International Finance Apr - Jun 2017 by International Finance

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April - June 2017

Volume III Issue 3

UK £4 | Europe €5.35 | USA $6

pg.12

What type of protectionism should we fear?

pg.20

banking: Synthetic securitisation makes a comeback

pg.66

What sports fans and stock market investors have in common

DRIVING THE FUTURE OF SAUDI COMMUNICATIONS pg.40

As the largest telecom operator in Saudi Arabia, the Saudi Telecom Company is a key player enabling Vision 2030

Note FROM EDITOR

s we approach the middle of 2017, Brexit and Trump continue to hog the headlines. All other issues, including the slowing of the Chinese economy, have been relegated to the sidelines. No one even talks of oil prices any more. In the UK, Prime Minister Theresa May seems to be getting her act together where Brexit is concerned. She does seem to be having some trouble on the Scottish front, which is only adding to the uncertainty. But, whoever said separation is easy. In the US, Trump seems to have learnt a few lessons of his own from the setbacks to the initial burst of presidential orders. It is likely that the setbacks made him come up with a statesman-like speech to the joint session of Congress on February 28. However, most people are still on tenterhooks citing the lack of details. Surprisingly, the markets are not showing any sign of weariness. Most of them are looking healthy. Even the economies of the UK and the EU presented healthy report cards in

Dhiraj Shetty Editor editor@ifinancemag.com

the six months post-Brexit despite the uncertainty immediately after the vote. As for the way ahead, PwCâ&#x20AC;&#x2122;s 20th annual survey of CEOs worldwide might have some pointers. CEOs say that they have plenty to worry about in 2017, but their confidence in their own growth prospects and their outlook for the global economy are back on the rise. However, the findings show that while business leaders are more positive in their outlook, their levels of concern about economic uncertainty, over-regulation and availability of key skills remain very high. At the same time, according to the 2017 UK Salary Guide by Morgan McKinley, employees reported unprecedented levels of scrutiny over headcount levels and hiring decisions. Overall, it appears that we have a few more months of uncertainty ahead. It is possible that companies will use this period to eliminate inefficiencies in their systems and get rid of unprofitable assets. Our cover story is about the Saudi Telecom Company (STC), which is taking steps to help both the private and public sectors become more efficient and more competitive. As the largest telecom operator in Saudi Arabia, STC is a key player enabling Vision 2030, which is expected to bring positive changes to the Kingdom. On this positive note, I invite you to write to us with your feedback on the April 2017 issue of International Finance and suggestions for the next one.

Director & Publisher Sunil Bhat Editor Dhiraj Shetty Production Sarah Williams, Mark Miller Editorial Adriana Coopens, Jessica Smith, Lacy De Schmidt, Business Analysts Dave Jones, Adam Lobo, Sharon Mendis, Sean Thomas Business Development Manager Steve Martin Business Development Newton Gois, Sunny Shah, Ashish Shenoy, Sid Jain Accounts Angela Mathews Registered office INTERNATIONAL FINANCE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550 Email info@ifinancemag.com Press Contact press@ifinancemag.com Associate Office Zredhi Solutions Pvt. Ltd. 5th Floor, Sai Complex, #114/1, M G Road, Bengaluru 560001 Ph: +91-80-40901144 Design & Layout Rahil Shaikh Miya

For advertisements, contact Adam Lobo Phone: +44 (0) 207 193 9451 | Email: alobo@ifinancemag.com

Apr - Jun 2017 International Finance

INDEX April - June 2017

Volume III Issue 3

COVER STORY

DRIVING THE FUTURE pg.40 OF SAUDI COMMUNICATIONS

As the largest telecom operator in Saudi Arabia, the Saudi Telecom Company is a key player enabling Vision 2030

12 16

BYTE BY BYTE

‘Change is the only constant in the cyber security industry’

Jong Woo Kang

What type of protectionism should we fear?

Steven Riznyk

A tech visa is way overdue

BANKING: Synthetic securitisation makes a comeback

CUB: The best in Taiwan, now eyeing Asia-Pacific

International Finance Apr - Jun 2017

58 62

BANKING Interview ‘Danske Bank is gradually closing physical branches’ economy: CEO confidence rises despite new risks and uncertainty

Melaine Campbell

Why data is king for compliance professionals uk salary guide: The jobs were in small to mid-tier firms

company FOCUS

Enthralled by short-lived images

P86

snapchat

pg.88

Mitigating flaws in spreadsheets

66 68 76

Growing popularity of hybrid social networks

Why businesses need a Global Legal Entity Identifier Index

Attacker innovation and IoT exploitation fuel DDoS attack landscape

Stefan Van Geyt

There’s no place like home

Camille Paldi

Challenges for Islamic finance in the USA

OUT OF OFFICE pg.102

‘I’m a bit of an adrenaline junkie’

There’s a new trade deal in town. But what is the TFA and who will benefit? Apr - Jun 2017 International Finance

Opinion Matters Jong Woo Kang Jong Woo Kang is Principal Economist, Economic Research and Regional Cooperation Department, in the Asian Development Bank. His areas of research interest include regional integration, inclusive growth, macroeconomic and trade policies, and aid effectiveness. What type of protectionism should we fear? | P12

Steven Riznyk

Steven Riznyk is a business and immigration attorney who has been practicing for 29 years. He is an immigration author and strategist. He not only creates cases for immigration lawyers and the public, but has been training lawyers too. Suspension of premium processing for H1B visas: A tech visa is way overdue | P16

Melanie Campbell Melanie Campbell is the Managing Director for Dun & Bradstreet’s Global Compliance Solutions. Formerly she was a New Jersey Division of Criminal Justice Deputy Attorney General who was Bureau Chief of Bribery and Corruption. Why data is king for compliance professionals |

P58

Dr Kim Kaivanto Dr Kim Kaivanto is an economist at Lancaster University who specialises in decision making – normative and behavioural, theoretical and experimental, strategic and non-strategic – in financial and cognate economic contexts. Risks and unintended consequences of blockchain- and smart-contractsbased fintech | P22

Stefan Van Geyt Stefan Van Geyt serves as Group Chief Investment Officer at KBL European Private Bankers, which operates in the UK under the name Brown Shipley. What sports fans and stock market investors have in common | P66

International Finance Apr - Jun 2017

Kristel Cools Kristel Cools serves as Group Head of Asset Management at KBL European Private Bankers, where she oversees Richelieu Investment Funds, the group’s in-house fund range. The group operates in the UK under the name Brown Shipley. Do companies with more women in the boardroom deliver higher returns? | P72

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COntributors

Tim Evershed

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Suparna Goswami Bhattacharya

Tim Evershed is a freelance business journalist with over a decade’s experience of reporting on the world of business and finance. As well as contributing to International Finance his work is published across a number of titles including Global Reinsurance, Insurance Post, The Journal, Financial Solutions and Global Trader.

Susanne Jakobsen Financial technology entrepreneur Gene Pranger has designed more than 500 bank branches since 1995. In 2008, he pioneered the market of video banking with the uGenius platform, acquired by NCR in 2012. His latest venture, BankOn Mobile

Financial technology entrepreneur Gene Pranger has designed more than 500 bank branches since 1995. In 2008, he pioneered the market of video banking with the uGenius platform, acquired by NCR in 2012. His latest venture, BankOn Mobile

It’s the best way to to reach our audience that is spread across over 100 countries Susanne Jakobsen

Susanne Jakobsen

and to know what’s latest inFinancial technology entrepreneur Financialreads technology IFM entrepreneur Financial technologythe entrepreneur Gene Pranger has designed more Gene Pranger has designed more Gene Pranger has designed more Banking, than 500 bank branchesFintech, since 1995. thanInvestment 500 bank branches since 1995. than 500 bank branches since 1995. In 2008, he pioneered the market In 2008, he pioneered the market In 2008, he pioneered the market Management, Insurance and of video banking with the uGenius of video banking with the uGenius of video banking with the uGenius platform, acquired by NCR in 2012. platform, acquired by NCR in 2012. platform, acquired by NCR in 2012. Islamic Finance His latest venture, BankOn Mobile His latest venture, BankOn Mobile His latest venture, BankOn Mobile Contact: Adam Lobo Email: alobo@ifinancemag.com /InternationalFinanceMagazine

/IntlFinanceMag

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INTERVIEW INTERVIEW

‘Change is the only constant in the cyber security industry’ CISOs of CTM 360 explain how they are tackling the emerging challenges Sindhuja Balaji

International Finance Apr - Jun 2017

INTERVIEW

Mirza Asrar Baig, CEO, CTM 360

Apr - Jun 2017 International Finance

INTERVIEW INTERVIEW Byte By Byte

he financial industry worldwide is on the brink of major change, especially due to the rising prevalence of cybercrime. Armed with the latest technology and preventive measures to preserve the security of banks, Bahrain-based cyber threat management company CTM 360’s Chief Information Security Officers* (CISOs) discuss the various challenges before the industry and how they are integrating with their clients to provide realtime and quick solutions.

How does CTM360 identify cyber security needs and evaluate their relevance? Understandably, the financial industry is in the frontline of cybercrime where monetary and brand reputation losses from cyber attacks are very evident. The challenge is to keep up with the latest variation, timely detection and comprehensive response. Having served the regional industry for a long time, we recognise that the only thing constant in the cyber security industry is change. The level of complexity and challenges are also constantly morphing. In response, we have adopted the strategy to remain agile,

continually research and evolve service offerings; facilitate dialogue and industry collaboration across the security industry, in addition to remaining primary drivers. Specifically, which area in IT security do you believe needs to be in the spotlight this year and why? Our view may come as a surprise to many as we neither want to focus on threat vectors or any new cutting edge technology. We believe that rather than doing more we should do different. Firstly, organisations need to adopt clarity of differentiating functions, i.e. IT security with the goal of enhancing secure end-user experience, information security with the goal of protecting information assets and cyber security with the goal of neutralising cyber attacks in cyberspace. Within these three domains, individuals performing either function need to understand and appreciate the challenges of the other two. Secondly, focus has to be on collaboration as only mitigation of cyber threats is a losing battle if we do not work together. If you are insecure in disclosing how you were breached, how do you expect any other

person to warn you based on how they have been breached? Thereby, for the same, we have developed a trusted community platform termed TRUST360. Lastly, organisations need to have a cyber incident response unit that would have the ability to even monitor and neutralise attacks in the very early stage, while attack elements are evolving in cyberspace. What steps are being taken by CTM 360 to mitigate cyber risks? CTM360 takes a holistic approach to managing cyber risks. By fortifying genuine assets, eliminating suspicious incidents and neutralising malicious threats, CTM360 can manage threats at every stage of the cyber kill chain. The company has developed multiple tools and systems, and currently offers them under 10 service modules that prevent, identify, manage or mitigate threats in cyberspace. Banking services are coming up significantly in the Asia Pacific region. What are your thoughts on this and does CTM plan to extend their services to this region? APAC can be considered more agile in leveraging

technology for enhancing banking business. Due to lack of cyber security skills, the challenge would be to adopt the latest secure practices at the same pace. CTM360 is addressing this very gap by proposing to be the 24x7 cyber security unit for subscribed members. We are focused on expanding into APAC in 2017 as it holds tremendous untapped potential and the banking services industry is flourishing with four to five core markets, including Singapore, Malaysia, Australia, Japan and China. Usually, how do you assess the scope of work with your clients? What are the parameters you would need to understand the kind of help they need from your company? The scope in the industry is normally defined by the category of attacks that an organisation may opt for and the brand keywords that the detection would be conducted upon. At CTM360, we prefer to act as the cyber security team for our subscribed members, hence our scope is meant for anything and everything in the cyberspace. The only difference is that we stay outside a member’s firewall, detect and neutralise all forms of attack elements in

‘At CTM360, we prefer to act as the cyber security team for our subscribed members, hence our scope is meant for anything and everything in the cyberspace’

International Finance Apr - Jun 2017

Byte INTERVIEW By Byte

many geographies. CIRU’s unique ability to action holistically on all cyber attack elements across the cyber kill chain has established CTM 360 as the preferred cyber security partner for financial sector clients in the GCC. We service 25 of the top 50 banks in the GCC. Aside from banks, we also work with insurance companies. Any entity with an online presence can benefit from a subscription to CIRU with minimal effort and time. All modules fit a specific purpose and are bespoke to the subscribed member ranging from prevention, detection and mitigation.

Mirza Asrar Baig, CEO, CTM 360 with the award for Special Contribution to Banking and Finance Sector as a Cybersecurity Provider at IFM’s EMEA Awards Ceremony at the JW Marriott Marquis Hotel in Dubai in January 2017

the cyberspace. Being the intelligence unit, it is our job to identify and run an inventory on all the cyber assets of our members as well. Hence, we do not need them to give us any parameters, but they do need to let us know the focus areas that their business and risk feels is important. Next, it is our job to always provide threat intelligence that is credible and member-specific, i.e. by severity and by relevance. FinTech, InsurTech and RegTech are among the biggest trends in banking today – how can companies like CTM360 help banks

make the switch safely? Adopting any new technology comes with a complete new set of security challenges, especially when security in general is an afterthought. The common components in the new threat scenarios and the old are the attack elements of the early stage of attack, and that is what cyber security is all about. So when any bank is switching, CTM360 is very operative and effective without requiring any changes in cyber security operations. Moreover, TRUST360 provides the community platform to gain knowledge about security challenges being faced by other banks in

this migration, facilitating cooperation across all stakeholders. Buzz words without understanding feasibility, risks and practicality remains risky. Can you tell us a bit about CTM 360’s most popular products and services? The 24 x 7 x 365 CTM360 Cyber Incident Response Unit (CIRU) was developed to address the needs of the regional financial sector; however, in a short span of time, the CIRU is now servicing multiple industry verticals, (e.g. Aerospace, Healthcare, Hospitality, Oil & Gas, Petrochemicals, Retail, SWFs) and across

What are your key markets for expansion in the GCC? CTM360 quickly evolved from being specific to Saudi Arabia through its parent company, IT Matrix, to catering to the regional GCC markets. After going global in 2016, the next phase of expansion will involve establishing global satellite centres for CIRU in 2017. IFM editor@ifinancemag.com

* Inputs have been provided by a range of Chief Information Security Officers (CISOs) within the CTM 360 network. CTM 360 was the Cyber Security Partner for IFM’s EMEA Awards Ceremony held in Dubai in January 2017

Apr - Jun 2017 International Finance

OPINION

Jong Woo Kang

What type of protectionism

Calling the US withdrawal from regional trade blocs protectionism is not accurate

should we fear? 12

International Finance Apr - Jun 2017

OPINION

S President Donald Trump recently signed executive orders to withdraw the US from the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). Both moves suggest his pre-election rhetoric of criticising the current international trade regime is being translated into concrete action. So, where will these changes in US trade policy lead us? Obviously, the US withdrawal from TPP is a major setback to international efforts in fostering freer regional trade and investment in the Pacific Rim, as well as a significant dilution of the ‘pivot’ to Asia strategy of the previous Obama administration. The Trump administration is likely to favour bilateral trade deals over regional or multilateral

blocs, which will have significant ramifications for its trading partners. One crucial drawback in having multiple bilateral trade agreements compared to entering regional or multilateral trade deals is the additional costs incurred to the business sector due to higher compliance costs of different rules of origin across different trade rules. This concern has underwritten the argument for regional and global trade regimes that govern international flow of goods and services through unified rules and standards. Furthermore, by allowing cumulative rules of origin (which allows countries to share production with others in complying with relevant rules of origin provisions) regional trade regimes can facilitate value chains among contracting parties, thus expanding the scope for international division of labor. Bilateral

trade deals will not be able to replicate these gains. There’s also debate about the breadth and depth these two options have vis-à-vis trade and investment liberalization. While regional and global trade regimes can expand the coverage of countries involved —and therefore the scope of trade and investments flows governed — the degree of liberalisation could be lighter given that multiple economies and stakeholders are involved in laying the common ground. On the other hand, bilateral trade agreements can aim for deeper and broader liberalisation by focusing on mutual interests during the bargaining process. Impact on value chain Another issue to consider is the impact on value chain structure. Multiple bilateral trade agreements are likely to bring about

President Donald Trump shows the executive order withdrawing the US from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington, DC on January 23, 2017.

changes to the structure of existing global and regional value chains. In this sense, it is ironic that the three countries of Canada, Mexico and the People’s Republic of China, which have become the major target of trade friction or rule renegotiation push by the US seem to have relatively deeper value chain linkages with the US than others as intermediate goods providers along the supply chain, according to a value chain analysis based on ADB’s 2015 MultiRegional Input-Output data. The deeper the value chain linkages, the larger the reciprocal pinch to be felt by producers in case of higher trade barriers among them. Viewed from this perspective, it is less clear which option serves the global economy better. First, let’s assume that deeper liberalisation in trade deals with the US becomes the benchmark for other countries to follow, prompting a virtuous cycle of liberalisation efforts worldwide. If the pursuit of bilateral trade deals culminates in deeper trade and investment liberalisation overall, the gains might outweigh the costs of ‘noodlebowl’ syndrome, and at least partially offset the disruptive impact to current global and regional value chains. One can imagine a firm facing higher fixed costs to comply with different rules of origin, but enjoying much lower tariff and non-tariff barriers from major export destinations due to stringent bilateral norms. As a result of strong

Apr - Jun 2017 International Finance

OPINION

14 bilateral push for liberalisation, trade surpluses of exportoriented Asian countries would certainly shrink, lowering the contribution of net exports to their economic growth. But lower trade barriers could yield economic gains by stoking competition in the domestic market and expanding consumer surpluses. The end result of all these changes remains to be seen. Moreover, calling the US withdrawal from regional trade blocs protectionism is not accurate. If the US push for bilateral trade deals aims for higher market access of partners without raising its own trade barriers,

this is closer to aggressive liberalism rather than protectionism. Trade barriers harm all in the long run Clearer and more worrying signs of growing protectionism are to be seen in US attempts to raise its own trade barriers, indirectly through border adjustment taxes or more directly through punitive country or industry level import tariffs. Penalising imports will not only hurt retailers but also manufacturers who rely on imported parts and components, and of course general consumers who will suffer higher prices of goods and services in the US. For

these taxes or import tariffs to yield intended results of import substitution, the rates should be high enough to close the gap in production costs between domestic and foreign producers. This will not only cause inefficient resource allocation across borders but also weaken the competitiveness of the protected US industries. A stronger US dollar resulting from export support and import penalization also may eventually offset the impact of import suppression, neutering the intended policy effect. Even worse is when unilateral trade policy tools such as trade remedies

This article was first published as an ADB blog https://blogs.adb.org/blog/what-type-protectionism-should-we-fear

International Finance Apr - Jun 2017

are engaged beyond the levelling playing field motivation in pushing for bilateral concessions. This could escalate into mutual retaliation and even trade wars, where no party wins. If history is any guide, though, protectionism comes and goes. The rising tide of protectionism will recede eventually, and â&#x20AC;&#x201D; if we are fortunate â&#x20AC;&#x201D; the damage done will be manageable, if not fully reversible. IFM editor@ifinancemag.com

Jong Woo Kang is Principal Economist, Economic Research and Regional Cooperation Department, ADB

OPINION

Apr - Jun 2017 International Finance

OPINION

Steven Riznyk

A tech visa is way overdue

International Finance Apr - Jun 2017

Immigration expert Steven Riznyk analyses President Trump & the halt of premium processing for H1 visas

