Canadian Equipment Finance Magazine May/June 2015

May/June 2015 • volume 3 • issue 3 | www.canadianequipmentfinance.com

Technology Report:

Canada leads the way in telematics and connected cars

Your Business: Trust barriers in equity crowdfunding Your Team: Integrating coaching into talent management PM40050803

contents May/June 2015 Volume 3 Number 3 Publisher and Editor-in-Chief Steve Lloyd steve@canadianequipmentfinance.com Editor Karen Treml karen@canadianequipmentfinance.com Creative Direction / Production Jennifer O’Neill jennifer@canadianequipmentfinance.com

ELFA REPORT: Overall new business volume for April was up one per cent year-over-year, while year-to-date cumulative new business volume increased 12 per cent compared to a year earlier »4

FEATURES

Photographer Gary Tannyan

Technology REPORT

Advertising Sales Mark Henry mark@canadianequipmentfinance.com

FULL STEAM AHEAD Canada can lead the world in telematics and connected cars »10

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HANDLING THE RISKS OF DISRUPTIVE TECHNOLOGY

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Services in the cloud involve risks »13

BELAIRDIRECT ‘Seriously … Just Drive’ aimed at curbing distracted driving »15

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HYUNDAI AUTOEVER TELEMATICS AMERICA Streamlining and automating the contracting process »16

NEWS »7

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Your Business Stakeholder relations: Equity crowdfunding trust barriers »17

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ELFA Report

Valerie Hayes Jester receives ‘2015 David H. Fenig Distinguished Service In Advocacy Award’ The Equipment Leasing and Finance Association (ELFA) has selected Valerie Hayes Jester, President of Brandywine Capital Associates, Inc., to receive its ‘2015 David H. Fenig Distinguished Service in Advocacy Award’. The award, named for ELFA’s former Vice-president of Federal Government Relations, honours individuals who have made significant contributions to the association’s advocacy efforts to promote sound public policies for the equipment finance industry.

Jester will be formally recognized during a ceremony at ELFA’s Capitol Connections event on Wednesday, May 13, in Washington, DC. Jester has been an active participant in ELFA for more than two decades. During this time, she has supported the industry’s policy objectives in a number of ways. She served as Chairman of LeasePAC, ELFA’s nonpartisan federal political action committee, working tirelessly to increase awareness of and member contributions to the PAC. She also has been a regular attendee and steadfast promoter of ELFA’s annual Capitol Connections event. She has met with members of Congress and executive branch agencies, highlighting the value of equipment finance to the U.S. economy and the impact of legislative and regulatory proposals on the industry.

Jester also has advocated for the equipment finance industry at the state level, educating members of the Pennsylvania state legislature about critical ELFA issues. She was instrumental in developing the key relationship in Pennsylvania that helped the industry effectively advocate for critical provisions of automatic-renewal legislation that later paved the way for national model legislative language for auto-renewals.

Jester was the first woman to serve as chairman of ELFA, a position she held in 2007. She has also served as the association’s treasurer and as an active member of the Small Ticket Business Council. In addition, she has contributed to ELFA’s research affiliate, the Equipment Leasing & Finance Foundation. She currently serves on the Foundation’s Board of Trustees and Chairs the National Development Committee.

Her fundraising efforts helped the Foundation to achieve a record-breaking fundraising year in 2014 in support of futurefocused information and research for the industry.

New business volume up

The Equipment Leasing and Finance Association’s (ELFA) ‘Monthly Leasing and Finance Index’ (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $903 billion equipment finance sector, showed their overall new business volume for April was $8.2 billion, up one per cent from new business volume in April 2014. Volume was down eight per cent from $8.9 billion in March. Year to date, cumulative new business volume increased 12 per cent compared to 2014.

Receivables over 30 days were 0.9 per cent, down from 1.2 per cent the previous month and from one per cent the same period in 2014. Charge-offs remained at an all-time low of 0.2 per cent for the 14th consecutive month.

Credit approvals totaled 78.7 per cent in April, unchanged from March. Total headcount for equipment finance companies was up 3.9 per cent year over year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for May is 67.5, slightly lower than the April index of 70.7.

ELFA President and CEO William G. Sutton, CAE, said: “Following a strong first quarter, April new business volume continues to show consistent, stable growth.

Equipment finance companies are taking advantage of abundant, available liquidity, thus providing very favorable economics for end users to acquire the capital equipment necessary to operate their businesses. These same equipment finance and leasing companies also report continued high-performing portfolios, with low delinquencies and losses, reflecting healthy credit markets and an overall economy that continues to grow, albeit unevenly and in fits and starts.”

John Evans, Executive Vice President, Equipment Finance Division, Bank of the West, said, “The good news is the MLFI-25 Q1 2015 new business volume was up year over year in spite of seven consecutive months’ decline in non-defense durable goods orders (ex. commercial aircraft). Unfortunately, the persistent weakness in durable goods orders is evident in April new business volume compared to March. MLFI-25 portfolio performance indices, receivable aging and charge-offs, along with credit approval rates, point to an underlying stable business environment. With bad weather and sharp oil price declines behind us and the possibility of more consumer confidence, conditions for business investment look more favorable for the balance of the year.”

For breaking news and in depth new features, visit our website at www.canadianequipmentfinance.com 4

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ELFA Report

Industry confidence remains strong in May The Equipment Leasing & Finance Foundation (the Foundation) releases the May 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $903 billion equipment finance sector. Overall, confidence in the equipment finance market is 67.5, slightly lower than the April index of 70.7.

The overall MCI-EFI is 67.5, slightly lower than the April index of 70.7.

◉◉ When asked to assess their business conditions over the next four months, 30.8 per cent of executives responding said they believe business conditions will improve over the next four months, down from 44.4 per cent in April. 69.2 per cent of respondents believe business conditions will remain the same over the next four months, up from 55.6 per cent in April.

None believe business conditions will worsen, unchanged from the previous month. ◉◉ 34.6 per cent of survey respondents believe demand for leases and loans to fund capital

expenditures (capex) will increase over the next four months, down from 48.2 per cent in April. 65.4 per cent believe demand will ‘remain the same’ during the same four-month time period, up from 51.9 per cent the previous month.

