IF YOU LISTEN to all the hype, there’s a tendency to feel that the advance of technology is like some kind of superspeed, unstoppable bullet train – rapidly improving our lives and adding layer upon layer of convenience at every station it hurtles past.
But the technology sphere – much like the world in general – is not as straightforward and smooth-running as it might first appear.
In this issue, we explore some of the challenges the sector faces, alongside some of the clear and obvious ways it is indeed adding value and creating opportunities for business.
Let’s start with where tech is clearly adding value – and where businesses see great opportunity from it.
One such area is in regtech. Our feature starting on page 30 explores how, having had the door opened by a need to automate processes during the Covid-19 pandemic, the regulatory sector has seen the opportunity for technology to play an even more crucial role –and is responding accordingly.
From automated digital address verification, to digital customer onboarding that ensures compliance with Know Your Customer regulations, and real-time fraud prevention monitoring – technology providers are racing to deliver the solutions businesses not only need, but which can help them gain an edge.
Far from being a dull regulatory topic playing out in the background, regtech has now become sexy as a result of the competitive advantage and reduced regulatory burden it can deliver across the financial sector in particular. As a result, it is predicted that by 2026, regtech will be a $204bn sector – up from $68bn today.
Another area purporting to offer considerable opportunity for financial services businesses is the metaverse.
As our feature starting on page 16 finds, JPMorgan Chase, HSBC and a host of other banks have already dipped their toes in the metaverse water – believing it can deliver greater financial opportunity alongside an improved and seamless customer experience.
JPMorgan Chase has described it as a world where “people will be interacting as avatars, working, making money and investing profits in the form of cryptocurrency” – albeit acknowledging that it will take some time for this to come to fruition.
Exactly how well the banks’ commitment will be met with demand remains to be seen – but it’s certainly an area that everyone is
talking about, and that usually means opportunity.
This issue (page 38), we also find that technology could be set to play an increasingly valuable role in the ESG space – with artificial intelligence tipped by many in the sector to finally deliver a universal measurement framework for companies’ true ESG impact.
With asset managers across the world expected to increase their ESG-related assets under management from $18.4trn in 2021 to $33.9trn by 2026 – tech’s involvement may again be timely.
Of course, alongside opportunities come challenges – and the tech sector is certainly not without some pretty hefty ones.
The first is around talent. According to our article starting on page 46, the focus on customer convenience, automation and remote access is fundamentally changing the skills that will be required at the heart of financial services firms going forward. The challenge is that we are not developing enough people with those skills.
“The investment in upskilling is sadly lacking,” one sector expert tells us. “People are investing in technology, but they are still fundamentally forgetting their most critical asset is their human resources – their great minds, their people.”
“A digital skillset is now becoming a prerequisite of roles within a strategic, decision-making capacity; not always that they must have specialist skills themselves – such as coding and development – but rather the understanding of how the latest technology can be harnessed and fully embedded within the organisation, to make best use of fintech solutions,” another expert says.
Alongside this challenge, the tech sector faces an even more immediate problem: supply issues. As we find in our feature starting on page 50, China’s plans to reunify Taiwan and the war in Ukraine are causing big supplyissues for a tech sector the business world depends on.
If the sector can’t find a way to overcome this immediate supply chain challenge, the multiple opportunities outlined above may well be irrelevant.
Enjoy the issue. nJon Watkins is Editor-in-Chief of Businesslife
Technology providers are racing to deliver the solutions businesses not only need but which can help them gain an edge
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Recent business developments in Jersey and Guernsey
Senior job changes across the islands
Offering everything from asset management to virtual real estate and loans against virtual assets, is the metaverse really set to be the next banking battleground?
The Digital Markets Act is poised to put the brakes on the five big tech firms that currently dominate the market
Promising competitive edge and streamlined operations, regtech is rising up everyone’s agenda
38 aI and esg
Artificial intelligence may be intelligent enough to give businesses – and investors – a reliable take on ESG credentials
Financial services professionals need to sharpen their skills to excel in an increasingly digital world
Office: 7 Castle Street, St Helier, Jersey, JE2 3BT
© Chameleon Group Limited, all rights reserved. Reproduction in whole or in part without written permission is prohibited. Views expressed by our contributors are their own and do not necessarily represent the views or policies of Chameleon Group. While every effort is made to achieve total accuracy, Chameleon Group cannot be held responsible for any errors or omissions.
David looks at the growing influence of artificial intelligence and automation within the increasingly important regtech sector, and finds that the regulators are accelerating the pace of change.
Amid rising tensions between China and Taiwan, and with ongoing supply chain challenges resulting from the conflict in Ukraine, Sophie asks: is tech manufacturing facing an outage?
chain China’s plans to reunify Taiwan and the war in Ukraine are causing big problems for a tech sector the business world depends on
AI is becoming indispensible in the fight against cybercrime but could it become a threat to humans in the process?
The knowledge Books and resources, focus on cybersecurity, and... who is Satoshi Nakamoto?
Meanwhile, David asks whether AI – with all its processing power and data-analysis capabilities – can finally deliver a universal method for measuring firms’ ESG commitments and impact.
And Alex takes a leap into the metaverse to see what it has to offer financial services firms that are eager to evolve and seize the opportunities of this virtual world.
in the NEWS Done Deals
JERSEY TAX COMMENDATION
Jersey has received the highest rating available in an assessment of its practical implementation of the Common Reporting Standard (CRS).
A report from the OECD’s Global Forum on Transparency and Exchange of Tax Information reviewed how well 99 jurisdictions had implemented the CRS. Jersey was among a few to receive the highest rating possible of being ‘on track’ for every aspect reviewed, with an overall rating of ‘on track’.
The CRS requires jurisdictions to collect and exchange tax information on financial assets held in Jersey by non-residents. In 2022, Jersey exchanged this information with the
Gorst, said: “This rating reflects the seriousness with which Jersey takes its commitments to international tax cooperation and transparency.
“I am pleased that the significant investment of time and resources by Jersey’s financial institutions and Revenue Jersey has been recognised by the OECD.”
GUERNSEY LENDING LAW
The Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022, approved by the States of Guernsey, the States of Alderney and the Chief Pleas of Sark in July 2022, will come into effect in two stages in 2023.
Various provisions come into effect from 1 January, which will allow the Guernsey Financial Services Commission to put in place its own rules and guidance, and to invite applications for licensing. The legislation will then come into full effect from 1 July.
The law covers several areas:
• It introduces consumer protection and the regulation of credit provision and home finance across the bailiwick for the first time.
Jersey law firm Edward Scott and Co has advised Fifty-Eight Capital on the sale of London mixed-use building Holborn Gate to Hoi Hup Realty. Holborn Gate, next to Chancery Lane station, comprises 159,000 sq ft of office and retail space. Edward Scott and Co’s team advised on the Jersey aspects of the sale and worked with Dentons (English counsel) and Moore Stephens (Jersey corporate administrator). A team from Ogier’s Jersey office advised Hoi Hup Realty on the acquisition, working alongside English counsel at Mayer Brown.
Mourant has advised Aristata Capital on the launch of its debut impact litigation fund, Aristata Impact Litigation Fund, domiciled in Jersey. Aristata was attracted to the island by the Jersey Private Funds regime and its scope for ESG-focused investment strategies. The fund is seeking to finance commercial litigation and arbitration that will generate positive and measurable social and/or environmental impact across a global portfolio of claims. Working with lead onshore counsel Reed Smith, as well as Fairway Group, the fund’s Jersey administrator, Mourant LP Partner Alistair Horn led the transaction for Mourant, supported by Counsel John MacFeeters and Associate Kieran Sharman.
tax authorities of 74 other jurisdictions.
The review examined whether jurisdictions have the necessary law, processes and systems in place to ensure that their financial institutions are complying with the standard.
It also looked at whether jurisdictions were properly collecting and exchanging the information collected.
Jersey, which committed itself to introducing the CRS in 2014, was one of the early adopters of the standard. Financial institutions have been reporting information since 2017.
The Minister for Treasury and Resources, Deputy Ian
• It replaces the existing registration regime for nonregulated financial services businesses with licensing and regulation requirements.
• It introduces the regulation of virtual asset service providers, bringing the bailiwick in line with international standards.
• It requires peer-to-peer and crowdfunding platforms in the bailiwick to be licensed and regulated.
The Commission is working through responses to its consultation on its rules and approach for regulating the sectors covered by the law.
It plans to issue a feedback paper, together with the finalised rules and guidance, ▼
Ogier’s corporate and funds advisers in Guernsey have assisted longstanding client Hipgnosis Songs Fund with a financing of $700m. Hipgnosis, which launched in 2018, is a Guernseyregistered investment company listed on the FTSE 250 Index. It is the first UK-listed investment company offering investors a pure-play exposure to songs and associated musical intellectual property rights. Working with onshore counsel Herbert Smith Freehills, the Ogier corporate and funds team provided Guernsey law advice on various aspects of the financing, which will be used to refinance the previous facility and for working capital. Partner Tim Clipstone led the team, assisted by Managing Associate Michelle Watson Bunn and Senior Associate Diana Collas.
Walkers’ Jersey banking and finance team has advised Rothesay on providing a 10-year senior term loan to Lendlease for the acquisition of 21 Moorfields in the City of London. The development, bought for £809m and expected to be completed in Q1 2023, comprises about 564,000ft of retail and commercial office space. The Walkers team, working with instructing counsel at Clifford Chance, was led by Group Partner Jon Le Rossignol and included Senior Counsel Louise Hamilton and Associate Rebecca Lever. They advised the lender on the Jersey law elements of the financing of the new office development, which will become Deutsche Bank’s new home in the City. n
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MERGERS AND ACQUISITIONS
Mourant has acquired Luxembourg law firm LexField and its affiliated governance services business, FideField. The transaction, subject to approval, is expected to complete in Q1 2023. LexField, a boutique corporate and tax practice, specialises in private equity, investment funds, M&A and private wealth, while FideField provides entity management services to corporate and financial services clients.
Zedra has announced the acquisition of two companies that provide professional trustee services to UK corporate pension schemes – AAA Trustee and Trustee Matters. The acquisition, which follows those of Inside Pensions and PTL in 2021, as well as Caledonian Trustees and Clear Pen Solutions earlier in 2022, enhances Zedra’s presence in the UK pension services sector. AAA and TML will sit alongside and report through Zedra Governance (formerly PTL) and rebrand as Zedra in due course.
The Highvern group, which has offices in Jersey, Guernsey, Ireland, Switzerland and the UK, has expanded into the Cayman Islands with the acquisition of Genesis Trust & Corporate Services. Genesis, which serves the private capital and funds governance markets, will complement Highvern’s private wealth, funds and corporate services offerings. Director Paul Drake and CEO Roger Priaulx will remain with the business. Roger has also joined Highvern’s Executive Committee. Naomi Rive, Group Head of Private Wealth at Highvern, has joined the Cayman board.
JTC has completed its acquisition of New York Private Trust Company (NYPTC), a Delaware-chartered non-deposit trust company. NYPTC offers a range of fiduciary services, including trusts, estate administration and white-label platforms to highnet-worth individuals, family offices and corporate clients based in the US and around the world. NYPTC joins JTC’s existing private client services operations in the US, which now include offices in Delaware, Miami, New York and South Dakota.
Stonehage Fleming has acquired Rootstock Investment Management, based in South Africa. On completion, Stonehage Fleming will acquire all the operating activities of the business, including the Rootstock SCI Worldwide Flexible Fund and the Rootstock Global Equity UCITS Fund. Subject to approval, Rootstock Global Equity UCITS Fund will be amalgamated with Stonehage Fleming’s Global Best Ideas Equity Fund. Rootstock SCI Worldwide Flexible Fund will be renamed the Stonehage Fleming SCI Worldwide Flexible Fund. Rootstock founder Thys du Toit will join Stonehage Fleming as a Partner. n
a list of exemptions from the requirement to apply for and hold a licence, and frequently asked questions, by the end of January. Information on the application process will be published alongside the final rules, and the licence application window will open at that time.
Early submissions will be encouraged, with discounted application fees to allow applications to be processed ahead of the commencement of the law. From 1 July, firms without a licence may not operate until the appropriate licence is in place.
DIRECTORS OF THE YEAR
The 2022 IoD Jersey Director of the Year Awards winners have been announced (pictured above), celebrating leadership across a range of sectors and organisations in Jersey. Ten awards, as well as the discretionary Chair’s Award, were announced at a presentation event at the Royal Yacht Hotel. The judges included Kevin Keen, Heather MacCallum, Dan Hare, Helen Hatton, Kate Wright, Kate Nutt and Chris Ambler.
• Director of the Year, Large Business – Paul Murphy (Onogo)
• Director of the Year, SME Business – Chris Le Masurier (Jersey Oyster Co)
• Family Business Director of the Year – Gerald Voisin (Voisins)
• Start-up Director of the Year – Rob McCombie (TCA Digital)
• Third Sector Director of the Year – Donna Abel (Jersey Cheshire Home)
• Public Sector Director of the Year – Amy Taylor (Digital Jersey)
• Young Director of the Year – Nathan Nicholls (Switch Digital)
• Director of the Year, Equality, Diversity and Inclusion –Julia Warrander (Affinity Private Wealth)
• Director of the Year, Sustainability – Mark Brandon (SunWorks)
• Non-Executive Director of the Year – Alan Merry (Jersey Post)
• Chair’s Award – Lisa Springate (Head of Legal and Technical, Jersey Finance).
Businesslife has announced a series of roundtable debates for 2023. The virtual discussions will bring together top business leaders from across the islands to discuss the hot topics facing the business world – and will be tied to the magazine’s key themes for the year:
• February/March – Wealth
• April/May – ESG
• June/July – Future of Financial Services
• August/September – Funds
• October/November – Trends and Disruptors.
Following each discussion, a write-up of the key messages from the debates will be produced for the magazine
– offering readers insights into the minds of the islands’ leading figures.
To take part in the continued
Sometimes you need to challenge the status quo to get the best outcome. At Collas Crill, we take the time to understand your goals and will break the mould to help identify simpler, smarter and faster ways to achieve them. Anyone can give you an answer, but we’ll find the answer that’s right for you.
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Deloitte publishes TMT predictions for 2023
Deloitte’s technology, media and telecommunications (TMT) practice has announced its predictions for the sector for 2023. These include:
Advertising video on demand
Deloitte predicts that by mid-2023, all major video subscription services will have launched an ad-funded tier alongside ad-free offerings in Europe.
By the end of 2024, half of these providers will also have launched a free ad-supported streaming TV (FAST) service.
Additionally, about twothirds of consumers will use at least one advertising video on demand service monthly, 5% up on 2022. By 2030, most online video service subscriptions will be partially or wholly ad-funded.
Meanwhile, ad-funded tiers from subscription video on demand (SVOD) platforms will join existing ad-funded streaming services from broadcasters.
Shopping through social media
Deloitte predicts that spending on goods and services via social media will
(continued from p8)
roundtable discussions, business leaders are invited to email Editor Jon Watkins, setting out their suitability and the subject they would like to speak on – jon.watkins@ blglobal.co.uk.
The write-ups of the discussions will also provide sponsorship opportunities for businesses interested in promoting themselves around certain topics – with deals available alongside the magazine’s other exclusive advertising offer announced earlier in 2022:
• An advertising slot in any three issues of Businesslife in 2023
• Advertisers that commit by 31 December 2022 can secure all three advertising slots for a combined price of £2,500
• Advertisers that book before 31 January 2023 can secure the deal for £3,000.
