciary lens Some of Capgemini’s work across the industry takes existing key performance indicators (KPIs) and key risk indicators (KRIs) and puts them through the lens of Consumer Duty. Often, this exercise points to how a product-centric approach might lead to a good business outcome but not a good customer outcome. Of course, financial investments cannot be guaranteed, and it’s
dangerous to equate a customer having more money at the end of their financial lifecycle as the main measure of success. Instead, financial firms need to be proactive in preventing harm. If a customer could have been better off to pay down a certain loan or credit card before another one, that’s an improved outcome. At the same time, regulators are focusing on empowering customers to better understand financial products and make more informed decisions. Again, how can something like financial literacy be quantified to evidence consumer understanding? Take technology as an example. If a digital banking app has been introduced and the customer uses it as intended, which supports them to make better financial choices, that can be considered a positive outcome. This example also illustrates the importance of how financial firms can embed Consumer Duty in the development and rollout of products by enhancing consumer understanding, engaging in two-way communication, and providing a fair exchange of value. Holistic insights and decision-making Of course, financial firms can’t guarantee a customer outcome, but they can positively impact it. The COVID-19 pandemic amply illustrated this when some financial firms allowed furloughed customers to defer their mortgage payments during a particularly challenging stage – not just of their financial journey but of their life journey. It was a shift from the transactional nature of relationships to one that reduced harm and built customer resilience and loyalty. Financial firms that approach Consumer Duty simply as a compliance exercise will miss an opportunity to use data to their advantage and differentiate themselves in the market. This culture shift will give firms a rare opportunity to re-evaluate their purpose and products and find new strategic benefits revealed when putting customers first, ultimately creating good outcomes for everyone.
Issue 54 | 09
TECHNOLOGY
Fear of embracing technological change is holding back the UK economy In a fast-evolving commercial environment, one of the most crucial lessons any modern business leader can learn is about the importance of change management. CEOs of large companies and organisations can afford to pay for consultancies like Mercer, Boston Consulting, and McKinsey to provide transformation services to oversee the introduction of new technologies, to reduce expenses, or to renovate company culture. Small-to-medium sized enterprises (SMEs), who don’t have the same luxury, must rely on their own skills and understanding – or acquire them quickly. Companies that exist because they have valuable intellectual property, or because they are the first to commercialise an online or technological opportunity, will retain an advantage only until someone comes along to improve upon their innovation. Then they must change. Today every business, no matter its size or function, depends on using some form of technology to operate on an equal, or more advantageous, footing, than its rivals. The most successful are those which embrace change quickest and most effectively. Over the time that I have run Cobry, I have found an extraordinary level of technological conservatism among UK businesses. In general, owners and managers are incredibly fearful of using anything other than what they already have in place. I believe that reluctance to innovate must, inevitably, adversely affect the performance of our economy and, as artificial intelligence promises to revolutionise the business landscape, this reluctance to change will become even more costly.
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It seems to me that most business owners are prepared to make only very small, incremental alterations to the way their business is run, even when presented with clear evidence that more ambitious improvements could bring greater rewards.
This is not an urban myth. One business we encountered, underwent a change of personnel at board level and assigned IT on the same level as utilities – the digital manager was seen as strategically as important as the office cleaner.
I find it odd, because in other respects the UK is fairly progressive in its thinking, compared with most other countries.
Another, national-scale company suffered a ransomware attack on its business management system, which effectively stopped it from functioning for three weeks.
Too often, technology is seen as a second-class citizen within companies and organisations, when it should be the fulcrum. In many businesses, the digital or IT lead is not even at board level, because their function is not considered to be strategic to the way the company operates. Of course, they should be, and it is. Too many business leaders attach the same level of importance to the smoothrunning of their IT systems as they do to keeping the lights on and the staff loos stocked with toilet roll.
Rather than switch to a cloud-based system to prevent the possibility of a repeat episode – Google’s software, for example, is literally impregnable to cyber-attacks – the company opted to reinstall a different version of the same, server-based software that had just been attacked, and carried-on regardless. In the meantime, staff were instructed to continue coming into work and to read a book until the IT system was back upand-running.
TECHNOLOGY
There is an extraordinary level of inertia about adopting new or different technology. A lot of big, customer-facing organisations in the UK, with thousands of employees, continue to use paper for organising rotas. Much of it is based on fear and ignorance – no-one wants to be the first to admit they don’t understand the technology that’s running their business, and they would rather maintain the pretence that they do than consider the possibility there might be a better way of doing things. It can be tempting to imagine it’s a generational thing, but I’m not convinced that’s the case. It’s true that younger people are more tech savvy or tech curious than their elders, but that doesn’t mean they fully understand how the underlying technology works. A range of skills is needed to engage with technology smartly, and just being young doesn’t provide people with those skills. Some of the most digitally engaged people I have encountered are over 50 or even 60. The reality is that most people running and working in UK businesses, no matter what their age, have no deep understanding of technology. They are getting by, dayto-day, by the skin of their teeth, using Microsoft Outlook and Word and hoping no-one deletes their shortcuts. When we do training courses for cloudbased Google systems, we find that, for many people, it’s the only tech training they have had in their lives. The general level of technological skill in a UK company is shockingly low, because so few business owners and leaders see it as a priority. Most don’t think it’s important, and that is reflected in our country’s comparatively low productivity levels, versus comparative economies.
It’s extremely rare to see genuine leadership – a business leader saying, ‘I want to take us from A to B and I want to work out the best way to do that’. In most cases managers will make decisions based on the least chance of them being fired if it goes wrong. If there was to be an exception, one imagines it should be around security but, as we have seen with the example mentioned above, even a catastrophic cyber-attack is not enough to convince some business owners to embrace change. Had that company spoken to us, we could have provided them with a cloudbased system that would guarantee, 100% that they would never again suffer a ransomware attack. Instead, they opted to spend potentially tens of thousands of pounds bolstering their existing systems with multiple antivirus and security add-ons, that might prove effective only until the next security breach happens. Our option is viewed as radical, while it’s seen as perfectly sensible for a company to have its staff sitting about reading novels for three weeks, while its IT people scramble around trying to rescue their existing system.
Colin Bryce Managing Director Cobry Colin Bryce is Managing Director of Cobry, a Glasgow-based digital transformation company and Google Cloud partner
It may seem like madness, but I’m convinced some owners would sooner go bust because it’s easier to imagine the end of their business than to make a strategic choice about which technology to use. In the modern business world, we all have to be change managers, and the evidence to date is that, for some owners, it remains an insurmountable challenge that exists only in their minds.
There used to be a saying that ‘nobody got fired for buying IBM’ and today the same can be said for Microsoft. Because it’s perceived that everyone uses the same, market leading software – and nobody wants to rock the boat by questioning whether that is actually the right and safe thing to do – nothing much ever changes.
Issue 54 | 11
FINANCE
Is There a Way to Fix the TechSkills Gap in Banking? Consumer banks need to digitalize, but face a shortage of the technology skills needed to do so. Stella Ioannidou of The Josh Bersin Company shares extensive research pointing to possible answers Right now, traditional banks are struggling—and not just with the lingering effects of the global pandemic, high levels of inflation, and a very mixed global economy.
Stella Ioannidou Director of Research The Josh Bersin Company
They’re also struggling, despite their best efforts on this during the pandemic, to fully digitize and offer the same level of digital and mobile-first experiences that their challengers have now made standard. And it’s not because of a lack of commitment to achieving this, nor a lack of investment. Main St (and even some Wall St) banks are hindered by their reliance on legacy enterprise technology, and a lack of people with the nextgeneration tech capabilities needed to oversee transformation in-house is fast becoming their most pressing concern. The shortage of tech skills
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What’s driving this tech skills shortage? Perhaps the main factor is that banks simply aren’t the only ones chasing these recruits; competition is fierce from many other industries including consulting, IT, aerospace, and even automotive. We found that consumer banking accounts for only 13% of the total unique job postings for tech talent. Nowadays, skilled technologists have a wide array of job opportunities across various industries, and these alternatives may be perceived as more appealing or fastpaced compared to positions within the banking sector. And when technologists do take a job in banking, they often don’t stay for a long tenure. For instance, we found that most technologists who pivot from the technology sector to banking eventually return to the tech industry. In fact, while 7,356 individuals made the transition into consumer banking in the past 5 years, 7,098 left banking to return to the tech sector. This high turnover of tech professionals in banking highlights how employee retention is a colossal issue here driving the skills shortage.
As part of the Josh Bersin Company’s Global Workforce Intelligence project, we’re compiling and carefully sifting through data from a range of sources to give a complete view of the workforce. These include our own data banks; eightfold.ai’s constantly updated talent intelligence platform; and Lightcast, a labor market insights platform with data derived from official government sources, enriched with additional figures from online social profiles, resumes, and job postings.
And whilst banking is thought of as a very well-compensated field, money alone isn’t the answer to this problem. Consumer banks are offering high compensation packages right now to get people on board (we see a 36% year on year increase in advertised salary post-pandemic allied with 19.5% uptick in similar salaries compared to other sectors), but there just aren’t enough suitable candidates willing to pivot into banking out there.
This deep dive showed us that in the last six years within consumer banking, there were (on average) over 216,000 newly posted job openings every month for next-gen technologist profiles. However, only 144,000 were filled.
Our research, bolstered by ongoing dialog with the banking organizations that are the best-performing in this area, suggests a few clear solutions:
What can be done?
FINANCE
Understand the competitive landscape. Consumer banks’ first steps should be to analyze job transitions of competitors, adjacent sectors, and other industries. They can then use this intelligence to attract and retain top technologists, ensuring a sustainable talent pool for the bank’s digital transformation efforts. Develop targeted recruitment strategies by examining job posting volumes, hire speed, and posting intensity ratios. By identifying tech roles with high posting intensity ratios and longer posting durations, a bank can develop tailored recruitment approaches that incorporate attractive compensation packages and ample career growth opportunities, and so more effectively compete for top tech talent.