None believe demand will decline, unchanged from April. ◉◉ 38.5 per cent of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 25.9 per cent in April. 57.7 per cent of survey respondents indicate they expect the ‘same’ access to capital to fund business, down from 74.1 per cent in April. 3.9 per cent expect ‘less’ access to capital, up from none who expected less access to capital the previous month. ◉◉ When asked, 53.9 per cent of the executives reported they expect to hire more employees over the next four months, an increase from 51.9 per cent in April.

42.3 per cent expect no change in headcount over the next four months, down from 48.2 per cent last month. 3.9 per cent expect to hire fewer employees, up from none who expected fewer in April. ◉◉ 3.9 per cent of the leadership evaluate the current U.S. economy as

‘excellent’, down from 7.4 per cent last month. 96.2 per cent of the leadership evaluate the current U.S. economy as ‘fair’, up from 92.6 per cent in April. None rate it as ‘poor’, unchanged from the previous month. ◉◉ 34.6 per cent of the survey respondents believe that U.S. economic conditions will get ‘better’ over the next six months, a decrease from 40.7 per cent who believed so in April.

65.4 per cent of survey respondents indicate they believe the U.S. economy will ‘stay the same’ over the next six months, an increase from 55.6 per cent in April. None believe economic conditions in the U.S. will worsen over the next six months, a decrease from 3.7 per cent who believed so last month. ◉◉ In May, 50 per cent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 59.3 per cent in April. 46.2 per cent believe there will be ‘no change’ in business development spending, an increase from 40.7 per cent last month. 3.9 per cent believe there will be a decrease in spending, an increase from none who believed so last month.

To send press announcements, please direct them to Karen Treml, Editor, at karen@canadianequipmentfinance.com

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CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

News

CLFP adds members The Certified Lease & Finance Professional Foundation (CLFP) held its first Academy for Lease & Finance Professionals (ALFP). The three-day event was hosted by Banc of California and ten individuals successfully passed the CLFP exam. They are: ◉◉ Déva Brooks, CLFP – Vice President, Leasing Sales Officer, First American Equipment Finance ◉◉ Paul Burnham, CLFP – President, El Dorado Commercial Finance LLC ◉◉ Austin Kingsley, CLFP Associate – National Account Manager, Allegiant Partners, Inc. ◉◉ Jakeb Klein, CLFP Associate – National Account Manager, Allegiant Partners, Inc. ◉◉ Steve Lewis, CLFP – Vice President, Baycap ◉◉ Ryan Makris, CLFP – Sales Manager, Allegiant Partners, Inc. ◉◉ Mark Rodeghiero, CLFP Associate – Owner, Source Finance ◉◉ Jim Schreder, CLFP Associate – Executive Director, Danjon Capital, Inc. ◉◉ Steven Ward, CLFP – Credit Manager, Providence Capital Funding ◉◉ Brandon Ware, CLFP Associate – Lease Accounting Manager, Banc of California Allegiant Partners, Inc. now employs 11 CLFPs and 2 CLFP Associates and Ryan Makris, CLFP explained, “Since coming on with Allegiant in 2011, the expectation was always set that I would one day pursue a CLFP designation. I’ve been very lucky to work with an organization that fosters learning at such a high level. For me, obtaining the CLFP designation represents the commitment to further develop one’s depth of knowledge in the industry.”

The CLFP designation identifies an individual as a knowledgeable professional to employers, clients, customers, and peers in the equipment finance industry. There are currently 241 Certified Lease & Finance Professionals and Associates throughout the world.

Element Financial stock up Element Financial continues its run as best-performing Canadian financial stock.

Coming off a blockbuster financing, and with a transformative acquisition in the works, Element is in good shape to extend its run as the bestperforming financial stock in the country, says The Globe and Mail.

This year so far, Element’s stock is up by 38 per cent, making it a top 10 performer among Canadian large caps. Its market capitalization now exceeds $5-billion.

LEAS

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T EAM

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NEWS

Oneplace Capital increases equipment financing efficiency Omaha, NE–LeaseTeam, Inc., a solution provider in the equipment and finance marketplace, and eOriginal, Inc., a digital transaction firm, have announced a collaboration that delivers a fully digital transaction management (DTM) solution for OnePlace Capital, an equipment financing company servicing U.S. medical, dental, and veterinary practitioners. The joint solution provides OnePlace Capital with increased efficiency and control of their business processes to decrease costs and better serve their vendors.

Headquartered in West Des Moines, Iowa, OnePlace Capital, a division of Bank Midwest, serves the healthcare industry by providing leading institutions and practitioners with more purchasing power to acquire additional and leadingedge healthcare equipment. The company features a financing model where every loan is designed to fit the specific needs of the requesting healthcare practice. The team at OnePlace Capital came to LeaseTeam and eOriginal to simplify its loan origination process and reduce its sales cycle, while still providing a customizable level of customer support and financing.

“Our partnership with eOriginal and LeaseTeam enables us to increase our efficiency with our loan origination processes, while still providing exceptional customer service,” said Scott Stewart, president of OnePlace Capital. “Every loan we process, no matter the size, costs our company the same amount of time and money to originate. By leveraging this technology, it’s a win-win situation. We

decrease our average transaction time, while better serving our vendor partners and borrowers.”

The joint DTM solution puts OnePlace Capital on the cutting edge of the equipment finance industry. LeaseTeam’s ASPIRE™, a lease and loan management solution, significantly reduces human error that disrupts the ability to close loans for equipment leasing, while also avoiding the majority of the costs related to traditional ink-and-paper processes. This improves the customer experience by optimizing processes that ensure valid information on documentation to reduce delays for corrections by customers and vendors.

“Paper will soon become a thing of the past within the equipment leasing industry,” said Dan O’Malley, president and CEO of LeaseTeam. “As competition continues to grow within the industry, companies like OnePlace Capital will be able to conduct business in a better and more efficient manner, attracting more customers and increasing their financing opportunities.”

With LeaseTeam’s ASPIRE paired with eOriginal’s eAsset® Management Platform, OnePlace Capital can manage and protect their financial eAsset documents throughout their lifecycle with compliant securitization in a fully digital environment.

The platform also provides the company with the ability to transfer documents electronically through the document custodian, decreasing the transfer time significantly.