If you are interested in exploring these or other commercial opportunities in
surpass $1trn (£820bn) globally in 2023 – representing a 25% increase year-onyear from $800bn (£650bn) in 2022 and $655bn (£540bn) in 2021.
This comes as a growing number of platforms offer e-commerce services, whether via content creators or brands.
Consumers are turning to new forms of online shopping to find the best deals. Research published in 2022 showed that in the UK 53% of Gen Z consumers and 42% of Millennial consumers are influenced by social media personalities when they are making buying decisions.
Deloitte predicts that 2023 will see the launch of the first 5G smartphones to retail at less than $100. Although this will make up a small share of smartphone sales in 2023, it marks a move towards more accessible 5G devices for consumers across most markets.
A $99 5G phone would look and feel similar to that of a top-of-the-line model in size and design, but would consist of low-end displays, single-lens cameras, low-power processors and smaller
storage capacities. The total sum of these components, plus shipping and assembly, could cost as little as $127.
The manufacturer, which could be a telecoms provider, could then subsidise the retail price of the device with additional revenue streams, such as pre-installed apps, and advertisements.
Virtual reality goes mainstream
Deloitte predicts the virtual reality market may generate almost $7bn (£6bn) in global revenues in 2023, a 50% increase on 2022’s estimate of $4.7bn (£4bn).
Headsets will generate almost all (90%) of revenue in 2023, with around 14 million units, averaging $450 (£370) each, expected to sell across the year.
Deloitte predicts that the number of actively in-use VR headsets worldwide will reach 22 million in 2023, almost 50% higher than the figure in mid-2022.
Consolidation of gaming sector
Deloitte predicts that in 2023, global deal volumes for game company mergers and acquisitions will increase by around 25%, up from 600 in 2021 and an estimated 750 in 2022. n
Businesslife throughout 2023, please contact Carl Methven on 07377 866779 or email email@example.com.
HSBC BALANCING ACT
A global study from HSBC has found that businesses face a balancing act of targeting international expansion and managing trade and supply challenges, with investment in digital platforms set to be a big driver behind that growth.
HSBC’s Business Balancing Act study surveyed CEOs and CFOs from more than 2,100 businesses across 14 markets around the world. It found that 64% of global mid-market enterprises – firms with a turnover of between $10m and $500m – plan to expand internationally in 2023.
The relative positivity shown by businesses, however, is set against concerns over inflation and the cost of living (38%), increased interest rates (32%) and, for many markets,
political uncertainty (27%). The research, carried out for HSBC by polling company Toluna, also found that businesses expect technologydriven efficiencies and the expansion to new digital platforms and channels to be two of the major growth drivers, demonstrating business leaders’ continued emphasis on digital and innovation.
In addition, more than a third of those polled said increasing domestic demand and the ever-growing prioritisation of sustainability will play vital roles.
Aline Ayotte (pictured), Head of Commercial Banking at HSBC in the Channel Islands and Isle of Man, believes the Crown Dependencies have the capacity to play a key role supporting that growth.
“There are a number of indicators in this global
survey that suggest the Channel Islands and Isle of Man are well placed to support the international growth objectives of businesses in 2023,” she said. “The islands have the capability to provide much needed access to financing for cross-border businesses looking to grow into new markets, while offering innovative digital solutions that can assist companies with streamlining operations.
“The islands have been successful in establishing themselves as centres for sustainable finance and, against the backdrop of market volatility, provide businesses with platforms of stability.
“That will be highly prized heading into 2023. It’s important that the islands continue to be robust and clear about delivering that message to the global commercial sector.” n
Oak has appointed Belinda Ridout as Director of Client Accounting, based in Guernsey. Belinda has spent the past 13 years with Aztec Group, latterly as an Associate Director, specialising in private equity across multiple complex fund structures. She has considerable expertise creating processes and procedures to improve delivery of services, as well as training team members and managing the onboarding of clients during fund migrations and launches. She has also served on numerous regulated general partner boards for venture capital and buy-out funds.
Hawk Group has hired Maria Tengdahl as Client Services and Lending Operations Manager and Compliance Administrator for Hawk Estates in Jersey. Maria has served as AMLi Manager for HSBC, covering the Channel Islands, Isle of Man, Hong Kong and UAE offices. For the past two years she has led the Government of Jersey’s Enforcement Team. In addition, Hawk Group has appointed Sean Le Chevalier as Client Services Manager for Hawk Brokering. Sean has more than five years’ experience in debt structuring at Close Finance CI, supporting sales teams and underwriting secured and unsecured lending applications for clients.
Nathan Petty has joined Praxis’ business development team in Jersey as Director, moving from his previous client role at the firm. Nathan brings to the new position 12 years of financial services experience working for high-net-worth and ultra-highnet-worth individuals and families. He has specialised in offshore structures including trusts, companies, foundations and limited partnerships. He joined Praxis in February, having spent eight years with fiduciary services provider Valla as a Director. Nathan spent his early career with First Names Group as a Business Development Manager.
Collas Crill has appointed Victoria Grogan as Group Partner in its International Private Client and Trusts team in Jersey. Victoria spent the first 11 years of her career in wills and probate roles at Carey Olsen, before joining Ogier in 2017 as Counsel. She most recently served as Head of Wills and Probate at Ogier. Victoria advises on all aspects of Jersey wills, probate and mental capacity law for local and international clients and she also acts as professional executor, delegate and attorney. She has significant expertise in succession planning, will drafting and the administration of complex and cross-border estates.
IQ-EQ has appointed Jon Stevens as Head of Risk and Compliance in Jersey. Jon has more than 10 years’ experience in risk and compliance, most recently as Director of Policy at the Jersey Financial Services Commission. He started his career with KPMG and Deloitte as a chartered accountant and auditor, before holding various senior policy and managerial positions with the JFSC. In his new role, Jon will lead on the delivery of strategic targets in the risk and compliance function, as well as participating in risk and operations committees, identifying improvements in policies and procedures.
Jersey consultancy Switch Digital has appointed Lynne Capie as Co-owner and Director alongside MD Damon Eastwood. As a result, Switch has partnered with Soteria, a crisis management business focusing on cyber incidents, which Lynne launched in September. Lynne is a communications professional with experience in hospitality, local government, finance and legal sectors. She has spent six years with Appleby, latterly as a consultant but also Head of Operations in Jersey. Her career also included periods with RBS, including two years as Head of Communications for RBS International.
Tim Ringsdore, CEO of the Jersey Competition Regulatory Authority, has taken over as Chair of the Small Nations Regulators’ Forum for 2023. Tim became JCRA CEO in February 2021, having held the role in an interim capacity from June 2020, when the JCRA split from the Channel Islands Competition and Regulatory Authorities. He has worked in regulation, telecoms and television across the Channel Islands, London and British Virgin Islands, with a strong track record at board level. The SNRF was founded by the International Institute of Communications (IIC) to enable small jurisdictions to share knowledge.
HSBC has appointed Will Paine to the position of Chief Risk Officer in the Channel Islands and Isle of Man, overseeing HSBC’s risk framework across the islands. Will has 20 years’ experience with HSBC, having started his career working for the UK bank in a distribution role, before moving to Jersey in 2011 to run the Premier Wealth business on the island. Over the past seven years he has worked in a variety of risk-focused roles within HSBC’s Wealth and Personal Banking (WPB) and Commercial Banking business, most recently as Chief Control Officer in WPB for the Channel Islands and Isle of Man and Europe.
Highvern has added Kerrie Le Tissier to its Guernsey office as a Director. Kerrie is an Advocate with 18 years’ experience in law firms in Guernsey and Jersey, including Ogier, Bedell Cristin and Collas Crill. Most recently, she ran her own private wealth practice in Guernsey, KLT Legal, specialising in services for fiduciaries and high-net-worth clients. She has chaired the Guernsey Association of Trustees’ technical committee since July, having been a committee member for the past year. Kerrie has also worked for Australian law firm Mills Oakley and a family office in Switzerland.
KPMG in the Crown Dependencies has appointed Rachelle Wilkes to the role of ESG Director, based in Guernsey. Rachelle has more than 15 years’ experience in science, technology and finance. She has spent the past five and a half years with HSBC, latterly as Product Governance and Sustainability Lead for HSBC Asset Management. Rachelle contributes to ESG education as a board member for the MBA programme at Durham University Business School and as a climate ambassador for MIT Sloan. She also has cross-sector experience as the business lead in state-wide projects across New South Wales in Australia.
Crestbridge has appointed Laura Parkes as a Director in its Family Office Services team, based in Jersey. Laura will lead on family office structures administered in Jersey for clients in the Americas, Canada and the UK. She will also support business development efforts in the Americas, including working with Crestbridge Fiduciary, the firm’s US joint venture with Willow Street. With more than 20 years’ experience in the private client trust sector, Laura joined Crestbridge after five years with Standard Bank Group, latterly as African Team Leader. Laura’s earlier career also included periods with Citi, HSBC and ABN Amro.
Hawksford has promoted Steve Spybey to Group Chief Operating Officer, Caroline Morris to Group Chief Financial Officer and Rachel Husbands to Finance Director for Jersey. Steve has been with the firm since 2014, latterly as Chief Finance Officer, having spent 11 years with EY. Caroline’s new role is an expansion of her previous one as Global Head of Finance. She joined Hawksford in 2012 after 13 years with Trustcorp (Jersey). Rachel joined Hawksford in 2019 as Head of Business Management. During her career she has also worked for Stonehage Fleming, Intertrust, Ogier and Coutts Offshore Europe.
Entrepreneurs and their succession the path to investing
Building a business succession or exit strategy can be one of an entrepreneur’s best investments – but in practice, traditional succession approaches can be complex.
Stephen Coelho, Client Advisor at UBS Global Wealth Management in Jersey, considers some potentially overlooked aspects of executing a business succession, exit or winding up
IN THE SECOND quarter of 2022, a UBS Investor Watch survey found that 37% of investors were highly concerned about the value of the assets they’d pass on to future generations.
Succession and exit often depend not simply on business value, but also on financial wealth and its ability to support the lifestyles of the business’ founder and their family.
The current economic and market uncertainty – particularly in relation to the path for inflation – could be making entrepreneurs more concerned about their next steps.
However, despite the turbulence, today may still be an opportune time to begin or revise business succession and exit strategies, so that they align with the
entrepreneur’s particular circumstances. Here we identify three dos and don’ts for entrepreneurs to consider and act upon for their business and private wealth:
1. DO INCLUDE SUSTAINABILITY AS PART OF THE AUCTION OR NEGOTIATIONS PROCESSES
Sustainability is an increasingly important topic for all stakeholders. This also applies to prospective buyers. However, traditional designs for an auction or negotiation process may not explicitly include sustainability criteria.
We are therefore experiencing growing scope for sustainability criteria to be included inside an entrepreneur’s value maximisation measures when working on a deal and its details.
The value maximisation process can be considered in terms of five parts:
1. Clear and consistent conditions around bidding
2. Robust information provisions
3. A comprehensive set of seller criteria
4. Creating a healthy competitive environment for potential suitors
5. Careful consideration of how the transaction will be structured.
Sustainability and ESG transparency are also increasingly important for attracting capital and investors. Potential buyers may view a target company as a sustainability leader, one with scope for sustainability improvement, or as a firm well placed for ESG engagement as part of the process to increase value before a full exit.
When it comes to designing the optimal auction or negotiation process for a partial or full business exit, it may be worth including sustainability criteria or commitments as part of the bidding rules.
Businesses with a strong sustainability or social mission may find that longterm value maximisation arises from selecting a buyer who pays a reasonable price and commits to the firm’s ongoing sustainability efforts through purpose and capital commitments.
Sustainability will also likely matter for entrepreneurs in their information provision. If the investment case for buying a firm can be increased by outlining the target company’s sustainability credentials (or scope for improvement), adding robust, verifiable and outcome-focused sustainability data into management presentations and the data room may be worthwhile investments for entrepreneurs looking to sell.
2. DON’T THINK THE PATH FROM ENTREPRENEUR TO WEALTH MANAGER IS LINEAR – THINK IN SCENARIOS
Reports in the financial press about a private company’s initial public offering and the sudden jump in an entrepreneur’s paper net worth can provide a misleading impression about the transition from business owner to wealth manager or steward.
In reality, the transition is often not linear. Nor does it necessarily follow the best-made plans. One of the most important initial challenges for an entrepreneur exiting, transitioning to the next generation or even winding up their firm is how to manage near-term financial
needs against long-term financial goals, such as saving for retirement or leaving a legacy to improve the lives of others.
Entrepreneurs often find it difficult to move their wealth from a business they control to external investments whose performance lies outside their control. This emotional challenge can be particularly acute in bear markets (defined as periods where the S&P 500 index of large-cap stocks falls more than 20% from its peak).
3. DO CONSIDER MARKET VOLATILITY AS FRIEND AND FOE – INCLUDING WAYS TO MITIGATE AND MONETISE IT
Volatility of wealth is less of an entrepreneurial concern when holding a business. Few business owners undertake frequent market valuations. At execution of a business sale, transition or winding down, the volatility of financial market assets (including cash) can be an uncomfortable and new reality for entrepreneurs to face.
Prima facie, the idea of ‘volatile’ cash may seem odd. But cash is useful for meeting real (after-inflation) spending needs. And in today’s environment of high inflation around many parts of the world – and uncertainty around how quickly inflation will moderate toward central banks’ targets – holding excessive amounts of cash can mean more volatility in the level of real wealth, with the potential to introduce uncertainty around meeting financial goals.
Shielding financial portfolios from volatility – to maximise the chances of having money when one needs it – is a key
entrepreneur consideration at a liquidity event. In our research paper Three ways to build financial resilience in an uncertain world, we discussed how portfolio diversification across multiple asset classes, sectors and geographies may help to smooth portfolio returns. But over recent months, the falls in both equities and fixed income have challenged many traditional asset allocation approaches. n
Whether you are looking for trusted advisors to guide a sale or succession conversation or to connect with peers who have already walked the path, contact Stephen Coelho for more information.
Stephen Coelho, Client Advisor, UBS Global Wealth Management in Jersey
St Helier, Jersey
JE2 3BX 01534 701134 firstname.lastname@example.org
You can also read the full report here: https://bit.ly/path_to_investing
UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. © UBS 2022. All rights reserved.
The idea of ‘volatile’ cash may seem odd, but cash is useful for meeting real (after-inflation) spending needs
Virtual reality or virtual insanity?
Everybody’s talking about it, But can the metaverse really become the next banking battleground – offering everything from asset management to virtual real estate and loans against virtual assets? Some are sceptical, others think it’s inevitable
IT’S A CUTE idea. You want a bank loan, but instead of going on your banking app and locating the products available, then filling in a lengthy form, you decide to pop into the branch and meet the manager face to face. It’s just like the old days, in fact. Except in this case, the branch in question doesn’t actually physically exist – it’s in a virtual place called the metaverse, and the manager is represented, like yourself, by an avatar.
Despite that virtual element, the two of you can interact directly, perhaps even exchange a little small talk, as the Know Your Customer (KYC) process is completed and your loan is arranged. You’re not exactly best buds now, but at least you can put a (digital) face to a name.
That’s just one vision of how banking and the management of assets might take place in the metaverse, the virtual reality stronghold that many tech companies believe is going to be the next big growth area for the internet.