OPINION

he H1B visa will not have premium processing available for up to 6 months. The H1B visa is used to cover labour shortages in the area of degreed individuals. In the past, the annual quota was rarely met until the end, whereas now the quota is met on the first day of applications, April 1st. Approximately 3 times as many applicants apply as the number of visas available, which is 85,000. In 2016, a record 236,000 persons applied for the H1 visa. Halting premium processing means that cases that were decided in 15 days will now take 3-6 months to approve. It won’t change many things in view of the fact that even if someone wins their case, that person is still subject to a lottery. The primary beneficiaries of the H1 visa are tech-related persons from India. In fiscal year 2014, 69.7% of these visas went to persons from India. Many of these people are brought into the US to work for consulting firms and then are sent

to various tech companies that pay a premium for their services. The pros & cons In order to ascertain a solution to this problem, all aspects of this challenge must be analyzed as it will never be resolved as long as all of the special interests only advocate their own positions, which is natural, but again, does not resolve the bigger problem. Here are some arguments that can be iterated and some questions that require resolve: 1. Although many tech firms may argue that it costs them dearly, it may force them to look to American labour a bit harder. Many of the tech imports from India and China are not bringing skills the US doesn’t have. This would be in line with President Trump’s initiatives to help America. A good outcome, if possible. 2. On the flip side, tech companies may argue they can’t get people fast enough

in the US. The question to be answered is: do we have that great a shortage of tech persons in the US? 3. On another note, with premium processing of cases being halted, if the CIS receives, say, 50,000 of the 85,000 applications with a premium processing check in addition to the high filing fees, this would mean a loss of revenue to the CIS of about $61,250,000. 4. One of the controversial subjects in the US lately has been that of the outsourcing of labour. Although we are not taking a position on that issue, we will address some points to consider. If a company outsources their technology to India, China, Russia, Romania, or the Ukraine in order to remain competitive and save money, that is one thing. Even then, people of course complain because they state that jobs are lost in America. True enough. Regardless of what one thinks

Apr - Jun 2017 International Finance

OPINION

Approximately 3 times as many applicants apply as the number of visas available, which is 85,000. In 2016, a record 236,000 persons applied for the H1 visa

of the issue, one can appreciate that it makes business sense. On the other hand, if a tech company imports foreign labour (and most of the positions are 6-figure positions), then not only are we outsourcing, but we are outsourcing at a very high cost. It is one thing to hire someone from India for $25,000 a year. In India, that is a substantial wage. To pay that person $100,000 now, does not make sense. It is outsourcing at an American wage. 5. If the tech sector feels that it makes sense to hire a foreign

International Finance Apr - Jun 2017

worker at a premium wage (as they are often hired by consulting firms that make money by marking up their hourly rate), which would be even more than the six figures these people are paid, then what is the problem with the American supply of tech workers? The common argument is that American workers are not available because they wonâ&#x20AC;&#x2122;t work at the wages that foreign workers will. Well, maybe the wages must be adjusted across the board. Perhaps, the tech sector is overpaid. As in any field,

there will be some people who rise above it, and they deserve a higher wage. However, an entire industry cannot be paid at a rate that makes it more feasible to outsource them. It would seem that tech workers would prefer to be paid a fair rate than be unemployed because they are asking too much. After all, there is no point to an education if after that one is stuck with student loans and no job. 6. A tech visa is way overdue. Either a subcategory of the H1 visa should be dedicated to technology or tech should have its own visa (preferred). If the tech sector has its own visa, regulations could be implemented that are tailored to the visa and to the needs of American business. The needs of the tech sector are very different to those in other areas of business and really should have its own considerations implemented after consulting with the tech sector that hires these people. Additionally, this would allow a control over the number of persons hired in the tech sector. As the H1 visa stands now, it is out of control and is destroying the validity of the H1B visa in that it is preventing people from other industries from entering the US. This has to be placed in perspective. If persons from third world countries are getting trained in technology in a country where the average daily wage for a doctor is $30, it would only make sense

OPINION

they have nothing to lose by applying to work in the US where they can make more than that per hour. It makes sense they would apply, but does it mean we have to hire them? 7. Doctors. Our underserved areas in America require highlevel doctors. It is not fair to a person who lives in a remote area not to have access to rapid and effective medical care. A wonderful program we have in place is the J1 program wherein foreign doctors can study in the US (in medical school or a residency program) but have to leave the country for two years before re-entering to work here. They can, however, under certain circumstances have the two-year bar waived if they offer to work for three years in certain underserved areas (this is also called the Conrad 30 Waiver Program). A lot of lives depend on the J1 program for doctors. If doctors cannot obtain the H1 visa, a lot of people will die or suffer due to a lack of highlevel medical care. The people cannot afford to go elsewhere or do not have enough time to travel and obtain assistance. This is one of the reasons the

tech sector has to be split off from the H1 visa as it stands, he states (additionally, the J1 section dealing with doctors needs to be severed from the other J1 categories, such as au pairs, camp counselors, and people learning to fly airplanes; it is too complex to be thrown into this general category and requires special care). There are always at least two sides to an argument and the other side to this one is that the J1 visa provides foreigners the opportunity to take career opportunities from US citizens and residents and is therefore unfair; if that is the case, then a compromise must be reached that works for everyone. 8. Last but not least, the H1 visa is overrun by tech applicants. The H1 was meant for all industries, not one. The problem with it right now, between the lottery system and the randomness of obtaining a valid H1 visa, persons from other industries that are badly needed do not have a chance of working here and helping other industries such as medicine, for example. This cannot go on, because this is the weakest link in the chain. It is here that we

have a real need for persons in other industries and day after day when I explain the H1 visa system to people in other industries, they simply tell me they will apply to Canada or elsewhere. The H1 visa is overdue for a fix, but there are many issues to be addressed. These issues require brainstorming with the business sector so that once again the visa, presently abused in many ways, can restore its integrity and serve the purpose it is meant to serve and help the United States become the leader it has been and will continue being. It will require a delicate balance when it comes to satisfying its many facets. IFM editor@ifinancemag.com

Steven Riznyk is an immigration lawyer and CEO of San Diego Biz Law

Apr - Jun 2017 International Finance

Banking

Synthetic securitisation makes a comeback The resurgence is a clear illustration of the dynamics of supply and demand Nicolas Roth

ecuritisation was almost deemed to be a bad word at the end of the global financial crisis. Following the Bear Stearns demise, Lehman collapse and the credit crunch, a number of investors discovered that an alphabet soup of credit products were at the onset of the crisis. ABCP, CPDO, CDO and CDO-square to name only a few were splashed across the news as the main culprits for the worst financial crisis post World War II. Aside from

International Finance Apr - Jun 2017

plain vanilla structured credit, the most complex structures disappeared for a while and investors focused on simpler strategies. 2016, however, saw a robust return of bankâ&#x20AC;&#x2122;s balance sheet synthetic securitisation deals and 2017 is very likely to see even more of those trades. Bloomberg has reported that Nordea and Lloyds Banking Group have both used these types of transactions as a way to reduce their credit risk exposure. Last year, Dutch pension

fund PGGM also disclosed a â&#x201A;Ź2.3Bn transaction with the Spanish lender Banco Santander. What exactly are these deals and do they pose a threat to the system? Synthetic securitisation, also called capital relief bonds or risk sharing transactions, involve a bank, a book of performing loans, and an investor willing to sell insurance. The bank buys credit protection, through the use of credit derivatives technology, on a portfolio of loans from an

Banking

investor, usually being a sophisticated pension fund, specialty credit investor or a credit hedge fund. The bank retains ownership of the asset on its balance sheet but the credit risk is being transferred to the seller of insurance. The rationale for the bank to enter into such a transaction is the capital relief factor on its balance sheet as well as credit risk hedging. Because the credit risk is being transferred to another entity, the capital treatment of the loans remaining on the balance sheet of the bank is being reduced, thereby positively impacting the RWA ratio of the bank. The term synthetic securitisation must be understood in opposition of a true sale transaction. In a true sale transaction, the bank and the buyer agree on a portfolio of loans that is being effectively transferred to the buyer in exchange of funding. The rationale for a true sale transaction is funding. In the case of a synthetic transaction, the rationale is credit risk management. The bank receives no payment when the transaction is being closed but only if a credit event happens, i.e. a loss in the credit portfolio. Typical transactions, being true sale or synthetic, involve corporate exposure, trade finance, lending to small and medium enterprises. Mortgages are usually not a part of those deals. The resurgence of such transactions is a clear illustration of the dynamics of supply and demand. On one side, banks are being pushed by the regulator to

restructure their balance sheet in the context of Basel III and to increase their tier I ratios. Even if Basel IV seems to be pushed back for now, the capital treatment of loans remains expensive and banks are being incentivised to find ways to reduce this exposure. Meanwhile, a number of banks continue to be saddled with non-core exposure or non-performing loans, which are expensive to carry. The sale of this exposure on the secondary market is feasible, but transactions are lengthy and rather complex. In addition, investors in European nonperforming loans are being pickier as the market has matured. On the demand side, sophisticated investors such as credit hedge funds, continue to chase yield and a number of funds have access to long term capital enabling them to participate in those transactions. Last year, a few funds were launched with the sole purpose of investing in risk-sharing transaction, while other managers are allocating a portion of their specialty credit books to synthetic securitisation. Investors should keep in mind that synthetic securitisation is not a way to reduce the risk in the system, it is simply a transfer of risk from a bank to a non-bank entity. As the transactions are private, it can be difficult for the regulator to track which entity is exposed to what particular credit risk, which has led to its involvement in this market. The European

Commission has taken a strong view on true sale securitisation. It recognised that securitisation, if of high quality and structured under a commonly accepted framework, can add value to the real economy. It has, therefore, issued a criteria to make securitisations simple, transparent and standardised (STS criteria). The simplicity rule implies that the assets being transferred are not encumbered, no loss has occurred and the loans have been originated during normal course of business. The transparency rule assumes that the bank originating the transaction must be able to provide historical data on losses to investors while the standardisation rule states that interest rate and currency risks must be mitigated and the mitigation methodology disclosed, as well as a number of other conditions. If a true sale transaction is deemed STS, the bank is allowed a preferential regulatory treatment. The European Commission has not yet fully endorsed STS criteria for synthetic transactions; however, in a recent report, the European Banking Authority recommended that synthetic securitisations, under a specific list of constraints, should be able to benefit from an equivalent treatment to their truesale counterparts. The discussion is still ongoing but most participants are optimistic that this risksharing technology will gain official recognition.

The adoption of a harmonised standard for synthetic deals can only be seen as positive for European banks and investors. From the bankâ&#x20AC;&#x2122;s perspective, working under a common framework would allow them to execute transaction more efficiently while investors will be in a better position when performing due diligence as the structuring details will most likely converge. Finally, there is today an emerging secondary market that can benefit from the harmonisation of deals. When adequately structured and if correctly monitored within a commonly accepted framework, synthetic securitisation or risksharing transactions are a positive tool for the banking sector. They allow banks to focus on their core lending business while transferring unwanted credit risk to institutional investors. Similar to the sale of non-core exposure, risksharing is a way for banks to strengthen their balance sheet and recycle capital in key businesses, hence increasing the likelihood of adding value to the real economy and potentially boosting European growth. IFM editor@ifinancemag.com

Nicolas Roth is Head of Alternative Investments at REYL & Cie

Apr - Jun 2017 International Finance

byte by byte Banking

Watch out for the

disadvantages

Risks and unintended consequences of blockchain- and smart-contracts-based fintech* Kim Kaivanto

f even a fraction of fintech’s potential is realised, the future for users of financial services is rosy. Indeed, the avant-garde of the fintech revolution are already with us, disrupting legacy business models and improving access, convenience and cost efficiency. A long list of advantages are associated with fintech serviceprovision models: speed, automation, security, non-manipulability (due to blockchain’s distributed consensus protocol), provable fairness, greater ‘reach’ leading to liquidity and diversification benefits, and vastly reduced fixed, variable and transaction

International Finance Apr - Jun 2017

costs. Here, the transaction costs being economised upon are inclusive of information acquisition and processing costs, as well as monitoring and enforcement costs. The advantages of fintech are so stark and numerous, and the reflected limelight so bright, that it is scarcely possible to catch a glimpse of a putative disadvantage. Yet, it would be most accurate to characterise blockchain- and smart-contracts-based fintech as having a different profile of risks and transaction costs, including some new risks and transaction costs that are absent in legacy business models.

Smart-contracts-based business models substitute software code and software execution for legal contracts and legal contract execution. Hence, legal contract-dispute risk is eliminated, but so is the option of easy legal recourse. Instead, smartcontracts-based business models are subject to cybersecurity risks and software-code risks. Instead of email-intercept risk (e.g. for invoice fraud) that off-line bricksand-mortar firms are subject to, nonblockchain fintech firms are subject to the risk of direct cyberattacks for exfiltration of personal data and password credentials, for denial

Banking

of service, and for other nefarious ends. Blockchainbased fintech firms build upon the culmination of decades of cryptography and security research, and while SHA-256 encryption is currently considered very strong, there still remain some areas of vulnerability (e.g. theft of cryptocurrency, tracing coin history through the blockchain to resolve pseudonyms into identities, Sybil attacks, packet sniffing and denial of service). Zero-day exploits aside, there is a risk that even well-tested code contains features that allow the system to be gamed – to the financial advantage of the well-placed software expert – in a manner not in keeping with the spirit of its intended use, although perhaps not technically illegal, and perhaps not technically constituting ‘hacking’. The troubles

experienced by Ethereum’s Decentralised Autonomous Organisation (DAO) in 2016 are a prominent example of this form of software-code risk. Furthermore, softwarecode risk becomes combined with moralhazard risk at the boundary interface between a cryptocurrency’s protocols and the external economy composed of fiat currencies and other digital currencies. Cryptocurrency exchanges are prime examples of fintech businesses that face this particular combination of risks. Importantly, so do the (potential) customers of cryptocurrency exchanges. In choosing between exchanges, the customer must gauge and weigh up the software-code risks and moral-hazard risks of each exchange relative to the risks of other exchanges

she might use instead. These risks act as a brake, slowing adopting and utilisation. In the extreme case, these risks can cause catastrophic loss of confidence in a particular fintech business, or potentially, even in an entire fintech businessmodel category. Despite these new types and combinations of risk, fintech’s overwhelmingly compelling business case continues to loom prominently – and undiminished. Yet, even where blockchain and smart contracts succeed in virtually eliminating transaction costs, there can be unintended consequences. To illustrate this effect without harming any particular fintech firm, consider the example of blockchain-based and smart-contracts-based lotteries, of which there are numerous in existence, primarily as demonstrators or in beta development versions. Whereas in the bricks-and-mortar world, the viability of a lottery

pool strategy (of buying up all of the possible number combinations) is frustrated by the frictions, logistical challenges, and transaction costs of physically buying up and storing physical copies of millions of lottery tickets, in the fintech world there are no frictions or transaction costs to prevent such a lottery pool strategy. It can be implemented with a few clicks, literally, in an instant. Counterintuitively, the drastic reduction in transaction costs brought about in fintech business models can have unintended consequences. Even something as simple as running a lottery can be a challenge precisely because of the comparative absence of frictions and transaction costs. Nevertheless, these considerations should not dampen enthusiasm for fintech. But they do highlight the need for a distinctly cyber-aware profile of concerns and priorities – both among fintech entrepreneurs and fintech consumers, as well as among financial regulators. IFM editor@ifinancemag.com

Dr Kim Kaivanto is an economist at Lancaster University who specialises in decision making – normative and behavioural, theoretical and experimental, strategic and non-strategic – in financial and cognate economic contexts. He is Programme Director of the MSc in Money, Banking and Finance, and maintains research collaborations and academic publishing activity across an array of cognate disciplines.

Apr - Jun 2017 International Finance

Banking

ClearBank makes UK banking history Becomes first new clearing bank in over 250 years

learBank has become the first clearing bank to enter the UK market in more than 250 years. ClearBankÂŽ is regulated and authorised and is on track to open its doors in Autumn 2017 to financial services providers, FCA-regulated businesses and Fintechs that require access to UK payment systems and core banking technology to support current account capabilities.

International Finance Apr - Jun 2017

The announcement was made on February 28 at a press conference attended by Simon Kirby, Economic Secretary to the Treasury. Free from the constraints of legacy technology, built on a combination of public and private cloud infrastructure, ClearBank delivers open access to payment, current account and transactional clearing services. Financial services organisations, from banks and building societies through

to new challenger banks and Fintechs, will be able to process payments and offer new competitive transactional banking services more cost effectively, efficiently and quickly than ever before possible. Principal clearing banks move money between different individuals and organisations via UK payment systems such as Bacs, CHAPS and Faster Payments. They are often the only banks providing agency banking

Banking

services that have full and direct access to all of the UK payments infrastructure. The majority of banks and financial services providers must use agency banking services from a clearing bank to process payments or offer current account and sort code based services. Before ClearBank, there were four principal clearing banks: Barclays, HSBC, Lloyds and Royal Bank of Scotland. ClearBank is the fifth UK clearing bank and the only one that does not offer services direct to the consumer. As a result, it offers a truly neutral and independent banking service to the financial services market and does not compete with its own customers. ClearBank was founded by Nick Ogden, fintech entrepreneur and founder of WorldPay, who is Executive Chairman at ClearBank. Former CFO of RBS Ulster Bank and CFO of Royal Bank of Canada Europe and Asia, Charles McManus, is ClearBank CEO and leads an executive team of high-profile industry figures including Chief Financial Officer Marc Jenkins; Chief Risk Officer Steve Barry; Chief Technology Officer Andrew Smith; and Chief Governance Officer Philip House. Nick Ogden, ClearBank Executive Chairman, said, “There are thousands of new fintech startups and challenger banks improving choice, but the industry will never truly move forward while it’s constrained by the challenges of legacy operational structures. ClearBank was built

specifically to create competition and aims to change the market dynamics radically. Figures from the Cruickshank Report indicate that, with the improved efficiency delivered by ClearBank’s built-forpurpose technology, between £2bn and £3bn could be saved from the annual costs that are paid for transactional banking in the UK. This represents a substantial boost to the UK economy delivering better operational processes without any impact on the way that commerce is operated in the country. We are delighted to share the result of more than three years of regulatory, operational and technology efforts, bringing true competition and a new level of transparency to UK banking. That is the ClearBank difference.” ClearBank CEO Charles McManus said, “There are two things that make ClearBank unique. Firstly, ClearBank is the first UK clearing bank to offer services that intentionally complement its customers’ market activities, driving choice and competition in the wider market. From our own customers through to the consumers they serve, we believe the benefits ClearBank offers will help develop greater choice, and more inclusive service offerings. Secondly, we’ve built ClearBank on cloud technologies from the ground up, meaning that our customers can access faster, more efficient and more cost-effective solutions and payment processing. It’s our mission to bring open

competition, transparency and efficiency to the agency banking services market. The right technology and regulatory environment and demand for open competitive pressure now exist to support us in achieving that aim.” Simon Kirby, Economic Secretary to the Treasury, said, “I am clear that UK financial services should be the most competitive and innovative in the world, which is why we are creating the right environment for new banks to enter the market. That is why I am so pleased to see ClearBank launch today – it will play an important role helping challenger banks access the services they need to do business, so they can compete effectively with the big players and deliver the benefits of greater choice and value for consumers and businesses.” ClearBank’s leading edge technology platform has been built on a combination of public and private cloud infrastructure. It is specifically designed to handle core banking, clearing and settlement services, in a ground breaking partnership with Microsoft and other technology providers. Built from the ground up on Microsoft’s Azure cloud platform, and benefiting from Microsoft’s cyber security shields, ClearBank has been developed to meet the needs of the UK banking market now and in the future. Cindy Rose, Chief Executive of Microsoft UK, said, “By embracing Microsoft’s cloud services,

ClearBank is rewriting the rules on how financial services can be delivered in the UK. Through the power of Microsoft Azure, ClearBank has been able to create a robust banking infrastructure that is able to overcome substantial barriers to entry in a fraction of the time it has traditionally taken, and at minimal cost. Furthermore, by utilising Microsoft’s UK data centres, not only can ClearBank be confident that it has access to cloud services that offer world-class reliability and performance, it can also be assured that its data residency and regulatory requirements are fulfilled.” ClearBank secured an investment of £25M from PPF Group and CFFI Ventures in addition to investments from the founding management team. All members of the ClearBank team participate in a share programme. The ClearBank graduate programme, which screened more than 3,000 applications when it was launched late last year, has already started with six graduates in house and offers a two-year Professional Retail Banking Certification. IFM editor@ifinancemag.com

Apr - Jun 2017 International Finance

Banking

ADB operations reach a record $31.5 billion in 2016 Strong showing was based on the larger financing capacity generated by the anticipated merger of the bank’s two main financial instruments — ADF and OCR

sian Development Bank (ADB) operations for Asia and the Pacific reached an all-time high of $31.5 billion in 2016, a 17% increase from $26.9 billion in 2015, according to preliminary figures released in January 2017. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. Approvals of ADB loans, grants, technical assistance, and co-financing have been growing steadily over the

International Finance Apr - Jun 2017

years as development needs in the region continue to rise. “The increase in our development financing to Asia and the Pacific is reflective of our strong commitment to reducing poverty and improving people’s lives in the region,” said ADB President Takehiko Nakao. “As ADB celebrates 50 years of development partnership with its member countries, we will strive to remain the region’s premiere development bank by providing financing, knowledge, and partnership.” “Asia is growing at a steady pace, but more needs to be done to achieve development that is both sustainable and inclusive,” Mr. Nakao added. “ADB will continue to improve by becoming a

stronger, better and faster bank to help the region achieve its development objectives.” The region faces many challenges such as implementing the Sustainable Development Goals, climate change, increasing inequality, rapid urbanization, aging, and disaster risk management. Approvals of loans and grants for sovereign (government) and nonsovereign (primarily the private sector) operations by ADB itself reached a record $17.5 billion — a 9% increase from $16.0 billion in 2015. Non-concessional loans from ADB’s Ordinary Capital Resources (OCR) amounted to $14.4 billion. Concessional loans and grants from the Asian Development Fund (ADF) reached $3.1 billion, with $2.6 billion going to loans and $518 million to grants.