“OnePlace Capital’s digital transformation has moved the company into

a new era,” said Stephen Bisbee, president and CEO of eOriginal. “eOriginal has long been a leader in bringing innovation to the equipment leasing industry. We are confident that the implementation of our DTM solution will allow OnePlace Capital to maintain the highest levels of security and compliance, while serving their internal needs of regulating their business processes.”

First Financial Corporate Services, an independent provider of equipment leasing and financial solutions, announced the hiring of John Sandoval to serve in a dual role as chief financial officer and chief operating officer. Sandoval will be responsible for the daily finance and operations of the company, and will further assist in the company’s continued growth plans.

Sandoval joins First Financial with more than 25 years of leasing, finance and strategic business development experience.

He most recently served as executive vice president of CHG-MERIDIAN USA where he helped start and grow the U.S. and Canadian operations of CHG-MERIDIAN. He also helped grow two other start-up operations during his career, including Bank of the West’s Direct Bank Equipment Leasing Group, and City National Bank Equipment Leasing.

“We are extremely pleased to have someone with John’s experience and leadership capabilities as our new CFO and COO,” says Tom Slevin, co-founder and copresident. “He will be a great complement to our existing team.”

Sterling National Bank reports record growth in equipment finance

The Equipment Finance division of Sterling National Bank, the principal subsidiary of Sterling Bancorp, finished the fourth quarter of 2014 with a record $310 million in new business transactions in addition to portfolio growth of 54 per cent rising from $270 million to $412 million.

“Our streamlined credit approval process and team-based service model helped us to achieve record portfolio growth in FY 2014,” says Keith Smith, senior managing director, Sterling National Bank. “As the bank continues to grow, we have expanded our lending to all industries and are serving clients of all sizes nationwide, with a specialized focus on the Middle Market.

Sterling’s Equipment Finance division has seen steady growth over the past several years. Sterling offers terms from 12 months to 84 months to meet the needs of both small portfolios and larger transactions.

“As our portfolios continue to grow, we have been able to maintain an extremely low rate of delinquency,” added Smith. “Looking forward, it is our goal to continue expanding our team and executing timely and efficient services for customers who are looking to finance their equipment needs.”

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CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

NEWS

Canada’s economy to accelerate after sluggish start to 2015 The broad-based weakness that knee-capped Canada’s economy earlier this year will prove to be temporary with stronger performance expected in the latter half of 2015, according to the latest ‘Economic and Financial Market Outlook’ issued by RBC Economics. RBC is projecting real GDP growth of 1.8 per cent in 2015 and 2.6 per cent in 2016.

“Our outlook for Canada’s economy reflects a positive read on expectations for consumption and housing, and the notion that a strengthening U.S. economy and a more competitive domestic currency will fuel increased demand for Canadian exports,” says Craig Wright, senior vicepresident and chief economist, RBC. The RBC report indicates that consumer spending will provide a solid contribution to growth in 2015 with labour market conditions gradually firming, wage growth accelerating, and lower gasoline prices lifting disposable incomes.

RBC says a recent rise in housing sales signals oil-producing provinces may have hit their lows early in the year; however, given the uncertainty surrounding the nearterm outlook for the price for oil, another round of selling cannot be ruled out. The rebound in sales activity in March and April in oil-consuming provinces will likely be maintained.

“Another rise in average home prices should put some pressure on affordability, though it will be tempered by historically low rates,” says Wright. “In 2016, a combination of price increases and rising rates will put more stress on affordability levels and resale activity will begin to soften.”

RBC’s outlook notes that a divergence in monetary policy between Canada and the U.S. will result in continued pressure on the Canadian currency, causing the dollar to depreciate to 77 U.S. cents, down from 81 U.S. cents - the average so far this year.

Wright comments: “The Canadian dollar is likely to remain below 80 U.S. cents in 2016 with the BoC policy rate expected to stay below that of the Fed.” RBC also anticipates headline inflation to bottom in the second quarter of 2015 as the effects of lower energy prices lessen.

In 2016, rising energy prices and abovepotential growth will underpin stronger increases in the headline rate, which RBC

expects will remain above the BoC’s 2.0 per cent target.

“We maintain that the first increase in the overnight rate will be announced in the second quarter of 2016,” says Wright.

“By the end of next year, we forecast the overnight rate will be 1.75 per cent, 100 bps above today’s rate.”

RBC notes that early economic indicators

for 2015 largely have disappointed on the provincial front, though this mainly mirrored a concentrated hit to capital spending in the energy sector, as well as stalled North American activity due to unusually cold weather in the east and labour disruptions along U.S. west coast port facilities. RBC says most provinces will kick into higher economic gear over the remainder of 2015.

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Technology Report

Full Steam Ahead Canada embraces the connected car

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Technology Report

By Blair Currie

anada is in a great position to lead the world in telematics, connected cars and intelligent transportation systems (ITS) because we have the advantages of world class infrastructure and a strong culture of technological innovation.

Canadian subsidiaries of global automotive equipment manufacturers are not deeply involved in the strategic decisions associated with vehicle manufacturing, including product design. Instead, Canada’s automotive manufacturers have concentrated more on producing (rather than designing) great cars and looking beyond production. This has led to two outcomes. First, Canadian companies have started to set a number of quality standards in automotive technology.

Second, Canadian companies have made great progress in automotives outside the realm of product design. Canadian companies, like Intelligent Mechatronic Systems Inc. (IMS) have excelled in both the software and services sides of the automotive business, developing the digital technology that is at the heart of today’s telematics platforms, connected cars and intelligent transportation systems.

C

Canadian leaders focus on automotive services and digital technology Connected cars are not just futuristic, they are on the roads today. The cost of connecting a vehicle to digital infrastructure is quickly decreasing as more automotive manufacturers are integrating digital technology for drivers. Within the next decade, all vehicles on the road will be connected, bringing benefits to both drivers and transportation systems worldwide.

A number of Canadian companies are well-known leaders in the global connected car space. These companies provide sophisticated

vehicle operating systems, telematics and infotainment platforms. Global intelligent transportation experts have emerged from technology hubs located in Waterloo, Ottawa, Toronto and Vancouver. Canadian companies are also pioneering automotive connectivity in the aftermarket, powering telematics solutions used by the insurance industry for usage-based insurance (UBI) and infotainment to allow drivers to be safer and more productive while on the road, and logistics and vehicle management tools for fleets and rental vehicles.