And last but not least, foster sustainable careers by addressing the discrepancy between skill demand and salary prospects, aligning salary progression with skill development, organizational purpose, and career advancement. So, focus not only on designing skillbased career pathways, but also on ensuring that career progression corresponds with salary increases—providing a fair and immediate incentive for technologists to stay committed and motivated.
Design a skills-based organization. Understand that more and more highly skilled technologists are looking for completely new skills, career pathways, employment models, organizational structures, and HR practices. A bank should ensure this demand is met throughout their company culture and ways of working.
Simply hiring new employees will not resolve the talent gaps that banks face. To address this challenge, it is crucial that leaders integrate recruiting, retention, development, pay, goal-setting, and leadership into systemic talent strategies.
Seek out talent in nontraditional talent clusters. Texas, New York, and California are hot spots for hiring the tech skills needed— but midwestern states have lower competition and a relatively smaller pool of job postings. Banks should identify and target the markets that align with its most pressing current talent needs.
The author is Director of Research at The Josh Bersin Company, a research and advisory company focused on HR and workforce strategies. For more on these themes, see the new report, ‘Consumer Banking Under Siege: Addressing the Digital Capability Gap’
Issue 54 | 13
BUSINESS
Communications surveillance: A company-wide consideration
The Securities Exchange Commission’s (SEC’s) primary function is to protect investors, by drafting and enforcing regulations which hold firms accountable for their actions. One fundamental example of this is that all interactions between brokers and investors must be scrutinized, to ensure no wrongdoing. The prevalence of digital communications in the modern world has prompted a regulatory overhaul, and since September 2022, the SEC has expanded recordkeeping requirements significantly. Two of their standout actions are listed below. i) Rolling out a new marketing rule, which has fundamentally altered which communications must be captured by regulated firms. ii) Alongside the Financial Industry Regulation Authority (FINRA) and Commodities Futures Trading commission (CTFC), administering billions of dollars worth of penalties in an industry-wide crackdown on the illicit use of mobile devices. As a result of this activity, compliance has taken center stage. Communications surveillance platforms are now less of an insurance policy and more of a mandatory requirement. More than ever, the compliance function directly impacts staff behaviors, and so its implementation will affect the entire organization it serves, rather than just the compliance team. It’s no longer just a box to be ticked. We’ll take a deep dive into the critical roles within any organization, and how they influence a buying decision for monitoring and surveillance vendors.
CHIEF FINANCIAL OFFICER Cost-effectiveness As with every product or service that the firm uses, cost is a major consideration for the CFO. Compliance can be a costly business, and mitigating as much risk around non-compliance will be forefront for the CFO. Assuming value from any potential vendors will also be critical, meaning priorities will lean towards competitively priced offerings. Transparent fees When considering service agreements, it’s important to understand that ‘hidden’ fees are common in the surveillance sector. Firms may be billed additionally for platform training, for example, a feature which could reasonably be expected to be included in the cost of service.
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BUSINESS
The SEC Rule 17a-4 mandates that records of business communications must be maintained for 6 years. In order to achieve this, firms may be charged data export fees when they leave their surveillance vendor. This ties users into the working relationship indefinitely, as the export fees can be extremely costly, as it’s generally based on the volume of data. Hidden fees make budgeting very difficult as the CFO can never be certain what’s around the corner, or what’s waiting at the end of the contract. Modern Platform Capture As mentioned, the SEC and CTFC issued over $2 billion worth of penalties last September over the unauthorized use of WhatsApp across the industry. Any CFO will be keen to keep their firm out of the financial firing line, so while there is greater cost in monitoring additional channels (WhatsApp, Telegram), they may deem it worthwhile for full peace of mind. Regulators take time to legislate for new forms of misconduct, but have shown a willingness to issue retrospective penalties once they have done so. From SMS to WhatsApp, iMessage, WeChat and Telegram, the list of different (largely mobile) corporate channels has grown as digital platforms have proliferated. Partial compliance is just another phrase for noncompliance, and so it would make sense for the CFO to support their COO in capturing as many of these channels as possible, to avoid any nasty surprises in the future. Evolving capture capabilities The CFO should look for a vendor that is able to react quickly to develop their product and evolve with regulatory demand. Some leading providers are built on antiquated systems and require longer product development cycles, which could have damaging financial repercussions.
CHIEF OPERATING OFFICER Minimal restrictions For any business, communicating on their clients’ terms gives a competitive advantage. By limiting the number of authorized channels that brokers can use, it may mean binding them to a platform which a client or prospect is not comfortable with using. Deals come down to making people’s lives easier, and a COO will know that the less restrictions they impose, the better. For example, SMS is the preferred avenue of brand communication for 48% of consumers. Email is the next highest, with just 24%. It’s not only about making consumers happy; the COO can optimize efficiency by enabling brokers to operate compliantly, whatever their preferred channel of communication may be. Finger on the pulse Capturing many platforms is not just about regulatory cover. There’s a reputational risk if firms can’t capture modern platforms, as they won’t engage tech-savvy prospects. The COO will recognize that a conservative approach is not sustainable in the current digital landscape, and should look for adaptability and modern platform capture in their solution. Native Threading Native threading should also feature on the COO’s wishlist, as once again, the less habits need refining, the more efficient the compliance process will be. In the communications surveillance sector, frustration has intensified around messages not being displayed in their native format, making compliance reviews confusing and time-consuming. By reviewing content in the format they recognize, they’ll save time and speed up the entire operation.
Issue 54 | 15
BUSINESS
Actionable Insights
LEGAL DEPARTMENT
Evolving capture capabilities
The insights from archived data are valuable business drivers. While all vendors will provide this information to a certain extent, one key differentiator is the quality of website capture. Website performance can be best evaluated and experienced through ‘replay’ – the ability to access an interactive version of the website as it appeared at the time of capture.
Marketing rule compliance
Legal monitoring takes up a large chunk of the legal team’s day to day workload. It’s important that the solution they select is able to pivot quickly and adapt in the transitory compliance landscape, which they will be pushing to keep pace with.
This is more effective than the relatively disjointed process of analyzing screenshots, as it gives a more authentic feel for the user journey. It is more appealing to regulators too, for the same reason. As a result, the COO should only settle for full replay capabilities in order to better understand their customers. Customer Service Communications surveillance software is technical, and as its capabilities expand, its implementation across a wider team becomes more complicated. This is often difficult with older, less digitallyadept employees, and so a reputation for prompt, effective training and customer service is extremely valuable. This should be a key consideration for the COO, to avoid damaging bottlenecks.
Ideally, the surveillance solution will capture all digital channels in order to comply with the new SEC Marketing Rule, which is mandatory. By capturing everything, from Slack to email, websites and social media, the legal department won’t need to worry about the implications of digital ‘advertisements’ being missed. Mobicomms compliance We have already discussed the huge fines issued across financial services in the past year, for the improper use of mobile messaging apps. The legal department will need to consider that even if a compliance risk is identified and certain channels are banned, they could still be used, unauthorized, by employees that have come to rely on their convenience. It is therefore in the legal team’s interest to capture as many platforms as possible. Furthermore, if a solution can be implemented which separates business and private communications on personal (BYOD) devices, this would certainly be worth exploring as an additional layer of protection. Full-Text Search When a legal hold (or litigation hold) is activated during the process of eDiscovery, the organization in question can suddenly be compelled to produce six years worth of electronic records. Archived content can be used to support such situations, and it’s extremely useful if the accumulated data is easily searchable, so the legal department can pinpoint the appropriate sections without rooting through vast swathes of data. Searchability is therefore a very valuable feature, and one that legal teams will depend on.
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CHIEF TECHNOLOGY OFFICER A future-proof solution The CTO is likely to favor a vendor that is in tune with modern communications channels. This means less limitations, greater adaptability, and simpler integrations with any wider tech projects. Even if the firm is not currently using a full suite of modern platforms, the wider surveillance capability is useful should they wish to expand their communications channels in the future. Onboarding While the CTO will be technically-minded, they’ll benefit from a vendor that leads on onboarding, ensuring that everything is in place for a smooth transition while project-managing the vital (and sensitive) process of data migration. Poor response times and connection difficulties should be avoided, so it’s worth conducting some research to ensure no time is wasted.
BUSINESS
Certification Data surveillance is a complex procedure, fraught with technical and legal considerations. The CTO will need peace of mind that their company data is being handled appropriately in a reliable, robust, platform. Appropriate ISO & SOC certifications and listings with the relevant authorities (such as the FINRA Compliance Vendor Directory) should provide reassurance. THE GREATER GOOD There are clearly myriad factors when considering a communications surveillance vendor. Success looks different in every role, and so different features provide different benefits to different stakeholders.
Many of these details are intrinsically linked. Technological shortcomings could eventually have legal repercussions, which will in turn impact the firm’s finances, and so on. Businesses should therefore strive to choose a solution that has the best holistic impact on your organization, keeping them out of the headlines while having minimal impact on employees’ day to day behavior. Most importantly, they should do their research. The status quo shifts frequently in the compliance landscape, and it would be smart to equip themselves with a solution that can adapt with it. Harriet Christie Chief Operating Officer MirrorWeb Harriet Christie, Chief Operating Officer – Harriet graduated from the University of Sheffield in 2010, with a BA in Management Accounting, Entrepreneurship, Business Law, BSR, HR. She entered the Tourism space, starting as an Accounts Executive at LateRooms.com, and earning the title of Global Accounts Manager within 3 years. She occupied this role for a further 5 years as the business continued to evolve and flourish, before taking up her role as a Key Account Manager with MirrorWeb, a communications archiving solution based in Manchester. Harriet was appointed Chief Operating Officer in 2020. Since then, she has helped oversee the evolution of the MirrorWeb product and service offering, as well as the business’ impressive growth since her taking on the role.