Technical assistance, meanwhile, increased by around 20% to $170 million from 2015’s $141 million figure. Among ADB’s operational highlights last year were the approval of several groundbreaking projects such as the contingent disaster risk financing in the Cook Islands, the first privately-financed solar project in Cambodia, results-based lending for an elderly care project in the People’s Republic of China, the development of India’s first coastal industrial corridor, and the $500 million counter-cyclical support to Azerbaijan. ADB’s Office of PublicPrivate Partnership entered into five new transaction advisory mandates to prepare and structure PPP projects in 2016. The strong showing of

Banking

ADB’s operations was based on the larger financing capacity generated by the anticipated merger of the bank’s two main financial instruments — ADF and OCR — which formally took effect on January 1, 2017. With this innovative reform, ADB’s annual approvals of loans and grants will increase up to $20 billion by 2020. For the period 20172020, a successful ADF replenishment, concluded in May 2016, will allow ADB to substantially increase support to the region’s poorest countries. The replenished ADF will also enable ADB to provide grant resources for disaster risk management and regional health initiatives. Total disbursements of ADB loans and grants reached $12.5 billion in 2016 — the highest ever. This strong performance

is tied to the reforms ADB has implemented to fast track procurement and implementation processes. Co-financing also expanded, reaching $13.9 billion in 2016 from $10.7 billion in 2015, a growth of 29%. This is on the back of ADB’s greater partnerships and collaboration with various development stakeholders in the Asia and Pacific region. Some of the strong partnerships ADB undertook in 2016 include co-financing with the Asian Infrastructure Investment Bank for a road project in Pakistan and natural gas project in Bangladesh. Agreements were also signed with other development partners, including an innovative guarantee agreement with the Swedish International Development Cooperation Agency (Sida) to increase

ADB financing by $500 million over the next 10 years, and a landmark agreement with the Japan International Cooperation Agency to finance private sector infrastructure projects for $6 billion. ADB’s knowledge work was strengthened in 2016 through newly established sector and thematic groups. Important forums on sustainable transport, food security, clean energy, and green business were held. In addition, ADB’s legal office hosted a symposium for Asian supreme court judges on law and climate change, and its anti-corruption office started supporting tax integrity and transparency of developing member countries in line with international efforts. IFM

The increase in our development financing to Asia and the Pacific is reflective of our strong commitment to reducing poverty and improving people’s lives in the region Takehiko Nakao, President, ADB

editor@ifinancemag.com

Apr - Jun 2017 International Finance

Banking

The best in Taiwan, now eyeing Asia-Pacific CUB already has the most extensive footprints in the Greater China and ASEAN countries among all private banks in Taiwan, and is ready for further expansion

athay United Bank (CUB), a wholly-owned subsidiary of Cathay Financial Holding Company (Cathay FHC), has successfully built a strong brand in the domestic market and is now aggressively expanding business in Asia. CUB’s parent company,

International Finance Apr - Jun 2017

Cathay FHC, is listed on the Taiwan Stock Exchange (2882 TT) and is now Taiwan’s largest financial conglomerate with total assets of $231 billion and market capitalisation of $16.5 billion as of December 2015. Other than its securities arm, Cathay FHC owns the largest life

insurer, the 2nd biggest property & casualty insurer and the biggest asset management firm in Taiwan with a customer base so large that one of every two people in Taiwan is its customer. In comparison with its peers, CUB’s most powerful niche for its rapid development and expansion

Banking

in both domestic and overseas markets lies in its full spectrum of products and cross-selling. Being the market leader in the securities brokerage settlement business, the 2nd largest credit card issuer and the top player in wealth management is proof of CUB’s strong customer base and superior services. More than 90% of its overseas footprints is in Greater China and ASEAN countries As of March 2016, CUB has 165 domestic branches and 65 overseas footprints, including 2 subsidiaries (in Cambodia and Vietnam), 10 overseas branches and 5 representative offices, creating an Asian financial platform serving customers in China, Hong Kong, Los Angeles (US), Vietnam, Cambodia, Singapore, Malaysia, the Philippines, Thailand, Myanmar, and Laos. In 2015, CUB opened a representative office in

Indonesia and launched a branch in the Philippines. In addition, Cathay FHC’s recent overseas acquisitions, 20% of Rizal Commercial Banking Corporation in the Philippines and 40% of PT Bank Mayapada in Indonesia, are expected to generate strong synergies for CUB’s operations in the overseas markets. Aiming at business opportunities arisen from the rapid development of Asian economies and the growth of intra-Asia regional trade, CUB currently owns the most extensive footprints in the Greater China and ASEAN countries among all private banks in Taiwan, and is ready to ride the momentum into both regions for the next 10 years. CUB’s robust growth rate of 77% between 2012 and 2014 in overseas earnings is solid evidence that CUB has benefited from expansion in the Greater China and ASEAN region, which will continue to

widen the gap between CUB and its peers in terms of overseas development. CUB’s overseas earnings accounted for 45% of its pre-tax profit in 2014, whereas the same figure is 37% for the industry. Along with building a broader banking services platform and engaging in ambitious acquisitions, CUB will continue to extend its footprints and step further towards the goal of being a leading regional bank in the Asia-Pacific region. Innovation in credit risk modeling strategies CUB keeps improving its credit risk modeling strategies by adopting the advanced Credit Capacity Index (CCI) model, applied worldwide in cross-selling credit cards with personal loans. Credit Capacity Index is an advanced tool to measure a customer’s sensitivity to his future incremental debt. CUB integrates CCI into its

existing risk management mechanism strategically in which customers are segmented in a more sophisticated way according to their risk-adverse levels. CCI is an excellent tool that is beneficial to CUB in terms of expanding its market share in personal loans and promoting revenue from advanced risk management skills. CCI brings great benefits in strengthening risk segmentation and realising credit limit management and risk-based pricing. Leveraging cutting-edge technology CUB has put substantial effort into strengthening its IT system and facilities to equip the mobile banking services with a more userfriendly interface. It has also equipped a Customer Relationship Management system, which provides mass information analysis of customer interactions with the bank, to facilitate customised financial products. These initiatives have made CUB one of the leaders in e-banking and mobile payments. Simultaneously, CUB has embarked on a project to transform into a customercentric organisation by shifting from the traditional ‘product push’ model to building a culture where its employees can find solutions to financial products and services based on customers’ unique requirement. In order to identify the target customers, understand what they like and when they would return for what services/products,

Apr - Jun 2017 International Finance

Banking

CUB creates a centralised Business Analytics Competency Center to conduct new analytical processes and to sustain innovation in problemsolving.

No. 1 player in Green Energy Financing In terms of corporate social responsibilities, CUB has committed to support the renewable energy service providers, such as commercial and residential solar power plants, by offering specialised funding schemes. By March 2015, CUB has provided loans to generate 187 megawatts of power, which reduced 134,406 tonnes of annual CO2 emission, equivalent to growing a forest as large as 10,889 football fields or building 25 New York Central Parks. The installation of rooftop solar photovoltaic systems through CUB’s financing can avoid direct sunlight and cool down the greenhouse’s indoor temperature about 2-3 degrees, accomplishing the dual goals of energy generation and energy savings. Furthermore, combining solar power systems with greenhouses and poultry farms can

improve land utilisation and productivity; farmers would therefore receive not only income from agricultural products but also extra revenue from electricity sales. Through financing green energy projects, CUB has received numerous awards for CSR accomplishment and is well positioned as the No. 1 player with 30% market share in green financing in Taiwan. In the overseas markets, CUB has successfully expanded its green financing model to China, US and Japan, and is now targeting to roll out the same in the ASEAN markets where power coverage is relatively low. CUB’s strong network in this region and solid experience in the green financing sector will become its great competitive edge over its peers. Implementing stateof-the-art technology into delivering banking services Digital banking and payment service CUB leads its peers in Taiwan in digital banking services and has successfully launched four channels to reach a broader range of customers:

1. Official website 2. MyBank Internet banking 3. My MobiBank Mobile banking APP 4. My ATM Online payment tool The bank has launched a whole new mobile banking product ‘KOKO’ that enhances the abovementioned channels and extends its service to the younger generation. CUB partners with LINE, who dominates the mobile app market, and has 17 million active users (nearly 75% of the population) in Taiwan. Its ambition is to promote LINE Pay as the new payment lifestyle to serve customers. For corporate cash management, CUB has implemented ‘Global MyB2B’, a web-based internet banking platform to facilitate cross-border payment. After introducing the application in Taiwan, Hong Kong, and Singapore, the company aims to integrate more overseas branches into this online network to better serve its customers across Asia. •

•

International Finance Apr - Jun 2017

KOKO APP: online saving account , spilt & transfer, budget management with contact list KOKO website & internet banking: all-in-one business application(anytime, anywhere apply for bank service) KOKO Store: Banking service , soft environment, social communication

First and only bank to adopt the Equator Principles In 2015, CUB became the first Taiwanese bank to join the Equator Principles (EP) Association. By adopting the principles, CUB has declared to commit to assess and manage social and environmental risks and monitor their impact on its credit evaluation process. Being an EP signatory not only reinforces CUB’s corporate commitment to sustainability and to environmental protection but also helps CUB to implement the longestablished environmental and social risk evaluation system. CUB commits to fulfill corporate social responsibility, implement corporate governance, promote environmental protection, take care of employees, best serve customers and support public interests to contribute to the sustainable development of the economy and society. CUB’s ‘Elevated Tree Program’ has donated more than $3.35 million to 60,000 students over the years. By caring for customers and contributing to society, CUB hopes to bring about a better future for everyone and strives to realise the vision of being a leading financial institution in Asia-Pacific. IFM editor@ifinancemag.com

Banking

Dr. Irfan Al Hassani (right), Editor-in-Chief, Corporate Communication, Dubai Economic Council presenting the award for Most Innovative Retail Banking Product Egypt 2016 to Mohamed Fayed, Deputy Chairman and Managing Director, Bank Audi in Egypt

Bank Audi wins IFM award for innovation The prize was won by Bank Audi in Egypt for its new innovative banking technology ‘NOVO’

‘N

OVO’ by Bank Audi in Egypt won International Finance Magazine’s award for the Most Innovative Retail Bank Product Egypt. The new innovative

International Finance Apr - Jun 2017

banking technology reflects the bank’s eagerness to invest in providing modern and advanced banking products and services to effectively and efficiently reach all its customers. NOVO Audi is a simple interactive

banking solution that allows customers to navigate through Bank Audi’s products and services via multi-touch screens, and a user-friendly interface. It is a revolutionary product in the banking sector that provides a unique

Banking

banking experience for its customers. Hatem Sadek, Chairman and Managing Director, Bank Audi in Egypt, said, “It is a great honour for Bank Audi to receive such a distinguished global award from a reputable magazine like IFM. Not only are we proud to have launched a one-of-a-kind service, but we are also honoured to be acknowledged as one of the market leaders for innovation and technology in the Egyptian banking sector. Our strategy is to continuously provide the best technologically advanced solutions to our customers; this award is a remarkable testimony of our efforts.”. Mohamed Abbas Fayed, Deputy Chairman and Managing Director of Bank Audi in Egypt, said, “We are delighted to be distinguished by the International Finance Magazine Awards as the ‘Most Innovative Bank in Egypt’ in 2016. Innovation has always been at the forefront of Bank Audi. NOVO by Bank Audi is the first of its kind to enter the Egyptian market and is expected to cause a ground-breaking change

in the banking sector, as it provides our customers with a unique and one-of-a-kind banking experience.” Amr Nossair, Acting as Head of Retail Banking of Bank Audi in Egypt, said, “The new innovative technology is a creative concept that complies with our strategy of providing the most technologically progressive solutions to our customers. This award gives us both confidence and assertiveness for our future endeavours, formulating new innovative services and products for all our customers.” Growth of the bank Bank Audi in Egypt was launched in 2006 with only three branches. Today, it has more than 40 branches, earning the position of being one of the most prominent and leading banks in the Egyptian banking market with a capital that reached $347 million in September 2016. The bank’s successful business operations are based on a complete banking model, which includes Retail Banking, Corporate Banking, Commercial Banking, SMEs, Wealth Management, Cash

Management, Electronic Banking, Islamic Banking, Mortgage Finance and Bancassurance products offered by ‘GIG’. Bank Audi strongly advocates Corporate Social Responsibility (CSR), ensuring that the role is met at both the internal and external levels. In Q4 2015, the CSR disposition focused on the Head Office where it started an awareness campaign educating employees about the importance of giving back to the community. Bank Audi acknowledges its role as a financial institution intertwined with the society in which it operates. Hence, the bank has extensively participated in various societal endeavours, such as blood donation initiatives for its employees, Breast Cancer Awareness Week, the Egyptian Food Bank Ramadan aid, and several recycling initiatives. IFM editor@ifinancemag.com

“

It is a great honour for Bank Audi to receive such a distinguished global award from a reputable magazine like IFM. Not only are we proud to have launched a one-of-a-kind service, but we are also honoured to be acknowledged as one of the market leaders for innovation and technology in the Egyptian banking sector. Our strategy is to continuously provide the best technologically advanced solutions to our customers; this award is a remarkable testimony of our efforts Hatem Sadek, Chairman and Managing Director, Bank Audi in Egypt

The winner Award: Most Innovative Retail Banking Product Egypt 2016 Product: NOVO Winner: Bank Audi Country: Egypt Chairman and Managing Director: Hatem Sadek Deputy Chairman and Managing Director: Mohamed Fayed

Apr - Jun 2017 International Finance

INTERVIEW INTERVIEW Banking: interview

‘Danske Bank

is gradually closing physical branches according to customer behaviour’ But while it pushes digital transactions, the Danish bank ensures alternatives to customers and users that prefer card or cash Benita James

International Finance Apr - Jun 2017

anske Bank, headquartered in Copenhagen, is the largest in Denmark and one of the leading financial enterprises in northern Europe. Its long term ambition is to obtain the highest customer satisfaction in its markets and to provide shareholders with a competitive return through share price appreciation and dividend payments. The bank made a net profit of DKK 19.9 billion in 2016. The bank’s chief communication consultant Peter Kjærgaard responded to some queries from IFM. People are choosing to bank in different ways. E-wallets are being popularised. How has the bank adapted to these changes? We have created MobilePay, one of the most successful mobile wallets in the world on a country level. Danske Bank created MobilePay to address the need for very simple money

INTERVIEW Banking: interview

transfers. The aim was to make transferring money to friends and businesses as easy as it is to send a text message. On May 7, 2013, we launched the MobilePay app. On that day alone, 25,000 people downloaded the app. After four months, there were 500,000 users. Three years after the launch, more than 3.7 million Danes had downloaded MobilePay. About 70% of users are customers at banks other than Danske Bank. MobilePay has been a great success in Denmark for three years and is gaining ground in Norway and Finland. As of today, Nordea, Jyske Bank and banks from the BOKIS cooperation have joined MobilePay as distribution partners. This means that MobilePay gets even more resources to invest ambitiously for the benefit of users and businesses. With the new model, other Nordic banks can also join MobilePay as distribution partners.

What role does the bank expect to take on as the Nordic nations move away from cash? How do you address customers’ concerns regarding cyber security? We have increased investment in digital solutions both in relation to payments and advisory services. MobilePay, just in DK, is on 9 out of 10 smartphones and passed 170 million transactions in 2016. At the same time, we take care that customers and users that prefer card or cash also have alternatives, and we work with homeless organisations and elderly organisations to try to find solutions for groups that are in risk of being hit by financial digitalisation. On cyber security, we have a lot of initiatives. The bank announced the closure of two of its branches in 2017. Is this a setback? Has the public perception of the bank changed because of the consequent loss

of jobs? We are only closing physical branches when customers’ needs and behaviour makes it more appropriate to gather competent resources in a bit fewer and larger branches. Our goal is to continue to have a strong physical network in the countries where we do retail banking. At the same time, we constantly strengthen our e-branch setup and possibilities for video meetings etc. We have closed far more than 100 branches in the last six years but always based on careful analysis of customer needs and behaviour. At the same time, we have more than doubled the customer contacts due to digital channels taking gradually over. In general, our customer satisfaction and public perception have developed still more positive over the last three years in all Nordic countries and Northern Ireland – the countries where we have retail

operations and branches. We are among the best in all markets within both corporate and personal banking, also if you dig deeper into the segments (customer satisfaction, image etc.). Loss of jobs in branches, as a consequence of digitalisation, is really not a topic. However, a few years ago, there was quite some focus in DK on elderly people having to travel longer distances to cashbased branches. We have, however, done many things to support customers that do not feel ready to jump quickly to digital channels. What countries does the bank operate in and where is it seeing the fastest growth? Danske Bank is a Nordic universal bank. Our core markets are Denmark, Norway, Sweden and Finland. In these countries, we serve all types of customers — from personal customers and businesses to large institutional clients. We also serve in Estonia, Latvia and Lithuania, where our primary focus is on business activities. Our Northern Ireland clientele consists of both personal and business customers. The fastest growth for the time being is in Norway and Sweden. Will the bank consolidate in 2017 or is there a plan to enter new markets? There is no plan to enter new markets. IFM editor@ifinancemag.com

Apr - Jun 2017 International Finance

Banking

Why Pafupi Savings makes for an interesting story It tells how banks and regulators can team up to close the financial inclusion gender gap

“I

f you build it, they will come,” goes the famous maxim from the 1989 Kevin Costner movie Field of Dreams. But when it comes to launching a new financial product, that adage doesn’t always hold up. A new savings account can pack impressive features designed to appeal to a target clientele of lowincome rural women, but unless the financial institution – in partnership with the country’s central bank – can clear the regulatory and logistical obstacles that keep potential clients away, the product will never reach its intended audience. NBS Bank’s (Malawi) Pafupi Savings is a digital account designed specifically for low-income rural women created in collaboration with Women’s World Banking. It has been a standout success story since it launched, with more than 75,000 accounts opened since 2014. Pafupi’s strong performance would

International Finance Apr - Jun 2017

not have been possible without NBS’s partnership with Malawi’s central bank. NBS’s Head of Personal and Business Banking Mercus Chigoga and Reserve Bank of Malawi’s (RBM) Principal Examiner for Policy and Regulation Yananga Alick Phiri joined Women’s World Banking Director of Product Development Jennifer McDonald to discuss what it took to make Pafupi Savings a win for both the bank and its growing client base in our recent webinar ‘How Regulators and Financial Institutions Can Bring Digital Financial Services to Women’. An intentional focus on low-income women’s banking needs Designing a savings product that works for low-income rural women means intentionally tackling the barriers those women face in accessing formal banks. McDonald notes that Women’s World Banking “saw a sincere commitment from NBS Bank (which

Banking

had a client base of only 29 percent women) to really look at how they could serve that market.” A savings account accessible to lowincome women needed an affordable pricing mechanism and the absence of a minimum deposit amount. But those features were only one part of the equation: NBS understood that low-income rural women — who have typically saved in cash at home or relied on group savings and village banks —must be able to open and access their bank accounts from anywhere, without spending time and money traveling to one of the bank’s branches. The bank hired and trained a team of mobile agents who can open a Pafupi account in 10 minutes at a client’s home or workplace or any convenient location, and can provide the client with an ATM card instantly. To make a number of Pafupi’s features possible, however, NBS had to work closely with the RBM to help clear the regulatory obstacles standing in the way. Importance of collaboration between bank and regulators Financial inclusion is a win-win-win for women, financial institutions, and the economy, but effectively means the bank cannot work alone: regulators must be willing to work with banks to rethink policies that keep those potential clients away. For instance, Malawi’s rural women lack the two forms of ID (a

passport or driver’s licence) required by law to open a formal bank account. NBS partnered with RBM to resolve the issue, requesting a waiver from these restrictions that was granted. The waiver allowed for the use of a more widely owned document among rural women: the voter ID card. Literacy presented another roadblock: the literacy rate is 59 percent among women in Malawi, compared to 73 percent for men. Opening a bank account anywhere requires filling out documents in person, an insurmountable barrier for clients who lack literacy skills. Also, “a lot of people felt uncomfortable opening accounts with banks because they felt uncomfortable exposing their illiteracy,” said Chigoga. To address this challenge, NBS worked with the RBM get a waiver for certain KYC (Know Your Customer) procedures that would allow clients to open an account digitally without going through the step of reading and signing printed documents. As Phiri explained about RBM’s decision to grant the waiver, the regulators “looked at the product offering, how relevant it was…also looked at the staff…it turned out that indeed NBS… was developing a human-centric product,” he said. The bank was “using agents who had a real understanding of the dynamics of the clientele,” creating an environment in which the simplified KYC requirements would

significantly increase financial inclusion without compromising security. RBM’s willingness to revise certain KYC regulations also allowed NBS’s fixed agents, in addition to its mobile agents, to start opening Pafupi accounts after a waiver was granted in March 2016. Giving banks the space to experiment and innovate NBS is now building on Pafupi’s success to expand Pafupi’s reach and introduce further innovations. This means eliminating additional regulatory obstacles and NBS is involved in ongoing negotiations with RBM on these additional features and products. RBM, through its emphasis on “responsive regulation”, has indicated its willingness to give NBS the space to grow it offerings, and to review existing regulations if they provide proscriptive to innovation. “The bottom line is that often regulation does not move as fast as innovation,” Phiri said, and emphasised the importance of “giving leeway for learning by doing through pilots.” For instance, NBS aims to increase the current turnover limit on Pafupi accounts from 50,000 kwacha ($70) to 200,000 kwacha. At the moment, Pafupi clients still need to follow the more formal KYC procedures in order to earn higher account turnover limits, but NBS is negotiating with RBM to raise that ceiling.