Data from connected cars No story on the connected car would be complete without a reference to data. There’s an entire industry emerging around the data, analytics and visualization components of connected car technology. The insights and intelligence that can be gained from driving behaviour and vehicle health are primarily driven by the growth in vehicle telematics. Data can be collected directly from today’s connected vehicle through embedded technology and through aftermarket solutions available from a number of in-vehicle enablers. These solutions include “built-in” technology in new vehicles, “brought-in” technology that connects to smartphones and tablets, and “plugged-in” technology such as the on-board diagnostics (OBD-II) device. Each of these technologies have advantages and disadvantages; however, embedded, or built-in, technology is most reliable but not widely available in today’s vehicles. Further, the data is also automotive equipment manufacturer specific as standards have not been set and adopted by the overall automotive industry.

The “plugged-in” technology that works through self-install devices in a vehicle’s OBD-II port is available for all vehicles made after 1996, when this emissions-based standard was made mandatory in North America. OBD-II devices that collect data from vehicles have built-in accelerometer and GPS

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Technology Report

sensors to help connect most vehicles.

However, this solution still requires the purchase of aftermarket add-on hardware that is seen as an expense and a barrier to widespread adoption.

Then there is “brought-in”, or mobile, technology that is becoming widespread as an increasing proportion of the driving population upgrades to smartphones. While the data from mobile devices (which have similar sensors to those found in OBD-II devices) are improving, there are still issues with widespread adoption. Issues include ensuring that fraud does not occur (i.e. reporting individual driving data versus all data from the family vehicle driven by multiple drivers) and differentiation between drivers and passengers does occur. Also, unlike OBD-II which is issued to collect information, mobile’s biggest limitation is the inability to add on additional value-added services, such as vehicle health data, fuel consumption, integrated roadside assistance and more.

Usage-based insurance (UBI) and the connected car One success story of using connected car data is that of the auto insurance industry that is leveraging telematics data to change the way it does business, through the adoption of usagebased insurance (UBI) technology.

Auto insurance companies are now incorporating measures of distance traveled, speed, time of day, relative aggressiveness (in terms of acceleration, braking and cornering) as well as vehicle data to help price insurance policies.

Some are also evaluating contextual data including weather, road conditions and 12

traffic to help assess driver risk. Insurers are also opting in to sharing data with drivers in the form of a score to help improve their driving performance and reduce claims.

There are many benefits to using insurance telematics. For insurers, usagebased insurance (UBI) can help attract and retain low-risk drivers who are also the most profitable to insure. UBI can also reduce claims and be a tool to build auto insurer loyalty. For auto insurance brokers, UBI can help solidify their traditional position of being navigators of a complex and changing landscape by using telematics. For drivers, this can result in more control and savings on their insurance. Further, it can also give parents peace of mind because they can monitor safe driving practices of teens and seniors in their household who are using the family vehicle.

Commercial fleets, vehicle rental companies and car-sharing organizations are also adopting various telematics solution to improve their cost savings through vehicle location mapping, fuel emissions measurement and enhanced route planning.

Moreover, federal, provincial and municipal governments have also begun to adopt telematics data to develop refined road charging systems, emissions testing and assessment of the usage of high-occupancy vehicle (HOV) lanes.

Emerging connected car innovations Due to telematics gaining traction in Canada, additional connected car innovations are on the horizon for drivers across Canadian roadways. With the ongoing focus being on connecting

CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

drivers with safer options for route planning and in-car experiences, innovation has centred around increased productivity and efficiency on the road.

Intelligent commuting remains a key area prime for innovative technology, as it saves drivers time and hassle when both traffic and weather conditions are intelligently incorporated into each journey. Services that can provide drivers with emergency operator connectivity in case of a breakdown or accident have also been successful in this space.

Expanding on roadside assistance applications that leverage location mapping, connected car technology coming into the market includes the option to track your vehicle in crowded shopping malls, or set up geo-fences enabling drivers to be notified when their vehicle leaves a certain predetermined location. Communication-blocking technologies are also being explored globally, involving a renewed focus on the reduction of smartphone use within the vehicle to improve driver safety and reduce distractions.

Finally, and not too far ahead, a new era of connected car services and solutions will arise, made possible by the spread of this technology to vehicle-tovehicle (V2V), vehicle-to-infrastructure (V2I) as well as infrastructure-to-vehicle (I2V) communications.

There are tremendous opportunities ahead in the automotive sector within Canada. It is full steam ahead as Canada embraces the connected car.

Blair Currie is Vice President of Business Development, for Intelligent Mechatronic Systems Inc. (IMS), a leading connected car company. Blair spearheads global business development and growth, as well as industry alliances. He is one of the industry’s leading speakers and writers on telematics and infotainment.

Handling the Risks of Disruptive Technology Services in the cloud involve risks

By Ben Hunter

ervasive new and evolving technologies are causing all companies – not just technology firms – to reevaluate their risk management strategies. Today, businesses of all kinds collect and store ever-growing mountains of data, send private and confidential client information over the Internet via the ‘cloud’, and stream sensitive data wirelessly to a host of mobile devices. As these trends transform commerce, however, they’re also reshaping risk management. When it comes to cloud computing, ‘big data’, and mobile technology, here are some key risks that companies of all kinds shouldn’t overlook.

P

Cloud risks First, let’s demystify the cloud. It’s simply

how individuals and enterprises access shared computing resources, such as networks, servers, and applications, on demand, over the Internet. Cloud services range from Web-based personal email accounts to business software (software as a service) all the way to countless servers located throughout the world utilized to store vast amounts of data for research purposes (infrastructure as a service). By 2017, research firm Gartner estimates about half of all enterprises will have hybrid clouds, that is, use a mix of on-premise and public cloud services.

Goldman Sachs predicts that spending on cloud computing infrastructure and platforms will grow at a 30 per cent annual rate, or six times faster than overall enterprise IT spending.

For companies that provide cloud services and those that use them, a variety of risks need to be recognized.

From a privacy perspective, companies

offering ‘software as a service’ solutions become custodians of their clients data, and may be responsible for maintaining its confidentiality. Private and confidential data should be encrypted not only when it is in transit or being processed, but also when it is at rest.