Issue 54 | 17
INVESTMENT
How asset managers can capitalise on generative AI
Timothée Raymond Head of Innovation & Technology @ Linedata
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As with every business, staying abreast of the latest technological advances is pivotal for success. The need for innovation holds especially true for the asset management industry. Ever-tightening margins have meant that firms have less flexibility to grow their headcount in line with the increasing number and complexity of portfolios and funds they offer. To rise to this challenge, generative AI as a partner to human intelligence is emerging as a novel avenue of development. Firms taking up this strategy are set to not only gain an investment edge but also disrupt the industry in unprecedented ways.
third of the industry has embraced and implemented sophisticated generative AI technologies. These tools not only harness internal data but tap into a vast repository of external data for comprehensive portfolio and operational analysis and insights. As an example, they can help diagnose trade failures and provide easy-to-digest, actionable predictive intelligence. Of course, prevention is more cost-effective than retroactive remedies and generative AI can be a vital tool in the arsenal for firms seeking to economise costs and enhance performance by leveraging predictive AI insights.
Accelerating past automation
Additionally, in the middle and back office, AI can help reduce operational risk, by making processes more automated and transparent, and improve regulatory compliance when used to augment human capabilities. For example, take the challenge of compliance officers sifting through numerous false positives in rule-based review systems for suspicious transactions. By introducing user-friendly human-like chatbot interfaces, these employees are empowered to navigate complex machine learning models, quickly verify whether alerts raised are genuine, and use actionable insights for appropriate mitigation strategies enabling them to improve efficiencies in their process.
While automation has undeniably played a pivotal role in achieving gains in operational efficiency, the ascent of generative AI technology signifies a step-change in sophistication. The implementation of these advanced solutions is gaining traction. In fact, Linedata’s 2023 Global Asset Management Survey found that approximately a
INVESTMENT
Empowering alpha generation and talent retention
Maximising the benefits of hybrid intelligence
Generative AI not only possesses the superior computing power of regular AI processes, for example, those used in financial analysis, but has the added advantage of producing outputs that are easier for humans to understand. This feature affords the technology the potential to execute decision-making tasks itself, going beyond AI’s conventional role as a tool for processing and presenting data. This potential to contribute to decisionmaking positions generative AI as a catalyst for alpha generation within the front office, and as a partner in driving investment operations success.
Although it may have advanced technological capabilities, asset management firms must adopt a measured and strategic approach to integrating generative AI into their core operations and business-critical tasks. Public AI, where sensitive firm and client data is uploaded to public servers, is yet to develop sufficient privacy guardrails and firms using these tools may inadvertently strengthen their competitors. Moreover, the inherent complexity of financial markets requires judgment, nuance, and contextual understanding that cannot yet be wholly delegated to algorithms. Though managers might now have much quicker access to detailed research reports, the risk of AI “hallucinating” information highlights the need to keep humans in the driver’s seat. Generative AI platforms excel in quickly creating convincing content but are yet to develop the necessary safeguards to ensure the information is accurate. For example, the platforms trained on public data may be influenced by unreliable information available on the internet and these inaccuracies can have costly consequences for traders if the technology isn’t used with the necessary oversight.
Many firms are still reliant on manual, paper-based processes. In the face of the economies of scale that generative AI promises, firms that look to grow solely by increasing headcount will struggle to compete with firms that choose to augment their employees’ abilities with the latest tools. Especially in a challenging economic climate, generative AI can be an asset for firms seeking to retain high-value talent. In a similar vein to how automation streamlines repetitive tasks for backoffice personnel, generative AI can liberate employees across the board to focus on higher-order tasks and responsibilities, boosting satisfaction and contributing to overall innovation in the company.
Conclusion To extract the most benefit possible, AI models and the staff using them should receive precise training tailored to their specific use cases as well as continuous data inputs, enabling these innovations to support their staff and business objectives effectively. Additionally, ensuring that the technology is sufficiently private for highly regulated financial organisations is a pressing concern, especially for heavily regulated financial organizations entrusted with sensitive customer data. When used to augment – not replace – human capabilities, the hybrid intelligence of experienced human decision-makers and generative AI can optimise accuracy, reliability, and performance. For asset managers, this approach holds the key to sustaining a competitive advantage in a rapidly evolving landscape.
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BUSINESS
The importance of weather risk assessments in construction
Introduction Construction projects are time-sensitive undertakings that are often reliant on good weather conditions. However, with global warming, the weather is notoriously unpredictable. It is increasingly difficult to make ten-day weather forecasts – which is a problem for the construction industry. According to research at Stanford, when the atmosphere warms by a few degrees Celsius, forecasts for reliable temperature, wind and rainfall become less reliable by about a day. That’s why it’s essential to incorporate weather risk assessments into your construction planning process.Read About Construction & Climate Change What Are Weather Risk Assessments? Weather risk assessments are analyses of the potential risks that severe weather events could pose to your project.
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It is a process by which a construction company can identify the risks associated with working in severe weather conditions and develop plans to mitigate those risks. The assessment should consider the risks posed by the specific weather hazards themselves and the risks associated with implementing safety protocols (e.g., shutting down work, evacuating sites, etc.) in response to those hazards. Potential Risks Associated with Extreme Weather Events Here are just a few of the potential risks that can be associated with severe weather. 1. Schedule Delays If wet weather causes delays in the delivery of materials or the start of work, it can quickly throw off your entire construction schedule. This can lead to costly delays and lost productivity.
BUSINESS
Josh Graham CEO & Founder EHAB 2. Site Access Issues Bad weather can make accessing your construction site difficult or even impossible. This can further delay the start of work and add to the cost of getting materials to the site. 3. Safety Hazards Wet conditions from flash floods can create safety hazards for both workers and passers-by. From slips and falls to traffic accidents, there are a variety of potential risks that need to be considered. 4. Traffic Disruption Deliveries of materials and equipment are essential for continuing progress on site, poor weather can cause travel disruption, sometimes slowing deliveries or preventing them entirely. The same goes for people working at site, if the roads are congested this can eat into time where they could be clearing the site after a storm or snow event. Benefits of Weather Risk Assessments in Construction The two primary benefits of conducting a weather risk assessment are as follows. 1. Mitigate Risks Incorporating weather risk assessments into your construction planning process is the best way to safeguard against the potential risks we have listed above. By taking the time to identify and understand the risks associated with bad weather, you can ensure that your construction project can withstand anything Mother Nature throws your way.
You can also make contingency plans for how to deal with weather delays or safety hazards. By being prepared, you can minimise the impact of bad weather on your construction project. 2. Solve Project Disputes Construction contracts often come with clauses that incorporate penalties for missed deadlines. However, if you can prove that the impact of the weather was extreme and outside the normal bounds of weather expected at that time of year then you will be able to claim and extend the programme, or in some cases recoup the cost as well. Read About Construction & Climate Change If weather delays cause disputes with your construction partners, accurate weather risk assessments can provide the documentation you need to support your position. How to Conduct Weather Risk Assessments A few different approaches can be taken when conducting weather risk assessments. The most important thing is to use an approach that makes sense for your project. Here are a few standard methods. 1. Reviewing Historical Data One approach is to review historical data for your area to get an idea of what weather conditions you can expect during the construction period. This data can be sourced from local meteorological agencies or private companies specialising in weather data collection and analysis.
2. Utilising Predictive Models Another option is to utilise predictive climate models that generate forecasts based on current conditions and historical data. These models can give you a pretty good idea of what weather conditions you can expect in the coming days, weeks, or months. 3. Consulting Local Experts A third approach is to consult with local experts who have experience dealing with the local climate and its effects on construction projects. These experts might include meteorologists, climatologists, or even construction professionals who have worked in your area before. The frequency with which you should conduct weather risk assessments will depend on many factors, including the type of project being undertaken, the location of the project site and the weather conditions that are common in that area. In general, however, most experts recommend that companies conduct assessments yearly — preferably during peak construction season. Conclusion Weather risk assessments are an essential part of any construction planning process. By taking the time to identify and understand the risks associated with bad weather, construction companies can safeguard against costly delays, lost productivity, and other potential problems.
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TECHNOLOGY
It is a certainty that new roles will be created as a result result of AI – we just don’t know what they are yet We are now firmly in the era of AI transformation. Slalom’s research shows that 84% of UK&I businesses are already using AI – going from single ‘point solutions’ 12-months ago to mass experimentation across organisations, championed at the most senior levels. Unsurprisingly, the vast majority of current use cases focus on productivity gains as we start by looking inwards at existing, ‘painful’ processes. History has shown that true market disruption and differentiation comes only after we have gained a level of confidence and knowledge in new technologies. However, this trumpeting of AI and Generative AI’s human-like ‘superpowers’ is creating fears of jobs being replaced en masse by ‘robots’. To compound this, there are now many websites offering to test the likelihood of each role being ‘taken’ by AI – effectively pitting human against machine. Writing this, I am reminded of hearing about similar disquiet from the introduction of ATMs to the UK in the 1960s and the impact on the jobs of bank clerks. But rather than being lost, these roles evolved into customer advisors and support, resulting in improved job satisfaction and fulfilment. In parallel, there was an enormous uplift in customer experience through greater convenience and service. A recent study by Forbes showed that 65% of senior financial management expects positive changes from AI usage. But this rapid advancement is threatened by the fear of job losses, causing colleagues to turn off from the AI innovations and disengage from adoption efforts. The key to realising the maximum benefits from this technology is creating a clear vision extolling the benefits of AI to the customer, company and, equally importantly, colleague. This is particularly critical to the 36% of business leaders in the UK surveyed by Slalom who feel they lack a clear AI strategy.