While the limit cannot be raised yet, Chigoga noted that RBM is “quite positive about supporting us.” Phiri assented, noting that RBM “unanimously agree that the limits need to be changed.” Nevertheless, the process of modifying financial regulation is complex, as hinted by RBM’s ongoing negotiations around the issue: “the process of changing [this regulation]… involves various stakeholders because it relates to an act [of Parliament]. The other stakeholders like the financial intelligence unit of government…are in discussion with the central bank as well.” The webinar ended with a dynamic Q&A session covering topics such as Pafupi’s profitability; best practices in creating marketing and educational materials for the lowincome rural market; and the importance of disaggregating data by gender to track how well financial institutions are serving women. The session included too many insightful questions and comments to cover in the 60-minute webinar timeframe. IFM editor@ifinancemag.com

This article originally appeared in Women’s World Banking Organisation’s website

Apr - Jun 2017 International Finance

Banking

Insignis Cash Solutions bolsters Advisory Board with new appointments

38 (from L to R): Guy Davies, Usman Khan, Mike Jensen, Stephen Grainger and Stu Taylor

nsignis Cash Solutions has completed its Advisory Board with the addition of four new members. Along with Guy Davies who joined the board in December, Stephen Grainger, Mike Jensen, Stu Taylor and Usman Khan form the Board. This team is expected to help shape and guide the strategy of Insignis Cash Solutions while working closely with the management team. The UK-based company is committed to providing its clients with active management of their cash deposits. The company focuses on improving the return available on Savings, Deposit, Trust and Client accounts.

International Finance Apr - Jun 2017

Its success is predicated on building relationships with the UK banking industry, which is going through substantial change and will see many new entrants in 2017. Given the importance of this, the appointment of Stephen Grainger to the Advisory Board is significant. Stephen is currently Group Treasurer of Aldermore Bank Plc and was recently Chairman of the Small Banks Association, an independent group of financial institutions working in the interest of new/smaller players within the banking system. He brings a wealth of experience in the end to end banking processes as well as deep understanding of treasury, liquidity, capital

and trading risk at banks. Mike Jensen is the CoChief Investment Officer at the Local Pensions Partnership, a collaboration between two prominent Local Government Pension Schemes offering bestin-class pension services for public sector funds. Mike earned a formidable reputation as the key transformer of Lancashire County Council’s pension scheme through an intense portfolio restructuring, leveraging his earlier career in commercial trading and debt/capital markets. The Board is further enhanced by two leading lights of the City’s FinTech revolution. Stu Taylor, CEO, and Usman Khan, CTO, formed Algomi in 2012 and

the company is now one of London’s most high-profile, fast growing FinTech startups, winning countless awards for its innovative ‘Honeycomb’ bond trading product. Paul Richards, Chairman of Insignis Cash Solutions says, “We are thrilled with the addition of these experts in their respective fields to our team of advisors. The background and experience our Board brings to the business is going to be invaluable as we not only move our product offering forward, but also ensure our platform is at the cutting edge of financial technology.” IFM editor@ifinancemag.com

STC Group CEO Dr Khaled H Biyari

Driving the future of Saudi communications As the largest telecom operator in Saudi Arabia, the Saudi Telecom Company is a key player enabling Vision 2030

ision 2030 is a hot topic in the Gulf region and beyond. Many eagerly anticipate the changes and developments that are expected to occur in Saudi Arabia over the next decade. As the largest telecom operator in Saudi Arabia, the Saudi Telecom Company (STC) is a key player

International Finance Apr - Jun 2017

enabling this vision. Its initiatives and services go much further than just installing home or commercial Wi-Fi networks or setting up a mobile telephone plan. In fact, STC is a key ICT enabler driving the future of Saudi communications. The company is taking steps to help both the private

and public sector become more efficient and more competitive. This is only possible because STC operates the biggest data centres, the Kingdomâ&#x20AC;&#x2122;s longest fibre optic network and the largest mobile network in the region. Vision 2030 is undoubtedly going to bring positive change to the Kingdom. STC sees its role as one vital to growth

Technology

— to provide the connective infrastructure for all these services. Company’s initiatives STC has launched the Saudi Cloud Computing Company (SCCC), in partnership with ELM and the National Information Centre, to provide the public sector with secure, trusted and robust cloud computing services. What makes SCCC unique in Saudi Arabia is its capacity to provide secure management through the National Information Center alongside ELM’s experience in building cloud environments and launching large end-user services through web and smartphone applications. STC is a listening company with communication at the core of its value system. The company understands that many of its customers would also like access to cutting edge ICT infrastructure. Therefore, in the near

future, these services will be available to the private sector. This means that banks, hospitals and universities used by citizens will benefit, whether or not they are an STC subscriber. Hub in GCC As a country, Saudi Arabia has the largest number of regional cross border cables, making it a prime destination for hosting various services and infrastructure. STC believes that the best way to support Vision 2030 is by continuing to lead the ICT market in the Kingdom, provide a state-of-the-art network and make the market more servicesdriven, as opposed to remaining simply a supplier of telephony, hardware and software licenses. Background of STC The Saudi Telecom Company (STC) is headquartered in Riyadh. It is the largest

telecommunications company in the Middle East and North Africa based on market value as it generated over 50,836,000,000 riyals ($13.5 billion) in revenue in 2015 and 9,334,000,000 riyals ($2.4 billion) as net income. STC was established in 1998 and currently counts about 100,000,000 customers worldwide. The company provides hightechnology knowledgebased innovative solutions. It focuses on providing services to customers through a fiber-optic network that spans 137,000 kilometers across Asia, the Middle East and Europe. Its main operations are in Saudi Arabia where the company operates the largest, modern mobile network in the Middle East covering more than 99% of the country’s populated areas in addition to providing 4G mobile broadband to more than 85% of the population

across the Kingdom of Saudi Arabia. Besides its main operation in Saudi Arabia, STC’s investments include 100% ownership in Viva Bahrain, 51.8% shares in Viva Kuwait along with a management contract, 35% shares in Oger Telecom Limited in UAE, which has a stake in Turk Telecom, which offers mobile services in Turkey under the brand name Avea; Cell-C in South Africa, 25% shares in Binariang GSM Holding in Malaysia, which controls both Maxis in Malaysia and Aircel in India. In addition to the above, STC has investments in information technology, content, distribution, contact centers and real estate, all of which support its telecom operations across the Middle East. IFM editor@ifinancemag.com

Company Details & Stats Company: Saudi Telecom Company (STC) Group CEO: Dr Khaled H Biyari Established: 1998 Headquarters: Riyadh Customers: 100,000,000 Fiber-optic network: 137,000 kilometers Areas covered: Asia, Middle East, Europe Footprint: Saudi Arabia, Bahrain, Kuwait, UAE, Turkey, South Africa, Malaysia, India Revenue (2015): 50,836,000,000 riyals ($13.5 billion) Net income (2015): 9,334,000,000 riyals ($2.4 billion)

Apr - Jun 2017 International Finance

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Saudi Arabia, Qatar emerge big winners at IFM Awards ceremony in Dubai The chief guest was H.E. Hani Al Hamli, secretary general of Dubai Economic Council Sindhuja Balaji

International Finance Apr - Jun 2017

s the city was winding down for the January 26 weekend, Marriott’s Emirates Ballroom was abuzz with anticipation. Award winners milled around the elegantly decorated foyer and mingled with their industry counterparts over hors d’oeuvres and drinks. The event, hosted by Phil Blizzard, began with H.E. Hani Al Hamli, secretary general of Dubai Economic Council launching Market Insights, the newest business quarterly magazine produced by International Finance Publications Ltd. The magazine will focus on oil & gas, clean energy, construction and communication in four upcoming quarterly issues this year, in addition to providing a platform for corporate trainings as well as industry events. Winners of IFM 2016 Awards presented in Dubai Big wins There were 50 categories of awards ranging from insurance, banking mobile application, Islamic finance technology, wealth management and foreign exchange. However, there were also some big winners in telecom, medical insurance and real estate. Saudi Arabia and Qatar emerged as the big winners of the night – Nine of the winning companies were from Saudi Arabia and between themselves won 11 awards; eight were from Qatar and they won nine awards. Five UAE-based companies won eight

awards, while four major Omani corporations were presented four awards. Four Kuwaiti companies bagged six awards, while there was one winner from Bahrain. Three Egyptian companies won three awards, and entries from Lebanon, Mozambique and Kenya won one award each. Telecom reigns at IFM ceremony The growth of the telecom industry in the GCC is a reflection of the mobility it has gained in the region. More so, steps are being taken by the governments to actively propagate the growth of other sectors in a bid to move away from their reliance on oil, and consequently diversify the economy. Saudi Telecom Company from Saudi Arabia and VIVA from Kuwait bagged the awards for ‘Best

Telecom Company – GCC’ and ‘Best Telecom Company of the Year’ respectively. Saudi Telecom Company, also the co-host of the ceremony, is making great strides in the region through its forays into digital platforms and acquisition of towers to expand its reach. VIVA Kuwait is considered the fastest growing and most competent telecom operator in Kuwait, offering a wide range of services for businesses, individuals and corporate entities. Eng. Salman bin Abdulaziz AlBadran, CEO, VIVA, said, “Reaping such an accolade proves our exceptional

performance and the high quality standards our professionals are providing to our customers. We endeavour at VIVA to foster our leadership in the telecom market with our innovative products and services that meet customers’ aspirations.” Luxury living a top draw Real estate and luxury retail too won top accolades at the ceremony. UAE’s SKAI Holdings, renowned for its stylish residential and luxury properties, won the Best Luxury Project UAE for its signature Viceroy Dubai Jumeirah Village, as

Apr - Jun 2017 International Finance

well as the Most Innovative Real Estate Development Company in the UAE. Mr. Mohammad Abdul Rahim Al Fahim won the award for Best Luxury Retail CEO in the UAE. Paris Gallery is one of the country’s leading retailers, with a presence across UAE, Saudi Arabia, Oman, Iraq, Qatar and Bahrain. Innovation a top priority Setting standards for economic growth are free zones, and Oman’s upcoming free zone Duqm was awarded Emerging Economic Freezone (Investment Offering). Ismail bin Ahmad al Balushi, deputy CEO of Duqm, said, “It is an honour to receive such an award and to be present at this ceremony. It feels good to be recognised by the international business community for our work in enhancing the importance of free zones in the GCC economy.” He explained that this award was particularly motivating as Duqm has a strong focus on innovation - right from planning, promotion and corporate social

International Finance Apr - Jun 2017

responsibility. Innovation ranks high for Saudi Arabia’s leading healthcare insurer Bupa Arabia as well, which won Best CSR Initiative and Best Medical Insurance Company in Saudi Arabia. Eng. Ali Sheneamer, chief commercial officer of Bupa Arabia, said, “We focus primarily on healthcare. Our goal is to innovate and introduce new services in the market. We have been leading with our initiatives such as online pre-op SMS services, coaching services from doctors for emergent patients, Telemedicine, Doctor on the Phone and more. We want experienced people who can empower the citizens to be able to help themselves at critical times.” Upping standards While the standard of banking and financial services are of high quality in most GCC countries, there are some others, like Egypt, that are making quick and successful strides in upping their standards. EG Bank won the Fastest Growing Bank award, Ahli United was adjudged the Best Trade Finance Bank while Bank Audi was specifically awarded for

its retail banking product Novo. Mohammad Fayed, deputy chairman and managing director, Bank Audi, said, “This award shows that Bank Audi is among the high-tech banks in Egypt, offering some of the best solutions in the market.” Specifically, the company’s product Novo is among the several innovative banking services for the ‘millennial banker’. Novo is a state-of-the-art multi-touch interactive application that allows customers to browse through Bank Audi’s range of products, talk to a personal advisor, procure personalised details for credit cards and loans, or even locate the nearest ATM. Fayed added, “Novo is a very new banking experience, and very new to the Egyptian market. Almost 52mn people in Egypt are unbanked – we can say our country is

underbanked. However, the Central Bank of Egypt is taking several measures to improve financial inclusion. Specifically, we want to empower the younger generation through financial inclusion.” Fayed revealed that Bank Audi is on its way to introduce its mobile wallet, following approvals from the Central Bank of Egypt, in a bid to bring more people to bank online easily. The awards ceremony was a culmination of efforts to bring up the financial services industry to new heights in the region. Especially with new products and innovative services winning top honours, it was reaffirmation that creativity ranks highly for all the contenders, who vow to introduce newer products and offerings in the market soon. IFM editor@ifinancemag.com

Apr - Jun 2017 International Finance

CEO confidence rises despite new risks and uncertainty PwCâ&#x20AC;&#x2122;s 20th annual survey of CEOs worldwide shows the US, Germany and the UK are attracting attention while enthusiasm for investing in Brazil, India, Russia and Argentina has lessened International Finance Apr - Jun 2017

Economy

• • • •

Confidence in company growth rises 52% of CEOs plan to increase number of jobs Concerns about over regulation and lack of key skills at record levels CEOs feel globalisation has done little to solve income inequality

hile CEOs around the world feel they have plenty to worry about in 2017, their confidence in their own growth prospects and their outlook for the global economy are back on the rise. In PwC’s 20th annual survey of CEOs worldwide, 38% (2016: 35%) are very confident about their company’s growth prospects in 2017 while 29% (2016:27%) believe global economic growth will pick up this year. The findings, released at the World Economic Forum in Davos in January, show that while business leaders are more positive in their outlook, their levels of concern about economic uncertainty

(82%), over-regulation (80%) and availability of key skills (77%) remain very high. Also worries about protectionism are growing, with 59% of CEOs concerned about protectionism, increasing to 64% for CEOs in the United States and Mexico. While positive on the benefits of globalisation in building the free movement of capital, goods, and people, CEOs questioned whether globalisation has done anything to close the gap between the rich and poor, or mitigated the issue of climate change. This is in contrast to the first PwC CEO survey in 1998 when CEOs were positive about the drivers of globalisation. Bob Moritz, Global Chairman, PwC, says, “Despite a tumultuous 2016,

CEO confidence is moving back up — albeit slowly and still a long way from the levels we saw back in 2007. But there are signs of optimism right across the globe, including in the UK and US, where despite predictions of a Trump slump and a Brexit exit, CEOs confidence in their company’s growth are up from 2016. And that mood is reflected elsewhere, with more CEOs across the world targeting the US and UK for investment than a year ago. While CEOs are more confident in the opportunity for growth, this year they told us these three concerns that were top of the mind: a people and technology strategy that creates a workforce fit for the digital age; preserving trust in their businesses

in a world of increasingly virtual interactions; and making globalisation work for everyone by engaging ever more with society and collaborating to find solutions.” Confidence in revenue growth climbs In sharp contrast to 2016, CEOs’ confidence in their own one-year revenue growth is on the rise in nearly every major country across the world with India (71%), Brazil, where confidence levels have more than doubled (57%); Australia (43%) and the UK (41%) topping the table. Confidence also rose by 11 points in China to 35%, 6 points in the US to 39% and 3 points in Germany to 31%. In Switzerland, confidence levels have more than doubled to 34%. Bucking the confidence trend are Mexico and Japan where confidence levels have dropped, markedly so in Japan where confidence has plunged from 28% in 2016 to 14%. When asked what drives growth, organic expansion tops the agenda for over three quarters of CEOs (79%) in the coming year while 41% are planning new merger and acquisition activity in 2017 and nearly a quarter (23%) of all CEOs intend to strengthen their innovation capabilities to capitalise on new opportunities.