Companies that offer ‘infrastructure as a service’, such as storage and processing systems, have to not only address cyber risks that are often in the news these days, but the physical risks tied to their data centres, such as fire and earthquakes. They also need to provide the right levels of redundancy and resiliency – or ‘fail over’ capability – to make sure a client’s business can continue uninterrupted if a server or data centre goes down because of physical damage or a cyber attack. These redundancies, and the steps necessary to execute a company’s response to such incidents, should be clearly articulated

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Technology Report in a business continuity and incident response plan.

Renting the cloud Before they make use of cloud services, companies should decide which data and functions are best kept in-house, such as trade secrets and intellectual property, and those that can be handled outside the corporate firewalls. Companies may want to keep mission-critical supplychain management and accounting functions in-house, for instance, while using the cloud to perform customer relationship management tasks.

Companies should assess the physical security of a cloud vendor’s site as well as the network security. ‘Boundary defences’ should include firewalls, the monitoring and control of access, and the level of user authentication required, such as biometric identification.

Resiliency and redundancy of data centres are critical considerations, with levels ranging from Tier 1, or less resilient, to Tier 4 with multiple redundancies to provide nearly 100 per cent uptime.

While the services may be in the cloud, the physical location of back-up servers and data centres should not be overlooked. Canadian firms handling personal, health, or financial data may want this information to remain in Canada, and not copied to an out-ofcountry data centre.

Big data, big risks By some estimates, roughly 90 per cent of the world’s data has been created in the last two years, reflecting the ability to record and store just about everything digitally. Big data refers to the massive amounts of data corporations are collecting, creating, and storing. Some of that data is useful, but much of it may just add risk.

Storage of non-essential data can pose a threat of a devastating breach, if unnecessary personal information or proprietary customer information is exposed. The loss of consumer information carries potentially severe reputational risks, as illustrated by a number of massive data breaches at large companies in recent years.

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To avoid the costs and risks of keeping huge quantities of unusable information, companies have to make some strategic decisions. Data collection rules should govern the kind of data that will be retained and its utility. Data management applications, such as analytics software, can derive useful intelligence out of the collected data, but if it cannot be interpreted or is of questionable veracity, it may be best discarded.

Companies should use data separation capabilities to identify important information that should be kept inhouse or on a ‘private-cloud’, that is, on specifically designated servers. Crucial data should be replicated and backed up daily to offsite remote locations.

Data decisions rules should cover which employees may access which levels of data, which data should be retained, and which information should be destroyed.

Companies need to address data theft by outsiders as well as the risks posed by disgruntled employees who may provide access to outsiders or even steal data themselves. Risk controls include monitoring employee data use for anomalies. Companies should not underestimate simple carelessness by employees as a security threat.

Data goes mobile Not only are corporations collecting massive amounts of data, they are sending much of it over wireless networks. Current ‘4G’ networks make it easier to stream video and perform other data-intensive tasks. Coming ‘5G’ networks promise even greater power and almost-instantaneous connectivity.

As more work goes wireless, companies need a mobile risk management strategy.

More employees are clamoring to use their own devices to avoid having to carry multiple ones, and Canada has been a leader in this trend. Research firm Ovum found in a 2013 study that more than 75 per cent of Canadian firms support the use of employee-owned devices. The proliferation of mobile devices adds risks and companies need to decide whether to provide access only on corporate devices or to a broader spectrum of personal devices.

People, however, do remain the

CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

weakest link. Security considerations include which apps employees can download and how data will be encrypted. For instance, if employees working in a coffee shop send unencrypted data wirelessly, that data may be intercepted. Small devices that hold very large amounts of data can easily be misplaced. Companies should have the capability to remotely wipe data from lost devices. Visitors to a company site may pose risks if they are able to use the corporate Wi-Fi network as an entry point to more sensitive systems.

Companies should establish an inventory of authorized and unauthorized devices, have secure configurations for hardware and software on mobile devices and laptops, and install multiple firewalls between wireless access and the corporate networks. Privacy policies should include mobile vulnerabilities and employees should be trained in proper procedures for mobile device use to protect sensitive information and corporate networks.

Managing virtual risks Even though much of business now takes place virtually, the risks remain very real.

While the proper security procedures and training can help to mitigate the risks that these disruptive technologies bring, they cannot eliminate them.

Computer hackers continually find new ways to break into networks, and employees still make careless mistakes.

Even the most resilient computer systems may crash. Losses tied to electronic activities or loss of data are typically excluded from general liability policies. For that reason, even nontechnology companies should consider cyber insurance to protect against those risks. Technology companies should also consider errors and omissions policies with cyber coverage included for the risks that may arise from providing technology products and services. Even though information technology often runs in the corporate background, risk managers should keep today’s cyber related risks front and center.

Ben Hunter is a Director of Technology & Clean Technology, Chubb Commercial Insurance, for Chubb Insurance Company of Canada in Toronto.

He can be reached at bhunter@chubb.com.

Technology Report

‘Seriously…Just Drive’ aims to curb distracted driving elairdirect insurance company and the ‘Seriously…Just Drive’ campaign are teaming up to promote a newly released mobile app to Ontario drivers in a bid to curb distracted driving.

Joining the chorus of public concern and renewed efforts by legislators to prevent distracted driving, belairdirect and Seriously…Just Drive hope the bumpr™ application, which automatically senses and responds to incoming calls and text messages when a vehicle is moving, will offer a solution to the growing issue. bumpr was developed by belairdirect to prevent distracted driving resulting from the use of smart phones and particularly text messages and social media notifications. Depending on the settings the user chooses, bumpr can redirect calls to voicemail, temporarily block various kinds of alerts and notifications and send a pre-selected response to incoming test messages, all without requiring the driver to touch the phone.

“As an insurance company, we see the results of distracted driving every day,” said Carla Smith, Vice President, Ontario Region. “This propels us to find new ways of educating motorists about the importance of driving responsibly, and to create the tools they need to help them stay safe on the road. belairdirect hopes the app will help reduce the number of

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Chevy’s ‘Valet Mode’ lets car owners record driving behavior

accidents caused by cell phone use while driving.”