There are many other visions for how the metaverse can support the banking sector, too. How do you finance and transact digital assets, for example? How do you transfer wealth from traditional or fiat currency to crypto, and vice versa? Is there a niche for fintech players that exist and operate entirely within the metaverse, in a self-contained but decentralised banking system? The questions – and opportunities –seem boundless.
Banks have certainly been among the early players to show interest in the metaverse. In February, JPMorgan Chase became the first bank to make a move when it opened its Onyx Lounge on the platform Decentraland. The idea is that the Onyx Lounge will allow the firm to run banking services virtually, just as it does in the physical world.
In an accompanying whitepaper, Opportunities in the Metaverse, JPMorgan Chase described a world where people would be interacting as avatars, working, making money and investing profits in the form of
cryptocurrency – albeit acknowledging that it will take some time for this to come to fruition.
HSBC was next out of the blocks. It formed a partnership with alternative platform Sandbox, acquiring a plot of virtual real-estate that will enable it to exploit opportunities in sport, esports and gaming.
The specific idea is that it will build a virtual stadium that will offer sharedscreen experiences for gamers, sports enthusiasts and entrepreneurs – but more than that, the initiative will give HSBC a toe in the water to test the market for a wider spectrum of banking services.
A number of other banks have also taken cautious steps into the metaverse, amid a great deal of hype about how profitable it could be in the years to come.
JPMorgan points out that already some $54bn is spent on virtual goods each year,
while non-fungible tokens – or NFTs as they are better known – have a combined market value of $41bn.
Goldman Sachs has estimated the metaverse – or metaverses – could generate $8trn of revenues every year by 2030, while KPMG puts the figure even higher, at $13trn.
Nobody knows if these forecasts will come to fruition, of course. But if they do, there will be a huge quantum of metaverse assets to manage – and the bets that players such as Facebook owner Meta have already placed on this happening mean it has to be taken seriously.
There is scepticism too. Kyle Brits, Suntera Global’s Isle of Man-based Senior Manager, Digital Technologies, providing corporate services for digital companies, believes HSBC’s initial motivation is really just to
gain brand exposure in the space. And he doubts that retail bank customers will want to go into any kind of branch – virtual or physical – to carry out transactions that they have spent recent years learning to do online or by mobile.
“I’m 35 years old and pretty tech savvy,” says Brits. “Why on earth would I log into the metaverse, and go through all the effort of actually getting involved in the space, just to be able to look at my bank account, which I can do very effectively by just going on to my app on my phone?”
The far more pressing issue, Brits adds, is for conventional banks to work out how they are going to handle the holding and transaction of the digital assets that will form the bread and butter of the metaverse if they want to have a role in the new space.
That’s something that will prove highly challenging, he says. “You’re going to need
some form of digital wallet, which can store both digital assets and cash. That’s going to have a unique user ID and my real-world person is going to be attached to a virtual avatar through this wallet.”
When it come to the KYC process, he says, banks will want to carry out enhanced due diligence because customers in the metaverse are likely to have cryptoassets, which traditional banks are uneasy with as a source of wealth.
“But that’s going to be a very tedious process if my money came from crypto; I’ll need to go back five years and prove where my crypto has come from, and the bank quite likely doesn’t even understand what I’m showing them.”
Alexander Curry, a Partner at Ogier who specialises in digital, blockchain and fintech matters, says he has seen a lot of interest from entrepreneurial clients who have developed assets in crypto and the
metaverse and now want to scale up their operations and formalise the structures.
“They are often people who had an initial hobby-type interest in crypto and the metaverse, and are starting to look for advice principally around how to hold these assets, how to scale up their business, how to attract additional investment, and how to take their business on to the next level,” Curry explains.
Some are looking to raise money to fund further acquisitions in the metaverse, he says, while others want to develop their assets, trade them and generate income.
Often, the assets in questions are NFTs or NFT land on sites such as Sandbox, Axie Infinity or Decentraland. The structures are not unlike those used for more conventional assets, but regulation is a work in progress.
“We have a very robust existing regime in Jersey, which was not designed
The regime in Jersey was not designed for virtual currencies. It is going through an overhaul, with a legal and regulatory upgrade that will come in during 2023
for crypto and virtual currencies,” says Curry. “It is going through a review and an overhaul, with a legal and regulatory upgrade that will come in during 2023.”
LENDING OF THE FUTURE
The key services that such players require from financiers – whether they be traditional banks or providers of decentralised finance – include the ability to on-ramp fiat cash and convert it to cryptocurrency, and then do the reverse when it comes to taking out crypto profits and turning them back into cash.
But entrepreneurs in the crypto space also want to borrow money in order to acquire assets. This is a new and complex landscape, but there is some agreement that, for now at least, crypto is simply too volatile to provide the security for such loans. For that, companies will have to fall back on their assets in the physical world to raise such borrowing.
There are organisations that style themselves as a kind of mortgage provider for the metaverse – British Columbia-based Terra Zero is one such firm. But, according to Brits, it is providing business loans on the back of a business plan, not on the strength of virtual property assets.
Banks that want to build true metaverse lending operations will need to develop an appetite for crypto assets to match.
“We cannot get new crypto clients onboarded with any of the major high-
street banks right now,” says Brits. “It’s not an acceptable risk level of business for them. But if you’re not willing to take the business, how do you think you’re going to get the business in the metaverse?”
For banks that simply want to get into the metaverse and then develop their presence, some kind of tech solution is an inevitable first step. India-based financial tech provider Kiya, which has offices in Jersey and Guernsey, has developed its own platform for banks to access the metaverse, called Kiyaverse.
Os Lopes, London-based Vice President of Digital Engineering Services at the firm, explains: “We provide integral interaction between the physical world and the virtual world. The customer will interact with an AI-based humanoid, and we have brought in customer journeys for specific use cases.”
Customer onboarding is one such journey. “Corporate onboarding requires
multiple people signing documents, being in the same room discussing it. That can all happen in the virtual world, where your digital twins can be in a single room having that discussion,” he says.
“You could use digital technology such as smart contracts and blockchain to actually do the documentation. And everything can happen in one go, which in the physical world might require multiple trips to the bank, physical documents being shared and so on.”
Banks could offer property for sale in an experiential interface, with the opportunity to walk through individual apartments, and then seal the deal with finance on the spot, says Lopes.
This approach could be applied equally to physical real estate and to digital assets in the physical world, he says, including NFT artworks.
Some of Kiya’s early stage clients want to create a metaverse platform to host AGMs, or for training, but Lopes sees opportunities beyond that – to hold investment portfolio meetings or for banks to power metaverse commerce for their retail clients.
It’s early days for the metaverse, and for anyone wanting to offer financial services there, many questions remain unanswered. But if and when it does take off, one thing is clear: managing assets in the metaverse will be a crucial step, and banks are determined they will play their part. n
For now, crypto is simply too volatile to provide the security for loans to acquire assetsENGAGE Oasis
Tech’s changing investment landscape
SINCE THE MARKET recovered from the initial pandemic sell-off in 2020, the value of the tech-heavy NASDAQ 100 more than doubled from April 2020 to November 2021. Tech heavyweights Amazon, Alphabet, Microsoft and Apple make up more than a third of the index weighting, with a combined market cap of more than $5.9trn.
Fast forward to 2022, and the world is a very different place. The perfect storm that conjured a rally across financial markets has subsided. The record low interest rates that prompted the borrowing of cheap money are no more. Quantitative easing that flooded the market with liquidity to stimulate the economy has turned to quantitative tightening.
The results of suppressed interest rates coupled with increased liquidity sent inflation soaring, double-digit prints remain sticky and central banks are wrestling to pull inflation back to the target rate of 2%.
Technology has been a darling sector for growth stocks, with companies growing at a rate significantly above the market average, and expected sales and earnings continue to outperform. But what happens when growth stocks stop growing?
TECH TAKES A HIT
Against today’s difficult economic backdrop, it could be argued that markets were overcooked towards the end of 2021.
Technology stocks have spent the year on the back foot, and 2022 has seen a rotation away from growth stocks as investors adjust to harsher economic conditions and seek to manage risk.
With persistently high inflation, August CPI prints triggered the NASDAQ to sink 5.16% in a single day during September, the steepest decline since June 2020, with the tech heavyweights losing a combined value of $500bn.
Amazon, which announced in November that it would pause recruitment of new corporate workers, is down around 47% year to date, tumbling 25% since releasing Q3 2022 earnings.
Having missed its sales estimates, the weak fourth-quarter sales guidance – in what is a historically busy period driven by
Christmas orders – is a sign that markets are likely to get worse. Alphabet, the parent company of Google, reported the lowest sales growth in two years. Revenues rose by just 6% against market expectations of 9%, compared with 41% growth last year.
A drop in advertising profits demonstrates the tight economic conditions as companies look to cut costs and deploy less capital to marketing.
Delivering somewhat better results, Microsoft managed to beat revenue expectations with an 11% increase year-
on-year. Despite this, however, its cloud revenue missed expectations and the company announced that forward cloud revenue growth is expected to slow.
Apple, the largest company listed on the NASDAQ has outperformed most of its peers and posted quarter-record revenues, up 8% year-on-year, although its share price is still down 23% year-to-date.
Recognising the tightening economy, the company announced that it will curtail spending and pause hiring for roles outside of research and development.
With the NASDAQ down from its highs, investors may be tempted to start buying now that prices have fallen. It is important to make the distinction between the price and the value of a company.
Technology stocks typically trade on a high price-to-earnings ratio and generate little or no income. This is to be expected when it is anticipated that a company’s growth will beat the market and profits are reinvested rather than paid out to shareholders.
As companies anticipate a continued drop in revenue, market sentiment and short-term economic outlook remain weak as global economies contract.
Fortunately, investors can take advantage of opportunities in alternative asset classes; higher interest rates have resulted in the fixed-income market being suppressed.
As the price of fixed-income securities such as bonds fall, the yields increase, offering investors a real return with the addition of capital uplift on maturity if bought at a discount.
At Ravenscroft, technology remains a core theme. Our thematic investment approach allows us to make long-term investment decisions and our actively managed funds allow us to take advantage of market movements.
The cyclical nature of markets means we have been able to make the most of the tech sell-off by increasing certain holdings and adding new positions where we feel there is value. n
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FINANCIAL PROMOTION: The value of investments and the income derived from them may go down as well as up and you may not receive back all the money which you invested. Any information relating to past performance of an investment service is not a guide to future performance.
To find out more about Ravenscroft and our offering, visit www.ravenscroftgroup.com
At Ravenscroft, technology remains a core theme. Our thematic approach allows us to make long-term investment decisionsCharles
Carpenter, Investment Adviser atRavenscroft,
explores what a market shift means for long-trusted tech
Twitter’s ripping off the plaster
IT IS ALREADY cemented infamously in history that within hours of acquiring Twitter in November 2022, the “individual eccentric genius” that is Elon Musk cleared the decks at Twitter globally, terminating more than 3,700 employees by email with immediate effect.
The mass exodus was followed swiftly by a rehiring – directed by Elon Musk – of anyone who, according to Twitter’s Global Vice-Present Sinead McSweeney, was “excellent” or who fitted within the category of being “not negative and performed a critical role”.
An interesting strategy to adopt, as one would usually expect the review process preceding any necessary terminations to identify those individuals with excellence, the right attitude and/or who performed critical roles within the business, thereby sparing those individuals from the execution in the first place. However, it seems that prudence did not prevail for Twitter.
The strategy of the mass firings can perhaps be best compared to ripping off a plaster – both ruthless and barbaric but also efficient and effective.
The reality as I understand it is that Twitter was a business that had never turned a profit. On the corporate balance sheet, workers are not regarded as an asset but as a cost. One of the most common ways of turning a business to profit is to cut costs, and staff are almost always the largest cost on any balance sheet.
The plaster strategy was effective –the cut-throat strategy immediately improved Twitter’s EBITDA.
It failed, however, to recognise that most of an organisation’s real value lies in its people – their knowledge, skills and ideas – and, by ripping off the plaster as it did, it
destroyed the very fabric of the business. While staff cannot be ‘owned’ like other assets of a business on a balance sheet, they are a critical asset – they hold the knowhow, the know-what, the know-where and the know-why of every business. Ripping off the plaster also likely ripped the heart out of Twitter, and we all know that broken hearts take a long time to heal.
But this article is focused on the legalities from an employment law perspective. Irrespective of who you are, the law applies equally to everyone – there are no exceptions.
In California, where the majority of the terminations were effected, the legal
risk was limited to the damages flowing from failing to provide 30 days’ notice to employees, together with any notice period under the contracts.
That risk was sought to be mitigated by offering three-month ‘severance’ packages to affected employees. So let us now explore the legalities of the plaster approach adopted by Musk, had it been applied in the Channel Islands.
In Guernsey and Jersey, when an employer wishes to terminate an employee’s employment, they must have regard to obligations imposed under the contract of employment and by the applicable statutory regime.
All employees are entitled to notice –with minimum requirements being set by the law and contracts of employment often providing for longer notice periods. In Guernsey, the minimum statutory notice period ranges from one week to four weeks and in Jersey, from one week to 12 weeks, in each case based on an employee’s length of service.
Whether or not the Twitter employees were made redundant is perhaps a topic for an article itself (particularly those employees who performed “critical roles” and who were subsequently rehired). But for now let’s assume that the mass firing was a cost-cutting exercise and satisfied the legal definition of redundancy in both islands. In such circumstances, regard would need to be given to:
• Employer handbooks, which often contain redundancy policies that may include an entitlement to severance pay. This generally ranges from one week to one month per year of service and may be capped at a certain level of pay referenced by the length of service.
• In Jersey, for employees with more than two years of continuous service, there
On the corporate balance sheet, twitter’s workers are not regarded as an asset but a costCarly Parrott, Head of Employment – Channel Islands at Bedell Cristin, offers a local employment commentary of Twitter’s very public fallout
is a statutory entitlement to severance payments based on years in service at one week’s pay per year of service, capped at £860 per week. No similar entitlement exists in Guernsey.
• In both islands, it is necessary to apply a fair and reasonable process to effect a redundancy and avoid an unfair dismissal claim (see below).
• Senior employees may have entitlements under long-term benefits schemes, the most common being longterm incentive plans that often provide for favourable treatment in the event of a redundancy.
Where an employer proposes to make more than 12 employees redundant in Jersey, the law imposes an obligation to consult with a nominated employee representative at least 30 days before implementing any of the redundancies.
A failure to do so could result in a payment of a protected award of up to nine weeks’ pay for each employee. Guernsey does not have a similar provision.
An unfair dismissal regime operates in both islands. Employers must have both a valid reason for dismissal and to adopt a fair process in effecting that dismissal.
Any dismissal must satisfy both limbs, with a failure of either limb automatically rendering a dismissal unfair. In such
circumstances, employees are entitled to compensation. In Guernsey, this is six months’ pay and in Jersey, the compensation award ranges from four weeks to 26 weeks’ pay based on length of service.
The unfair dismissal regimes in both islands only apply to employees with more than 12 months of continuous service (with limited exceptions for dismissals for an automatically unfair reason).
Therefore, had the mass firings involved employees in either of the Channel Islands, the financial cost to Twitter would have far exceeded the three-month severance package offered to employees.
All that said, the far greater issue for Twitter is the mess that now needs to be cleaned up.