Apr - Jun 2017 International Finance

Economy

Where CEOs will look for growth PwC’s first global CEO survey showed emerging markets, including China and India, as a sure bet for success. But the changeability of markets, exacerbated by currency volatility, has caused CEOs to turn to a greater mix of countries. This year’s survey shows the US, Germany and the UK have become bigger priorities while enthusiasm for investing in Brazil, India, Russia and Argentina has lessened from three years ago. The top five most important countries for growth identified are the 1. US 2. China 3. Germany 4. the UK 5. Japan with the UK rising in popularity as a growth destination with CEOs from the US (+4%), China (+11%), Germany (+8%) and Switzerland (+25%). Shanghai, New York, London, and Beijing were

also identified as the top four cities most important to an organisation’s overall growth prospects over the next 12 months. Globalisation 58% of business leaders think it’s become harder to balance globalisation with rising trends in protectionism. The concerns contrast with their views in the first PwC CEO survey, which reported ‘the typical global corporation has as much freedom of trade as it needs’. For the past 20 years CEOs have been largely positive about the contribution of globalisation to the free movement of capital, goods, and people. However, this year’s survey respondents are sceptical that it has mitigated climate change or helped close the gap between rich and poor. This is similar to the public’s view on these issues in a separate consumer poll commissioned by PwC of over 5,000 people in 22 countries. Only 38% of the public

believed globalisation has had a largely positive impact on improving the movement of capital, people, goods and information, compared with 60% of CEOs. Almost two thirds (64%) of the public believe globalisation has helped create full and meaningful employment, contrasting with over three quarters of CEOs (76%). The public are also less convinced than business leaders that globalisation has created, to a large extent, a skilled and educated workforce (29% of the public vs 37% of CEOs). “Public discontent has the potential to erode trust which is needed for long term sustainable performance. The real challenge here though, isn’t just one of how CEOs navigate, it’s about the need for CEOs to have a deeper, two-way relationship with stakeholders, customers, employees and the public. Understanding the root cause of the potential discontent or perception is a critical first step towards communicating the benefits

“

Public discontent has the potential to erode trust which is needed for long term sustainable performance. The real challenge here though, isn’t just one of how CEOs navigate, it’s about the need for CEOs to have a deeper, twoway relationship with stakeholders, customers, employees and the public. Understanding the root cause of the potential discontent or perception is a critical first step towards communicating the benefits of business for society. There’s a lot at stake if we do not achieve inclusive global growth Bob Moritz, Global Chairman, PwC

International Finance Apr - Jun 2017

Economy

of business for society. There’s a lot at stake if we do not achieve inclusive global growth,” says Bob Moritz. Technology and Trust CEOs tell us that technology is now inseparable from business’ reputation, skills and recruitment, competition and growth. Almost a quarter believe technology will completely reshape competition in their industry over the next five years (23%). In an increasingly digitaldriven world, technology has created a new dynamic between business and customers bringing huge benefits for both. However, on the flip side, 69% of CEOs say it is harder to gain and keep people’s trust in this environment and 87% believe risks from use of social media could have a negative impact on the level of trust in their industry. 91% of CEOs also agree data privacy and ethics issues could impact people’s trust in their organisations in the next five years. Twenty years ago, trust wasn’t high on the business radar for CEOs. 15 years ago only 12% of CEOs thought public trust in companies had greatly declined. This year, 58% worry that a lack of trust in business

will harm their company’s growth, up from 37% in 2013. After several high-profile technology and security issues for big companies, CEOs unsurprisingly identify cyber security, data privacy breaches and IT disruptions as the top three technology threats to stakeholder trust. “CEOs expect it to become harder to sustain trust in the digital era. But competitive advantage will go to those with the greatest capacity to turn technology into their strength when coupled with the ability to connect with their stakeholders in an ongoing relationship grounded in trust,” added Bob Moritz. Skills and jobs Concern about skills has more than doubled in 20 years (from 31% concerned in 1998 to 77% in 2017) and human capital is a top three business priority, with diversity and inclusiveness and workforce mobility amongst the strategies being used to address future skills needs. Skills availability is a concern for over three quarters (77%) of business leaders, and is highest for CEOs in Africa (80%), and Asia Pacific (82%). Over half of CEOs (52% vs 48% 2016) expect to increase headcount over next 12 months. The UK

(63%), China (60%), India (67%) and Canada (64%) are amongst those with the most ambitious hiring plans. Looking by industry it is CEOs in the Asset Management (64%), Healthcare (64%) and Technology (59%) that have the most ambitious hiring plans, with CEOs in the Government and public sector (32%) having the least. While only 16% of business leaders surveyed expect to reduce their overall employee base, CEOs say that 80% of those affected jobs will be impacted in some way by the use of technology or automation. Business leaders in Canada (100%), US (95%), Germany (93%), Australia (92%), and Brazil (91%) see technology having the greatest impact. Over half of business leaders interviewed (52%) are already exploring the benefits of how humans and machines can work together, and two out five (39%) are considering the impact of artificial intelligence on future skills needs. With the speed of technological change a concern for 70% of CEOs, it’s no surprise that skills in creativity and innovation, leadership and emotional intelligence are identified as

the most valuable skills, that CEOs are finding it difficult to recruit. Digital and STEM skills are a recruitment issue for over half of business leaders. Bob Moritz, Global Chairman, PwC concludes, “CEO’s are concerned that key skill shortages will impair their company’s growth potential, relevance and sustainability. And it’s soft skills that they value the most. Innovation and relationship skills can’t be coded. So to drive the change CEOs need — thinking carefully and actioning accordingly — a balance between technology and irreplaceable skills in their people is key. Managing expectations with stakeholders will help enable the needed trust to survive and thrive. Bottom line - prioritizing the human element in a more virtual world will be a pre-requisite for future success.” IFM editor@ifinancemag.com

Top 3 concerns 1. A people and technology strategy that creates a workforce fit for the digital age 2. Preserving trust in their businesses in a world of increasingly virtual interactions 3. Making globalisation work for everyone by engaging ever more with society and collaborating to find solutions

Apr - Jun 2017 International Finance

Economy

Details of Survey

This survey was carried out between September and December 2016. 1,379 CEOs responded from 79 countries, to online, postal, face to face and phone interviews. 57% worked in privately owned companies, 43% in publicly listed companies. 36% worked at companies with revenues over $1bn PA; 38% between $101-$999m PA; and 21% with revenues of less than $100m. 2. Growth confidence: The highest level of confidence in 12-month growth for companies was recorded in 2007 — 52% of CEOs said they were very confident of growth in the next 12 months. The lowest was in 2009 (21%). The highest level of three-year confidence previously recorded was 51% of CEOs (very confident) in 2011, similar to this year’s survey. 2014 recorded the highest ever levels of CEO confidence in global economic growth improving (44%). 3. The public survey took place in December 2016 in 22 countries — USA, Canada, UK, France, Germany, Netherlands, China & Hong Kong, Italy, Spain, Russia, Australia, Japan, India, Brazil, South Korea, Mexico, Sweden, Switzerland, South Africa, Singapore, and United Arab Emirates.

CEOs’ confidence has grown over time Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Q; Do you believe economic growth will improve, stay the same or decline over the next 12 months? 52% 48%

50%

44% 41% 40%

39% 39%

36%

31%

37%

38%

35%

31% 26% 27%

21%

29%

18% 15%

2003

2004

2005

2006

2007

2008

2009

CEOs very confident in 12-month revenue prospects

2010

2011

2012

2013

2014

2015

2016

2017

CEOs confident global economic growth will improve

N/A

Base: All respondents (2016=1, 409; 2015=1, 322; 2014=1,344; 2013=1,330 2012=1,258; 2011=1,201; 2010=1, 124; 2008=1, 150; 2007=1,084; 2006 (not asked); 2005=1, 324; 2004=1,386) Please note: From 2012-2014 respondents were asked ‘Do you believe the global economic will improve, stay the same or decline over the next 12 months?’

International Finance Apr - Jun 2017

Economy

top concerns for CEOs Q-How concerned are you about economic, policy, social, environmental and business threats to your organizationâ&#x20AC;&#x2122;s growth prospects? Top ten threats Uncertain economic growth

82%

Over-regulation

80%

Availability of key skills

77%

Geopolitical uncertainty

74%

Speed of technological change

70%

Exchange rate volatility

70%

Increasing tax burden

68%

Social instability

68%

Changing consumer behavior

65%

Cyber threats

61%

Top four risers since 2015

Availability of key skills

Speed of technological change

Social instability

70 58

Lack of trust in business

68 53

Respondents who answered somewhat or extremely concerned Base: All respondents (2017=1,379; 2016=1, 409; 2015=1,322; 2014=1,344; 2013=1,330)

Apr - Jun 2017 International Finance

Economy

Very confident of short-term revenue growth

2017

2016

2015

2014

India

71%

64%

62%

49%

Brazil

57%

24%

30%

42%

Romania

52%

50%

44%

39%

Spain

50%

54%

35%

23%

Australia

43%

35%

43%

34%

41%

33%

39%

27%

Argentina

40%

42%

17%

10%

39%

33%

46%

36%

Denmark

39%

30%

33%

44%

Mexico

38%

46%

50%

51%

Global

38%

35%

39%

Canada

38%

31%

36%

27%

Italy

38%

20%

27%

Nordic

37%

31%

26%

***

China

35%

24%

36%

48%

Switzerland

34%

16%

24%

42%

South Africa

33%

37%

39%

25%

ASEAN**

32%

38%

47%

45%

Germany

31%

28%

35%

33%

Russia

31%

26%

16%

53%

Africa*

28%

42%

***

Hong Kong

27%

***

Japan

14%

28%

27%

Venezuela

13%

***

* Africa excludes South Africa ** The ASEAN countries in which interviews were conducted are: Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam *** Not available

International Finance Apr - Jun 2017

Economy

Percentage of CEOs expected to boost headcount 2017

2016

2015

2014

Asset and Wealth Management

64%

65%

61%

58%

Healthcare

64%

56%

59%

53%

Technology

59%

67%

55%

63%

Business services

57%

51%

56%

62%

Hospitality & Leisure

55%

53%

45%

51%

Mining

55%

45%

52%

25%

Industrial Manufacturing

54%

47%

53%

46%

Retail

53%

51%

46%

51%

Transport & Logistics

53%

51%

49%

40%

Communications

51%

48%

40%

52%

Power & Utilities

51%

42%

36%

Engineering & Construction

50%

42%

51%

Entertainment & Media

48%

39%

46%

53%

Pharmaceuticals & Life Sciences

46%

64%

58%

44%

Banking & Capital Markets

45%

43%

53%

52%

Automotive

43%

48%

49%

45%

Insurance

41%

49%

50%

59%

41%

32%

41%

Metals Energy (includes Oil & Gas)

41%

***

Chemicals

40%

46%

50%

49%

Consumer Goods

40%

41%

40%

46%

Forest, Paper & Packaging

35%

36%

27%

45%

Government/public services

32%

***

*** Not available

Apr - Jun 2017 International Finance

insurance

The importance of scanners The deployment of scanners in the insurance industry can typically save 80% of the workload, says the IT head for the Middle East at Zurich International Life

International Finance Apr - Jun 2017

insurance

s part of the company’s automation and digitisation efforts, Zurich International Life made the decision to upgrade its document capture capabilities, starting with the deployment of ten Kodak i3400 Scanners from Kodak Alaris. The award-winning scanners are purpose-built to deliver consistent throughput and minimise downtime. Ramesh Ramakrishnan, Head of IT, Middle East at Zurich International Life estimates that in the insurance industry, the deployment of scanners can typically save 80% of the workload. Zurich International Life is part of the Zurich Insurance Group, offering investment and protection solutions in the Middle East. The company has been operating in international markets around the globe for many years. In the Middle East, customers have trusted Zurich for almost 30 years to protect their futures and provide financial security for their families and businesses. Talking about the need for scanners, Ramesh said, “15 years back, there was no integration between technology and business. But all that has changed. Technology is not just seen as a business enabler, but as a business driver. CIOs now report to CFOs. The intent is to be more agile and cater to growing demands of business so that the business is able to generate more revenue. “The model which Zurich International Life

operates in this region is primarily through banks and independent financial advisors/brokers. So when we have strategic relationships with key banks, like Citibank and HSBC, the demands are pretty high. We have to be on our toes, racing against time. Automation in this industry is a gamechanger and can be a huge competitive advantage, especially as customers demand faster service. Scanners are an integral part of this automation process. “In every department there is scope for process improvement and scanning is something done by all departments today. We are in the era of ‘E-Storage’. Everyone is talking about reducing paper. Ultimately it boils down to cost. Even one employee manually doing this job is additional cost for a company.” Explaining the document handling process in the insurance industry and Zurich International Life’s decision to automate processes, he said, “Insurance is a very competitive industry and delivering top quality and fast service to our customers is key. Typically, when we sell life insurance policies to customers, most applications contain many supporting documents. These then go through the process of screening to ensure everything is in order. The final decision will then have to be communicated to the customer. Overall, this is quite a complex and time consuming process.

“Automation helps to reduce the timeframe. So where do you automate? Scanners are the starting point and they should integrate seamlessly with the back-end systems. The moment you receive an application form, it should get scanned automatically and then be fed into the imaging and workflow system. Then it gets assessed and once accepted, a policy document will be generated. It all comes down to customer experience and how automated you are. Providing high-end service means reducing that end-to end process journey and making it more competitive.” He estimates that typically in the insurance industry, with digitisation and scanning, up to 80% of the workload for an insurance application can be saved — sometimes even half a day on one application. With scanning, once the document comes in, it is directly scanned and sent for verification. Alternatively, in a manual process, the employee has to ensure the paper application is physically sent for verification and then if it has some errors, comes back to the agent and then goes back and forth, wasting a huge amount of time. Instead once scanning takes place, it is easy to scroll through and verify that everything is in order. The turnaround time is much faster. IFM

“

In every department there is scope for process improvement and scanning is something done by all departments today. We are in the era of ‘E-Storage’. Everyone is talking about reducing paper. Ultimately it boils down to cost. Even one employee manually doing this job is additional cost for a company Ramesh Ramakrishnan, Head of IT, Middle East at Zurich International Life

editor@ifinancemag.com

Apr - Jun 2017 International Finance

OPINION

Melaine Campbell

Why data is king for

compliance professionals International Finance Apr - Jun 2017

How a business manages compliance can impact its growth potential, and using the right data can minimise risks

OPINION OPINION : M&A

hen it comes to the current economic and financial evaluation of global economies, uncertainty is an all too frequent theme, especially in the post-Brexit world. With the Bank of England dropping the UK’s credit rating and interest rates almost immediately after Brexit was confirmed, and the pound enduring instability against worldwide currencies, the consensus has arguably been that the outlook is bleak. The political economy has also played its part with remain voters continuing to express discomfort with the UK government’s ‘hard Brexit’ strategy, which will see the UK favour immigration control over access to the single market. Despite the initial Brexit reaction, figures released in August showed that global

mergers and acquisitions hadn’t slowed and in fact reached a surprisingly high valuation of nearly $65billion. Yes, businesses must take note of their surroundings and adjust, but there is still clear cause for optimism. Even the recent news that Sky PLC has agreed to a £18.5bn takeover by 21st Century Fox supports the claim that businesses are not afraid to operate as normal. Economic instability will continue to threaten growth but when used correctly, quality data and insights can prove the difference between logical business deals and risky partnerships. It would be wise for businesses to carefully operate as normal, and understand that they cannot successfully do so without the help of compliance teams. Successful compliance teams must now be

agile, quick and smart in their offering; therefore, technology cannot be ignored especially when data courses through everyday life. Data is a compliance team’s best friend Mergers & acquisitions are always highly complex moments in a business’ life – the coming together of two organisations each with its own complex supply chain of partners, customers and suppliers. The risk it brings forward is huge but it can be managed efficiently to minimise risk and disruption. This is where data analytics can help; it’s the core to every piece of intelligence a compliance team needs. Businesses can arm their compliance teams with the necessary data points that enable them to spot opportunities. Large mergers warrant a huge amount of information and

data is the primary solution that can lead to accurate, in-depth analysis. M&As also involve managing various and complicated regulatory regimes. How a business manages compliance can impact its growth potential, and using the right data can minimise risks. In a globalised environment, many businesses work with multiple suppliers and partners, and data can be used to provide an accurate, worldwide view – an essential tool for success in the collaborative business world. The introduction of emerging technologies, such as blockchain, AI, cloud and the Internet of Things, will impact how businesses comply, particularly when undergoing M&A activity. When acquiring another company that operates in an entirely different market, compliance teams must consider the potential impact of local regulations, while also navigating complex worldwide risks. Instead of relying on slow legacy systems, businesses should develop and adopt robust digital tools. The volume of data available on the internet is unrivalled and coupled with realtime data analytics, audits and vast data storage; compliance could prove to be the route towards unexpected, profitable growth. Businesses must use the digital technologies available or face being left behind by competitors who do. It may not be the most glamourous job but compliance is definitely one that can save companies millions, and possibly earn

Apr - Jun 2017 International Finance

OPINION : M&A

Despite the initial Brexit reaction, figures released in August showed that global mergers and acquisitions hadn’t slowed and in fact reached a surprisingly high valuation of nearly $65billion

them much more.

Speed can be a gateway to hidden growth When onboarding a customer, investigating beneficial ownership – when property rights and an official title in equity is shared with another business – is key to ensuring legal compliance is met. Adopting a single customer view that is both reliable and accurate can ensure that a business does so efficiently. Data can be leveraged by business leaders to gain an advantage and provide the most up-todate validation. D-U-N-S,

for example, is a unique number identification given to a business that can provide global data insights and pre-regulate potential growth prospects before the onboarding process. The extensive data can be easily integrated amid regulatory processes, and prevent potential legal complications. The compliance team is often made up of few individuals that can buckle under the pressure without the proper support. With budget and resources thin, data and technology can bridge the gap between an over-worked team and

quick profitable outcome. The more accurate the information the better, but it needs to be quickly processed. The vast data pools available can be priceless to businesses undergoing a huge merge. The overall goal of mergers and acquisitions is to externally grow business, and compliance teams need as much data as possible in today’s increasingly globalised world. M&As live on M&As that deliver sales and revenue growth, can fall at the first hurdle if a supplier is found to be

committing fraud or a company merged with is on the verge of bankruptcy. Compliance teams are becoming core to more business decisions, such as M&A, especially as the country moves towards Brexit. Compliance teams must now be the heartbeat of the business and drive global growth, but cannot fulfil this role if they aren’t given the necessary data. Whether it is analytical tools, real-time reporting or other data, businesses must equip compliance teams with the right information to succeed. IFM editor@ifinancemag.com

Melaine Campbell, Managing Director with Global Compliance and Supply, Dun & Bradstreet

International Finance Apr - Jun 2017

Appointments

V VocaLink hires

Rosy Ruiz To lead business development in the Americas

ocaLink, the global payment partner to banks, corporates and governments, announced that Rosy Ruiz has joined the firm as Senior Vice President, Sales, Americas. Based in the US, Rosy will be responsible for business development in North, Central and South America, and the Caribbean, working across the full range of VocaLink products. Rosy has extensive experience in the payments sector having spent almost two decades working for a variety of financial institutions across product development, marketing and sales. Rosy joins from Earthport, where she was Vice President of Business Development across Latin America and the Caribbean, driving revenue for the payment network provider. Rajiv Garodia, Managing Director of VocaLink International Business, says, “Rosy has joined VocaLink at a very important time for the business internationally. She will be focused on responding to the growing interest in

instant payments from the Americas and instrumental in building key relationships across the region. Rosy will also support our ongoing work in the US, where we are currently working with The Clearing House to develop a real-time payment service for North America. Rosy’s knowledge and expertise will be invaluable in introducing our systems across the region as we continue our growth internationally.” Rosy Ruiz said, “VocaLink is at the forefront of payments infrastructure development and I’m looking forward to being a part of the team at such a transformative time. VocaLink’s technology will provide a platform to launch a range of innovative new services throughout North America and having the opportunity to use my skills to promote this offering across the Americas will be an exciting challenge.”

Paysafe appoints two independent Non-Executive Directors Former Hoffmann-La Roche and Colgate-Palmolive executives join the Board

aysafe Group plc (“Paysafe” or the “Company”) has appointed of Jennifer Allerton and Karen Guerra as independent Non-Executive Directors of the Company, with immediate effect. Jennifer Allerton brings a wealth of international experience in payments technology, data innovation, operations and IT strategy. She is the former CIO of the pharmaceutical division of Hoffmann-La Roche, where she was a member of the pharmaceutical executive committee, which doubled sales and quadrupled profits in a five-year period. Before joining Hoffmann La Roche,

Jennifer was Technology Director of Barclaycard and played a key role in the move to data mining and customer profiling there. Jennifer is currently a non-executive director on the boards of Sandvik AB, Iron Mountain Inc. and Aveva Group plc, and was previously on the board of Oxford Instruments plc. Karen Guerra has significant seniorlevel experience in the consumer goods sector, having been Managing Director and Chairman of Colgate-Palmolive’s UK company between 1996 and 1999, followed by heading the larger French subsidiary between 19992006 operating across Oral, Personal & Household Care. Prior to Colgate,

Karen worked for PepsiCo and in UK food retailing. She is a non-executive director of Davide Campari-Milano SpA, ASX listed Amcor Ltd and the FTSE 250 business Electrocomponents plc. She previously served as a nonexecutive director of Inchcape plc and Swedish Match AB. Dennis Jones, Chairman, said: “I am delighted to welcome Jennifer and Karen to Paysafe. Their experience as executives and non-executives in technology and consumer markets brings an extra dimension, strength and depth to our Board that will be invaluable as Paysafe continues its rapid rate of development in the coming years.”

Apr - Jun 2017 International Finance

Job Market

The jobs were in small to mid-tier firms But unprecedented level of scrutiny over headcount levels and hiring decisions, reveals survey

International Finance Apr - Jun 2017

Job Market

lobal professional services recruiter Morgan McKinley revealed in its 2017 UK Salary Guide that 2016 was one of mixed fortunes for professionals in the UK. David Leithead, Chief Operations Officer, Morgan McKinley, said: “Uncertainty was the overriding sentiment in

the UK business sector in 2016. We saw the impact of that in reduced volumes of job vacancies in many industry segments, particularly permanent roles in the larger employers, for whom the political and economic backdrop meant an unprecedented level of scrutiny over headcount levels and hiring decisions. As a consequence, the

professional temp market inevitably saw better conditions. For the moment this balance is likely to continue. “Every year, recruiters mark a new zenith in the rise of the specialist, and this report is once again full of examples of big wage increases being needed to attract the specialist skills that

hirers seek. Of course, the very fact these specialists exist is a reassurance to those concerned about the UK’s future post Brexit - increasingly it is the assuredness of the supply of talent, above all else, that decides where an employer will base itself and the UK will always remain competitive in this area.”