The bumpr application will be featured at Seriously…Just Drive events, where participants engage in advanced ‘distracted driving simulators’, an initiative launched by AIM Autosport’s chief race engineer, Ian Willis, and racing champion, Juliana Chiovitti.

“Distracted driving is now the leading cause of road deaths in Ontario.

We established a relationship with a reputable insurance company to increase the awareness of this growing issue,” said Chiovitti. “With the bumpr app, you can take away the anxiousness we feel to stay connected on the go and less drivers will feel obliged to answer, look or glance at their phones.”

In Ontario, distracted driving is cited as the cause in 30 to 50 per cent of traffic collisions. The figures are alarming especially in the case of young adults: 60 per cent of drivers that own a cell phone admit to using it even though they are aware of the risks of doing so.

Cell phones are one of the main distractions for motorists, increasing the risk of a car accident when used while driving. belairdirect aims to bring awareness to the public and take action to address this risk.

The bumpr application is available free of charge to all Canadian motorists. The application is designed exclusively for use with the Android™ operating system.

ver been apprehensive about handing car keys over to a valet? If so, then check out “valet mode” available in the upcoming 2014 Chevrolet Impala.

Accessed via the settings menu in the available 8-inch display powered by the next-generation MyLink infotainment system, Valet Mode is initiated with a PIN and locks the retractable faceplate in the center stack, thereby protecting the storage bin behind it, while blocking access to addresses and contacts stored in MyLink.

According to Chevrolet, customer clinic participants expressed interest in Valet Mode, especially young car buyers who appreciated MyLink’s ability to protect the information stored in the system. Meanwhile, the lockable hidden bin behind the PIN-activated faceplate capable of storing items like wallets, gadgets, or maybe even paraphernalia for [insert a societally-frowned-upon activity of choice here] resonated well as a place to keep personal items out of sight.

In particular, the locking storage space behind the 8-inch display is made possible thanks to the relocation of MyLink system electronics to another location in the vehicle, thereby creating space behind the touch-screen

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Technology Report

Hyundai Autoever Telematics America selects Icertis Contract Management to streamline and optimize the contracting process certis, the leading provider of enterprise solutions in the Microsoft cloud, announced that Hyundai Autoever Telematics America [HATA] has selected Icertis Contract Management (ICM) to manage and streamline its contract management process.

“We selected Icertis Contract Management after a comprehensive evaluation of leading products in the market,” said Daniel Goralik, Senior Manager at HATA. “We needed a robust and flexible solution that would match our unique business requirements in terms of contract management

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and vendor management. ICM, with its rich feature set along with an intuitive user interface provides us with the right system for automation and standardization of our contract management and supplier performance capabilities.”

Built on Microsoft Azure cloud platform, Icertis Contract Management has proved to be highly successful in the market because of its ease of use, rapid implementation, and ability to generate faster ROI for the customers. Customers such as HATA can achieve significant benefits using ICM including, reduced contract administration costs, improved

contract turnaround time, minimized risk, and increased compliance.

“We are delighted to partner with HATA in addressing their contract management needs,” said Anand Veerkar, Executive Vice President, Sales at Icertis.

“This win yet again demonstrates the differentiating capabilities of Icertis Contract Management to meet the complex needs of our customers, yet keeping the product easy to implement, adopt, and use. I am confident that ICM will enable quick adoption and provide tremendous business value to HATA.”

NetComm Wireless signs M2M distribution agreement with Wyless etComm Wireless Limited and Wyless, the leading provider of global Machine-to-Machine (M2M) wireless connectivity solutions and managed services, have announced a strategic distribution agreement that will expand NetComm Wireless’ footprint in the Americas and Europe through the delivery of cellular M2M devices to Wyless’ enterprise, mobile network operator and channel customers.

The new partnership introduces NetComm Wireless’ open platform M2M devices to the global M2M market as part of Wyless’ unique end-to-end-service offering. Developed to overcome global deployment challenges by enabling specialised M2M applications across diverse markets, NetComm Wireless’ M2M products complement the interoperable, multi-layer business model adopted by Wyless.

“Wyless offers complete solutions that encompass the

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capabilities of leading partners across the M2M value chain and we are pleased to collaborate with NetComm Wireless to provide customers with scalable custom solutions that simplify M2M and Internet of Things (IoT) deployments in line with our company vision which is to offer a smarter approach to the challenges of M2M and IoT,” said Shelby Noakes, VP of Product Marketing, Wyless.

“This partnership strengthens our global position as Wyless continues to gain a significant share of the M2M market. We look forward to working with Wyless to build value for customers through the delivery of highly adaptable M2M devices that offer universal connectivity to enterprise applications, remote healthcare, smart meters, ATMs and other remote management applications,” said David Stewart, CEO and Managing Director, NetComm Wireless.

Your Business

Alex Todd, Principal at Trust 2 Pay

By Alex Todd

arly stage companies now have a whole new way of raising vast sums of money for their ventures. Crowdfunding is the newest vehicle for financing anything from a cause to a business. To date, most crowdfunding has been for charitable causes, such as the famous ALS Ice Bucket Challenge that raised $88.5 million. Recently, businesses have adopted rewards-based crowdfunding campaigns, the most notable being Pebble Time Smartwatch that raised $20.3 million in discounted pre-orders.

However, equity (including debt)

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crowdfunding, which is the newest form of crowdfunding, promises to be the most significant. Barely two years old, early, high profile success already has Neil Young’s PonoMusic Player raising $4 million in total financing, even after having turned away millions of dollars from investors who failed to satisfy regulatory requirements; on the heels of already having raised $6.2 million from a pre-order rewards-based crowdfunding campaign.

It is the people who were turned away, the same category of individuals who, to date, have been funding cause and rewards campaigns at ten

Gary Tannyan

Stakeholder Relations: The Top Five Equity Crowdfunding Trust Barriers

times the value of the largest equity crowdfunding campaigns, who will be the key to unlocking the full potential of this new digital medium for business investment. It is these non-accredited investors, namely ordinary people like you and me, those not deemed to be high net worth individuals, who hold the keys to the ultimate promise of equity crowdfunding. They will be the gamechangers that fuel future new business creation. They are also the people who are currently barred from investing through equity crowdfunding in most jurisdictions around the world. This is about to change, as newly proposed

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Your Business regulations, most notably in the U.S. Jobs Act, are going to give the rest of us an opportunity to also participate in this super-high-returns asset class.