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TECHNOLOGY
Historically, we have seen the most effective strategies are those that embrace, embed and enable new technologies, equipping and exciting colleagues for the journey ahead. Reducing the repetitive, increasing customer focus ‘Lack of challenge’ commonly ranks as one of the top reasons (behind compensation) people leave a company as they feel frustrated and bogged down by repetitive, ‘boring’ tasks. This results in innovation and value-add work becoming a wish rather practice. We have already seen AI in action addressing many of these tasks, such as the widespread use of chatbots to support simple customer queries, wholesale compliance monitoring, and documentation of investment advice. In parallel, we are seeing these colleagues spend more time on ‘higher value’ activities – compliance teams becoming more forwardlooking advisors, and wealth managers spending more time with clients. This move up the value chain is supported by a recent report by Goldman Sachs forecasting only 7% of jobs across all sectors will be lost through AI, with the majority being complemented and uplifted by it. The AI-led job creation possibilities are immense Demand for AI skills in the market is already strong with a current focus on data scientists to create solutions, train the models and improve ‘prompting’ to provide better results. However, we expect limited further growth in this demand over the coming years as models improve and no longer require the same level of specialist input. Instead, there is an upcoming need for talent to provide controls and oversight over the use of AI. These are even more important in financial services to mitigate unintentional biases, avoid ‘hallucinations’ (models making up pseudo facts), and support the ‘explainability’ of models. This will require new skills, expertise, and passion for AI – stretching existing business roles. It is a certainty that new roles will be created as a result of AI – we just don’t know what they are yet. We are seeing firms start to look to use AI to differentiate and disrupt markets through new products, services, and transformation of purpose, such as robo-advice and highly personalised insurance products.
Alice Hansen Senior Principal Slalom
Supporting employee acceleration into AI Enabling employees to embrace and embed new AI skills must be a key part of a firm’s successful AI strategy. Opening up, rather than locking down, the AI ecosystem with appropriate safeguards, will promote confidence in the vision. It is critical to involve colleagues in developing AI use cases and testing proof of concepts to showcase the benefits and dampen down fears. In parallel, firms should invest in upskilling teams in AI – from technical expertise to responsible usage and controls. This will enable them to accelerate ahead of the competition in the speed of creation and deployment of innovative AI solutions, and create a wider AI-led cultural transformation. AI as an enabler for growth and development Fear is only going to hold us back from realising the enormous benefits of AI to the financial services sector, but importantly should not be dismissed. Organisations should develop holistic strategies that embrace, embed and enable not just AI technologies, but also AI / innovative mindsets and skills. Recent research from economist David Author showed that 60% of the current workforce are in occupations that did not exist in 1940. I’m really excited to see the AI-led job transformation over the next 10 years.
Issue 54 | 23
INTERVIEW
Gobi Finance CEO on Digital Lending, Mobile-Based Innovation, and Supporting Women in Business Established in 2012, Gobi Finance NBFI is a Mongolia-based finance institution with a focus on micro/SME and consumer financing. It is fully licensed by the Financial Regulatory Commission of Mongolia and offers traditional as well as mobile lending services to its clients. It won three accolades at the 2023 Global Banking & Finance Awards, including Best SME Finance Company Mongolia. Wanda Rich, editor of Global Banking & Finance Review, recently spoke with Gobi Finance CEO Mrs. Zulaa Ganbat to learn more about the organisation and some of the initiatives behind its award-winning success. “Our country is landlocked and strategically located between two economic giants, China and Russia, and offers vast untapped natural resources. With a fast-growing economy fuelled by the mining sector, there is an unmet demand for micro and SME finance that is not fully served by the local institutions,” she began. “Thus, Gobi Finance has been working to fill this gap and contribute to the establishment and expansion of a well-managed SME industry and consumer lending segment in this country. In addition, Gobi Finance is managed by a team of senior Mongolian and international professionals who bring investment and operational management experience from not only Mongolia, but also global financial institutions.” Innovation, particularly in terms of digitalisation, has played a key role in the firm’s progress. “Our growth and success are made possible by our team’s dedication to providing financial services with innovation,” Zulaa said. “At Gobi Finance, we have a team of people who have studied and worked abroad, and we have our own in-house IT team. “The Mongolian microfinance industry has experienced rapid advancement in terms of digital lending in the last few years. Gobi Finance was one of the
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early adopters of digital lending, and with our in-house team, we have been able to grow and provide our services to an increasing number of customers. Currently, we offer mobile-based lending and savings services to customers, and we are working to introduce money remittance and trading services.” She also confirmed that Gobi Finance is the only microfinance institution in the country to have successfully received long-term financing from the US development institution, the Development Finance Corporation (DFC). “This financing was a demonstration of our company’s prudent management and financial standing, and also allowed us to generate growth in times of rapid changes.” She went on to explain how the SME sector is one of the most important drivers for the Mongolian economy, accounting for 50 percent of employment and making up two-thirds of the total registered enterprises in the country. “The biggest challenge faced by micro and SME businesses is the lack of financing opportunities available in this country,” she said. “Gobi Finance is one of numerous microfinance institutions that continue to serve SMEs, but we cannot meet the evergrowing demand generated by the rapid economic growth. The local capital market is in its early stages and is not equipped to serve the industry’s needs. Moreover, the foreign direct investment into the country fluctuates with the commodity market. As a result, we continue to seek foreign funding opportunities to serve the increasing demand at home.” One of Gobi Finance’s areas of focus is opening up financial opportunities for women and supporting their growth in business, an ethos that earned another honour at the 2023 Global Banking & Finance Awards for Mongolia’s Best Financial Institution for Empowering Women in Business. Zulaa described how this approach came to be.
“Mongolia is ranked as a country with advanced gender development, and women account for a high share of employment and business,” she said. “64 percent of SMEs are women-owned, and often they are underserved by the local financial institutions. Naturally, the majority of Gobi Finance customers are SMEs that are either owned or run by women. We believe they choose to work with Gobi because we provide reliable information about financing terms and facilitate loans swiftly. Also, the financing by the DFC highlights Gobi Finance’s developmental impact on Mongolia by supporting local micro and SME businesses.” When it comes to financing, the advice Zulaa offers to businesses and consumers centres around access to the right tools and thorough research to find the terms that suit them best. “Access to finance is a persistent challenge, but also, SMEs need access to know-how, networks and skills to succeed,” she asserted. “We advise our customers to plan ahead and shop around for the best terms. In practice, loans provided by local institutions tend to be short-term and expensive, and require extensive collateral pledges. Thus, planning ahead and making sure to get the best terms available for interest rate, duration and collateral value are important.” Gobi Finance’s third win at the 2023 Global Banking & Finance Awards came for Mongolia’s Best Fintech App, which was awarded for CashOne, its mobile-based lending platform. “We introduced CashOne in 2019, and it is one of the first of its kind,” Zulaa reported. “Since personal credit cards are not widely used, mobilebased lending has been an instant hit because it does not require collateral, and loans can be issued in a few minutes. “CashOne is a fully integrated platform that includes a core system, credit scoring, and a banking gateway. The
INTERVIEW
Mrs. Zulaa Ganbat CEO Gobi Finance platform combines traditional and behavioural digital footprints to calculate innovative credit scores. Through CashOne, we now provide mobile consumer lending and savings products, and we will launch international money remittance and securities trading services. Ultimately, CashOne aims to solve personal finance with a one-stop super-application.” All of the aforementioned services and initiatives are supported by Gobi Finance’s client services team, which provides its customers with financing information and periodic monitoring courtesy of its dedication to ongoing training and development. “In order to ensure the best customer experience, we continuously provide training to our team with local and international training centres and courses,” Zulaa said. “These courses range from antimoney laundering to training for micro and SME
financial service providers. Thanks to the EBRD in Mongolia, microfinance companies like Gobi Finance can freely participate in digital and classroom training provided by the Regional Small Business Programme, which provides know-how in the field of microfinance and best practices in providing financial services in Mongolia.” Zulaa concluded by reaffirming Gobi Finance’s commitment to maintaining its support of Mongolia’s financial development. “Mongolia is a developing country, and we will see steady growth in the financial sector. Gobi Finance is working to be a part of the driving force that elevates SME and consumer lending based on our experience and dedication to financial innovation.”
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2023
BUSINESS
How firms can elevate their monitoring strategy in 5 steps It should come as no surprise that having a substantial amount of IT often means having lots of monitoring tools. Importantly, if one of these tools is facing issues, and cannot relay information from a crucial transaction application, how would your firm know? The health of your monitoring tools is as important as the health of the applications and infrastructure they monitor. This is why you need a monitor-of-monitors.
1.
Financial services institutions have several monitoring tools for their vast IT environments to ensure constant availability of their business services. This is done through checking the underlying technical services enabling the business at regular intervals.
2.
As IT services grow more complex, spanning from onpremises to the cloud, the potential for IT service disruption, the associated costs for businesses, increases. IT service disruption or outage can have severe implications on not just their revenues, but also the organisation’s reputation. If an incident disrupts service, firms will not only have to rebuild investor trust, they also may become susceptible to regulatory inquiries and fines. Why do monitoring services fail? There are a variety of reasons that monitoring services can fail, although what is abundantly clear is that IT services monitoring play a very important role in avoiding an outage. Whenever an outage does occur, it is likely due to one or more of the following: 1. 2. 3.
Service was not being monitored due to not being configured or an outdated model No alerts/too many alerts were configured even though monitoring was being done Alerts didn’t catch the attention of the operator or were lost among too many alerts, or a “sea of red”
The above demonstrates exactly why it is critical that you monitor the health of the monitoring system itself in order to steer clear of it being one of the root-causes for an outage. 5 ways to monitor your monitoring tools Drawing on the insights into the pitfalls of monitoring services mentioned above, here are five fundamental checks to ensure the robustness of your monitoring system.
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Are all your monitoring systems working?