The highlights of the 2017 UK Salary Guide

Accounting & Finance • There has been strong demand across the board throughout the year for newly-qualified accountants, and specifically auditors making their first move into industry. • A number of the larger banks kept low volumes of hiring, due to critical-hire-only policies, but the small to mid-tier institutions have maintained a steady flow. • Owing to increasing demand on businesses to comply with changing regulations, candidates with a confident technical understanding of IFRS are becoming increasingly popular. Job seekers with IFRS15 IFRS16 experience can potentially

Compliance • Regulatory change has driven a lot of the recruitment that we saw over the year, with MAR in July, many firms invested heavily in bolstering their surveillance teams. • Throughout the second half of the year we have seen firms hiring MiFID II specialists with an eye on January 2018, when the legislation comes into play. • Salary increases are healthy, but not at the lofty levels that we saw in 2015, where professionals could expect anything upward of 20%. • The multitude of regulations impacting compliance teams has seen employers requesting

Apr - Jun 2017 International Finance

Job Market

•

gain a premium over their peers. Our interim and qualified contract divisions received a broad selection of roles, with analytical and commercial finance support roles dominating their mandate in 2016. We saw a 24% increase compared to 2015 in FP&A positions as businesses continue to invest this area, seeking clarity on the long term projections and possible threats in asset management

•

• •

specialist knowledge of these regulations from new hires, we expect this area to continue to grow in 2017. With GDPR coming into effect on the 25th May 2018, we have seen a number of firms within financial services hire in this space. They are predominantly looking at two types of people: Project managers, who have experience of working on implementing privacy policies Privacy SMEs, these individuals are mainly coming from a legal background with recent experience in privacy. Due to the competitive nature of this area, employers are considering candidates with privacy experience from different industries.

Risk Management • The year saw an increase in hiring in the quantitative risk space, mainly around the model validation and methodology areas. • We saw good levels of recruitment in the operational risk space, namely around 2nd line of defence projects. • We anticipate that 2017 will largely mirror these trends, with quantitative risk again expected to be the main area of hiring, particularly with incoming regulatory changes. • Basel compliance deadlines have been pushed back and are again at risk of falling further behind – nonetheless junior individuals with this knowledge are creating competition between institutions and pushing up salary brackets significantly. • From a change perspective, we are seeing a great-

International Finance Apr - Jun 2017

Tax • On the whole, salaries have remained flat and senior level candidates have had to be particularly flexible - those out of work often having to accept a drop on their previous package - due to lower job flow and increased competition. • Generally, candidates will expect to receive a 10% increase upon changing roles. In some instances, however, there have been notable salary hikes driven by niche skill sets and candidate shortages at certain levels of experience. • Newly qualified candidates remain simultaneously the most elusive and the most in demand. We have seen the Big 4 hire candidates with profiles they may not have even considered for interview as recently as a few years ago.

Job Market

er requirement for senior business analysts across data-centric projects around FDSF and BCBS239.

•

We have seen multiple examples of large corporations hiring candidates for permanent positions on the (two-year) Tier 5 Visa having exhausted their options (or patience) in searching for a UK trained equivalent. The fact that so many companies are showing willingness to pursue this option demonstrates the shortage of UK trained candidates emerging from training contracts.

65 Marketing • 2016 was a fantastic year of growth and opportunity for marketing professionals across financial services, technology and retail industries. • Marketing is becoming a higher-priority on Csuite executives’ growth plans, with team sizes increasing up to 50% and budgets becoming healthier. • This stands in stark contrast with previous years and moves away from the trend of cost-cutting and redundancies.

Information Technology • Demand for specialist recruiters, within areas such as technology, was noticeably higher as companies looked to grow their IT divisions within projects, development and cyber security. • The second half of 2016 saw demand for recruitment specialists within London’s technology sector. With many of the key players in this sector announcing extensive growth plans for 2017, the hiring for technical recruitment specialists started early as companies looked to get ahead of their competitors to grow teams in line with strategic ambitions. IFM editor@ifinancemag.com

Morgan McKinley is a global professional services recruiter connecting specialist talent with leading employers across multiple industries and disciplines. With offices across Ireland, the UK, EMEA, Asia and Australia, the company’s professional recruitment expertise spans banking & financial services; commerce & industry and professional services.

Apr - Jun 2017 International Finance

OPINION

Stefan Van Geyt

Thereâ&#x20AC;&#x2122;s no place like home What sports fans and stock market investors have in common International Finance Apr - Jun 2017

OPINION OPINION: Wealth Management

ports fans the world over (from Manchester to Munich to Mumbai) often form a profoundly intense attachment to their team. Very rarely, however, is that attachment founded upon rational deliberation, objective research or any kind of considered personal preference. Instead, we simply root for the team based in the place we call home. In fairness to such fans, nearly all of our core beliefs are similarly arbitrary. That includes, at least partly, when it comes to investing. Individuals worldwide tend to invest disproportionality in stocks listed in their native country, a phenomenon known as ‘home bias’. Given the proven benefits of diversification and easy availability of global data flows, this makes little strategic sense. Consider Canada. The country has a global index weight, or share of total world market capitalisation, of about 3%. Yet, Canadians hold roughly 60% of their equity investments in domestic shares.

Or take South Korea, which has a global index weight of less than 2%. Residents there nevertheless make 90% of their equity investments in the domestic market. Even the United States, with a massive global index weight of nearly 40%, is guilty of home bias – with American investor holdings in domestic equities standing at approximately 80%. Such bias is found, to a greater or lesser degree, in every single market worldwide. The trend is especially pronounced in emerging markets – where there are often structural barriers to overseas investment – and is least evident in Europe, especially since the introduction of the common currency and elimination of exchange-rate risk. Between 1997 and 2004, the level of home bias in the eurozone declined by 9%. Over the same period, the level of regional bias (meaning total investment in eurozone shares) increased slightly. Within Europe, the Dutch, who have long embraced an international

equity investment strategy, are by far the least exposed to home bias, with slightly more than 20% of equity investments allocated to the domestic market. That sounds pretty balanced – until you consider that the Netherlands represents less than 1% of total world market capitalisation. Like the Netherlands, Austria, Belgium and Germany also at first appear relatively unbiased, with roughly 37%, 45% and 48% of their equity investments in domestic shares. Once again, though, this has to be put in context: Germany, the largest of the three markets, has a global index weight of barely 3%. The trend is even more exaggerated in France, which has a global index weight of 3% and where residents there nevertheless make 60% of their equity investments in the domestic market. While each of these countries compares favorably to the international mean, being better than average obviously remains far from ideal. Over the past two decades, nine out of the ten best-performing stock markets have been in emerging markets, according to Bloomberg data. Yet, relatively few investors have much exposure to Brazil, Kazakhstan or Peru (the world’s three bestperforming markets in 2016). Given the governance gaps and political risks in many emerging markets, it’s understandable that

not everyone wants to buy Kazakh shares. But the broader issue of home bias remains a puzzle that has left economists scratching their heads for decades. It may pain practitioners of the dismal science to admit it, but the value of geographic portfolio diversification is simply no match for human psychology. That’s why we overweight our own market, despite all the evidence that says we should do otherwise. It is the same reason our spirits rise and fall with the fortunes of our home team – even if, deep down, we know it’s just a game. IFM editor@ifinancemag.com

Stefan Van Geyt serves as Group Chief Investment Officer at KBL European Private Bankers, which operates in the UK under the name Brown Shipley. The statements and views expressed in this document are those of the author as of the date of this article and are subject to change. This article is also of a general nature and does not constitute legal, accounting, tax or investment advice.

Apr - Jun 2017 International Finance

islamic finance

Challenges for Islamic finance in the USA The biggest challenge is the First Amendment of the US Constitution Camille Paldi

ith proper regulation, legislation, and dispute resolution, Islamic finance, sukuk (Islamic bond) and takaful (Islamic insurance) have tremendous possibilities in the United States at this moment in time. Modes of Islamic finance,

International Finance Apr - Jun 2017

including musharakah, mudharabah, murabahah, tawarruq, salam, and istisnaâ&#x20AC;&#x2122;a, can enhance the capitalist performance of the USA and help Americans compete with the rest of the world. Sukuk or Islamic bonds may be utilised to gain capital for businesses, the state and federal government,

and individual entrepreneurs. Islamic finance is gaining popularity around the world and it is time for the United States to tap into the global Islamic finance, sukuk, and takaful markets and compete on the global stage. As of date, East Cameron Gas [$165,670,000 (2006)], General

islamic finance

Electric [$500,000,000.00 (2014)], and GoldmanSachs [$500,000,000.00 (2014)] have issued sukuk. The states of Illinois and New York have both tabled legislation allowing for sukuk transactions. Ernst and Young predicts that the sukuk market may reach $900 billion worldwide by 2019. The sukuk instrument is growing in popularity around the world as an innovative financing instrument and a way to raise funds for various projects and business expansion, and increased competitiveness, which attracts ethical and creative investors worldwide. The UK recently announced that it is the first Western nation to issue a sukuk (£200 million). The USA should join the competition. The topic of Islamic finance is being taught at Drake University, American University, Pebble Hills University, Harvard University and the University of Pennsylvania Wharton School of Business.

All major US banks and law firms now have Islamic finance departments, usually with staff from overseas and/or located in other countries. There exists an opportunity now for Americans in Islamic finance. This short article aims to briefly discuss the regulatory and legal aspects of Islamic finance, sukuk, and takaful in the United

According to CNBC, Islamic banks’ capital grew from

$200 billion in 2000 to close at $3 trillion in 2016

States. In order for the sukuk business to thrive in the USA, each state should pass a law enabling sukuk transactions. Islamic finance and sukuk should be incorporated into federal commercial law. In addition, as each state regulates the insurance industry, each state should also pass a takaful or Islamic insurance law. Takaful should also be incorporated into federal insurance regulations and laws. Furthermore, dispute resolution in the United States may need to be adjusted in order to accommodate Islamic finance, takaful and sukuk as well as sukuk bankruptcies. The East Cameron Gas sukuk bankruptcy was successfully settled through the US judicial system. However, additional adjustments may be necessary in order to successfully adjudicate Islamic finance transactions, including takaful and sukuk bankruptcies inside the

United States. In terms of the takaful business, the US has a state-regulated insurance system whereby each state determines its own licensing requirements for insurers. In order to obtain a licence, a company must demonstrate that it has the experience and management capability to run the company and show that it is financially sound. Insurers are also required to justify their premium rates. In addition, companies must fulfil the solvency requirements set by the state. Furthermore, there may be limits on the types and concentration of investments made with ‘held’ reserves. These issues should be addressed in the state and federal takaful laws. The biggest challenge in introducing takaful, sukuk and Islamic finance in the US is the First Amendment of the US Constitution, which prohibits the making of any law respecting an

Apr - Jun 2017 International Finance

islamic finance

establishment of religion or impeding the free exercise of religion as well as the Establishment Clause. In Murray v Geithner, a case was filed against the Federal government challenging the permissibility of bailout money provided to AIG under the Emergency Economic Stabilization Act (EESA) legislation saying it violated the Establishment Clause. The Act gives the Treasury the ability to purchase troubled assets from any institution. In this case, EESA was used to purchase $40 billion in AIG shares. AIG conducts takaful business in Bahrain and the US. The plaintiff alleged that tax dollars were going towards the financing of Shari’ah products and activities. The court found that the EESA legislation and the AIG bailout were created for a secular

International Finance Apr - Jun 2017

purpose and did not violate the First Amendment of the Constitution. Although there is a green light for Islamic finance in the USA, Islamic financial institutions may be at a disadvantage in possibly not being able to gain access to federal funds. Islamic institutions may also experience compliance issues as well as legal challenges. Islamic finance is currently offered by Devon Bank, University Bank, LARIBA, Whittier Bank and Guidance Residential all across the United States. According to CNBC, Islamic banks’ capital grew from $200 billion in 2000 to close at $3 trillion in 2016. This figure is expected to grow to $4 trillion in the 2020s. There are now more than 300 Islamic banks and 250 Islamic mutual funds globally. Islamic finance

constitutes approximately 5-6% of the global financial system, and growing. Ernst and Young predicts that Islamic finance will grow 19.7% annually through 2018. At this point, there are 25 Islamic financial institutions operating in the USA with the top three being The American Islamic Finance House, University Bank’s subsidiary University Islamic Finance, and Harvard Islamic Finance Program. J P Morgan started Islamic banking in 2013. Standard Chartered conducts Islamic finance worldwide through its Islamic ‘Saadiq’. These banks are overseen by federal regulators, such as the Federal Reserve System, and must also comply with local regulations. The Islamic bank LARIBA Bank of Whittier (CEO: Yahia Abdul Rahman),

operating in California, has assets of $10.6 million and offers banking and home financing across the USA. Saturna Capital, an investment advisor and fund management company, manages more than $3.5 billion in assets, which are invested in Shari’ah compliant mutual funds. The opportunity cost for the USA in not participating in this global market is quite large. On the other hand, the United States could introduce the rules and regulations required to engage in the worldwide Islamic finance, sukuk, and takaful business. Interest-free financing options may enhance the system currently in use in the United States and offers a chance for Americans to diversify their portfolios, attract global investors, enhance liquidity and compete in the global village. IFM editor@ifinancemag.com

Camille Paldi is CEO of the Franco-American Alliance for Islamic Finance (FAAIF)

Apr - Jun 2017 International Finance

OPINION

Kristel Cools

The diversity

dividend 72

International Finance Apr - Jun 2017

OPINION

Do companies with more women in the boardroom deliver higher returns?

n the waning months of 2016, senior French businesswomen were in unusually high demand. Since the start of this year, at least 40% of board members at large French firms (including those with over 500 employees and annual revenues in excess of €50 million) must be female. Companies that fail to comply with the quota system risk seeing any additional male nominations blocked, as well as a freeze on all board remuneration. Legislating gender diversity is hardly controversial in Europe, where women today account for just under 25% of

board members at the largest listed companies. By comparison, they hold roughly 19% of board seats at S&P 500 firms and fewer than 3% of seats at TOPIX-listed companies. However, it’s not clear that such quota systems – which also exist in Belgium, Iceland, Italy, Germany the Netherlands and Spain, and will be introduced in 2018 in Portugal – have much trickle-down impact. A recent review of the pioneer in this regard – Norway, whose 40% quota for female directors came into force in 2006 – found that “the reform had very little discernible impact on

women in business beyond its direct effect on the newly appointed female board members.” There are also reasons to challenge the conventional wisdom that greater gender balance on a board level is linked to superior financial performance. Despite the publication of multiple studies that claim to demonstrate such a correlation, there is little evidence that having more women in the boardroom actually causes profitability to increase. That distinction – between correlation and causation – is important.

Apr - Jun 2017 International Finance

OPINION

Consider the correlation between sleeping with one’s shoes on and waking up with a hangover. While the presence of shoes in bed may be statistically interesting, the Hush Puppies obviously aren’t the cause of the headache. In this case, too, there are additional variables that may inform why companies with diverse boards perform better – including that companies that do better tend to attract more diverse board members. Indeed, a 2016 Peterson Institute study of some 22,000 firms in 91 countries found that “the impact of women’s presence on the board is not statistically robust.” Writing on the same topic last year, Professor Alice Eagly, a fellow at the Institute for Policy Research at Northwestern University, summarised current findings: “Taking into account all of the available research on corporate

boards … the net effects are very close to a null, or zero, average.” Even if the evidence suggests that boardroom diversity doesn’t necessarily deliver higher profits, that’s no reason to abandon the larger effort. On the contrary, social justice and female empowerment are themselves entirely worthy goals. Where it helps Meanwhile, there is an area in the organisation where gender diversity seems to more clearly pay a dividend: senior management, where fewer than 25% of all roles worldwide are held by women. Having a higher proportion of women at the C-suite level is strongly correlated to improved corporate performance, according to the Peterson Institute, which argues that “a more diverse leadership team tends to deliver better

outcomes on average.” The same study found that female CEOs did not significantly underperform or overperform when compared with male chief executives. In other words, having a robust pipeline of senior women – who are actively involved in day-to-day management – is more important to corporate profitability than such diversity in the boardroom or CEO’s office. That fact may be frustrating for governments that legislate diversity through quick-fix board quotas, especially since it’s a lot easier to count such seats than it is to identify senior management positions, which vary greatly from one firm to the next. It’s also disappointing news for investors keen to capitalise on the diversity dividend through similarly simple math that just doesn’t add up. That said, what’s the

harm in linking boardroom proportionality and increased corporate profitability, since that serves the goal of equality? Such myths, according to Professor Eagly, “set people up to expect that corporate financial gains … follow easily from diversity. Of course they don’t. That expectation could sideline people from understanding and overcoming diversity’s challenges.” That’s why organisations that are truly committed to this effort must recognize its complexity, and support policies that help every woman navigate what Eagly calls “the labyrinth of leadership,” which is replete with barriers to success – from the entry level to the very top. IFM editor@ifinancemag.com

Kristel Cools serves as Group Head of Asset Management at KBL European Private Bankers, where she oversees Richelieu Investment Funds, the group’s in-house fund range. The group operates in the UK under the name Brown Shipley. The statements and views expressed in this document are those of the author as of the date of this article and are subject to change. This article is also of a general nature and does not constitute legal, accounting, tax or investment advice.

International Finance Apr - Jun 2017

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Thereâ&#x20AC;&#x2122;s a new trade deal in town. But what is the TFA and who will benefit? International Finance Apr - Jun 2017

global trade deal went live on February 22 that will help to smooth customs procedures and cut red tape at the border. Against a backdrop of anti-globalisation sentiment, shuttered regional trade pacts and shifting geopolitics, the TFA flies in the face of the current news cycle. The following offers a quick explainer on what’s in the deal as well as what it means for you and for global trade.

The agreement aims to minimise the number of different procedures businesses might have to master to move goods between countries Francesca Bianchi

Kimberley Botwright

Sean Doherty

It’s a trade deal. Should I protest? You may not have heard much about this new World Trade Organization (WTO) Trade Facilitation Agreement (or TFA). On the web, it’s eclipsed by the Star Wars episode The Force Awakens, which has the same three-letter-acronym. Through the TFA, governments have agreed to publish a wide range of customs-specific information, including online where possible, outlined measures to help speed up the processing and clearance of goods – such as procedures for accompanying documents to be processed ahead of the arrival of a package – specified options for electronic payment of import or export duties and encouraged countries to use relevant international standards for import, export or transit formalities, helping to minimise the number of different procedures businesses might have to master to move goods between

Apr - Jun 2017 International Finance

Trading

By cutting transaction costs and improving transparency, the TFA stands to deliver gains to smaller businesses, which may be held back from accessing global markets due to transaction costs and information asymmetry

countries. The deal even includes a specific provision on perishable goods, encouraging countries to adopt procedures that clear these items as quickly as possible while meeting all relevant domestic requirements, and ensuring that importers can properly store these items pending their release. This could be a boon for the world’s rural poor, who are often exporters of perishable agriculture products. In sum, the TFA basically tackles the unintentional barriers to trade – or the barriers that exist due to old and outdated

customs systems – fairly unobjectionable stuff. How is this deal different – and is it fair? Earlier trade deals have typically been about setting the duties on buying or selling in other countries’ markets or determining how to set national rules, such as regulations and procedures, which treat all products equally regardless of where they are made. Despite these, it hasn’t always been easy to actually get products across our borders. Paperwork, complexity, delay and uncertainty have discouraged all but

the biggest and bravest. Ignoring the rules or giving up has been the approach taken by smaller business. By cutting transaction costs and improving transparency, the TFA stands to deliver gains to smaller businesses, which may be held back from accessing global markets due to transaction costs and information asymmetry. The WTO also estimates that TFA implementation could create around 20 million new jobs. The new system is unique in other ways too. The TFA allows developing economies to determine when they will implement

individual provisions and to clearly identify where they need technical assistance or capacity building. In other words, countries haven’t bargained for lower standards to avoid legal threats if they’re not ready or consider themselves not ready – instead the same good governance standards will be used for everyone, though some may take longer or need help to get things working. Trade facilitation may also have positive effects for the world’s poorest countries, because border delays may choke export and economic growth opportunities. Some studies find that countries requiring reams of paperwork for imports are more likely to have a higher poverty rate or higher inequality rate. Further, the TFA can also help fight corruption, with customs automation leaving less room for corrupt practices that remain rife in some developing countries and act as a significant drag on trade and investment. Hasn’t it been overtaken by events, with the news full of trade wars? Quite the contrary – trade facilitation is very pragmatic, it doesn’t involve more trade liberalisation or market opening and it’s

International Finance Apr - Jun 2017

Trading

not generally a political football. All told, the WTO estimates that the TFA could boost export gains by up to and beyond $1 trillion dollars per annum. TFA implementation could reduce trade costs in WTO members by an average of 14.3% and the most significant cost reductions will be in least developed countries. Developed-country businesses and governments, including in the US, have been big supporters too, seeing the promise of efficiencies at home and abroad.

online, letting paperwork precede or follow the actual movement of goods and so on. The people who know the ins and outs of getting goods across borders are generally those who are trying to do so. But dedicating time to the common good is draining, even for the most community-spirited. So hybrid partnerships such as the Global Alliance for Trade Facilitation, which bring together donor funding with business priorities and expertise, can really help to get reforms moving.