Major change, such as this, will be disruptive for all concerned, from issuers, to investors, to all traditional intermediaries that facilitate the early stage venture investment process.

Change is difficult, fraught with wellfounded fears, as well as inevitable misconceptions that foster resistance.

Despite the promise, issuers and their chosen crowdfunding portals will need to adopt innovative new ways to overcome significant barriers inhibiting investor acceptance. Many so-called, early adopters are bound to experience remorse and rouse public indignation before norms and common understandings are established. Already, a high profile example has emerged from the Oculus Rift (virtual reality headset) rewards crowdfunding campaign that provided a preview of the implications of unmet expectations, when ‘crowdfunders’ expressed public outrage over a perceived betrayal of trust upon hearing of the company’s sale to Facebook for $2 billion, because their ‘donated’ funds would no longer be needed (fueled by underlying remorse that they had not had an opportunity to invest in company’s shares instead). Equity crowdfunding initiatives must be diligent not to fall into similar expectation traps.

Sophisticated investors, such as angel investors and venture capitalists will also need to adapt to the new realities of equity crowdfunding that threaten to disrupt established business models and open opportunities for new ways to create value. Portal-supporting ecosystems of 3rd party services providers (e.g. lawyers, accountants, consultants, technologies, marketing, governance, compliance, insurance, derivatives, secondary markets, etc.), regulators, and broker/dealers will need to evolve to support simplified, low cost, volume-based transaction flows.

More than ever, issuers’ stakeholder relations practitioners will become a critical success factor. In addition to traditional investor relations, which deals primarily with matters 18

of corporate governance, corporate social responsibility, and shareholder management and communications, for crowdfunding, stakeholder relations becomes event-based, more akin to an initial public offering than steady state relationship management.

Crowdfunding demands new, high standards for stakeholder “engagement” that progresses investors through the entire transaction lifecycle (discovery and evaluation, negotiation and fulfillment, commitment, settlement and compliance, and exit), helping smooth all friction that could impede capital (or debt) deal flow. The most significant areas of abrasion reside with the novel aspects of equity crowdfunding:

1. Limited liquidity By definition, unlike publicly listed companies, private companies cannot easily sell their shares on secondary markets. That means investors in private companies can neither buy nor sell their shares without involving the issuer.

Private equity investors are therefore considerably more committed to their investments than those holding publicly listed shares that trade on a stock market. To mitigate their liquidity risk, equity investors typically get very close to the business and its owners.

In most cases, start-up investors are the founders themselves, together with their families and friends. Founders are held to account through their strong personal and community ties. Subsequent rounds of financing come from increasingly distant circles of trust. These include angel investors who establish close relationships with the founders of the business, followed by sophisticated venture capitalists who rely both on familiarity with the founders and management, and the critical success criteria for the business and their investment. The latter pay particular attention to how they will realize their return on investment (their exit strategy), either by selling their shares to an acquiring company, or by taking the company public.

By contrast, crowdfunding investors primarily fund angel rounds, with limited ability to know the founders.

Although digitally intermediated

CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

crowdfunding opens new opportunities for enhancing stakeholder relations effectiveness, it also introduces special challenges, since they also need to bridge the requisite investor-to-founder familiarity gaps that could otherwise give suitors cold feet when contemplating the reality of being locked into prenuptials that largely preclude them from initiating future divorce proceedings – namely selling their shares.

2. Novice crowdfunding investors Accredited investors are accustomed to relying on investment dealers to provide professional investment advice.

However the Exempt Market Dealers, who once played an advisory role and now run the neutral and transparent equity crowdfunding portals, can no longer advise their former clients.

In crowdfunding, even sophisticated investors will need to learn new, nontraditional ways of assessing their investment options, which could retard the investment transaction process even for those who are most qualified to invest.

For the first time, non-accredited investors, those deemed less capable of making informed investment decisions, will also have access to these early stage investment opportunities (already available in some provinces under the Offering Memorandum Exemption), although likely with some protective restrictions. However, their prior investment experience, if any, would likely only have been with publicly traded shares, which they could sell, at will.

Stakeholder relations will need to find new ways of connecting both classes of investors with resources that appropriately help them navigate new crowdfunding-related risks and provide mechanisms to render any residual uncertainties acceptable (e.g. escrow, insurance, guarantees, warranties, derivatives, etc.)

3. Empowered digital crowds Social-media savvy, online investors are likely to have non-traditional investment expectations. They are accustomed to having direct, bidirectional communication with decisionmakers via direct, online channels of

Your Business communication, such as blogs and social networks, and are likely to have elevated expectations for issuer responsiveness.

They also feel entitled to reinforce their views by mobilizing similarly minded activist “crowds” to drive change by creating collectives and aggregations that amplify their voice. Digital crowds also tend to trust and rely on the opinions and support of like individuals, more than traditional so-called “experts”.

These new dynamics have implications beyond issuer-investor relations that include cultivating healthy engagement among critical stakeholders themselves, including investors, opinion leaders, and the influential portal ecosystem of services providers.

4. Shotgun deal Traditional private equity investors have some control over the investment agenda, timing their investment commitments to coincide with their confidence and comfort thresholds. In other words, they take their time to build trust in the company before finalizing the deal.

Similarly, public company shareholders choose when to buy and sell their shares based on individually selected criteria, such as personal preferences and market conditions.

Crowdfunding takes away much of that ability to time investment decisions, since crowdfunding campaigns typically run within time-limited, 30 to 60 days windows of opportunity. Stakeholder relations will need to adjust their engagement strategies to satisfy the needs of diverse investors in order to maximize participation.

5. Ambiguous shareholder rights Experienced private equity investors rely on established practices for postinvestment decision-making. Typically, if they hold a significant stake in the company, they are entitled to a seat on the board of directors, or at least can influence the selection of board members.

Unaccredited investors, by contrast, might only be accustomed to exercising their proxy voting rights in publicly listed companies, with marginal, if any, influence over director selection, but they can always sell their shares if they become

unhappy with corporate decision-making.