This sounds simple but firms need to apply checks on availability of monitoring for all services to ensure that they are working at all times. This can be done by applying a simple severity rule on sampling status of all services being monitored. It can be then checked through the sampling status that it is indeed being monitored. Ensure monitoring of Physical and Virtual servers:
Modern IT infrastructures often consist of a mix of physical and virtual servers, each playing a vital role in delivering various services. Check if all the configured application services are covered in monitoring, whilst keeping in mind that there may be more than one application service on a single server. 3.
Ensuring certificate compliance
Digital certificates allow firms to verify the identity of the sender/receiver of an electronic message to protect their website, network, or devices. Every certificate has an expiry date written into it. But if it has expired, there is often no way to tell until it is too late. There needs to be a way to check – and fix – digital certificates that are about to expire. Monitoring tools can help. 4.
Understanding the health of your monitoring system
Effective monitoring alerts play a crucial role in guiding troubleshooting decisions when incidents occur. Based on monitoring alerts, various troubleshooting decisions like restarting a process, restarting a module or fail-over to backup are taken during incident. Consequently, it becomes important that the health status of the monitoring estate is available to all who take these decisions. This can be done by having a placeholder for the underlying monitoring health on the mission critical dashboards itself. Thus, the decision maker knows if they are relying on the correct monitoring data or if there is a break in monitoring services which may be resulting in the alert. Additionally, a one-second ticking date time also assures that the dashboard state is latest and not affected / screen freeze due to a local workstation issue. 5.
Keeping on top of reporting and audit
BUSINESS
Guy Warren CEO ITRS
Finally, it is key that the monitoring team publishes to all stakeholders daily / weekly/ monthly reports on: • • • • • • •
Lists of servers covered in monitoring and the metrics and regular expressions being monitored The data which was evaluated to define an alert, including the data which didn’t breach a threshold Lists of applications covered in monitoring Lists of existing issues in monitoring Lists of critical, warning alerts per application, per server Lists of alerts disabled or snoozed Lists of alert receipts configured (email & mobile).
It is then expected from the stakeholders to pinpoint any gaps in the configured monitoring. Luckily, services and product do exist which can partner with mission critical financial enterprises to continuously mature the monitoring templates for the ongoing transition of enterprise datacenters to hybrid IT. Despite the rapid changes, the core principles of effective monitoring and observability have stood the test of time. With ITRS Geneos you can monitor and contextualize everything in one single tool, from legacy systems to cutting-edge new technology, from applications, servers, VMs, databases, middleware and cloud services to containers.
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TECHNOLOGY
Battling bots in the ticketing industry: how best to stymie the scalpers Nowadays, almost all businesses have an online platform. Within the ecommerce industry, online sites are constructed to provide a seamless shopping experience, providing easy access to hot items. Within the ticketing sector, offering a user-friendly experience for ticket purchases is key, particularly for in-demand shows. Yet, these sites often lack effective protection against malicious lurking bots, which alarmingly now make up 30% of all internet traffic. The troves of customer data and potential to capitalise on flash sales and ticket launches are tempting targets for fraudulent online attacks.
Antoine Vastel Head of Research global cybersecurity company DataDome
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Enter the scalper bot: harnessed by malicious actors to target ticket or product releases and snatch them up faster than humans, selling them on at highly inflated prices. This summer, scalpers stormed the presale queue of Taylor’s 2024 Era’s tour with almost 40,000 fans facing crashing ticket sites and inflated resale prices. This scalper success is particularly alarming given bots succeeded despite the ‘Verified Fan’ presale, established to protect against bots following the previous Ticketmaster fiasco for Taylor’s US tour back in November 2022.
The success rate of these scalper attacks – alongside the financial gain of scalping – will motivate increasing numbers of bad bot attacks over the next few years.This is alarming; recent Datadome research found that 66% of UK websites tested were unprotected against simple bot attacks, highlighting companies’ widespread vulnerability. This poor protection, combined with the growing level of bot sophistication highlights the urgent need for companies to invest more into defences against bot attacks, to avoid the financial and reputation impact of a successful attack. Bot attack sophistication: scraping paves the way for scalping Bot attacks are increasingly sophisticated, with bot programmers quick to adopt new technologies like AI and ML to enhance their attacks. Furthermore, these bots come in many forms, and businesses should fear more than just the scalper bots trawling their website. Paving the way for scalper bots are scraper bots, used by cybercriminals to extract data from a website, mobile app or API. They’re dangerous because they can collect information which acts as a gateway to more malicious activities.
TECHNOLOGY
Think of scraper bots like burglars assessing their opportunities: they’re peeking into windows, evaluating whether there are any goods worth stealing. Once they’ve confirmed the value of the goods, they can formulate a plan for entry and escape. On a ticketing site, scraper bots can be used to collect information, monitoring when in-demand tickets go on sale. This enables scalper bots to position themselves at the front of the queue and snatch-up tickets in large batches immediately when they go live, leaving customers frustrated and empty-handed. Complex bot attacks target more than the ticketing industry. Retailers’ inability to defend against bots led to the huge shortage of PS5 consoles in 2020, where the majority of consoles were snapped up by scalper bots, and sold on for hugely inflated prices. Similarly, in 2021 & 2022, bots played a role in the GPU shortage. Such attacks are widespread, and incredibly damaging for organisations. They disrupt the customer experience, and risk enormous reputational damage for the business. The emergence of scraping as a gateway threat highlights the increasingly
sophisticated nature of bot attacks, thus the growing importance for companies to develop strong cybersecurity strategies to protect themselves. Strong defence deters attacks To sufficiently protect against bot attacks, online ticketing sites need more than just a presale or verified fan system. They must improve their online security and become vigilant to scraping and scalping attacks, and opt for a robust cyber strategy with real-time bot detection and prevention software. Across all industries, robust cybersecurity strategies should include multiple anti-scalping measures. Implementing behavioural analysis, for example, enables sites to identify genuine human vs bot interactions. This is possible given bot behaviour differs to that of humans; bots typically race to target tickets or in-demand items, as opposed to the slower scrolling typical of human customers. Once bot behaviour is detected, additional bot detection and deflection methods can be activated.
Sites can also deploy browser or device fingerprinting, whereby websites collect information about a user’s browser or device type and version. This helps to identify bots, given that they use automated browsers or HTTP clients which differ when compared to humans’ non-automated browser activity. Identifying bots through their browser and device parameters increases chances of detection – and they can then be blocked. Security interferes with the seamless customer experience In some instances, security measures in place can disrupt user experience. For example, common CAPTCHAs are used to create challenges difficult enough to stop bots. However, CAPTCHAS also challenge real people, with frustrating test failures slowing down their browsing activity. To reduce such friction, businesses can reduce the number of CAPTCHAs deployed by ensuring this defensive tactic is always a last resort. Instead, deploying purposebuilt detection and mitigation software can reduce successful bot attacks and improve customer experience. Bot attacks continue to disrupt the online world, leaving customers disappointed when desired items or tickets are scalped out of their hands and distressed when services are slowed by bot activity. Being outplayed by a bot and faced with crashing web pages is frustrating. One such experience damages reputation, but if businesses continue to poorly protect themselves more and more customers will be driven away. Given that bots are more sophisticated than ever, protecting online sites is an imperative. Improving cybersecurity strategies to match the pace of bot evolution will enable continual protection, ensuring companies beat the bots and avoid the reputational and financial damage such attacks threaten.
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BUSINESS
Now you’re talking: top 5 ways innovation is breaking language barriers in the HR and communications industries Technological innovation has created a vast array of opportunities for people to connect and progress within the workplace. Now, more than any other time in history, we have the tools to successfully relocate – virtually anywhere in the world – to re-establish ourselves both personally and professionally. Yet, for many of the millions of global deskless workers, communicating at work can be a stressful, difficult and laborious process, often precluding them from the wider, and vital, corporate communication chains and processes. Language and communication form the backbone of the HR industry, but the sector has long been hindered by an inability to hire across a diverse, multiskilled range of qualified personnel. With that in mind it is becoming increasingly apparent that technology will have a crucial and complex role to play in improving communication for deskless workers, and ultimately for the HR and communications sectors at large. Very little attention has been paid to the day-to-day communication opportunities and issues faced by frontline and deskless workers, with a study from Oni reporting that only one percent of software technology is designed for this group – a cohort that actually makes up 80 percent of the global workforce. Those numbers, when you see them written down, really depict the severity of the situation. This same 80 percent are the people who kept the world spinning during the pandemic, and yet they do not have access to the advanced, productive and necessary communication technologies enjoyed by their computer-based counterparts. The situation has proven to be a source of considerable frustration across the HR and communication sectors, with additional figures indicating that one out of every three deskless employees feels undervalued, unappreciated and neglected by their organisations.
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Benedikt Ilg CEO and Founder Flip
With so little digital infrastructure aimed at frontline workers, language barriers and the inability to effectively communicate with HR departments often result in skilled non-native speakers rendered “unqualified” for a position. Alternatively, if they do get the job, the risks of potentially dangerous miscommunication, and feelings of isolation and disenfranchisement are common – and often daily – occurrences. So, how can technology break this language barrier to give hardworking, talented people the same opportunities, regardless of their mother tongue? •
Integrated translation features
Firstly, corporations need to introduce real-time, integrated translation features, company wide. Language translation tools are rapidly taking centre stage, offering instantaneous translation across numerous languages. Businesses should leverage this technology for effective and immediate communication, whether it’s internal within the HR department or between frontline employees and the external organisations with which they interact. With Flip, for instance, staff can implement an employee app with translation features, empowering seamless communication, despite differences in language and fluency.
BUSINESS
•
Artificial intelligence
Additionally, it won’t have escaped anyone’s notice that AI is dominating the tech conversation and will continue to do so for the foreseeable future. AI has its place in creating an advanced, more equitable working environment for frontline employees. As it stands, to build the foundation upon which innovative, industry-changing AI can stand, companies first need to address mass digitalisation, introducing systems that will benefit not just computerbased employees, but the deskless workers whose processes have been predominantly analogue.