It would be fair to say that the scab came off with the plaster and has no doubt opened a whole new wound – a culture wound that will take a particular type of leader to heal the damage that has been done to the very fabric of Twitter; to try to rebuild a business where staff are not walking on eggshells, too scared to check their emails for the next round of firings.
What Twitter needs now is a leader who has a high ‘love quotient’, otherwise known as ‘Love-Q’. This is different to IQ. It is more than EQ – it refers to a leader’s ability
to create a safe, connected and sustainable workplace for their staff.
Love-Q is all about consistency, fairness and integrity – all of which appeared to be lacking in the Twitter plaster debacle –and all of which will take months, if not years, to rebuild.
All leaders need to make tough decisions and the best leaders will not shy away from doing so, but great leaders will ensure that those decisions are implemented effectively, having appropriate regard for the human beings that make up the very organisations that they are appointed to lead.
Workers are not just a cost to be cut, they are not just assets to be disposed of at will – they are the very fabric of a business and once a hole is made in that fabric, it won’t take long to unravel.
How Twitter responds now to repair that hole will make or break it as a business. n
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Head of Employment – Channel Islands, Bedell Cristin
Tel: +44 (0)1481 812825 www.bedellcristin.com
had the mass firings involved employees in the Channel Islands, the cost to Twitter would have far exceeded the threemonth severance package offered
Time to Act?
The arrival of big tech – and the way it captures and uses data – has transformed the digital marketplace, But it has also allowed the world’s largest companies to shut out competition and create dupe versions of popular products.
The Digital Markets Act, which is set to come into force in 2023, could be a game-changer
IN A GLOBAL first for big tech, new regulation is being enacted that could mark the end of online monopolies by the big tech firms. The Digital Markets Act will introduce restrictions in the EU to radically change how these tech giants can handle users’ data and promote their services.
Data has become one of the world’s most valuable resources. And while the big five companies – Amazon, Meta, Apple, Alphabet (Google) and Microsoft – have until now used their huge data resources to cut potential competitors out of the market, the Digital Markets Act promises to shake things up.
The Act will come into force in the EU in October 2023, says the Institute of Analytics, with other nations considering similar approaches to the same challenges. It will outlaw certain data practices that have consolidated power online, such as Amazon allegedly cloning best-selling products into its own range or forcing in-app purchases within search websites.
DAVID AND GOLIATH
Under the new regulation, tech companies will be required to make their digital platforms more open and transparent, as well as allowing interoperability where it is in the interests of the customer.
“This legislation came as an attempt to control the big five tech companies and their behaviours, particularly their monopolistic behaviours, and what we call their gatekeeping behaviours,” says Dr Clare Walsh, Director of Education at the Institute of Analytics. “We have an
acknowledgement that when a company gets big, it has advantages of scale. But there’s a risk that can be perceived as them doing some shady things, such as evading monopoly laws and counterfeit laws.
“The intention of this regulation is to grant consumers and businesses new freedoms to use technology in the way they expect and want,” she adds. “This will undermine the big tech hegemony that has
held the digital market, such as isolated systems and platforms that have locked users into using one-brand products.
“It will also undo restrictive practices that have closed the opportunity for competition.”
Walsh points to fake, or dupe, products, which capitalise on big tech data to undercut the price of original products with very little of the development costs.
“If you’re a small company and you want to sell a product, you really have to have it on Amazon these days,” she explains. It’s quite difficult to reach out to the market if you’re not.
“Amazon, meanwhile, has access to all of the data on you, your company and your sales. And when you see these TikTok videos where influencers claim to have found an effective dupe version of an expensive product, that’s not accidental.
“Amazon has the ability to look at the sales data and create identical rival products, which they can then sell.
“And they will, of course, undercut your prices, because they haven’t had to do any of the product development. They haven’t had to advertise and create a demand for the product.”
Walsh says such practices make it “impossible” for small companies to compete because, as soon as they become successful, they are being brought down by cheaper versions of their products.
“There have been a number of legislative attempts to hold Amazon to account in the
law courts, but it’s just not working. If a small company can go to its government, rather than go face-to-face with big corporations’ lawyers, it will be far easier for them to address it.”
Another key aspect of the Digital Markets Act is to give consumers the right to uninstall all apps from their devices. As it stands, many versions of Apple devices, for example, do not allow for the removal of certain apps.
“The language around this is very dull, which I think is why many people aren’t paying attention, but uninstall rights are really important,” says Walsh. “There are some apps that you cannot uninstall from your phone, in particular, the App Store (Apple UK), which basically gives Apple complete and total control over who can and cannot have an app sold on their site.
“It gives the app the ability to charge much higher transaction fees, because you have to go through its payment portal.
“Through the Digital Markets Act, Europeans are going to be able to uninstall the App Store and install their own choice of apps, or uninstall Safari or Google. That’s a big change.”
Legislators are hoping the new Act will help level the playing field in the digital marketplace, although Walsh believes it will also provide an exciting opportunity for smaller businesses to connect with new customers.
“It really is only the big five that come under these legislations; nobody else has to worry. If I were a small business, I would be starting to look at opportunities to create add-ons and tie in or create alternative products and services, particularly in manufacturing,” she says.
Walsh is optimistic that the introduction of the Digital Markets Act may be the start of a longer-term change that will encourage consumers to seek out manufacturers that adopt more ethical, more sustainable business practices.
“Persuading people to adapt their behaviours is probably challenging –especially after going through a pretty major recession – but this is part of a much wider suite of legislation that’s coming in to start controlling these companies,” she explains.
“Take Google, for example. I think the definition of a monopoly used to be any company that controls 25% to 30% of a particular market. Because Google is also the search engine behind Safari –which is the default search engine used on Apple iPhones – it controls something like 90% of searches on iPhones in the US, which is ridiculous.
“There was a time when we would never have tolerated that kind of monopoly because it obviously had a negative effect on competition and fair practice.
“I think this is a turning point in the way governments relate to these companies, because they’ve had enough. They are beginning to start bringing them under governmental control, which they have been talking about for a long time.” n
This is a turning point in the way governments relate to the big tech companies, because they’ve had enough
s3: An effective cybercrime preventer
OVER RECENT YEARS, the digital economy has transformed how we all do business. As technology evolves, it continues to become the lifeblood of innovation, growth and sustainability.
Data is critical to the success of a business, and data compromises can have catastrophic effects, including loss of revenue and reputation, breaches in compliance and regulation and damaging litigation.
It is therefore little wonder that businesses are highly protective of their data as the number of moving parts grows exponentially, exposing vulnerabilities across the expanding attack surface area.
That’s why at Sure Business we have introduced our Simple Storage Service (S3) as a secure, reliable way to store business data using the latest technology on the market.
CYBERSECURITY ARMS RACE
Cybercrime tactics have adapted to target mission-critical systems and data. Ransomware attacks are now a major threat to operational performance and business survival.
This has created an ongoing ‘arms race’ between cybercriminals and the IT industry – and as each one ups their game, the stakes get even higher.
This is how S3 storage and backup offers significant additional value, particularly where data immutability – also known as tamper-proof protection – is embedded.
S3 is a highly secure, scalable, reliable and affordable storage and archiving solution that is simple to use, accessible from anywhere and compatible with cloudbased and on-premises IT systems. When combined with immutability features, an additional layer of protection is added to ensure data cannot be tampered with.
SO, HOW DOES S3 STORAGE WORK?
S3 stores data files as ‘objects’ in S3 ‘buckets’ that are then managed using an intuitive cloud-based interface.
Sure Business’s S3 solution platform provides a highly secure and robust storage infrastructure for any data that is in need of protection.
Data versioning is protected with logical retrieval, restoration and preservation of all achieved information. This enables
swift recovery from system failures and unforeseen downtime, where the service defaults to the most recently updated information of whatever document, file or record required.
The S3 protocol is gaining widespread popularity across cloud services, data protection applications and software-as-aservice (SaaS) solutions. Implementing this solution is a smart business decision due to its enhanced data protection capabilities, simplicity of operation and commercial accessibility and viability.
The standout critical feature is the immutability element of the service, which ensures criminals (as well as loose-fingered employees) are not able to tamper with or delete information, in line with data retention policies.
SCALABLE, RELIABLE, FUTURE-PROOF
Sure Business customers can integrate our S3 services with existing infrastructures as a core building block of formalised IT security processes, policy and governance.
S3 storage integrates with our cloudbased recovery-as-a-service (RaaS) backup and business continuity solution, offering peace of mind and operational assurance.
It also works with wider backup technologies designed for long-term archiving, including Sure’s own protection offering for Microsoft 365 services –OneDrive, SharePoint, email and Teams.
Crucially, with S3 storage there’s no devil in the detail. The solution is simplicity itself, with an easy-to-use interface and a simple charging structure offering exceptional value for money.
Sure Business’s data and security consultants are always available to discuss any aspect of your data storage, archiving and security needs. As a team of locally based experts, we understand the unique requirements of organisations across our islands and provide a bespoke service to meet all customer needs. n
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If you’d like to know more about Sure Business’s S3 data storage and our other services, email email@example.com
S3 ensures criminals (and loose-fingered employees) are not able to tamper with or delete informationMalcolm Mason, Professional Services Consultant – Cloud and Data at Sure Business, discusses the benefits of the immutable S3 data storage
In conversation: Martin hall
HIGHVERN HAS JUST been through its greatest evolution since its management buyout in 2016, building it into one of the most respected independent financial services providers in the Channel Islands.
Over the space of 12 months, the business has grown from a Jerseycentric business to a multi-jurisdictional organisation nearly double the size, collecting multiple awards along the way.
Few businesses have seen such success in the midst of the uncertain and constantly changing economic climate. Highvern Chief Executive Martin Hall discusses why 2022 has been the business’s most successful year yet, and the lessons learnt along the way.
How would you describe 2022 from a personal and a business perspective? It has certainly been a transformational year in both respects. Twelve months ago, Highvern was a successful trust, family office and fund administration business but largely based in a single offshore jurisdiction. A year on, we offer our clients more services across six jurisdictions, all focused on the private capital markets in their various guises. From our start point, that’s some achievement.
My role has transformed in response to this growth, with us now having clients and more than 125 colleagues spread across so many more places. It means I spend a much higher proportion of my time travelling, which has always been something I relish.
Talking to people, finding out what they want to achieve and what I, or Highvern, can do to support that, is what is currently driving me.
What have been your year’s highlights?
Our organic growth has continued very strongly, which is positive proof that Highvern is a great business at its core. The recently announced acquisition of Genesis
Trust & Corporate Services in the Cayman Islands brought two extremely strong businesses together, and the collaboration already taking place is really encouraging.
We announced our acquisitions in Guernsey and Switzerland, which feels some time ago now, and integration has been quick and smooth, to the credit of all colleagues involved.
In Ireland, our team is already winning significant client work, and the UK office has gained its first clients.
So, overall, that’s a positive outlook.
How much of Highvern’s growth was planned and how much was opportunity? While we have grown rapidly, it has all been planned and done in a controlled way.
One thing we will never do is compromise what our clients expect of us. We knew we wanted to balance the diversification with a mix of acquisition and greenfield investment, and we carefully selected the businesses and teams based on making sure the fit was right.
We’re very happy that our homework has paid off in the way that it has.
What was the greatest hurdle in expanding across so many jurisdictions over such a short time?
It’s really no different to any other challenge in business; you make sure you constantly prioritise and re-prioritise so you’re dealing with the most important tasks.
Most of my career has been spent with responsibility for teams in different countries and I enjoy exploring the cultural differences and challenges that this throws up.
One of the key messages that all members of the Highvern team know is that we are completely agnostic on where the best ideas come from; a big part of our job is to make sure that they receive the oxygen they deserve.
It has certainly been a transformational year – we now offer our clients more services across six jurisdictions
How are you ensuring that Highvern retains its values, reputation and highquality service?
We do that in so many ways, but I like to think it’s because we keep things simple and consistent.
It’s a good story, too, which we share with new colleagues and clients – from our name, which captures a permanent sense of quality and aspiration, through to our mission statement, which is not about what we are, but what we do: setting new standards.
If this is what we aim for each day, the rest will take care of itself.
After such a successful year, what is Highvern’s next move?
What we do next will continue to be based on controlled and measured decisions. We
have already taken some interesting technology investment decisions that we’ll implement in 2023 and we’re continuing to invest in hiring value-add expertise in all our locations, alongside continuing to invest in our existing staff.
What do you see as the biggest challenges in your sector right now?
The usual response to this question is the increasing regulatory environment we operate in. While this remains true, if handled right it can also be net positive, enabling our industry to become stronger.
The global economic and political environment is less controllable, so monitoring those developments remains as important as ever.
I’m sure that all businesses are also wrestling with the effects of inflation at
the moment, so it’s important that we take the approach of balancing our support for clients and colleagues.
As a multi-jurisdictional business, how do you approach the question of travel, given that there is so much focus on climate change?
We are very conscious of the impact of our international travel, but it’s a fact of human nature that personal contact beats talking through a screen, so again it’s a question of finding the right balance.
Highvern has a very active ESG committee, run by colleagues and generously funded, making sure that we align our activities with as many of the UN sustainability goals as we can.
Our group-wide travel policy also encourages employees to consider the environmental impact of any business travel and offers incentives for those travelling in a more sustainable way.
We were delighted this year to be able to announce that Highvern in Jersey was climate positive in 2021 as a result of investment in the Durrell Rewild programme – a goal we will be looking to replicate across the wider group.
What is your mantra in business?
My own favourite used to be ‘keep it simple’, but more recently I think it has become ‘never be satisfied’.
This is not to say that we don’t pause and take stock of our achievements and celebrate success, but there are always ways to get better at what we do. n
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To find out more about Highvern, visit highvern.com
Our acquisition of Genesis Trust & Corporate Services in the Cayman Islands brought two strong businesses together
The rise of regtech
Far from being a dull regulatory topic playing out in the background, regtech has become sexy as a result of the competitive advantage and reduced regulatory burden it can deliver across the financial sector. But who is driving its rise – and how much further can it go?Words: David Burrows
THE WORLD OF regulatory compliance is reaping the benefits of using technology – and its adoption is, unexpectedly, being driven as much by the regulator as by forward-thinking firms.
Many firms still have legacy compliance processes that are manual and labourintensive, with high administrative overheads. Workflows are linear and iterative, and many teams still rely on email, Excel and PDF files to manage their compliance reporting. This creates siloed data with little status visibility.
Such lack of oversight, control and accountability leaves significant room for error. As a result, the adoption of solutions to create more efficient regulatory reporting is not just being driven by firms that recognise the time and cost savings, but also by the regulators themselves.
Mark Le Page, Guernsey-based Director at risk advisory firm Kroll, accepts that
regulators are playing an unexpected role in implementing technology. But he believes there remain additional concerns around the rise of tech.
“There is concern in the Financial Action Task Force (FATF), for example, that fuzzy logic – a historic mathematical concept recognising that truth and falsehood are rarely binary concepts –could lead to curious outcomes when programmed into machine learning regulatory tools,” he says.
“Similarly – and this is very much at the heart of what we do – regulators are concerned about the increased cybersecurity risks.”
Nevertheless, he believes that the impact of 9/11, and the recognition that terrorism could be financed with relatively small sums of money, brought an abrupt halt to the practice of only examining transactions over a certain value, even if it was not always recognised.
“Machine learning tools seek to ensure that all transactions effectively pass through a first net before human inspection of those that are unusual,” Le Page adds.