Decision-making at early-stage private companies usually resides with the founders alone, with some influence from founder-selected, family and friends board members. Their corporate governance practices tend to be less well defined, if not non-existent, and therefore generally unknown to shareholders. While all have equally locked-in investments, only majority shareholders have the power to force management to initiate a liquidity event, which tend usually to be the founders themselves. Equity crowdfunding inherently attracts larger numbers of less-empowered, minority shareholders, therefore mitigating their liquidity risk will become a major consideration.

Post-campaign, the new capital stockholders (as distinct from secondary market shareholders) are likely to feel a unique sense of company entitlement.

This poses an added challenge for issuers; to optimize their investors’ participation

in company decision-making.

Before equity crowdfunding can realize its promise, portals will need to develop new, crowdfunding-optimized corporate governance standards for issuers and introduce other means of protecting shareholders from becoming disillusioned with their investment.

Stakeholders relations needs to play a proactive role in engaging with the crowdfunding community and helping portals devise effective and practical trust enabling practices, such as promoting the proliferation of secondary markets (e.g. TMX and Aequitas).

‘Particivesting’ (participatory investing) that establishes equitable decisionmaking rights for its capital stockholders will be critical for equity crowdfunding success, and promises to ultimately become its distinguishing quality.

Alex Todd, Principal at Trust 2 Pay, delivers game-changing insights to financial technology ventures.

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Your team

Five Steps to Integrate Coaching into your Talent Management Strategy

By Renée Robertson

oaching means many things to many people.

Many times a certain technique that is referred to as ‘coaching’, isn’t really coaching at all; it’s actually counseling or feedback.

For example, you may have heard or had this happen to you – a manager will say, “Let me give you some coaching around

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ABC,” and they proceed to explain to an employee why the employee failed to accomplish a task. The manager then explains the way ABC needs to be done.

More times than not, the recipient of this so-called ‘coaching’ walks away disillusioned by what they think was a coaching experience and perhaps, deflated and unmotivated. As a result, coaching can get a bad rap and employees may begin to disengage. So

what does a real coaching conversation look like? Well, something like this: “So, how do you think your presentation on ABC went?” The employee is given time to reflect, respond and be an active participant in the conversation. The manager continues to ask thoughtful questions such as: “What would you have done differently?,” “What actions will you take?,” or “How can I support you?”

Do you notice the difference? This is a

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Your Team

Look for individuals and managers that can become trained to be internal coaches inside your company. coaching conversation – the employee is empowered to act while being supported by their manager. The employee gains confidence knowing that they own the outcome while feeling acknowledged and supported by their manager.

Now more than ever, there is a great opportunity to bring coaching into organizations. According to Gallup’s study on the global workplace, only 13 per cent of employees worldwide are engaged at work or are psychologically committed to their jobs and likely to be making positive contributions to their organizations. Therefore, 63 per cent are ‘not engaged’. If this is the case, then why not integrate coaching into your talent management strategy, not only to increase employee engagement, but to achieve other talent development goals such as developing certain competencies like problem-solving, strategic thinking or filling your talent pipeline with ready-now talent for upward or lateral assignments?

In order to integrate coaching into your talent management strategy, the following five steps should be taken: 1. Educate your leaders: Start at the top and educate your executives on the differences and benefits of coaching versus counseling.

Interview them on their perspectives on coaching and assess their willingness to participate and support a coaching initiative. Explain the benefits of coaching and ask them where they see applications for coaching inside their organizations.

2. Identify coaches, participants and executive sponsors: Look for individuals and managers that can become trained to be internal coaches inside your company. These individuals may be inside your talent management and organizational 22

development areas or could exist inside the business itself. Consider having talent management or Human Resources executives trained and credentialed by the International Coach Federation as professional coaches. As a result, they will be in an excellent position to coach executives in the company.

Alternatively, you may choose to utilize external coaches. If so, you can submit a request via the International Coach Federation Coach Referral Service website or ask colleagues for recommendations.

Simultaneously, you will want to identify candidates to participate in the coaching program. Therefore, review your succession planning and consider top talent managers, directors and executives. Participants should be excited to be part of the program and willing to make a commitment. Just as important as identifying the coaches and participants is to make certain that you have executive sponsorship.

Determine which executives would like to sponsor the program and be a participant. Request that they support you in your coach and participant identification, marketing efforts, during participant enrollment and throughout the program’s life cycle.

3. Manage expectations: Be sure to clearly set expectations with your internal coaches, individuals being coached, the executive sponsors and, of course, your managers and colleagues. It is best to run the initial program as a pilot and build upon its success. Make certain everyone is clear on the goals of the program, time commitment and their roles and responsibilities.

4. Train: Enroll your internal coach

CANADIAN EQUIPMENT FINANCE | May/June 2015 | canadianequipmentfinance.com

candidates in a coach-training program that is designed to train individuals that work inside companies as a coach. If you choose to enroll internal employees to become coaches, ensure they’re being coached by a coach with experience coaching internal coaches.

In addition, be sure to train the individuals who are to be coached on the role and responsibilities of the participant. While training your coaches, be sure to establish a clear and consistent process for enrolling clients, coaching time and exiting clients. The key here is to ensure that everyone participating has a similar experience.

5. Measure success: Prior to starting the program, determine how you will measure its success. It may be done simply by using a Net–Promoter score or setting up a simple impact study. It doesn’t have to be a rigorous measurement such as ROI. If your program is embraced and utilized (coaching clients show up and participate in the coaching), then that’s a great sign. Interviewing them or surveying them on the benefits they received is also an excellent idea. In addition, be sure to ask the managers of the program’s participants about the changes they may have noticed in their employee’s behaviors after being coached.

In a time where we’re surrounded by change and have so many demands on our personal and professional lives, the need for coaching is at an all-time high.

Coaching is a model for engagement, empowerment and accountability.

It teaches those being coached to be responsible and to “own” their results.

By engaging in coaching, you’re making a decision to replace mediocrity with high-performance. So let’s ask ourselves, who and what company doesn’t want full engagement and high-performance?

Renée Robertson is a two-time International Coach Federation Prism Award Winner for Internal Coaching, in addition to being the CEO of Trilogy Development. She shares her insights and first-hand experience in her new book, The Coaching Solution: How to Drive Talent Development, Organizational Change and Business Results.

To learn more, visit www.trilogydevelopment.com.

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