•
Digital language courses
Digital language courses, delivered across the employee applications through a reliable third-party integration, will also be key in tearing down barriers to engagement with HR, and ultimately advancement within an organisation. While translation features are vital and can automatically aid an employee struggling with language, training courses aimed at non-native speakers can gradually improve a person’s language skills and their ability to effectively engage with their co-workers, HR department, and the overall corporate culture. It can not be overestimated how damaging it can be to a company, when it routinely loses talented employees, or fails to attract adequately skilled personnel, due to issues that are entirely solvable with a degree of ingenuity and common sense technological implementation.
Looking to the future, AI has the potential to revolutionise how deskless workers interact with HR and their fellow employees. Advanced AI-powered chatbots and virtual assistants have the capacity to comprehend, learn, and respond in different languages, facilitating easy communication for employees and clients worldwide. AI will be key in data analysis and predictive analytics, aiding in understanding language patterns and trends, and consequently minimising language-related misconceptions. •
Machine learning
Machine learning (ML) can also greatly impact the manner in which HR and deskless workers interact. For the HR sector, adequate knowledge of a diverse range of languages can be a valuable skill. Companies can utilise ML algorithms to develop personalised language learning capabilities. These platforms allow users to learn new languages at their own pace, adapting to their original learning style and capabilities. This level of creativity and innovation encourages employees to actively combat the language barriers they are personally experiencing, while also promoting continuous learning in an engaging way.
•
Cultural intelligence
Lastly, cultural intelligence platforms have the potential to bridge the gap between HR and the deskless worker in a number of ways. A respectful understanding of cultural nuances plays a crucial role in effective communication. Cultural intelligence platforms are innovative tools that provide insights into different cultures, language usage, etiquette, and norms. This knowledge goes a long way in fostering culturally sensitive communication, essential for multinational companies dealing with a diverse workforce and clientele. Additionally, it empowers HR and communications departments to manifest and maintain a safe, happy and professional working atmosphere, as well as keeping HR up-to-date with culturally specific dates of importance. In conclusion, the advent of technology and innovation have significantly impacted the way HR and communication industries tackle language barriers. The optimised use of real-time translation features, digital language courses, AI, machine learning functions, and cultural intelligence platforms, have not only enhanced communication but also contributed to promoting inclusivity and diversity in these areas. The future undoubtedly holds more transformative innovation in store, and is sure to mould these industries to unprecedented heights.
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INVESTMENT
Philanthropic Giving Plays Central Role in Comprehensive Wealth Management Approach In 2021, the Giving USA Foundation released its latest findings surrounding philanthropic contributions. Clearly illustrating that individuals are still the largest source of contributions, the report’s findings indicated that individuals gave more than $326.87 billion – more than foundations, bequests and corporations combined. That translates into not only large amounts of individually-driven impacts around the world, but it also illustrates just how vital it is to employ a comprehensive wealth management approach that makes much of that large-scale giving possible in the first place. Regardless of whether a wealth management plan involves millions of dollars or not, individuals may often fail to see that philanthropic giving is a notable piece of overall wealth management, serving a key role in making sure that long-term aspirations are reached. It’s important that donors employ the best giving vehicle that fits their individual situation and goals.
Kevin McGrath Senior Director Ren Kevin McGrath currently serves as senior director at Ren (www.reninc.com), the trusted technology partner to top financial institutions and those of nonprofit organizations.
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Donor-advised funds (DAFs) have emerged as one of the most recently preferred charitable giving options, as a DAF allows individuals to deposit funds into an account that can appreciate in value and eventually be granted to charitable causes important to the donor. It leads to an immediate charitable deduction for the contribution and avoids capital gains taxes on appreciated assets. In exchange for their irrevocable gift, donors gain advisory privileges that enable them to propose grants to qualified charitable organizations and offer guidance on how the gifted funds should be invested and ultimately distributed – a highly welcomed role among today’s donors. Moreover, donors can contribute various types of assets, such as cash, securities, real estate, business equity, restricted stock, and even cryptocurrencies.
INVESTMENT
Here’s a look at additional options commonly seen in today’s philanthropic ecosystem:
•
Pooled Income Fund
•
A charitable trust that combines gifts from a number of donors, investing them together to generate income for income beneficiaries and eventually distributions to charitable organizations.
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Private Foundation – A tax-exempt entity that can receive contributions as a charitable organization under Section 501(c)(3) of the Internal Revenue Code.
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Charitable Remainder Trust – A taxexempt trust that can liquidate an asset to create two interests: income and remainder interest.
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Charitable Gift Annuity – An effective solution for donors interested in avoiding taxes, generating lifetime income, and supporting the charity of their choosing.
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Pooled Special Needs Trust – A trust that combines and invests assets contributed by multiple individuals to generate funds for individuals with disabilities.
•
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Charitable Lead Trust – A powerful charitable planning tool used to generate charitable deductions for income, gift, or estate taxes. The trust makes distributions to charity, and at the end of the term of the trust, the remaining assets revert to the donor or heirs.
Flex Giving Account – A workplace giving platform that helps companies deepen their corporate culture, inspiring engaging, community driven philanthropic activities
Regardless of the giving vehicle selected, the overall role of philanthropic giving in wealth management is to serve as one of the key pillars of a clear-cut plan to reach customized goals for the individual or their family.
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FINANCE
Beyond Traditional Insurance:
The 831(b) Plan’s Response to Market Challenges
The Hardening of an Insurance Market: Then and Now The insurance market operates in cycles, influenced by a myriad of factors. In a Soft market, premiums align closely with claims, leading to increased profits and competitive rates for insurers. Conversely, a Hard market arises due to external challenges such as economic instability, political uncertainty, and poor investment returns. Historically, the US experienced a notorious Hard market from 1984 to 1987. Liability premiums skyrocketed, in some cases by up to 250%, due to factors like lenient underwriting and massive litigation settlements, notably those related to asbestos. This crisis sparked allegations of insurer collusion and was highlighted by Time magazine’s March 1986 cover: “Sorry America, Your Insurance Has Been Canceled”. In response, Congress acted in 1986, capping liability premium increases and advocating for self-insurance, an idea first introduced by General Motors in 1915. Fast forward to today, and we find ourselves in another Hard market, which began in 2021. Unlike the typical three-year cycle, this market shows no signs of relenting. Contributing factors include: • • • • •
• •
Severe weather events leading to significant property damage. Diminished returns on investments due to lowinterest rates. Escalating litigation costs associated with digital threats, such as data breaches. The unexpected repercussions of the COVID-19 pandemic, which led to the downfall of giants like JC Penney and Virgin Atlantic. In 2022, weather-related losses amounted to $99 billion, and by Q1 2023, the Property and Casualty industry reported $8.2 billion in net underwriting losses. Ongoing supply chain disruptions, intensified by geopolitical tensions and events like the prolonged conflict in Ukraine. Inflation, at its highest in four decades, is pushing underwriters to increase premiums to strengthen reserves.
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These challenges, among others, are driving up the costs of business insurance premiums. A Tax Code For Self-Insurance The silver lining is that history has taught us valuable lessons. During the market hardening of the 1980s, Congress introduced the Tax Reform Act of 1986, which empowered business owners. The 831(b) Tax Code permits businesses to create and fund an 831(b) Plan, also known as a micro captive insurance company. Contributions to the 831(b) Plan are tax-deferred and can be utilized to self-insure against underinsured or uninsured risks. This tax code encourages business owners to establish a “rainy day” fund, which can be tapped into for specific risks that might jeopardize their operations. What is Covered? An adaptable 831(b) Plan can offer business coverage(s) when insurance providers demand exorbitant premiums or are reluctant to underwrite unique risks such as: • • • • • • • • •
Dispute resolution Data breaches, including ransomware, phishing, malware, and more Supply chain disruptions Accounts receivable defaults Deductible reimbursement Subcontractor defaults Warranty claims or government-mandated product recalls Political instability, both domestically and internationally Specialized coverages tailored for specific industries
Rather than feeling beholden to insurance carriers, 831(b) plan owners can craft coverage types and limits that address their unique risks, all while retaining commercial insurance for more conventional risks. Protecting Success Through an 831(b) Forward-thinking businesses should consider establishing an 831(b) Plan as a safeguard for low-frequency, high-severity risks. When such a risk materializes, and it’s likely it will, these proactive businesses won’t find themselves cornered or, even worse, forced to shut down.
FINANCE
831(b) Plans have proven their worth over time. So, why aren’t more business owners aware of them? Designing, implementing, and managing these plans necessitate administrative experts who can delineate the coverages, oversee the claims process, and ensure IRS compliance. Much like a 401k requires an administrator, so does an 831(b) Plan. The seasoned team at SRA 831(b) Admin boasts over 100 years of collective experience in establishing and overseeing 831(b) Plans.
Van Carlson Founder and CEO SRA 831(b) Admin Van Carlson is the Founder & CEO at SRA 831(b) Admin. He is an industry leader in enterprise risk management solutions with over 25 years of experience. Along with the responsibility of bringing SRA’s new products to market, he helps clients achieve their financial goals and aid in protecting a business’s assets through times of uncertainty. Of SRA’s many products, the company is most known for plans that aid mid-market businesses in mitigating risks more effectively. Van began his career with Farmers Insurance Group as an agent, where he saw firsthand the benefit of how 831(b) plans can assist small to mid-size businesses. Van is a veteran of the U.S. Coast Guard.