“Without that, in large-volume transactions, firms’ manual regulatory compliance would become unwieldy, particularly around countering the financing of terrorism.
“We have been supporting firms to refine their code to significantly reduce the number of alerts requiring manual intervention.”
QUICKER AND MORE ROBUST
Jonathan Wauton, Founding Partner and Chief Commercial Officer at Tiller Technologies, says regulators have now woken up to the fact that paper-based traditional processes are highly vulnerable and that they can increasingly be better served by technology.
Tiller has developed an automated digital address verification service, which works across many countries. All the customer needs to do is enter their address online and Tiller accesses regulatory level databases –utilities, credit bureaus, government sources – in the relevant country to match that customer to the stated address.
“This means the process is quicker, more robust and far less error-prone” he says. “For the ID document check, the customer uses an app to take a photo of their ID document. This is compared against a government-issued template to digitally test the authenticity of that document before using biometrics to match it to the person presenting it.
“Again, this is done in real time. Given the difference in the reliability, reduced risk
If you don’t choose to utilise the regtech tools available in the market, you’re putting your own neck on the line
of fraud and reduced cost, it’s no surprise that regulators are shifting their view on the use of this technology from ‘agnostic’ to ‘encouraging and favouring’.”
Adam Brown, Programme Manager at Jersey regulatory technology specialist Vaiie, points out that the regtech sector has been growing exponentially over the past few years. By 2026, it is predicted it will be a $204bn sector – up from $68bn today.
Brown believes this is being partly driven by the fact that as criminals develop increasingly sophisticated methods of avoiding detection, those trying to fight financial crime are facing an ever-growing challenge – and regtech can provide at least part of the solution.
“Regtech allows compliance officers to undertake more checks – and technology such as identity verification can undertake more checks than the human eye,” he says. “Regtech has the power to reduce firms’ costs and time, and turn their teams’ focus on only the most challenging problems.”
He adds: “The collaboration of regulators and these forward-thinking businesses to combat financial crime together will undoubtedly lead to further innovation, which is great news for the compliance world, the business world and regulators.”
As Dev Sian, a Director overseeing compliance tool MaxComply at IQ-EQ, explains, with an element of futureproofing, regtech can prevent the need to
redo work that may be caused by human error, and avoids upsetting investors with repeated questions.
“One other negative outcome it helps overcome, besides steep regulatory fines for failings, is the ability to avoid reputational damage,” he says. “I shudder to think about how far-reaching and longlasting that can be.”
Another issue that has heightened levels of attention on compliance within organisations is legislation being drafted in the UK and EU that will make individuals personally accountable for the compliance failings of firms.
Legislation in this space isn’t just being drafted, explains Sian. It is already being enforced – and penalties are already being applied. “As a senior manager, if you don’t choose to utilise the regtech tools available in the market, you’re putting your own neck on the line,” he says. “You are the risk.”
Sensible and appropriate options to mitigate risk are within reach. But just buying a solution does not mean businesses are safe from accountability.
“Senior managers leading significant functions need to demonstrate they have taken all reasonable steps and evidence it robustly. It’s important to find the right balance between systems and expert people to ensure ongoing compliance,” Sian says.
Le Page at Kroll thinks it’s a case of unintended consequences. “Company
law places boards responsible for the full operation of the company,” he says. “Making individuals – potentially and likely including non-board members –personally accountable for compliance failings would drive up compliance costs. Individuals would demand greater remuneration for their considerable additional risk and labour supply would fall as some resign, not liking the riskreward equation.”
Brown takes a similar line: “It is extremely important and well-intended. Many on-island directors and officers have liability insurance, so the concept isn’t new. But if the accountability goes too far, there is a risk that some may turn their back on the profession, which would be a regressive step.”
He adds: “This will certainly put pressure on organisations to ensure their processes are simple, straightforward and well-communicated to their compliance teams. And compliance team training will no doubt become even more intense. For regtech vendors, this could be a tipping point into greater regtech adoption.”
There is one other driver for growth in this sector, so another question remains: how far has, or will, the growth of regtech be driven by investor demand? Will investors put pressure on asset managers who don’t use regtech?
Sian at IQ-EQ suggests that the current surge in regtech is primarily being driven by investor demands. “Regtech allows firms to differentiate themselves from their peers to attract capital, as well as achieving the necessary compliance they need, which puts pressure on asset managers to make the shift to compliance software,” he explains.
Surfing the wave of digital onboarding
onboarding remains one of the
is expected to accelerate in the next few years. So, just how valuable is the transition into digitised onboarding and, beyond that, into digital compliance?
Jonathan Wauton, Founding Partner and Chief Commercial Officer at Tiller Technologies, says it’s clear that the use of digital onboarding has already reached the tipping point, and it is now regarded as a hygiene factor.
“It has become so commonplace that businesses that don’t have it will begin to look old fashioned and difficult to deal with,” he says. “From the customer’s perspective, they just won’t put up with having to send in physical copies of documents – and then having to wait. They are used to digital immediacy and convenience.”
Adam Brown, Programme Manager at Vaiie, agrees that the transition is incredibly valuable. “Most of us already transact in a digitised world, and we expect the businesses we interact with to be doing the same. When they don’t, it is incredibly frustrating. We are currently experiencing a convergence of technology and financial services, which will lead to product and service innovation built from a digital-first perspective.”
As an example, he points to utility bills that have long been an acceptable standard of address verification but, due to their ease of forgery, may not be in the longer term. “I see the future of digital compliance as using digital solutions throughout customer onboarding to significantly improve accuracy, efficiency and costs,” Brown continues.
“For example, products such as Vaiie Locate provide an alternative to the traditional address verification process by using authentication technology to securely authenticate individuals using geolocation.”
Kroll Director Mark Le Page argues that from a compliance perspective, the ability to have all onboarding immediately loaded on to a single system, from which ongoing compliance monitoring can occur, is critical to an efficient and effective business.
“Efficient in terms of cost savings from a unitary system; effective in terms of no loss – or unintentional hiding – of information that is crucial to an ongoing assessment of the relationship risk and unusual transactions,” he says.
Brown at Vaiie believes a business’s adoption of regtech isn’t just an indication of where it is now; it also demonstrates that the company is preparing for an evolving future – and that’s something investors are watching closely.
“We read all the time about activist investors, whether the subject is environmental, financial or technological. Boards understand this type of investor. Don’t neglect the silent investors. If they don’t feel engaged or the process is just too
hard, they will go to a competitor. This risk is the slow attrition of clients that might not be realised until it is too late.”
“The time to invest is now,” says Brown, adding that the sector will start to see new firms, unbound by legacy systems, emerging with a highly adapted digital ecosystem.
“This will allow them to gain a competitive advantage and adapt to new and existing markets more quickly than those that have not yet invested in regtech,” he concludes. n
All-in-one KYC app.
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tel: +44 330 390 4500 tillertech.com
how to Achieve a data-driven culture
IN 2021, IT was found that 74 zettabytes (74 billion gigabites) of data had been generated globally, with 90% of the data in existence created in the previous two years. This is a trend showing no indications of slowing down.
Data is certainly king when it comes to being a successful organisation in the digital era. Organisations with a solid datacentred strategy in place have a significant advantage as businesses increasingly recognise the importance of giving employees the tools and skills they need to turn data into insights.
Equipped with timely and accurate information, teams can adapt to the changing business landscape, delivering better client experiences and ultimately driving business growth.
The benefits range from optimising business processes and regulatory compliance to understanding customers more deeply than ever.
So, it’s not surprising that building a data-driven culture is at the top of the agenda for most organisations. But how do you successfully create one?
Having a good data-driven strategy is important, but creating a data-driven culture is more about transforming behaviours and mindsets regarding the importance of data. And this needs to start at the very top of an organisation.
CHANGE STARTS WITH BEHAVIOURS
Change projects fail when the data and related technologies are identified, procured and implemented but the underlying business case and desired benefits were not clearly communicated to the end users. This will always reduce the effectiveness of any project.
This is mitigated by ensuring the business is proportionately represented and actively engaged with any proposed change programme.
Taking users on the journey rather than enforcing change on them will lead to a
significant increase in engagement with any new solutions. It will drive organisational acceptance by instilling confidence in employees’ ability to affect business outcomes through data-informed decision-making.
Planning is vital. Before undertaking any change projects:
• Identify critical problems and pain points
• Clearly define the expected outcomes of any proposed change
• Don’t simply buy a solution and think it will be adopted
• Emphasise that everyone uses and owns data, it’s not just an IT issue
• Importantly, for any project, business knowledge and experience is essential.
To respond with the correct tool, it is important to clearly define the question. To obtain positive cultural influences, organisations must look to change the most critical behaviours.
Key to this is ensuring that everyone is framing the objectives and requirements of any project, or programme of projects, established to address identified issues.
Identify the key pain points. Describe in detail the impact, consequences and emotions involved. Contextualise each problem and relate it to business objectives, which then inform hard metrics that can be used to measure the outcome, success and impact of a project.
This should not be a one-off exercise, but an ongoing process to identify opportunities for improvement.
MAKE YOUR DATA WORK FOR YOU
All organisations need a governance framework that helps shape data strategy, governance, data integration, architecture and data quality. Modern tools enabling automated and intelligent data processing are crucial. This includes removing the burden of repeated and non-value-adding tasks from staff, letting them focus more on leveraging the data for their primary goals.
When assessing which tools are appropriate, organisations need to look outward, then inward – outward in order to evaluate what tools are available and how their competition is using data; inward to derive competitive advantage by empowering their organisations to make better, faster, customer-focused decisions from data.
When assessing how best to analyse and utilise data, it is imperative to understand the desired outcomes to select the right data. Understand where the data comes from, how it was collected and what it represents.
This process is key to building trust in the quality of the outputs being used in business decision-making and ensuring accuracy in any external reporting.
It is particularly key that this data is consistent across the organisation. You want to work with one version of the truth.
In our experience, with appropriately selected projects, clients will see:
• Improvements in revenue growth
• Improvements in customer experience ratings
Data is certainly king when it comes to being a successful organisation in the digital era
Mark Stone, Senior Manager, Advisory at KPMG in the Crown Dependencies, discusses the tools and skills required to succeed in this increasingly data-driven world
• Improved risk management process and controls
• Greatly improved accuracy and consistency in statutory and regulatory reporting.
Using a few high-visibility, highimpact projects as catalysts to drive the right behaviours will help build an understanding of the merits of a datadriven approach.
Consistent use of data not only drives operational efficiencies, it facilitates a simpler and more transparent data governance framework and the creation of more robust controls.
Key metrics and key performance indicators can be delivered to boards and committees; data protection and classification processes can be simplified; and the impacts of data and cyber-related incidents can be clearly identified, which will help reduce risks and improve incident response.
DATA TRANSFORMATION: A TEAM SPORT
Effective data transformation programmes require an array of hard skills and technical knowhow, as well as soft skills such as being highly collaborative.
Companies taking their first steps by hiring a single person fresh out of university, or new to the field, are finding that this formula often doesn’t work. Recent graduates do not usually have the business acumen and leadership experience that is required to manage projects in an organisation.
Conversely, seeking that unicorn candidate who has the necessary level
of methodical thinking, as well as programming skills, statistical knowledge and specialised business expertise, is difficult and expensive.
A more beneficial approach is to define the skillsets the programme needs and build a team of individuals who have diverse primary strengths that complement one another.
Importance should be given to finding and taking advantage of the required skills in several individuals and nurturing this talent in support of business goals.
Use a mixture of internally sourced skills, skills available from any outsourced service providers and partners and specialist consultants at a strategic level and based on specific project requirements.
The cross-pollination of ideas and viewpoints arising from practitioners from different backgrounds speaking the same language and exposing each other to new ideas, is a driver for innovation – a necessity for success in a field in a constant state of change.
STAY ON TRACK WITH KPMG
Our advisory professionals within KPMG in the Crown Dependencies have experience helping organisations with their data challenges. We have extensive experience in governance and control frameworks, project management and data analytics, as well as in advising on technology solutions.
Contact us today should you wish to discuss how we can help make your data work for you and help achieve an effective data-driven culture. n
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If you would like to find out more, contact Mark
Creating a data-driven culture is not just about strategy, it’s about transforming behaviours and mindsets about the importance of data
Is AI the answer for ESG?
With environmental, social and corporate governance now on every business agenda, can artificial intelligence and technology finally deliver a universal ESG measurement solution?Words: David Stirling
ONE THING IS absolutely clear: ESG investing has soared in popularity in recent years as the world faces up to the pressing challenges of climate change and social issues such as racial justice.
According to figures from PwC, asset managers across the world are expected to increase their ESG-related assets under management from $18.4trn in 2021 to $33.9trn by 2026.
Driving part of this growth has been the steady adoption of ESG reporting regulations and measurement metrics. These are aimed at making companies and those in the finance sector reflect on their ESG impacts and highlight the risks both for themselves and their suppliers.
They are also targeted at helping investors to make better informed decisions on when and where to allocate capital by analysing the data produced from the reporting.
These regulations include the European Union’s Corporate Sustainability Reporting Directive, requiring companies to disclose information on non-financial issues such as human rights and
environmental impacts. Another is the Sustainable Finance Disclosure Regulation, which requires asset managers to make mandatory disclosures on ESG factors integrated at an entity and product level.
But industry experts believe much more can be done to create consistent and accurate analysis and reporting – to drive even more investor interest.
Data is at the heart of this. “The main issue for the industry right now is the quality of the ESG data coming through, a lack of alignment between the different data providers and the huge number of metrics being asked by different regulatory frameworks,” says Dasha Kuts, Senior Manager at Ogier Global’s Sustainable Investment Consulting team.
“There are inconsistencies in definitions around ESG metrics, with some, such as Scope 3 emissions, requiring lengthy, in-depth analysis of supply chains.
“Good governance scores are frequently missing or differently defined by the various ESG vendor providers. As a result, it is hard to set benchmarks to measure improvements and to define what good and bad looks like.”
AROUND THE GARDEN PATH
Andy Sloan, Managing Director of Netherite & Grunweldt, which provides climate risk advisory services in the Channel Islands, adds: “When it comes to reporting and risk, most firms I speak to have been led around the garden path about needing an airy-fairy list of ESG metrics that add precious little value to the investment or risk management process.
“It’s policymakers dreaming up reporting requirements for which the data coverage just doesn’t exist.”
Those same firms, he says, are also “frankly clueless” as to what climate risk reporting requirements on their
clients’ portfolios and assets might look like against the global standard of the Task Force on Climate-Related Financial Disclosures (TCFD).
Neither do they know what portfolio emissions metrics might be consistent with the guidance set by regulators in the Channel Islands.
“We had the European Central Bank earlier in 2022 complaining that only 30% of the banks it regulates were able to produce data on financed CO2 emissions,” Sloan adds. “That’s the absolute central metric in TCFD and it wasn’t there.
“There are an awful lot of mismatches between rhetoric and reality out there and so much data you can be measuring.”
Sloan believes the use of AI in ESG could improve the process and ensure more actionable and available data for investors.
Over the past six months, he has been working with global software provider Kiya.ai to develop a cloud-based reporting tool for climate risk and climate metrics for the types of financial services firms found in the Channel Islands –particularly fiduciaries, fund administrators and insurers.
A central hypothesis of the reporting is that knowledge of the temperature alignment of portfolios is key to helping firms and clients develop an intuitive understanding of the climate risk issue and its potential financial impact.