When will I see benefits? Just as writing a short letter is often harder than writing a long one, making border crossing cheap and simple takes work. The hard work carries on. Countries have taken great strides in putting customs procedures

What happens next? Now that the deal is in play, a series of institutional arrangements will be activated to help support its implementation. The WTO will house a Committee on Trade Facilitation, which will provide a space for information and exchange

with other international organisations, such as the World Customs Organization (WCO), and allow countries to regularly review the deal’s operation and implementation. One important question looking ahead is how governments and stakeholders might build on this deal. The TFA mainly tackles goods moving across borders and one obvious approach would be to copy the model for other types of trade. A similar logic could be applied to investment – helping to tackle some of the barriers foreign investors might have to investing in the critical infrastructure needed for sustainable development – trade in services or e-commerce. Maybe the Star Wars comparison isn’t so far off the mark: tractor-like beams carrying fast-growing digital data flows now enable vast amounts of trade and

business activity, from more efficient value chains to new online platforms connecting businesses with consumers. What the TFA shows us is that the physical world may finally be catching up. IFM editor@ifinancemag.com

This article originally appeared on World Economic Forum

Apr - Jun 2017 International Finance

trading

Growing popularity of hybrid

social networks

As compared to traditional online social media, they provide opportunities for social networking as well as a source of income

International Finance Apr - Jun 2017

he contemporary generation views the modern world as a large-scale communicative medium. Everyone can contact any person on Earth choosing any means from a wide range of options like a telephone, messenger, video conference, airmail etc. However, social networks are recognised as the most popular means of communication in the 21st century. Nowadays, we are not satisfied with merely swapping messages. Modern users want to share their preferences, tastes, skills, professional achievements, and even unveil their private life. Some people are keen to behave like stars and set the tone. Others behave like fans, who follow their

trading

favorites. The former shares oneâ&#x20AC;&#x2122;s experience with the latter. The latter absorbs information and learns from the former. Sometimes, they exchange roles after a while. In essence, modern trading in financial markets is similar to a social network. Year after year, trading is hot on the heels of technological innovations. So speculative trading has become available to anyone and more transparent. Now, modern retail traders do not hide behind nicknames, do not keep their strategies in secret, and do not avoid communication. On the contrary, recent trends in forex trading, such as PAMM accounts and network trading, suggest transparency and full access to trading operations. Communication is the key concept in trading, like in social networks. Similar to social media, there are popular forex traders who are the focus of

attention, whose strategies are followed, and who set an example for others. On the other hand, there are less successful participants in the forex community. Besides, there are newcomers who just look around, ape popular traders, and eventually launch their own forex careers. The ForexCopy system with InstaForex is a special service which is the most akin to social networks. Nearly five years ago, InstaForex outran other brokers and created a trading service which combines a practical forex course and social network. Importantly, unlike a traditional training course and social network, this service gives users the opportunity to make good money alongside learning and communicating. The ForexCopy system with InstaForex is an innovative service which enables copying deals of

successful traders online. Every user of this service gains access to deals of successful experienced traders who do not hide their knowledge and skills, but share them with other users. Thus, the ForexCopy system allows all participants to earn. Similar to a social network, some participants in the ForexCopy system are recognised as stars, favorites or underdogs. The more followers a seasoned trader has attracted, the higher his status and profits are. However, participants are free to add to â&#x20AC;&#x2DC;friendsâ&#x20AC;&#x2122; or subscribe to any trader. Perhaps, a less popular trader could bring better profit. On the contrary, the most popular trader could ensure steady but modest gains. As mentioned earlier, your status in a social network would change sooner or later. Once,

you used to subscribe to somebody. After a while, you will receive requests from followers. At a certain point, the ForexCopy system can offer you more than just an opportunity to copy deals of successful traders. Your time will come and you will become a leader after being a follower. So you will register as a trader with the ForexCopy monitoring. In other words, apart from your own earnings on Forex, you will be paid commissions for your followers. Everything will depend on you, your trading skills, and popularity. At present, thousands of traders have been registered for the ForexCopy service with InstaForex. Some of them are registered as traders, some are acting as followers. Every day, a lot of traders join the service seeking income and popularity. Nowadays, hybrid social networks are at the forefront of popularity. They have outpaced traditional online social media, as they provide both social networking service and a source of good earnings. IFM editor@ifinancemag.com

Apr - Jun 2017 International Finance

Trading & Tech

T The LEI test The Global Legal Entity Identifier (LEI) Index can help organisations make smarter, less costly and more reliable decisions about who to do business with Stephan Wolf

International Finance Apr - Jun 2017

he 2008 financial crisis, and more recently, the leak of the Panama papers have meant that governments and companies alike are under increased pressure to become more transparent about corporate entities. Yet, simply gathering large volumes of data to comply with regulation will not suffice. As stated by a Financial Times article in July 2016, what is needed is â&#x20AC;&#x2DC;a way for analysts to track the connections that exist between companies scattered across different national jurisdictions1â&#x20AC;&#x2122;. No mean feat you might say. After all, there are thousands upon thousands of companies listed on global stock exchanges and millions of others listed on national registries. The latter group presents more of a problem since registries are extremely disjointed. In financial markets, the word transparency is nearly always equated with information disclosure. The

Trading & Tech

trouble is that up until now, legal entity reference data has been proprietary, siloed and non-standardised. Put simply, organisations across the globe are in dire need of a solution. Not only to keep on the right side of the regulators, but also to be able to make smarter, less costly and more reliable decisions about who to do business with. So, what’s the solution? The good news is, there is one and progress is already well under-way to unlocking it. It exists in the form of a Global Legal Entity Identifier (LEI) Index. As a result of GLEIF services, this is a free online source that provides open, standardised and high quality legal entity reference data with the potential to capture any entity engaging in financial transactions globally. The reference data represents the information on a legal entity identifiable with an LEI. The LEI itself is a 20-digit, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization. It connects to key reference information that enables clear and unique identification of legal entities participating in financial transactions. Why the continued focus on quality Without continually optimising the quality of the LEI data pool, however, the

entire system would become perfunctory. And it’s one of our core responsibilities at GLEIF to keep on top of this. In partnership with the LEI-issuing organisations, we provide in-depth knowledge of local markets and can be relied on to make available the correct information year after year. To clarify the concept of data quality with regard to the LEI population, GLEIF has defined a set of measurable quality criteria using standards developed by ISO. These can be summarised as follows: • Monthly data quality reports Since February 2016, GLEIF has been publishing monthly data quality reports, which summarise

the results of its assessment of the level of data quality in the Global LEI System, based on a set of clearly defined quality criteria. Going forward, the GLEIF data quality management program will continue to evolve by gradually implementing previously defined quality criteria and corresponding controls. •

A central challenge facility This extends the ability to trigger updates of LEI data to all interested parties. •

A central duplicate check facility This is to help the LEI issuers ensure that any organisation, which has applied for an LEI, has only one LEI and that any LEI

code is only issued once. •

Data on who owns whom Starting in early 2017, GLEIF will publish relationship data, which allows the identification of direct and ultimate parents of a legal entity and, vice versa, so that the entities owned by individual companies can be researched. By publishing data clarifying who owns whom, GLEIF will provide a unique and free data source that allows corporate dots to be connected globally based on open, standardised and high quality LEI data. Progress made to date As of December 2016, more than 470,000 LEIs had been issued globally to

https://www.ft.com/content/bd036a0a-2e28-11e6-bf8d-26294ad519fc

Apr - Jun 2017 International Finance

Trading & Tech

entities based primarily in the US and Europe where regulations require the use of LEIs to uniquely identify counterparties to transactions in regulatory reporting. We expect that by 2020 we will look at a global LEI population of about 1.5 million as a result of regulation. Today, public authorities in many jurisdictions rely on the LEI to evaluate risks, conduct market surveillance and take corrective steps, if required. The private sector opportunity We believe that the Global LEI System has the potential to generate significant advantages not only in the regulatory space, but also for private organisations. Businesses across the globe to date are grappling with how to develop and implement a common entity

International Finance Apr - Jun 2017

identification system that could serve as a linchpin to identify financial market participants and connect data. Gathering and maintaining related data requires replicating efforts across the market, tying up resources that could be spent more productively elsewhere. Taking advantage of the Global LEI Index will empower organisations across the board to cut costs, simplify and accelerate operations and gain deeper insight into the global market place. The benefits for the wider business community to be generated with the Global LEI Index could grow in line with the rate of LEI adoption. So, our message to businesses around the globe is this: Get an LEI and make it work for you. We canâ&#x20AC;&#x2122;t offer a complete solution to the issue of transparency just yet,

but we are consistently moving closer as the use of the LEI becomes more widespread. To accelerate progress, we must foster greater coherence and collaboration to promote the increased adoption and implementation of shared open data principles, standards and good practice around the world. We will continue to focus, in cooperation with our partners in the Global LEI System, on further optimising the quality, reliability and usability of LEI data, empowering market participants to benefit from the wealth of information available with the LEI population. The LEI is the linchpin that connects the dots across the universe of entity identification in the digital age. Weâ&#x20AC;&#x2122;re calling on private and public sector organisations across the globe to consider the benefits of having an LEI

and take full advantage of whatâ&#x20AC;&#x2122;s on offer. IFM editor@ifinancemag.com

Stephan Wolf is CEO of Global Legal Entity Identifier Foundation (GLEIF). He has extensive experience in establishing data operations and global implementation strategy. He co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO.

Appointments

MarketInvoice Appoints Chairman of the board of directors

arketInvoice, the world’s largest peerto-peer invoice finance platform, has announced the appointment of Giles Andrews as chairman of the board of directors. He will work directly with co-founders Anil Stocker and Ilya Kondrashov to drive scale in the business as well as chairing and managing the board of directors. Giles is an experienced entrepreneur with over 25 years’ experience and a strong track record of building successful, challenger businesses. He is the chairman of Zopa, the world’s first peer-to-peer lending platform, a business he cofounded in 2004 and led as CEO from 2007 to 2015. Zopa is disrupting retail financial services by providing better value and service to the UK consumer lending market. Zopa recently

announced plans to launch a next generation bank to extend the range of products it can offer customers. Giles is also chairman of Bethnal Green Ventures, the accelerator for start-ups using technology to make social or environmental impact. He read Experimental Psychology at Oxford University and has an MBA from INSEAD. He received an OBE for services to financial services in the 2016 New Year’s Honours list. The appointment comes at an exciting time for MarketInvoice as the business gears itself to achieve their £2bn funding goal in 2017 and follows the launch of MarketInvoice Pro, a new funding product that offers larger businesses a credit line against all their outstanding invoices. Anil Stocker, CEO and co-founder of MarketInvoice, said, “In preparing the business for the next phase of

growth, we are delighted to welcome Giles as chairman of the board. His expertise in building businesses and extensive experience of the peerto-peer lending sector will provide just the perspective and guidance MarketInvoice requires to scale new heights. This appointment is yet a further signal of our intent to shaking up and challenging the mainstream market. MarketInvoice is committed to evolving its proposition in delivering smarter, faster finance to businesses and consistent returns for investors.” Giles Andrews, chairman of MarketInvoice, said, “MarketInvoice is transforming the landscape of the business finance industry. I have long been fascinated by their gamechanging and innovative attitude. I look forward to working with the team in channelling their drive and ambition.”

Shakespeare Martineau appoints finance and disputes partner to grow London practice

aw firm Shakespeare Martineau has appointed a new partner in its finance and disputes team to lead the development of the firm’s financial services practice in London. Previously a partner at Kennedys and Mills & Reeve, Paul Spibey has over 15 years of experience advising banks, fund managers and building societies on a range of issues, including mis-selling of financial services products, fraud and insurance related issues.

Paul will be based at Shakespeare Martineau’s offices on Gracechurch Street and will work closely with the firm’s insurance team, using his expertise to enhance the existing banking and insurance offering for clients in the UK and internationally. The appointment comes at a time of growth for Shakespeare Martineau in London, which has also seen the firm hire Winston Bell-Gam as energy and infrastructure finance partner. Kamran Rehman, partner at Shakespeare Martineau’s London office, said, “As a firm, we pride ourselves on having the capability to truly get underneath the skin of our

clients’ businesses. Paul’s knowledge and experience in acting for clients within the financial services and insurance sectors means he is well equipped to advise on complex disputes and his skills will be hugely complementary to our practice.” Paul Spibey, finance and disputes partner at Shakespeare Martineau, said, “As we prepare to leave the EU, many firms in the financial services and insurance sectors face confusion over post-Brexit regulation. I look forward to working with them to understand the implications and how the post-Brexit model will affect their operations.”

Apr - Jun 2017 International Finance

Company in focus

Enthralled by short-lived images The ‘story’ of Snapchat whose IPO was possibly the biggest financial event of 2017 in stock markets Harshala Chandraiah

he dog faced and tiara emo filters we see on everyone’s profiles kick-started the growth of Snapchat into the kind of giant no one expected. Despite the efforts of many social media platforms, none have been able to quite compete with the face recognition patents that the company acquired only a few months ago. The kind of revolution that ensued in the social-media user demography has landed Snapchat an IPO touted as the biggest financial event of the year. Like the now romanticised idea of leaving college to chase an idea, Evan Spiegel too left Stanford at 2012, shortly before completing his M.S. to concentrate on expanding ‘Picaboo’, as Snapchat was initially called. This was not all; the company’s history has a strange resemblance to Facebook’s high-profile case between Mark Zuckerberg and Winklevosses, which was settled privately. A fallout between Spiegel and co-founder

International Finance Apr - Jun 2017

Reggie Brown in May 2012 led to the latter being accused of making no creative contribution to the company. This seemingly tiny glitch cost Evan Spiegel and another co-founder Bobby Murphy millions in 2014, when Brown sued Snapchat. The origins The idea was conceived by Spiegel as part of a project at Stanford with Reggie Brown. The central idea behind Picaboo was to create a selfie application, which allowed sharing images but were also short lived and self-deleting. While many expressed doubts over the exclusivity of an application dependent on its short-lived feature, Spiegel said, “Snapchat isn’t about capturing the traditional Kodak moment. It’s about communicating with the full range of human emotion — not just what appears to be pretty or perfect.” It was also about the sense of frivolousness generated by the nature

of impermanence of the snaps. From a company identified with a ‘weird’ logo, it grew to include features never seen before on any social media platform. It evolved into a mixture of a platform for private messaging and for public content, and live sports and music events. Many had doubts about the future of Snapchat. Some accused it of encouraging rampant sexting with nudity while others didn’t view the temporary nature of pictures as a breakthrough in any sense. Hence, the trajectory of its growth can be set apart from the initial successes of Facebook and Twitter, two of its biggest rivals today. It was amidst such an apprehensive environment that Snapchat released the ‘My Story’ concept in October 2013. It allowed users to record videos and snippets from their everyday life and share among their friends in chronological order. My Story later evolved into ‘Live Stories’, which

company in focus

updates your location. Should you be present at any major live or public event, you are automatically updated to be a part of public content – it is one of those social media features that give out the sense of being live on television! Beating a new path It has developed its own niche while also acquiring a sense of ubiquity among social media users because if you aren’t on Snapchat, you are definitely missing out on a lot of things – from jokes by your favourite stand-up comedians to the initial crowd reactions on artists’ live performances. This fear of missing out has helped Snapchat reap major dividends and has in many ways, set itself apart from Facebook and Instagram. This has doubtlessly prompted Facebook to try and woo some of Snapchat’s fans by acquiring Instagram and introducing the concept of ‘Stories’ to both

WhatsApp and Instagram. While the public rejection of Facebook’s offer to acquire Snapchat is common knowledge, what is relatively unknown is that prior to making the offer, Facebook came out with its own version of Snapchat called Poke. Initially, this apparent threat perturbed investors but the matter was unquestionably settled in 2013 when Zuckerberg offered $3 billion to acquire Snapchat. Spiegel did not take the offer. Now, each co-founder is worth $5 billion. Snapchat, deliberately or not, has always stood out from the crowd when it comes to strategy with its office situated alongside the shores of Los Angeles, which is far away from the Silicon Valley bubble of San Francesco. It re-christened itself as Snap Inc. in 2016 and, to everyone’s surprise, called itself a Camera Company (in stark contrast to Spiegel’s

initial exposition that it wasn’t trying to create a ‘Kodak moment’) and unveiled a manufactured product Spectacles, a pair of geeky sunglasses with huge frames designed to hide the battery. Intended to capture images and videos in real time, they are sold at $130 a pair through vending machines called Snapbots, a Minion look-alike. What next? Spiegel has frequently been compared to Steve Jobs because of his meticulousness in overseeing every project and insisting on secrecy. Many had doubts about his decision to go public in 2017, just over a year after having actually generated some revenue. When Google and Facebook went public, they had Google Ads and Social Ads in place. This is not to take away the importance of ‘Geofilter’ and ‘Discover’ section of Snapchat, which

are currently generating revenue, but to draw attention to the fact that though generating huge amounts of revenue, the numbers are decelerating. Also, only a couple of weeks before going public, Spiegel changed the cumbersome nature of the platform and reduced the presence of the ‘Discover’ section without previously consulting their Chief Strategist Officer Imran Khan and CFO Drew Vollero. While these have been some of the dampening snippets, it has however shown a knack for surprises with its timely acquisition of Bitmoji and Looksery, in addition to the face recognition patents. These strategic moves have made it almost impossible for Facebook and Twitter to completely replicate Snapchat’s products, or success. Twitter, in particular, has failed to impress investors with its ad revenues as it seems to serve only a niche of users who are not ready to subscribe to its ads as earnestly as engaging in tweets and re-tweets. In view of the problems encountered by Facebook and Twitter in matching the expectations of investors, it remains to be seen how Snapchat will deal with their demands after going public. IFM editor@ifinancemag.com

(L to R) Snapchat co-founders Bobby Murphy, chief technology officer of Snap Inc., and Evan Spiegel, chief executive officer of Snap Inc., prepare to ring the opening bell as Thomas Farley, president of the NYSE, looks on

Apr - Jun 2017 International Finance

technology

Mitigating flaws in spreadsheets Automation of business-critical financial and compliance spreadsheet-related processes is necessary for efficiency-led cost savings Henry Umney

ccording to a recent survey ClusterSeven took of 160 professionals across the financial industry to understand the perception of spreadsheets and End User Computing tools (EUC) within their organisations, internal audit, finance, compliance and risk management professionals spend, on average, 43% of their time monitoring and validating information on spreadsheets. Those in management, spend closer to 47% of