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TECHNOLOGY
Safeguarding data in the hybrid era
Ian Jones Director of Operations Matrix
As hybrid work models become the new norm, businesses face a complex set of challenges, particularly regarding data compliance and security. Whilst managing remote teams has become more refined in recent years, there is something that threatens this way of working. That threat is unseen, unsafe and unsuspecting. It’s a digital danger that comes in the form of sensitive data loss, cyber-attacks and data breaches, each one looming ever larger in this evolving working model. The stakes are high. Therefore, business leaders must understand that compliance and security controls must be equally effective to protect any business and its people, irrespective of where the work is done. And with hybrid working models relying on digital technology, there’s an urgent need to safeguard confidential information. So, how can this be addressed? How can businesses stay ahead of the threat? Well, the first hurdle lies in managing data security for hybrid teams. The challenges of data compliance A key concern is the diverse locations and devices from which employees now
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access and handle sensitive information. In a traditional office environment, 65 per cent of business managers find data protection easier when all employees work in the office, as it can be centralised and controlled to a greater extent. However, in a hybrid work model, employees can access company data from their home offices, coffee shops or even out travelling. Control is reduced. The endless possibilities of work environments now increase the potential risk of unauthorised access to sensitive data. And remote working already makes it harder to spot phishing email attacks, let alone more serious security breaches.
Employees, however, still need the freedom to collaborate, share files and access information seamlessly without compromising the confidentiality of sensitive data. Therefore, investing in the right resources is key, particularly as 87 per cent of users say they would not do business with a company if they had concerns about its security practices. With the introduction of the new Data Protection & Digital Information (DPDI) bill – an update to the UK’s data protection framework that focuses on protecting individuals’ data rights – organisations must adopt a more proactive approach if they’re looking to avoid substantial
TECHNOLOGY
penalties. It’s an opportunity for them to implement robust compliance measures for hybrid working, providing better protection in our digital landscape. The steps to a safer workplace To effectively navigate data compliance challenges in a hybrid environment, businesses must adopt a set of best practices that prioritise data security and privacy. One of the most important is training employees on data handling. Around 80 per cent of data security incidents are caused by staff errors, so appropriate employee training and refresher sessions are crucial to an effective data security policy. From there, establishing clear guidelines for remote access and communicating this to staff will help further reduce risks as data breaches pose a unique threat to remote working. In fact, breaches cost over £1 million more on average when remote work was considered a factor in the event. One common solution is multi-factor authentication systems that add an extra layer of security when logging in or even the use of virtual private networks (VPNs) can create secure connections when accessing company resources remotely. Finally, business leaders should turn to technology to identify security gaps and implement necessary improvements, utilising secure resource collaboration tools and software to keep data safe. Leveraging software that offers built-in
security features, such as end-to-end encryption, secure file sharing and secure communication channels will protect confidential information with ease. A unique way to protect data
see exactly who accessed sensitive data, when and where, giving them an advantage over the digital threats lurking in the shadows. Ensuring a more secure future
As digital technology accelerates, security transformation must follow suit. As staff access and communicate data in a hybrid model beyond corporate firewalls, organisations must adapt. The traditional “castle and moat” security model used within office premises is no longer sufficient.
For remote work to be sustainable in the long term, business leaders must conduct comprehensive audits of their digital security and make strategic investments to fully ensure a more digitally secured future.
Enter the likes of resource booking software. This technology offers a new way of maintaining compliance whilst providing other valuable benefits. Using resource booking software for hybrid workers to reserve desks, equipment or other necessary tools not only ensures more efficient management of resources and staff’s time but it also safeguards employee data, including names, contact information and booking history. Imagine a centralised booking software system that provides greater control over the data the business collects. Resource booking software simplifies the handling of information of visitors – or those staff booking desks and rooms – and securely stores details externally. In addition, the automatic purging of data after a specified period, is particularly efficient in helping organisations to remain compliant. Enhancing security and privacy also becomes easier with a standard anonymisation feature of the software. This is a higher level of data protection where older bookings can be completely anonymised, stripping away sensitive data and personal information. This leaves only essential information that can be used to better shape resource allocation decisions, all whilst fortifying data security measures. More importantly, resource booking software can provide transparency and accountability, as it can maintain a trail of activities related to employee data, such as details of bookings, modifications and access attempts. This helps businesses
By understanding and implementing effective data strategies, organisations can navigate the complexities of data compliance and safeguard their sensitive information. And resource booking software has emerged as a practical tool for organisations that are striving to perfect their hybrid working policies when protecting data. It helps them navigate the evolving challenges of data compliance and maintain the highest standards of data security in a dynamic and evolving work environment. The risks are clear. It’s high time to put the right controls in place for a safer digital future.
[i] Ponemon Institute, The Impact of the New Normal on Workplace Privacy: A Study of Business & IT and IT Security Managers [ii] ZDNet, Phishing: Why remote working is making it harder for you to spot phoney emails [iii] McKinsey & Company, The consumerdata opportunity and the privacy imperative [iv] UK Government, Data Protection and Digital Information Bill: updated impact assessment [v] TwoVenture, Do your staff need data protection training? [vi] IBM, Cost of a data breach 2022 [vii] CyberHoot, Castle-and-Moat Network Security Model
Issue 54 | 39
INVESTMENT
Beyond money: What private equity needs to bring to ventures on the African continent If you ask an entrepreneur or even the leadership team of a larger company why they’re approaching private equity investors, the answer will usually be pretty straightforward: money. There’s a good reason for that too. Whether the company has serious growth ambitions or is aiming to turn its fortunes around after a rough patch, money is vital.
also fewer companies achieving the kind of massive growth that allows for riskier investments. Those and other factors mean that the stakes for private equity investors in Africa are higher. They need as many of the companies they invest in as possible to thrive. And that means bringing more to portfolio companies than simple funding.
But investment funding can only take a business so far. And if it’s not used effectively, then the business receiving that funding can quickly end up in trouble. In some markets, that’s not too much of a problem. In fact, in places like Silicon Valley, it’s part of every investor’s calculus. They can make that calculus, at least in part, because they know that if a company folds, its employees will quickly find work again and the company bosses are in an environment where they can easily start up something new. The companies that do make it and grow, meanwhile, make their investments worthwhile.
Expertise, access to networks, oversight, and operational improvements
But that’s simply not the case across almost all of Africa. Even in South Africa, one of the continent’s biggest and most advanced economies, the official unemployment rate is 32.6%. There are
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But what should private equity investors bring to African portfolio companies in addition to funding? A good start is expertise. That expertise shouldn’t just lie within the field that a prospective portfolio company plays in but also in the markets in which the company operates. This dual expertise allows the private equity investor to provide proper guidance to the portfolio company. As a result, the company will be in a better position refine their business strategies, identify growth opportunities, and navigate challenges. But investors can also provide financial expertise, aiding with things like financial planning, budgeting, and capital allocation.
Another important thing that investors can bring to African portfolio companies is access to networks. Private equity investors typically have extensive networks of industry contacts, potential customers, suppliers, and other stakeholders. They can leverage these networks to create new business opportunities, partnerships, and collaborations. These networks can also be leveraged to help portfolio companies enter new markets, both domestically and internationally, further bolstering their growth prospects. Additionally, investors may draw from their networks to bolster the management teams of their portfolio companies. Private equity investors can additionally play important governance and oversight roles. A good investor will provide oversight, governance structures, and accountability mechanisms to ensure that the company’s operations are aligned with strategic objectives. Those are, of course, just a handful of examples of the additional value that private equity investors can bring to African companies. But there’s another one that’s increasingly important for any company looking to thrive.
INVESTMENT
The ESG elephant in the room
Finding the real value in private equity
Institutional investors and regulators alike are increasingly insisting that companies adhere to environmental, social, and governance (ESG) guidelines. African companies are no exception to that.
Ultimately, it’s not just important for private equity investors to provide these additional value sets, but for companies looking for investment to seek them out. In fact, there are times when the right expertise, access to networks, and strategic direction provided by really good private equity investors is worth more than the finding they put into a company.
Even in the increasingly unlikely scenario that their home markets don’t have tight regulations concerning these things, they may try and get additional funding from investors who are bound by ESG guidelines. A company may also need bolster its ESG capabilties if it’s looking to export its products to a new, more tightly regulated markets. Private equity investors are increasingly focused on environmental, social, and governance (ESG) considerations. They can assist portfolio companies in implementing sustainable practices and ESG initiatives, which can enhance longterm value.
And with Africa’s very real economic potential (there’s a reason private capital funding in Africa has plataued while falling everywhere else in the world), that additional value will become more important than ever. Bryan Turner Partner Spear Capital
Issue 54 | 41
FINANCE
Lehman 15 years on: margin rules have reduced risk, but increased complexity
With today marking the 15-year anniversary of the collapse of Lehman Brothers, the ripple effects that it had through global financial markets are still being felt in many different ways. Lehman Brothers’ collapse was, of course, in part triggered by its exposure to highly complex derivatives. The widespread use of over the counter (OTC) derivatives like credit default swaps (CDS) and the opacity of these markets contributed to the crisis. In the aftermath of the collapse and the broader financial crisis, regulators around the world have sought to address the risks associated with derivatives trading. One of the key responses over the past one and a half decades has been the implementation of clearing and margining requirements for OTC derivatives. Take the enforcement of the global uncleared margin rules (UMR) as a prime case in point. UMR has been phased over the past six years to enhance transparency, risk management, and stability in the financial system by addressing some of the issues exposed by the financial crisis, including the use of derivatives. The purpose of the regulation was to introduce standardised margin for uncleared (OTC) trades which ends up making it more expensive to trade bilaterally (driven by higher margin requirements) which, ultimately, makes clearing more attractive and, in some instances, results in participants having to de-lever. UMR does this by requiring companies to post upfront collateral as security when doing trades, tying up trillions of dollars of assets that could otherwise generate returns.