To that end, it has made reporting of the implied temperature rise of assets and portfolios an integral component of the reporting tool.
“The implied temperature rise is, as it kind of says on the tin, the future temperature rise of the planet if all physical
There are an awful lot of mismatches between rhetoric and reality out there and so much data you can be measuring
assets emitted carbon at the same intensity of the asset (or portfolio) in question.
“Clients might not know if a weighted average carbon intensity of 430 tons of greenhouse gases per million dollars of revenue is a good or bad asset to have in the portfolio. But they will know that a 2º future-aligned asset is better to have in the portfolio than one aligned with a 4º future,” Sloan says.
“Transparent, robust and simple… the implied temperature rise provides a single easy-to-understand metric that encapsulates everything one needs to know for a first-pass, informed discussion of climate risk at board level.”
The data is taken by Kiya either through APIs or direct bulk uploads from Excel or
bulk transfers from corporates’ software or physical systems. Its functionality includes measuring against global and national benchmarks and extends to an estimation of requirements under the Science Based Targets initiative.
“It’s built with high-net-worth individuals in mind who have a mixture of some physical assets and holdings in unlisted funds. In addition, it helps private equity and the banking sector, which need to calculate and assess climate risks when they are lending,” Sloan says.
“But the real boon for corporate governance is the auto-generated risk report that measures separately against five different elements of climate risk: asset risk, transition risk, concentration risk, event risk and jurisdictional risk.
“We can give an assessment of risks inherent in portfolios based on the available data. The next expansion of the tool will be looking at the emissions of listed funds and corporates. We can scrape and pull off the data from public resources on the web.”
Sloan says it is the automatic nature of the AI process that can help speed up and boost the quality of reporting. “AI can’t pluck data out of the atmosphere. It has to be collated and pushed onto a system in the first place. There has to be a primary data source inputted manually – and really, as an investor, do you have the time to go and find it?” he questions.
“We can pull that data into our system automatically and then automatically upload it for investors, to help with their calculations.”
Another example of AI and ESG is GreenWatch – a team of sustainable finance experts from academia and industry – which has developed a tool for the finance sector to assess and monitor the authenticity of green claims made by companies on their websites and/or in their publications/statements.
It provides data on greenhouse gas performance and sustainability claims, where corporate statements related to sustainability leaderships are collected, with a special focus on claims made by senior executives.
Using AI, the statements promoting green credentials are rated in their boldness. These ratings are then verified by the team.
Greenhouse gas data, as publicly reported by each company, is also collated and performance categorised based on disclosure level, completeness and absolute emission reduction.
The final assessment contrasts the boldness of the green claims and the greenhouse gas performance of each firm
to determine who “talks the talk and walks the walk on climate change”.
AI is clearly making strides in helping investors and others in the financial sector begin to make sense of the ever-increasing volumes of ESG-related data.
But challenges in its development remain, such as squaring the circle over the large carbon footprint caused by data storage and processing, and a dearth of both tech and data understanding among senior managers.
Kuts also raises concerns around machine learning algorithms and that certain ethical bias can emerge because they are ultimately created by human beings.
But the primary concern threads back to the lack of quality ESG data for AI to work with. “Because this is so questionable, the use of AI is limited,” Kuts says. “We need better ESG-quality data for AI to present any meaningful insights.”
Sloan agrees that data can be ‘patchy’ given the reliance on manual uploading, particularly with financial CO2 emissions.
“Whether presenting to boards on climate risk in terms of reporting requirements coming down the track in the Channel Islands or just to the public, I try to concentrate minds on what’s needed and what’s nice – but definitely not the nonsense that’s being peddled by numerous self-interested parties,” he says.
“We’ve just gone through a ‘money for nothing’ decade. Now, capital costs – the functionality has to be worth it –and we’ll see a paring down into more proportionate reporting.
“We’ll get the necessity, which will be vital in dealing with the urgency around climate change. It is real and it is now.” n
Transparent, robust and simple… the implied temperature rise provides a single easy-to-understand metric for a boardlevel discussion
NFT s ’ relationship with intellectual property
Sophie Peat, Partner, Intellectual Property, at Ogier, sets out five things you need to know about non-fungible tokens and intellectual property
NFTs (NON-FUNGIBLE TOKENS)
new earning potential for those in the creator economy. Interest surged during the pandemic, and investment in NFTs and the metaverse continues to increase.
NFTs are digital assets based on computer code with a unique identifier that creates proof of title to underlying digital or physical assets, such as artwork, music or other creative works. Similar to a digital certificate of authenticity or deed of title, NFTs can be used to prove ownership and authenticity of an asset as evidenced by an immutable, cryptographically secured record on a blockchain or other distributed ledger technology. They can be non-fungible and non-interchangeable.
Given the relationship between NFTs and creative assets, one must be alive to the interplay of intellectual property (IP) and NFTs. Here are some points to consider.
1. NFT S ARE NOT EQUAL TO IP RIGHTS
NFTs are assets but are not equal to the underlying digital or physical asset they represent, nor any intellectual property rights therein. Buyers need to carefully review the terms and conditions of sale to understand what they are buying and what they can do with it. For example, will IP rights in the underlying asset be part of the NFT sale? This is rare, and there must be express written and signed assignment of the relevant rights for the IP to be effectively transferred.
On the other hand, and more commonly, if the IP rights will be licensed, what is the scope of the licence? The answers will
determine how the underlying asset can be exploited and how much the buyer is willing to pay.
2. COUNTERFEITS: DO YOUR DUE DILIGENCE
Once you understand precisely what is being sold, check that the seller actually has the right to sell the asset(s). Particularly if the asset is a copyright work, such as a digital piece of art or a brand-named digital handbag, you should check the chain of title to ensure that the original creator or IP owner authorised the NFT’s minting in the first place.
If not, you could be purchasing an NFT for a counterfeit. To reduce this risk, buy through a reputable NFT marketplace and conduct research into the seller, including a review of their account, online feedback and associated social media.
Other indicators of a counterfeit could be the price point or its availability in other marketplaces. You can also inspect the metadata and any digital certificate issued via a reputable blockchain explorer.
3. YOUR EXISTING TRADEMARK RIGHTS MAY NOT EXTEND TO NFT S OR VIRTUAL GOODS AND SERVICES
If you are a brand owner looking to protect or exploit your trademark in the digital world, you should review your portfolio and check the goods and services descriptions provide adequate protection.
For example, do they specify the relevant digital goods that may be authenticated by NFTs and/or downloadable virtual goods or services that you may offer now or in future? You may also want to register new trademarks for specific digital brands.
4. CREATING/MINTING NEW NFT S FOR COPYRIGHT WORKS
If you wish to mint an NFT for a digital asset you have created and in which copyright subsists (such as a digital artwork), you will likely want to retain ownership of the copyright, as you would for a physical work.
Consider whether you wish to allow the buyer the right to display the artwork for personal, non-commercial use only and in the NFT marketplace for resale purposes, or whether you will allow for any commercial use of the work. This may include creating adaptations or derivative works of digital art from the original.
If you are considering the latter, think about the scope of the licence and how compliance will be monitored and enforced if there is a breach, and in which jurisdiction that will be.
5. IMPACT ON THE VALUE AND REPUTATION OF YOUR BRAND
Consumers are more informed and demanding than ever and seek to purchase from brands that share their personal values.
A number of factors can affect the value and reputation of a brand in the NFT space, but one that receives an increasing degree of media attention concerns the carbon footprint associated with the minting and selling of NFTs on the blockchain.
Consumers are increasingly scrutinising brands and holding them to account – and if sustainability promises conflict with working practices, this can have an adverse impact on the brand.
Brands that address these issues transparently, however, are likely to have greater longevity in the digital world. n
FIND OUT MORE
For further information, contact Sophie Peat, Partner at Ogier in the Cayman Islands.
The considerations and suggestions above do not constitute legal advice. Developers, issuers and market participants should obtain their own unique legal advice before undertaking any NFT-related project.
Buyers must carefully review the terms of sale to understand what they are buying
EWG’s innovative, digital-by-default alternative to traditional banking provides international payment solutions and multi-currency account management services with competitive fees, 24-hr onboarding, and responsive client service; we understand what clients need most from a trusted digital banking partner.
Access your account securely, anytime, anywhere through the EWG APP or integrate your business systems with the EWG API; the tech backbone of our cross-border payment engine.
We can solve your banking challenges and help you work more effectively. Please call EWG on +44 (0) 1534 601212 or visit ewggroup.com
Composable banking: treating change as a constant
Alan Yates, Director at EWG, shares a roadmap to a future of digital banking that truly meets clients’ needs
TODAY, WE ALL expect the same level of digital convenience from our banking service providers as we enjoy from the e-commerce sectors, subscription-based streaming services and telecommunications.
If Amazon can deliver a seamless end-toend service – where we know exactly, through real-time reporting, where our ordered items are, anywhere in the world – why can’t we enjoy the same level of service delivered seamlessly from our banking service provider?
Regulators across the world also agree, as we see more banking providers such as EWG entering the digital marketplace. These positive disruptors are equipped with the technologies and the mindset to deliver products and services to the market, at speed, designed around the needs of the end customer or client, not the other way around.
We take time to listen to what our clients are saying, fully understand the challenges they face and then develop a technologydriven solution that takes that pain away.
It’s simple: along with other challenger banks, we recognise the challenges and then apply our resources and technology to continually evolve and develop our digital banking platform to meet the ever-changing needs faced by our clients.
EWG is not a traditional bank adapting dislocated and legacy banking platform systems that have been developed and evolved since the 1990s. EWG’s DNA is embedded through a composable banking platform approach.
WHAT IS COMPOSABLE BANKING?
So what makes EWG’s platform different from traditional banking providers? Cloud banking platform developer Mambu says: “Composable banking is an approach to design and deliver financial services that treat change as a constant based on the rapid and flexible assembly of independent, best-for-purpose platform systems.”
A recent Deloitte report into composable banking said: ‘The future of banking is a moving target’. And how do we hit that target? By designing and delivering a composable banking solution that fully meets our clients’ needs and exceeds our clients’ expectations.
Composable banking platforms can be brought to market and evolve at speed. They are incredibly flexible and scalable
and the client journey can be highly personalised and surprisingly enjoyable. Using EWG APIs, they bring together the best of each component and provide a future-proofed, constantly evolving, costeffective digital banking alternative.
KEEPING UP WITH THE PACE OF CHANGE
Traditionally, change in the banking sector has been slow. Big bang transformations can take so much time to develop that they can ultimately deliver outdated products or services that clients simply do not want.
With the plug and play approach of composable banking, that dynamic of slow transformation is banished to the past.
Through the use of EWG APIs, composable banking platforms don’t require transformation but constant technological improvement to components that can take place in months, not years.
As a digital banking partner to the professional fiduciary, corporate and fund sectors, we understand our clients’ sectors intimately. Through constant dialogue, we shape our programme of technology development, whether it’s self-service automation for client account-opening through the client onboarding process or creating banking ecosystems through our API integration to client host systems.
And because EWG’s platform is a composable banking solution, our updates don’t take years to implement.
WHY IS COMPOSABLE SO AGILE?
Composable banking should not be mistaken for modular banking. Modular banking platforms are based on a core traditional banking system that can be extended by adding separate modules. The choice of these modules will be limited by the provider, and the systems are neither open nor flexible.
Although this modular approach is widely accepted within digital banking, it’s definitely not client led and therefore the ability to keep pace with the evolving needs of those clients is somewhat lost.
Composable banking consists of a core banking engine that coordinates a set of independent components through open APIs. This means the functionality can be extended by adding or exchanging components. And because clients have the option to choose those components, they can integrate them with their host systems.
The result is a solution that can be completely flexible, constantly evolving and future-proofed, and can address the specific challenges or bespoke requirements of individual clients. It’s as far removed from the traditional ‘one size fits all’ as you can get.
WHAT DOES THIS MEAN FOR YOU?
At EWG, we build and continually test our client value propositions. Our vision is simple: make digital banking an enjoyable experience for our end clients. Our team achieves this by creating a great platform experience while partnering with our clients to deepen the relationships that transform how clients transact.
Uniquely, all our services can be accessed via one platform, using one log-in, whether you want to make cross-border payments, screen inbound and outbound client funds, manage multiple currency accounts or even run an international payroll.
EWG is able to onboard clients within 24 hours and integrate our platform into existing in-house client host systems using our open APIs. This will then automate bespoke reporting, creating cost savings and efficiencies.
EWG is at the forefront and leading the change in the offshore corporate services banking landscape. We are creating a new way to work – via client-led composable banking. n
FIND OUT MORE
EWG is a leader in fintech and a specialist digital banking partner for the fiduciary, corporate and fund services sectors.
Our cloud-based dashboard interface enables third-party business software to communicate with us and share data securely and in real time. Our platform enables the efficient and cost-effective management of international payments and currency management. EWG now services more than 200 jurisdictions.
For further details, contact Alan Yates, Director, EWG.
Tel: 01534 608022
March of the geeks
A CENTRE FOR Finance Technology and Entrepreneurship (CFTE) survey in 2021 stated that 60% of jobs in the financial services industry would require mid- to high-level digital skills, and 50% of the workforce would require reskilling by 2025 –with new job titles prevailing, such as data scientist, tech consultant and innovation manager.
In one sense, this presents something of a cultural clash for the established industry. But the signs are that Channel Islands financial institutions are moving in the right direction in their bid to navigate this new world.
That said, and while there are signs of transformation taking place, there is still some way to go.
“Sixty per cent sounds like a somewhat utopian position from digital soothsayers, but over the next seven to 10 years, there will continue to be seismic changes in the sector,” says Chris Clark, CEO of Prosperity 24/7.
“The investment in upskilling is sadly lacking. People are investing in technology, but they are still fundamentally forgetting their most critical asset is their human resources –their great minds, their people,” Clark adds.
“It is a great frustration as a technologist to not see the fruition of people’s labours when they are implementing sizeable change projects but not realising them all the way through by giving colleagues the permission, time and the space to learn and be effective in their jobs.”
Martin Keelagher, Chief Executive Officer of Agile Automations, also sees a 2025 horizon as somewhat ambitious – and recognises that management understanding is a central factor in this transition.
“A digital skillset is now becoming a prerequisite of roles within a strategic, decision-making capacity; not always that they must have specialist skills themselves – such as coding and development – but rather the understanding of how the latest technology can be harnessed and fully embedded within the organisation, to make best use of fintech solutions,” he says.
“We have seen roles adapting to new ways of working and embracing technology within their everyday activity. This can be seen as automation with a robotic workforce embedded within organisations, releasing the true potential of the traditional workforce.”
Today’s financial services employees need a very different skillset to that possessed by the bankers, lawyers and accountants traditionally associated with the industry
Keelagher suggests that initially progress will be made by large organisations partnering with small, agile providers that can quickly scope, build and launch solutions, project by project – by combining business insight and technical expertise to turn business process dreams into reality.
In terms of the key job titles predicted in the CFTE Global Future Roles report, Clark acknowledges that data scientists are hard to find. “A true data scientist who really can look at disconnected data sets and draw intelligent insight from them is rare indeed,” he says. “If you can get one of those as an asset inside an organisation of any scale, they will be truly transformational.
“The broader aspect here is around the nurturing of digital natives and ensuring that we have a pipeline of talent that’s coming up into the workplace. Are we really seeing those people embraced, encouraged and nurtured within financial services businesses? I think it would be mischievous to say that we are. It’s quite frustrating,” says Clark.