International Finance Apr - Jun 2017

their time on this activity. Why? Spreadsheets and other end user computing applications (EUC), such as databases and modelling tools, are one of the key contributors of financial, regulatory, operational and reputational risk. These applications are extensively used in financial environments for complex calculations and modelling, but organisations that have put into place enforceable policies and procedures (underpinned by technology) are in the minority. The above-mentioned research

shows that today, 88% of professionals recognise the risks posed by spreadsheet applications and only 24% of organisations are systemically enforcing a manual control policy; and lesser still, a small minority have actually instituted automated controls to mitigate spreadsheet risks. In 2017, the number of such organisations will increase as they recognise the value of spreadsheets and the risks they pose, and therefore make their use and business purpose more transparent. In doing so,

technology

organisations will retain the business agility delivered by spreadsheets as well as make operational efficiency cost savings. Burden of spreadsheet data accuracy Today, the onus of manually ensuring the accuracy of data held in spreadsheets is entirely on the professionals. Consequently, with a vast number of businesscritical processes being undertaken in often poorly controlled spreadsheets, and as such the benefit of the spreadsheet to users is gradually diminishing. The very reasons for using spreadsheets – i.e. flexibility, agility, efficiency and productivity – are negated as managing them is becoming a drain on the time and resources of users. A single discrepancy in a spreadsheet poses the potential of circulating

across the spreadsheet landscape to generate errors that can lead to misstatements in the millions of dollars. Marks and Spencer’s experience last year where the company inadvertently issued inaccurate company results due to double-counting in a spreadsheet, is a case in point. Interestingly, in the above-mentioned report, nearly 50% of risk, finance and compliance professionals expect a significant financial and/ or reputational loss event attributed to spreadsheet error to occur in the next two years. Unmanaged use of spreadsheets is inefficient, unproductive and costly Despite its flaws, the use of spreadsheets for business-critical processes is expected to grow over the next two years according

to auditors (nearly 60%), regulators (40%) and risk and compliance professionals (nearly 45%). Clearly, spreadsheets are a valuable tool for certain processes and tasks. They do the job, where perhaps corporate financial systems, which are indeed the preferred option for operational processes, fall short of meeting user requirements. For example, if there is a requirement for a new finance report that the existing corporate system does not currently provide, there is likely to be a long lead time for the system provider to offer the required functionality. The spreadsheet on the other hand, is readily available at no cost; and is flexible enough to allow users to swiftly produce new reports, models and complex calculations, from the ground up. So, it’s unlikely that

corporate financial systems will ever entirely replace spreadsheets, rather they will always co-exist in business. The same research highlights that nearly 76% of organisations would like to replace spreadsheets with a different type of business information management system, but almost 25% realise that it is an unrealistic aspiration. Therefore, organisations require a well-designed application management framework, similar to any other business-critical tool deployed in the company. Spreadsheet management has to be a continuous process. Due to its intrinsic nature and manner of use, an organisation may at a point in time decommission 100 spreadsheets, but potentially another 100 new ones would have been created by users at the same time. There is no merit in running a business using uncontrolled spreadsheet applications. These tools warrant the same level of scrutiny and management as that accorded to corporate financial systems. By streamlining and automating the management of the financial and compliance processes in the spreadsheet environment, organisations will greatly reduce the risk of losses and crippling compliance-related penalties, but especially long-term reputational damage. Importantly, financial institutions will optimise the efficiency and productivity gains such applications genuinely offer; and thereby make tangible

Apr - Jun 2017 International Finance

technology

According to the survey, nearly 76% of organisations would like to replace spreadsheets with a different type of business information management system, but almost 25% realise that it is an unrealistic aspiration

financial savings as a result of reduced manual effort. To illustrate via a simplistic, conservative scenario, there is a population of 100 operational spreadsheets in an organisation, with an average of eight hours per month being spent on each application by an employee costing $50 an hour. So, each spreadsheet costs the company $400 per month or $4,800 annually to operate. For the full spreadsheet population, the tangible, operational

cost to the organisation is $480,000. The exasperation of course is that notwithstanding this cost, manual checks are never entirely accurate and the possibility of human error still remains high due to the extensive spreadsheet landscape, and the close and complex data lineages between different files. Furthermore, aside from the fact that the detection and remediation of spreadsheet errors is extremely timeconsuming, this time spent

is never formally allocated to any resource budget. Automation of businesscritical processes Automation will enable organisations to achieve a well-managed, controlled and yet flexible and agile spreadsheet environment. Technology can support spreadsheets across their lifecycle â&#x20AC;&#x201C; from creation through to retirement and decommissioning by incorporating them into the core enterprise systems. Organisations can set

up change management processes and control mechanisms, supported by an audit trail to ensure that the integrity of the model and its data is always maintained. This entirely eliminates the risk and inefficiency of manual checking, offering fail-safe assurance that the outputs derived from the data in spreadsheets are indeed accurate. IFM editor@ifinancemag.com

Henry Umney is Director at ClusterSeven and is responsible for the commercial operations of the company, overseeing global sales and client activity as well as partner engagements. He brings over 20 years of experience in sales and account management in financial services. Prior to ClusterSeven, he held the position of sales director in Microgen, London and various sales management positions in AFA Systems and DART, both in the UK and Asia.

International Finance Apr - Jun 2017

technology

The spreadsheet is here to stay According to a new study, a huge proportion of companies in the financial sector rely on spreadsheets to handle their business critical data - despite the fact that lack of management in End User Computing (EUC) is now widely recognised as risky business and a major drain on time. The ClusterSeven survey provides interesting insights into the attitudes and concerns held by individuals and organisations across the UK regarding spreadsheets and similar EUC tools. Carried out across a wide range of organisations, the study has revealed that 60% of auditors, 40% of regulators and 45% of risk and compliance professionals believe that interest in use of spreadsheets in business is set to increase over the next two years.

WHO WE ASKED Role Within Organisation

Internal Auditors

Risk Management

21.02%

28.03%

33.76%

32.48%

17.83% 13.38%

2.55% Compliance

Finance Function

22.29%

28.66%

18-24

25-34

35-44

45-54

55+

Age Apr - Jun 2017 International Finance

technology

Spreadsheets: Are they a risk? YET An overwhelming 88% of respondents recognise the risks posed by spreadsheets and similar EUC applications.

Particularly in the financial services industry, nearly 57% of respondents rate spreadsheet risk as a risk or serious risk.

Only 24% of organisations are systematically enforcing a manual control policy (let alone anything automated).

In answer to the question:

â&#x20AC;&#x153;Is spreadsheet and other End User Computing (EUC) risk recognised in your organisation?â&#x20AC;? Yes, but there is no control policy in place

9.55%

Yes, and it is mitigated by a manual control policy - but only enforced locally

42.04%

Yes, and it is mitigated by a manual control policy that is systematically enforced

23.57%

Yes, and it is mitigated by automated controls No Donâ&#x20AC;&#x2122;t know

Approximately speaking, respondents said that more than 60% of their business critical data processes rely entirely on spreadsheets.

12.74% 5.10% 7.01% This makes sense. As professionals, we need technology in place to guide us through complex calculations, analytical tasks and presentations. Readily available at little to no cost, spreadsheets offer us agility, flexibility and the ability to swiftly produce new reports, models and complex calculations from the ground up.

However, the strong presence of EUCs in business makes manual controls time- intensive, costly and errorridden.

...believe that interest in the pros and cons of spreadsheets will increase significantly over the next two years. Less than 5% of respondents expect interest to decrease. International Finance Apr - Jun 2017

technology

On average, respondents spend 43% of their time monitoring and validating information on spreadsheets.

Those in management spend closer to 47%, consituting very poor use of an expensive resource.

Organisations could learn a lot from Marks and Spencer - the company experienced trouble recently when it mistakenly issued inaccurate company results due to a spreadsheet error. Double-counting in a spreadsheet led M&S to say that sales had risen by 1.3% in the three months leading up to July when in reality they had fallen by 0.4%.

93 Nearly 50% of respondents expect spreadsheet error to trigger a significant financial and/or reputational crisis at some point in the next two years.

CONCLUSION Often the preferred choice for numerical problem solving, EUCâ&#x20AC;&#x2122;s are here to stay. For the foreseeable future spreadsheets will continue to co-exist with the other various systemsimplemented by individual businesses. Safely navigating EUC-related risks requires a comprehensive, rigorous and strictly enforceable risk management policy. Ultimately, automation is the only fail-safe way forward. ClusterSeven is a unique system which allows organisations to manage their EUCs throughout their lifecycle. Contact the team to see what we can do to keep your data accurate and your business on track.

Apr - Jun 2017 International Finance

technology

Attacker innovation and

IoT exploitation fuel DDoS attack landscape Arbor Networksâ&#x20AC;&#x2122; 12th Annual Worldwide Infrastructure Security Report shows that the stakes have changed for network and security teams

International Finance Apr - Jun 2017

technology

he 12th Annual Worldwide Infrastructure Security Report (WISR) by Arbor Networks Inc., the security division of NETSCOUT (NASDAQ: NTCT), shows the stakes have changed for network and security teams. The threat landscape has been transformed by the emergence of Internet of Things (IoT) botnets. As IoT devices proliferate across networks, bringing tremendous benefits to businesses and consumers, attackers are able to weaponise them due to inherent security vulnerabilities. This year’s report goes in-depth, covering how attackers exploit and recruit IoT devices, how IoT botnets enabled by Mirai source code operate and offers practical advice on how to defend against them. The largest distributed denial-of-service (DDoS)

attack reported this year was 800 Gbps, a 60% increase over 2015’s largest attack of 500 Gbps. Not only are DDoS attacks getting larger, but they are also becoming more frequent and complex. This increased scale and complexity has led more businesses to deploy purpose-built DDoS protection solutions, implement best practice hybrid defences and increase time for incident response practice – all positive developments in an otherwise gloomy threat environment. “The survey respondents have grown accustomed to a constantly evolving threat environment with steady increases in attack size and complexity over the past decade,” said Darren Anstee, Arbor Networks Chief Security Technologist. “However, IoT botnets are a game changer because of the numbers involved. There are billions of these

The largest distributed denial-of-service (DDoS) attack reported this year was

800 Gbps, a 60% increase over 2015’s largest attack of 500 Gbps

devices deployed, and they are being easily weaponised to launch massive attacks. Increasing concern over the threat environment is reflected in the survey results, which show significant improvements in the deployment of best practice technologies and response processes.” Survey Methodology The 2016 Worldwide Infrastructure Security Report (WISR) is based on a survey comprised of 133 free-form and multiple choice questions. This is a significant decrease from 172 last year. Beyond the reduction in the number of questions, this year’s survey has specific logic flows that enable service providers and enterprise/government/ education respondents to see a different set of questions depending upon their self-classification. The questions diverge depending upon the nature of the respondent. Arbor distributes the WISR survey by specifically targeting individuals within the operational security community to get as accurate a picture as possible. Survey participation remains strong despite additional efforts to encourage recusal of respondents without direct network or security operational experience. The number of responses this year was 356 as compared to 354 for the previous survey. IFM

“

The survey respondents have grown accustomed to a constantly evolving threat environment with steady increases in attack size and complexity over the past decade Darren Anstee, Arbor Networks Chief Security Technologist

editor@ifinancemag.com

Apr - Jun 2017 International Finance

technology

Key findings Innovation and Exploitation Fuel DDoS Attack Landscape: The emergence of botnets that exploit inherent security weaknesses in IoT devices and the release of the Mirai botnet source code have increased attackers’ abilities to launch extremely large attacks. Scale: The massive growth in attack size has been driven by increased attack activity on all reflection/ amplification protocols, and by the weaponisation of IoT devices and the emergence of IoT botnets. • Since Arbor began the WISR in 2005, DDoS attack size has grown 7,900%, for a compound annual growth rate (CAGR) of 44% • In the past five years alone, DDoS attack size has grown 1,233%, for a CAGR of 68% Frequency: The chances of being hit by a DDoS attack have never been higher, with respondents showing increased rates of attack. • 53% of service providers indicated they are seeing more than 21 attacks per month – up from 44% last year • 21% of data-centre respondents saw more than 50 attacks per month, versus only 8% last year • 45% of enterprise, government and education respondents experienced more than 10 attacks per month – a 17% year over year increase

Complexity: Multiple simultaneous attack vectors are increasingly being used to target different aspects of a victim’s infrastructure at the same time. These multi-vector attacks are popular because they can be difficult to defend against and are often highly effective, driving home the need for an agile, multi-layer defence. • 67% of service providers and 40% of Enterprise, Government and Education (EGE) reported seeing multivector attacks on their networks Consequences of DDoS Attacks Are Becoming Clear: DDoS attacks have successfully made many leading web properties unreachable – costing thousands, sometimes millions, of dollars in revenue. This has led the C-suite and company boards to make DDoS defence a top priority. • 61% of data centre operators reported attacks totally saturating data centre bandwidth • 25% of data centre and cloud providers saw the cost of a major DDoS attack rise above $100,000, and 5% cited costs of over $1 million • 41% of EGE organisations reported DDoS attacks exceeding their total internet capacity. Nearly 60% of EGE respondents estimate downtime costs above $500/minute More Appreciation of Risk Leads to Better Behaviour: This year’s survey results indicate a better understanding of the brand damage and operational expense of successful DDoS attacks, driving focus on best-practice defensive strategies. Across the board, in every industry, there has been an increase in the use of purpose-built DDoS protection solutions and best practice methods. • 77% of service provider respondents are capable of mitigating attacks in less than 20 minutes • Nearly 55% of EGE respondents now carry out DDoS defence simulations, with approximately 40% carrying them out at least quarterly • The proportion of data centre and cloud provider respondents that are using firewalls for DDoS defence has fallen from 71% to 40%

International Finance Apr - Jun 2017

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Demographics of Survey Respondents

ervice providers represent the majority of respondents at 64 percent (Figure 1) â&#x20AC;&#x201D; a 12 percent increase over last year. The remaining 36 percent come from enterprise, government and education (EGE) network operators. Breaking down the EGE segment, 61 percent are enterprise respondents, with 35 percent and 14 percent representing education and government respectively. Within the service provider category, tier 2/3 and tier 1 operators are the main groupings, as in previous iterations of this report (Figure 2). Looking closer at the EGE respondents, we identified a broad representation of verticals (Figure 3). The largest proportion of enterprise respondents are from banking/finance at 32 percent, a significant increase from 18 percent last year. Technology, automotive/transportation and manufacturing are also well represented, rounding out the top four verticals. Two-thirds of all respondents identify as security, network or operations professionals (Figure 4), a similar result to last year. Security professionals are the highest represented demographic, with 40 percent having this background.

The survey garnered wide participation from all regions (Figure 5). The United States and Canada represent the lead region for participation, with Western, Central and Eastern Europe following closely in second place. Participation from Asia Pacific and Oceana increased significantly this year, with small decreases proportionally for Latin America, the Middle East and Africa. Figure 1 Respondent Classification

64%

Service Provider

ENTERPRISE VERTICALS

Figure 3 Enterprise Verticals

32% Banking/Finance

20% Technology

11% Automotive/ Transportation

9% Manufacturing

7% Energy/Utilities

Respondent Classification

5% Insurance

4% Healthcare

36%

Enterprise, Government, Education

3% eCommerce/Retail

Figure 2 Service Provider Type

Gaming/Gambling

60%

51%

Tier 2/3 provider or regional ISP

50%

Tier 1 service provider Mobile service provider

40%

Managed service provider/MSSP

3% Military/Law Enforcement

Hosting/data center/c o-location services 30%

Wireline broadband (MSO, DSL, etc.)

25%

CDN/c ontent delivery (caching, distribution, streaming, etc.)

20%

10%

Cloud service (virtualization, storage, cloud applications, etc.)

3% Other

DNS registrar/DNS service provider

Other

Apr - Jun 2017 International Finance

R Cl

technology

Figure 4 Respondent’s Role in the organization

5% 40%

12%

Security professional Network professional Manager or director

Respondent’s Role in the Organization

16%

President or officer (CXO) Operations professional Vice President Other

23%

Figure 5 Respondent’s Geographic Information 0%

10%

15%

20%

25%

30%

35%

40%

45%

32% US AND CANADA

7% LATIN AMERIC A ( including Central and South America)

28%

Where is your organization headquarters?

WESTERN, CENTRAL AND EASTERN EUROPE ( including Russia and Iceland)

10% MIDDLE EAST AND AFRICA

23% ASIA PACIFIC AND OCEANIA

45% US AND CANADA

23% LATIN AMERIC A ( including Central and South America)

45%

In what region(s) of the world does your network operate?

WESTERN, CENTRAL AND EASTERN EUROPE ( including Russia and Iceland)

25% MIDDLE EAST AND AFRICA

41% ASIA PACIFIC AND OCEANIA

International Finance Apr - Jun 2017

technology

Customers remain the number one target, with three-quarters of attacks targeting them compared to only two-thirds last year.

75%

11%

Network infrastructure [e.g. routers, firewalls, etc.]

Customers

13%

Service infrastructure

13%

Others

[e.g. DNS, web portal, etc.]

DNS OPERATORS

20%

No security group is responsible for securing DNS infrastructure

22%

Special security group for DNS

DNS Security Responsibility

58%

Same security group

Apr - Jun 2017 International Finance

CALENDAR INTERVIEW

29 June -01 July 2017 Manufacturing Technology World (Trade Show - Industry) Cebu City, Philippines

31 July -02 August 2017 CBAO Convention and Trade Show (Business Services; Banking, Insurane and Finance) Cincinnati, USA

01 August 2017

MARK YOUR

Calendar

29 June -01 July 2017

100

Sunnybank, Australia

22 June -01 July 2017 Aspen Ideas Festival (Business Services) Aspen, USA

28 June -04 July 2017 Battle Creek Field of Flight Air Show and Balloon Festival (Aerospace) Battle Creek, USA

International Finance Apr - Jun 2017

Cuttack, India

Nairobi, Kenya

01 August 2017

29 June -01 July 2017 SAFE - Security and Fire Expo, South India (Trade Show - Industry)

Des Moines Career Fair (Education) Des Moines, USA

Chennai, India

29 June -01 July 2017 Expo Internet LA (Trade Show - Computer Hardware and Software) Buenos Aires, Argentina

06 July 2017

03 June -04 June 2017 Gunyah Club Display Gem Show (Gems)

Business Opportunities Show Cuttack (Business Services)

China Trade Week (Trade Show - Industry)

Sicherheits Expo Munchen (Technology) Munich, Germany

07 July -08 July 2017 E-Power & Lighting (Energy)

Melbourne, Australia

29 July -01 August 2017 Iran International Water and Wastewater Exhibition (Environment and Waste Management) Tehran, Iran

01-02 August 2017 Cyber Texas Conference and Exhibition (Computer Hardware and Software; Industrial Products) San Antonio, USA

29 August -01 September 2017 Asia Pacific Mining Exhibition (AIMEX) (Business Services) Sydney Olympic Park, Australia

06 -08 September 2017 Internet of Things (Technology)

Malaysia, Kuala Lumpur

08 -09 September 2017 International Conference on Additive Manufacturing Technology (Manufacturing) Bengaluru, India

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OUT OF OFFICE

‘I’m a bit of an adrenaline junkie’ Brett King, CEO at Moven, which has pioneered a smartphone banking app that helps users track their money, loves to fly planes when he is out of office How do you spend time outside of office? I spend time with my children whenever I get downtime as my travel schedule keeps me away a lot. It’s great to hang out with them and see what they are getting up to, how they are doing at school. When I’m not with them, I also like to spend time flying. There’s really nothing like it. What do you generally prefer doing on your off days — stay at home or go out with family or friends? When I’m not working, I often find myself being a taxi driver for my teenage children. I’m glad that’s not my full-time job. It’s such hard work! I’ll normally end up taking them to their friends’ houses, or wherever. When I’m not driving them, we often try and catch a movie, or go out for dinner as a family. You can’t beat good quality downtime, right?

102

What are your hobbies? I’m a private pilot and I’m doing my Instrument Flight Rules (IFR) rating training these days, which means lots of study and practice. If I pass, it means I will be able to fly with fewer restrictions, to higher altitudes and within differing meteorological conditions (i.e., clouds). I also enjoy gaming and - when I can - driving competitively, too. You could say I’m a bit of an adrenaline junkie. Do you buy the latest gadget out in the market? Which has been your most recent purchase? Absolutely, I love gadgets. I already have the iPhone 7, which is great, and I also bought the new virtual reality headset for Playstation which, frankly, is taking gaming to amazing new levels. Do you go on vacations often? Which place did you visit on your last vacation? Ha, I wish! I don’t vacation nearly enough. Most recently I took a week out with my daughter in the summer. We went to Australia, which was awesome. As well as hanging out with her, I also got the opportunity to catch up with my dad, who lives in Melbourne. It’s such a beautiful city, and it was great to have some solid father-son time.

As told to Suparna Goswami Bhattacharya

International Finance Apr - Jun 2017