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It encourages a shift away from the bilateral OTC world, into clearing through CCPs, which aim to reduce counterparty risk by providing a central entity that guarantees trades. This move has broadly speaking helped to reduce risk among the investment banking community but it has also meant that hundreds of asset managers and pension funds (with portfolios above €8bn in notional) that have previously never had to post initial margin, have been forced to do so. This has presented a major operational and liquidity challenge for any company doing large volumes of non-cleared OTC trades. Since the UMR rules started to be phased back in 2016, thousands of companies have been made to carry out huge amounts of work at the same time. In addition to the operational impact of this task, these changes have significantly increased the cost of trading. The intended effect of these changes is that companies will be strongly incentivised to stop two parties trading a contract between each other (bilaterally uncleared), and move towards central clearing for any trade that can be cleared. While clearing also involves posting margin, this is typically close to half the level of bilateral trading (5bp). There is also a huge question mark over whether banks that provide clearing services have capacity on their balance sheets to cope with a barrage of firms now looking to clear. Although many companies have clearing agreements in place, clearing brokers are unable to offer long-term clearing certainty and therefore retain the right to pull access to their services with as little as one- or twomonths’ notice.
Global financial markets are, of course, structurally very different to how they were 15 years ago. With regulatory changes, such as UMR, that have occurred over that time to financial market stability, firms have had to adapt. They must rely on doing things the way that they did in what is now essentially a totally different era. When all is said and done, the need for non-bank institutions like pension funds and asset managers to work out how to efficiently post and optimise their margin obligations is significant, especially when one contemplates the vast changes to market structure since the collapse of Lehman.
Joe Midmore Chief Commercial Officer OpenGamma
FINANCE
Issue 54 | 43
HEADER
Name Title Company
Issue 54 | 00
BUSINESS
How businesses can use intelligent pricing to navigate economic volatility and enhance resilience The economic landscape has grown increasingly complex in recent years, posing new challenges for businesses, particularly when it comes to pricing. Stubbornly high levels of inflation and subsequent interest rate rises have led to volatility in costs and demand, all of which are causing headaches for pricing teams and key decision makers. To navigate this, businesses need to put systems into place that enable more effective price management, and here’s why. The default for many businesses in times like these is cost saving, reducing headcount, closing stores or downsizing sites. Although these measures may help to protect profits in the short term, they represent a business risk. They can have a negative impact in the long term by inhibiting growth when recessionary conditions begin to ease and the rate at which costs are currently increasing is so significant that these methods likely won’t be able to provide enough of a cushion to make a lasting difference.
John Moss CEO Flintfox
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HEADER
The alternative to cutting costs is generating more income, yet the task of managing pricing is far from straightforward for most businesses. In the past, historical data served as a dependable foundation for forecasting the future. However, ongoing economic uncertainty has made this approach increasingly untenable and for manufacturers and retailers, making adjustments to pricing has become more difficult. Without easy access to precise data on all of their prices, businesses risk making the wrong pricing adjustments and alienating both existing and potential customers. Currently the effort spent on juggling multiple pricing spreadsheets creates a huge drain on resources, and getting a real-time overview of profitability seems almost impossible for many businesses. Have no fear though, intelligent pricing can offer the solution that you have been looking for. Intelligent pricing provides businesses with insight into achieved margins and then goes on to highlight the areas where price adjustments are needed to optimise revenue and profitability. Using an automated pricing tool can also help to mitigate the risk of human error as well as under-pricing. Changes can be executed quickly and take immediate effect, which gives sales teams more time to focus on current and new customers. It is valuable for sales teams to be able to model deals in real-time as this enables them to commit to prices that achieve desired margins and avoid any potentially risky scenarios.
In difficult trading conditions, businesses often move straight to standardised price hikes, however business leaders should instead look to adopt a data-driven pricing strategy that is more precise and adaptable. Intelligent pricing has the ability to collect large amounts of data from different locations and consolidate it all in one platform. We believe that the best way to tackle variability is to have better visibility. Automated pricing can help to provide more comprehensive pricing data that spans various categories, subcategories, and individual product units. This gives businesses an instantaneous overview of their costs, which enables real-time assessment of profit margins and where price adjustments can be made in different places. This approach also helps to maintain both brand reputation and customer loyalty. Rebate management is also an important part of financial management. On average, an estimated £2.65 million in rebates goes unclaimed annually by companies globally. Transitioning to an automated system can help businesses avoid loss of profits with more accurate calculations as well as more timely claims or payments. The time taken to claim rebates can be reduced, with claims submitted promptly upon the accrual of owed amounts, leading to improved cash flow. In a landscape characterised by unpredictability, gaining control is invaluable. A well-crafted pricing strategy, combined with the right pricing tools, allows businesses to confidently execute pricing decisions, even when faced with the most challenging market conditions.
Issue 54 | 47
FINANCE
Why should the financial sector care about the dark web? The financial sector has a deserved reputation for taking cyber security seriously, but that hasn’t stopped cyber criminals keeping the industry in their cross hairs. In fact, with highly sensitive data and huge sums of money as the potential reward – the average cost of a data breach in the financial sector is $5.9 million – threat actors are constantly evolving their methods of attack. With so much at stake, it is vital organisations equip themselves with the intelligence and capability to defend themselves against impending attacks. Many of these cyberattacks originate on the dark web – this secretive corner of the internet where company data is sought and sold to the highest bidder. This is where the foundations are laid by criminals to create the next generation of cyberattacks. Targets are named, malware is bought and sold, and weak spots to attack are identified. Shining a light on the dark web To combat cybercriminals operating on the dark web, it is important to understand how it works. The dark web cannot be accessed by conventional browsers and does not show up in typical search engine searches. The dark web requires specialist software to gain access to, and provides a high level of anonymity to users. Combined with the anonymity of cryptocurrency, cybercriminals use the dark web to buy and sell sensitive information, exploits, and cybercriminal tools in the belief they can act with impunity. However, it is possible for security teams to monitor activity across the dark web’s ecosystem of forums, marketplaces, and websites. This turns it from a shadowy world of unknowns into a source of intelligence for early warning of imminent cyberattacks and, ultimately, can help organisations to prevent their network being breached. So, how are cybercriminals on the dark web targeting the financial sector? And how can knowledge of this activity be used to an organisation’s advantage?
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FINANCE
The rise of the Initial Access Broker The majority of dark web activity against financial institutions involves posts from what are called ‘Initial Access Brokers’. These are people who use hacking forums like Exploit, XSS, and BreachForums to sell access to company infrastructure via exploits like remote network access or SQL injections. Other criminals, like ransomware groups, then use this access as the starting point for their attacks. Below is an example of an Initial Access Broker post, and the type of information cybercriminals provide:
Monitoring for this activity can provide invaluable pre-attack intelligence and alert organisations to when cybercriminals are targeting them. If they match the profile of the Initial Access Broker advert, they can launch an investigation to see if their internal technology – which the cybercriminal lists – is compromised.
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FINANCE
Recruiting employees Dark web messaging forums are also where cyber criminals look to recruit people from within an organisation to commit malicious activity. Often, when posting, they will relinquish information about the target organisation and type of data or access they are looking for. This information can be used to identify insider threat activity within your own organisation and keeping track of all aliases associated with a specific poster can also help determine their capabilities and any potential risk. Infrastructure reconnaissance Infrastructure reconnaissance is when attackers gather information on a potential victim organisation – for instance, on the network topology, operating systems and applications, and user accounts. It is their way of trying to pinpoint a potential weak spot and way in. The discussion of this reconnaissance is another dark web activity that, if spotted at an early stage, can help security teams stop a breach before it happens. Organisations can take the data shared by cybercriminals in the planning stage, and use it to their advantage: for example, to patch systems that have been called out as vulnerabilities. Supply chains It is all well and good having a robust cyber security policy in-house. But if your suppliers and partners have not invested the same time and money – and are identified on the dark web because of these vulnerabilities – it leaves you open to attack. 62% of system intrusions in 2022 involved the supply chain. And, recent research shows that only 28% of CISOs in the finance industry currently collecting dark web data are using it to monitor for their suppliers being targeted on the dark web.
This lack of visibility can leave organisation exposed, especially given the complex supply chain ecosystem within the financial sector. Monitoring when details of key suppliers appear on the dark web can identity when a supplier (and, as a result, you) are under threat. This allows to inform the supplier to take action and, ultimately, close off a potential avenue for attack in your supply chain. Leveraging dark web intelligence Given the type of activity taking place there, incorporating dark web threat intelligence into threat modelling allows businesses to be better protected and crack down on cyber threats when they’re still in their preliminary stages. Greater insights into dark web activity can quantify potential threats and determine where to allocate time, money, and attention. Threat models leveraging dark web insights can help financial sector organisations: • • • •
Identify assets that could be targeted. Analyse weaknesses and countermeasures against threat actors. Understand trigger events that may lead to an attack. Create a comprehensive view of their threat landscape.
Turning the unknown into the known The dark web has become the go-to place for cyber criminals and malicious insiders to lay the groundwork for cyber attacks against organisations in the financial industry. But it can be turned from a challenge into an opportunity. Organisations can harness its power to stay one step ahead. Monitoring dark web forums, marketplaces and sites can shine a light on Initial Access Brokers, cybercriminals targeting employees, and infrastructure reconnaissance to help organisations take a proactive approach to securing their assets and data. The financial sector has long pursued top-class cyber security measures but to ensure defences are capable of withstanding the evolving threat landscape, organisations must remain vigilant and innovate.
Dr Gareth Owenson Co-Founder and CTO Searchlight Cyber
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ble
si Pos
Making Your Dream Possible
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, INVESTOR MUST READ AND FULLY UNDERSTOOD THE MUTUAL FUND PROSPECTUS AND OR OTHER OFFERING DOCUMENTS BEFORE DECIDED TO INVEST IN MUTUAL FUND. INVESTMENT VALUE OF MUTUAL FUND CAN GO UP OR DOWN IN ACCORDANCE TO MARKET CONDITION, PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. PT SUCORINVEST ASSET MANAGEMENT IS LICENSED AND SUPERVISED BY FINANCIAL SERVICES AUTHORITY (OTORITAS JASA KEUANGAN) WITH LICENSE NUMBER KEP01/PM/MI/1999 DATED JUNE 1ST 1999