He adds that one area of growth in the past three to five years has been the cyber domain, noting that, in the current geopolitical climate, cybersecurity is pervasive.
ROLE OF THE ROBOTS
Keelagher identifies another gap in the rollcall of emerging tech jobs. “A key role missing from this list is Head of Automations and Robotics, one of the
fastest growing areas given the huge growth predictions for automations and the adoption of the robotic workforce. Many of these roles are intrinsic to each other and offer a very exciting look into the future. Departments are no longer treated in siloes. Rather, it will be a collaborative working environment.”
One of the consequences of inadequate investment in fintech is a lack of people with the right skills.
Keelagher says: “The demand for individuals with these skillsets will only continue to grow, forcing a highly competitive environment to become ever more so, especially when considering the global workforce and the often nomadic nature of technological work in a hybrid working environment.”
Clark adds: “Looking at our geography in the Channel Islands, the talent pipeline is by far the greatest challenge – having the ecosystem yet needing talent between the ages of 18 and 29 that simply is not there.
“There’s a huge amount of work and a very positive economic picture that is bucking the trend in the UK. The tech sector seems to be flourishing, thanks to all the investment we have seen from Digital Jersey and the Digital Greenhouse across the islands. The demand is there but being able to meet that demand is a challenge.”
Clark sees huge potential if businesses are prepared to foster the right environment for creativity to flourish. “I can see technology moving into ESG reporting and analytics, because that’s going to be a critical dimension for every financial services business that is a listing entity.”
People are investing in technology, but are still fundamentally forgetting their most critical asset – their human resources
To some extent, the skills shortage is compounded by a reticence to change, he says. “The problem we often see is that people value current productivity – pushing a wheelbarrow with a square wheel up a hill – over engaging and informing their colleagues to be able to push a wheelbarrow with a round wheel up a hill.”
Keelagher agrees. “Employers are extremely serious in looking at how best to utilise the skillset of their teams and recognise the right individuals for the best roles. But this requires investment in HR processes and internal training, as well as giving teams time to explore new areas and the future of work.”
Both believe that HR and education have a part to play in producing the necessary innovation and creativity in the workforce.
Clark adds: “We don’t want robots; we can use robotics for that. We want to use the cognitive capability and almost the freedom of youth to inspire innovation. We need to be able to create a permissive culture to enable people to flourish.”
Keelagher suggests that organisational culture and the right approach to research and development are also critical.
“This needs to be carved out of the time for the ‘day job’, rather than be treated as something being done on the side of the desk. It needs to be embraced, taken seriously and integrated into the strategic goals and aspirations of the organisation.”
Clark believes that training cannot start too soon. “If we are parents, we need to make sure we inspire innovation and creative thinking. That is probably more fundamental to the education of youth, to ensure that they can be creative thinkers and that we are not producing sheep.”
Keelagher adds: “The effort to reduce the gap is now seen in schools from a young age, where coding is being taught in primary and secondary schools, while higher education is working to quickly adapt to the new demands of a digital workforce.
“But this is not limited to the education system. Many developers are self-taught and have taken it upon themselves to develop their own digital skillset, perhaps driven in part by seeing themselves as the next Elon Musk, Mark Zuckerberg or Steve Jobs. Coding is now cool.” n
Departments are no longer treated in siloes. Rather, it will be a collaborative working environment
With Chinese leader Xi Jinping’s recent announcement that he intends to reunify Taiwan, combined with the ongoing supply chain instability caused by the conflict in Ukraine, is the tech sector at risk of a disruption that could threaten its rapid advance?
IN DECEMBER 2022, customs officials arrested a woman for attempting to smuggle hundreds of semiconductor chips into Zhuhai, China – from Macau – under a fake pregnancy bump. This incident alone highlights the extent of China’s chip shortage, which is the result of high domestic demand and an extremely constricted supply.
As a result, a buoyant underground market has emerged, meaning that secondhand or out-of-date chips can fetch 500 times their original cost.
Semiconductors – which are sometimes referred to as integrated circuits (ICs) or microchips – are the brains of modern electrics. Today, there are more than 100 billion in daily use around the world –reported to be equal to the number of stars in our corner of the Milky Way galaxy.
These chips have been in acute shortage in China since 2020, when a global scarcity caused by Covid-19 supply chain disruptions upended every aspect of the Chinese tech industry. This problem is now being felt worldwide, too, owing to the fact that Ukraine is home to half of the world’s neon gas, which is critical for manufacturing semiconductor chips.
Ukraine is also a major supplier of xenon and krypton gases, also critical to chip manufacturing. The recent war, therefore, has had a further detrimental effect on the industry.
“For a long period, we enjoyed no challenges with technology infrastructure supply chain,” says Chris Clark, CEO of Prosperity 24/7. “We were able to procure, purchase and implement with, at worst, a one-month lead time.
“And if you were using cloud computing or on-demand elastic computing, what you needed was available there and then.
“But recently, there have been issues – for obvious reasons – around certain materials, such as neon coming from Ukraine, palladium from Russia and microchips from Taiwan.
“We’ve seen it over the past year or so in industries other than tech, too,” he adds. “The car manufacturing sector has had huge issues when it comes to access to microchips. In fact, because of this, it had to stop producing various cars – lots of
Porsche models and some Volkswagens. It is a really pervasive challenge that people are either ignoring – ostrich in the sand approach – or are hoping that it will just go away. But with the current geopolitical climate, it’s actually getting worse.”
THE TAIWAN ELEMENT
In October 2021, China’s president, Xi Jinping, vowed to realise “reunification” with Taiwan by peaceful means. Taiwan responded shortly after by calling on Beijing to abandon its “coercion”, reiterating that only Taiwan’s people could decide their future.
Clark explains that, at present, 90% of the world’s microchips are made in Taiwan. “This means that there is a huge concentration risk,” he says.
“The major manufacturers are trying to mitigate by setting up in locations like the US and other more geopolitically secure environments, but they are a long way off that point of being live.
“This means that we have a lack of availability of the raw materials that go into microchips because of the war between Russia and Ukraine, coupled with the fact that – and hopefully this won’t happen –
We’ve got a problem with what is literally a fundamental component that holds everything together
China could attack Taiwan. We all depend on technology so much today, but we’re being left very exposed.”
Clark adds that the real impact from all of this could be felt by businesses when they hit an unexpected event – such as a serious cyberattack.
“A large-scale company might have 400 devices suddenly destroyed, and it’s not like they can pop to John Lewis and buy 400 more. There’s no availability in supply chains for laptops or devices or desktops or servers, so the results would be absolutely catastrophic,” he explains.
“We’re also at a point in time where we’re much more mindful of sustainability and are trying to avoid excessive consumption, and we’re having to go back to the older approach of having to have cold spares, which is antiquated from a business continuity perspective.
“But it feels like some organisations of scale are certainly going to have to make sure that they’re planning for that worst-case scenario.”
He continues: “We’ve been used to living in a safe world. We’ve had a positive relationship with China for many years. Germany has enjoyed purchasing cheap gas from Russia and selling its materials to China, which has meant a really productive period for its economy.
“But that fuel supply is now being sanctioned and [Germany] is receiving warnings about exporting to China, so it has to change its market.
“When you start unpicking it all from a geopolitical risk perspective, it’s only then that you open your eyes wide and see the real impact. Russia has fuel, Ukraine has grain and China has supply chain.
“Then you’ve got the situation with microchips,” adds Clark. “And while Taiwan is presently on the right side of the
fence from a geopolitical standpoint, if China were to take it back then suddenly it goes to the other side.”
MEASURING THE IMPACT
So, what will be the impact of this troubling situation? “If you think of the globalisation of cloud computing and the speed, accessibility and enjoyment we’ve had from elastic computing – that will persist and continue. But the cost of service may suddenly be ratcheted up,” says Clark.
“If the likes of Microsoft, Amazon and Google suddenly can’t purchase what they need, you’re going to start having a finite supply of tech until they can address their supply chain risks. I don’t think consumption-based computing will be in jeopardy, but I think it will be hindered.”
He believes connectedness, however, is a different matter. “If things like microchips and laptops, which are the end-user device, aren’t available, then the situation starts to become far more frustrating.
“And we can’t even pin a Brexit badge on it, which is what most of us – including me – tend to do. We’ve got a problem with what is literally a fundamental component that holds everything together.
“I’m not going to say the fabric of society’s going to unwind, but the accessibility to cost-effective technology is going to be seriously hampered because companies are going to put their prices up to maintain their margins.”
What does this mean for businesses?
“For the average company, I think the ability to protect infrastructures is probably more important than ever,” says Clark. “You can’t expect to just swap things out if they go wrong.
“Similarly, from a sustainability point of view, we should all be stressing assets longer anyway.
“The financial services sector still loves its physical infrastructure – such as servers and storage in a cupboard somewhere in a datacentre. It will have to transition to cloud computing and it’s having its hands forced here.
“Similarly, people who think that they can just have a rolling replacement with their desktop devices are going to have to be a bit smarter about when they can procure, when they can purchase and when they can have access to them – because it may be that you go to order kit and it just isn’t there.”
Clark also believes we might see a shift towards nearshoring.
“This was something that came out of Covid-19,” he says. “We saw an initial trend of people producing items closer to home because they knew that supply chains were being disrupted.
“Then we had a very quick flight back in response to traditional geosupply chains being re-established.
“But once again, owing to everything that’s happening at the moment, I think nation states that have put down equipment, so to speak, may need to stand things back up again.” n
financial services loves its physical infrastructure but it will have to transition to cloud computing
AI to the rescue?
ON THE EVENING of 27 April 1986, millions of HBO subscribers in the US were watching the movie The Falcon and the Snowman when their screens suddenly displayed – for four and a half minutes –a message: “GOOD EVENING HBO. FROM CAPTAIN MIDNIGHT $12.95/ MONTH? NO WAY [SHOWTIME/ MOVIE CHANNEL BEWARE!]”
This was the work of American electrical engineer and business owner John R MacDougall who, under the pseudonym of Captain Midnight, had decided to protest against HBO’s rates for satellite dishes.
It is also one of the first ‘hacks’ that received widespread public attention – as a result it was an extremely surprising occurrence at the time.
Some 35 years on, the element of surprise has worn off. We are now all too familiar with terms ranging from phishing to ransomware, and we have witnessed
many times the damage that large-scale attacks can do to businesses of all shapes and sizes. In 2022 alone, Crypto.com, News Corp, the Red Cross and PressReader were all victims.
Software giant Microsoft was also targeted in 2022 – this time by a group known as Lapsus$.
However, the outcome of this attack didn’t quite go according to the script. The hackers did manage to retrieve some company material. But, within just two days, the tech giant announced that it had quickly stopped the hacking attempt, with only one account compromised and no customer data stolen.
This was at least in part down to the fact that Lapsus$ had previously targeted Nvidia, Samsung and plenty of other companies – which allowed Microsoft to be well equipped for an attack.
In fact, the response resulted in positive publicity for the company.
artificial intelligence and machine learning are now crucial tools in the battle against the growing threat of cyberattacks on businesses – but could AI also turn against firms to pose an even greater threat?
So are companies becoming more resilient and better prepared for attacks – and what role can technology play in helping them hold the hackers at bay?
Data suggests that attacks will continue to soar. It’s thought that the global cost of cybercrime will surge in the next five years, rising from $8.4trn in 2022 to $23.8trn by 2027.
James Thoburn, Associate Managing Director in the cyber risk practice at Kroll, says: “Our latest threat landscape report indicates that email compromise is the most common type of cyberattack that we’re currently facing, followed closely by unauthorised access and then ransomware.
“In the past quarter, we’ve seen an increase in the number of insider threat instances, which are part of the unauthorised access category.”
He adds: “All cyberattacks can have significant consequences for businesses. Depending on exactly what has been compromised, confidential data may be at jeopardy, and organisations could face fines and reputational damage, not to mention the costs of recovering and reducing the chances of cyberattacks in the future.”
So does the solution to the huge risk posed rest in artificial intelligence (AI) and machine learning (ML)?
Grant Mossman, Cybersecurity Consultant at Sure Business, believes AI and ML will be key to supporting the evergrowing skills gap in this sector. “AI and ML are buzzwords of sorts in cybersecurity at the moment,” he says. “Do they have a
place? Absolutely. AI is a great help because we’re all already stretched when it comes to resources, and the skill core is quite limited. Anything that can bolster what we’ve got will come in very useful.
“So that might be going through alerts, picking up methodologies, minimising the attack vectors or picking up traits from attackers,” adds Mossman.
“We see these in our endpoint detection solutions. They’re starting to use AI technology to identify patterns and get rid of false-positive alerts, to make sure that the relevant analysts can see the ones that really need addressing.”
Mario Ciccarelli, Vice President in the Italian cyber risk practice at Kroll, adds that ML’s involvement in cyber protection has been present for some time.
“Since the early 2000s, we have seen basic forms of ML that distinguish spam emails from legitimate emails, for example. In this process, algorithms learn information through patterns, structures and characteristics, which can then be applied to similar situations.
“This means that detection of potential cyberattacks can happen urgently. The earlier you detect an attack, the quicker you can intercept and mitigate the damage caused,” he explains.
Ciccarelli warns of the downsides to AI and ML in cybersecurity. “Black-box models that delve into previously unknown situations in a process called ‘deep learning’ can make decisions and classifications that are not logical,” he says. “It also takes time for
AI contributes to rule-based learning and analytical accuracy but does not cover intuition, creativity, empathy or human intelligence
these algorithms to be built into a reliable statistical model, and with minimal sources available, the AI can become unreliable.”
Mossman, meanwhile, is very much of the opinion that while AI and ML are effective, you can’t beat a human brain confronting an issue. “When you have actual eyes on a problem, going through alerts, they pick up patterns that ML and AI sometimes can’t,” he says.
“But the issue we have is sheer volume – and the time this takes up. Where AI can play its part is in speeding things up from initial detection to putting a blocker on it. If we do this, there are a number of benefits – we stop cyberattacks and other attacks quicker; we don’t overwork staff; and we don’t get analysts with alert fatigue or mental health issues.
“What’s more, companies retain more staff because the work-balance is a lot better. We mustn’t forget that a cyberattack is an extremely stressful situation to work through, and not having any support makes it even more taxing on the individual.”
Ciccarelli agrees that AI and ML are no substitute for humans. “Although AI will have a lasting impact on the future of cybersecurity, its use is by no means the Holy Grail,” he says.
“AI contributes to rule-based learning and analytical accuracy but does not cover the equally important aspects of intuition, creativity, empathy or human intelligence.”
There’s also a general consensus that the very tech being used to prevent attacks could be used against us.
“If we put ourselves into a threat actor’s shoes for a minute, could they manipulate
machine learning to their benefit?” asks Mossman. “It is possible.
“It’s probably not as common now, but machine learning looks at patterns. And if there’s a way that they can control how patterns are being looked at, then there’s a way they could bypass machine learning, which is bad for us because we will come to increasingly rely on it.”
Martin Keelagher, CEO of Agile Automations, adds: “Organisations are looking at how they can work more effectively with a much smaller workforce, and cybercriminals are embracing that methodology themselves.
“They will target organisations and effectively bombard them, and the way they’re doing that is by automating their own processes. A lot of the time they’re highly organised, they’ve got money and they’re nimble.
“They are taking the tools and efficiencies that we drive into a commercial
environment, and they’re implementing that for criminal gain.
“They have robots, for example, that send out an email campaign that people reply to. So you’re communicating with a bot, but rather than it be for a legitimate purpose, such as for customer care, it’s a criminal organisation. And they are trying to get you to provide data or even funds. It can be quite powerful.”
Keelagher provides an example of how bots can collect and build on data.
“This is often the case if you get an email from a bot but deem it to be real – people quite often reply, not realising that they are inadvertently providing criminals with the extra information that sits in your email signature. This could be your full name or a mobile number.
“So the adversary had one datapoint, which is your email, but the moment you reply to them they have all of that data that’s in your email.”
He adds: “Large organisations tend to spend an awful lot of money on AI systems that are built into the firewalls and will actually mitigate against these things. But as we go into a recession, smaller firms will be looking at where they can make cost savings. They’ll look down the budget and question if they should be spending a lot of money on, for example, penetration testing.”
In conclusion, Keelagher warns: “Companies need to be extremely careful before turning these things off, or they could leave themselves wide open to an attack by the very methods that are supposed to be working in their favour.”
Businesses could leave themselves wide open to an attack by the very methods that are supposed to be working in their favour
Meet Pierpaolo, he’s one of three Masters of Wine here at Waitrose & Partners. He and his team spend their lives searching the planet to find the best wines for our customers. Think of them as your very own sommeliers. Because every single wine we sell has been hand-picked by them.
MORE PEOPLE HAVE BEEN INTO SPACE THAN HAVE PASSED THE MASTER OF WINE EXAMPierpaolo, Partner & Head of Wine Buying
Rats move in time to rhythm and they particularly like the music of Lady Gaga. That’s the conclusion of a study conducted by the University of Tokyo and reported in the journal Science Advances, in which 10 rats were fitted with tiny wireless accelerometers that could measure their slightest head movements. When music from a variety of artists was played, their movement was recorded, and it was found that the rats jerked their heads and kept up with the beat alongside human participants. Their best performance was to music in the 120-140 beats per minute range, which included Mozart’s Sonata for Two Pianos in D Major.
A survey by recruitment firm Robert Walters in the UK has found that almost two thirds (66%) of 18- to 24-year-old young professionals have at least one second job alongside their main occupation. Of the 6,000 individuals who took part, three quarters said that having just one job was ‘too risky’ and more than half expressed a desire to have a portfolio career. One reason for the popularity of side-hustles is anxiety about pay, with 59% of those taking part saying that was a significant concern for them. Toby Fowlston, CEO of Robert Walters, said: “A side hustle or portfolio career for a junior professional showcases entrepreneurialism, initiative, innovative thinking and project management skills – all characteristics that should be championed by employers.”
The Netherlands is the top non-native English-speaking country in the world, according to the English Proficiency Index, an annual report by language school EF. Of 111 countries tput to the test, the Netherlands came first with a proficiency score of 661. Singapore and Austria took the next two positions, followed by Norway, Denmark and Belgium. Laos was bottom of the table with a score of 364. Spain and France were among the lowest scoring EU countries, ranked at 33 and 34 for English proficiency, far behind Greece, Romania and Hungary. After Singapore, the Philippines had the highest score in Asia, while South Africa came top in Africa, and Argentina in South America.
The bacteria that cause leprosy can have powerful effects in repairing and regenerating parts of the body, including entire organs, according to researchers at the University of Edinburgh. An article published in the journal Cell Reports Medicine reports on a study where the leprosy bacteria were given to armadillos –one of the only animals other than humans known to host the disease. The bugs were introduced to the animals’ livers, which grew to twice their previous size but remained completely healthy and functional. It is hoped the technique can now be used in humans with liver disease.
Luxembourg has the highest transport emissions per head of any country in the EU, despite being the second smallest after Malta. That’s the surprising conclusion of research by the Austrian Automotive Club, which put the duchy at the top of its league table of shame with annual emissions per capita of 7,355 kilograms of CO2. Austria, with 2,300 kg and Slovenia with 2,180kg were in second and third positions. France, which is the EU’s biggest country by surface area, came 15th, and Romania had the lowest emissions at just 925kg per capita.
Luxembourg has the highest car ownership per capita in the EU and has tried to reduce its footprint by making public transport free.
New in… BOOKS
jungle out there
Pandemic Diaries: The inside story of Britain’s battle against Covid by Matt Hancock and Isabel Oakeshott (Biteback Publishing, £25, hardback)
In the wake of the former health minister’s sojourn in the I’m a Celebrity jungle, this is likely to get plenty of attention The performance of the UK government over Covid-19 has become, alongside Brexit, the bellwether of Boris Johnson’s term in office. This account promises to detail how decisions were made and reveal the inner workings of government as the UK attempted to control the vaccine and find a way out. It can be expected to give a good share of the credit to Hancock for the UK’s vaccine roll-out. Sales, you feel, will not have been damaged by that stay in the jungle.
Be the Calm or Be the Storm: Leadership Lessons from a Woman at the Helm
by Sandy Yawn (Hay House Business, £21.99, hardback)
This is a guide to leadership with a twist. The helm in question is not metaphorical but the wheel of a superyacht, where Yawn has come to prominence in the TV series Below Deck Mediterranean. She’s also shown herself to be the match of any ship’s master during her three-decade-long career. Captain Sandy fought off alcoholism before starting a career in sailing and making her meteoric rise to skipper. She was awarded the prestigious Distinguished Crew Award for her bravery after facing down a catastrophic fire and pirate threat in the Red Sea off Yemen in 2006. Here, she shares lessons on how she selects and sizes up her crew, what to do when bad things happen at sea, and what makes for great teamwork on board. All of which is not a million miles from what business leaders need to do.
back to basics
The Natural Order of Money by Roy Sebag (Goldmoney Publishing, £11.99, hardback) You only need look at the cover to know this is not just another book on finance – clothbound with gold foil and ribbon markers, printed and bound in Oxford “by one of the few remaining artisan bookbinders in the world”. The subject is the relationship between money, people and the natural world and its author is the son of third-generation farmers, who asks: why do we expect food to be a given? What is the true cause of inflation, wealth inequality and the forgetting of ecological accountability? For those who feel the world has become far too removed from nature, and that society is obsessed with wealth and finance, this is a commendable attempt to bring money back to its most basic value.
The Lego Story: How a Little Toy Sparked the World’s Imagination by Jens Andersen (Mariner Books, £25.00, hardback) Few children’s toys – few brands of any description –command the emotional power and loyalty of Lego. In the age of the internet and virtual reality, between 80 and 90 million children around the world are still given a box of Lego every year, unlocking the opportunity to create whatever their imagination can invent. Jens Andersen’s book tells the story of the company and the Danish family that invented Lego 90 years ago, turning a small carpenter’s shop into a global brand in the process. It’s built on the family archive, as well as extensive interviews with some of the key players, including Kjeld Kirk Kristiansen, former president and CEO of the Lego group and grandson of its founder, Ole Kirk Christiansen. Lego fans will also love the archive pictures.
In numbers: video games
One million phones for the planet
This partnership between Vodafone and WWF aims to incentivise Vodafone customers to trade in old mobile devices to be repaired, refurbished or recycled. For every phone collected £1, or local equivalent, will be donated to WWF conservation projects. Under the scheme, Vodafone users can arrange to have their old phone collected by the company. shorturl.at/amnov
Jersey to Belfast flight
Aer Lingus is to run Jersey’s first regular commercial route to Belfast in nearly a decade. Ports of Jersey has announced the seasonal route will start on 6 May, with 6,000 seats available on Wednesdays and Saturdays through summer. Passengers have not had a regular link between the Channel Islands and Northern Ireland since 2013. www.jerseyairport.com/news/new-air-route-to-belfast/
Natural Capital Fund
The Guernsey Financial Services Commission has launched this fund designation, which will endorse investment schemes that make a positive contribution to, or significantly reduce harm done to, the natural world.
The concept of natural capital – clean air, water supply, plant life, animals, soil and minerals – seeks to recognise the role of nature as an asset, says the GFSC. Any class of Guernsey fund can take part. https://www.gfsc.gg/industry-sectors/investment/guernsey-sustainablefunds/investment-natural-capital-funds
AI for Decarbonisation Programme
This UK government has launched this programme to support the use of artificial intelligence to reduce the UK’s carbon emissions. Stream 1, worth up to £500,000, will be made available to co-fund a virtual centre of excellence on AI innovation and decarbonisation up to March 2025; Stream 2, worth up to £1m, will fund innovation projects that develop AI to support decarbonisation. Applications can be made until 19 January. www.gov.uk/government/publications/artificial-intelligence-fordecarbonisation-innovation-programme
Heard anything from Satoshi Nakamoto lately? While cryptocurrency has been having its ups and downs – not least with the demise of FTX – it’s surprising that the inventor of bitcoin hasn’t had anything to say.
Unless, of course, you realise that Nakamoto is widely regarded as a pseudonym and hasn’t been seen or heard in public since his original white paper describing a digital cryptocurrency, Bitcoin: A Peer-to-Peer Electronic Cash System, was published 14 years ago. In that paper, Nakamoto laid out the theory and operating system of the Bitcoin payment system: “I’ve developed a new open source P2P e-cash system called Bitcoin. It’s completely decentralised, with no central server or trusted parties, because everything is based on crypto proof instead of trust. Give it a try...”
who received the first ever transfer of Bitcoin in 2009. He denied it and died in 2014. Elon Musk has also been named and has insisted he is not Nakomoto.
Because of the spelling in the original Bitcoin white paper, some insisted that Nakamoto must be British; while others pointed at an out-of-work Japanese-American physicist living in California called Dorian Satoshi Nakamoto, but he also disowned the authorship. Another programmer and cryptographer, Nick Szabo, who developed an earlier version of Bitcoin called Bit Gold has also been put in the frame – not least by Elon Musk – but said it wasn’t him.
Last year, Hungary dedicated a statue to Nakamoto, based on a hooded figure
Bitcoin, of course, rapidly took off and today more than 100 million people are estimated to hold some of the currency. But Nakamoto’s identity is an ever deeper mystery. Some thought it was Craig Wright, an Australian computer programmer, who made a public claim to the identity and filed for copyright on the white paper. Others pointed to Hal Finney, a cryptographer
JARGON BUSTER desk bombing
Only a little while ago, especially at the height of the pandemic, people were afraid working from home would leave them isolated. Now that some of us have started drifting back to the office, there’s a new anxiety: desk bombing. This is the rather scary name given to the practice of dropping by your co-worker’s desk, uninvited, and ahem, talking to them.
Pilita Clark at the FT sees it as “an outbreak of overweening shyness, or intolerance of interruption, that is at best selfdestructive and at worst unproductive and annoying”. It is easier to email the person sitting next to you than speak to them; and among younger exponents it is not unknown to ask your parents to make medical appointments on your behalf rather than have to pick up a phone.
Those who fear being desk-bombed see hybrid working or a full-time return to the office as a regressive step. Perhaps it’s only a matter of time before those afflicted start to erect defences around their desktop, or companies start to draw up a policy on when you can approach a colleague at their desk without invitation.
Last year, Hungary dedicated a statue to Nakamoto, based on a rather anonymous and generic looking hooded figure. It came soon after the 10th anniversary of his final enigmatic message: “I’ve moved on to other things”. Whether we will ever hear from him again (few seem to doubt Nakamoto is a man) appears doubtful. But that leaves one final mystery: what happened to his Bitcoin, worth tens of billions of dollars according to projections?
One day that wealth might turn up – and with it the identity of one of the most influential figures in 21st century finance.
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Safety and censorship
What we get to see on the internet and on our social media platforms has become a hot topic.
The UK’s Online Safety Bill promises to lay down strict new rules about who can use social media platforms, what they should see, and the penalties platforms face if they break the rules.
Meanwhile, over on Twitter, Elon Musk has taken the reins with a pledge to restore free speech and re-activate the accounts of those who were previously banned – most notably former US President Donald Trump.
In China, a more extreme form of internet censorship is taking place as protests against President Xi’s zero Covid policy have gathered pace. And in Iran the government imposed an internet blackout in the midst of protests over the death of Mahsa Amini.
As the power of digital content becomes increasingly loaded, is there any consensus about what we should and should not be allowed to view online? And who is going to decide where safety becomes censorship?
The Online Safety Bill, one of the first attempts internationally to police the internet, is to become law in the UK by summer 2023 after a stuttering start. A clause that would require tech platforms to stop users from seeing “legal but harmful” content has been withdrawn, apparently in response to criticism that this posed a threat to freedom of expression. Instead the focus will be on making social media platforms enforce age limits so that children are protected from seeing risky material on topics such as self-harming and eating disorders.
The idea is that corporations should no longer be left to regulate themselves: in future, Ofcom will be able to fine those who don’t comply up to 10% of their worldwide revenues.
But critics say the bill has been diluted and there is nothing to stop adults seeing extremely harmful content, including extreme violence and pornography as well as images that might
encourage people to harm themselves. Julie Bentley, Chief Executive of the Samaritans, said: “The damaging impact that this type of content has doesn’t end on your 18th birthday.”
Australia has a similar law in the pipeline. Other jurisdictions, including the EU – where digital markets and digital services legislation is afoot – have hitherto focused specifically on laws to enforce removal of illegal material. What counts as illegal varies widely from country to country, although there is a core set of materials most countries agree on – child pornography and content that encourages crime or terrorism.
Nevertheless, there’s a fine line between safety and censorship. When he took over Twitter, Elon Musk vowed to make it a bastion of free speech, including for those banned for posting offensive or dangerous material, such as Trump and Kanye West. How far he’ll go remains to be seen. So far advertisers have been voting with their feet, which shows there are many influences when it comes to deciding what should be allowed.
Behind all this lurks a fear of political censorship – governments that find ways to curtail material on the internet that doesn’t suit their own ideology or control of the population.
According to pro-consumer website Comparitech, North Korea and China are the worst countries for online censorship: “There isn’t anything either of them doesn’t heavily censor thanks to their iron grip over the entire internet.”
Western social media are blocked alongside messaging apps from abroad.
Iran, UAE, Myanmar and Turkmenistan are not far behind. It’s no coincidence that countries such as China and Iran, which are currently stamping down on political protest, see control of the internet as one of the first steps to achieving that.
For some, the internet is a weapon. For others, it is a danger. And for still others, it is the passport to freedom. Finding a balance between the last two objectives is the elusive goal.
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Fine art, decorative art and design works are the main passion investments attracting the attention of wealthy investors, according to the findings of a new Survey of Global Collecting in 2022 from Art Basel and UBS.
The survey explored collectors’ habits over the past two years, revealing that cars and sports investments actually drew the least interest over that period.
The report states: “While the pandemic brought about a sharp reduction in sales and cross-border trade in the international art market, these were temporary contractions and the recovery in values was clearly evident by 2021.
Source: Survey of Global Collecting in 2022, Art Basel and UBS
“All respondents had bought either fine art (90%), decorative art (77%) or antiques (66%) in the previous two-year period. There was evidence of significant cross-collecting with other luxury and collectibles markets, with 76% of the sample having also purchased jewellery, gems and watches.
“The majority (69%) had also bought 20th or 21st century design works. Fine art was the most popular category across all generations and in most regions apart from Brazil and Italy, where more jewellery, gems, and watches had been purchased.”
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