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Issue 8



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I am pleased to present to you Issue 8 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

Marketing Manager Rachel Thomas Head of Operations Sreejith Nair Assistant Manager Operations Bala Prasad   Project Managers Megan Sash, Peter Barron, Manuel Carmona, David Dineen, Oisin Kavanagh   Video Production and Journalist Phil Fothergill Graphic Designer Jessica Weisman-Pitts Business Consultants Anshuma Gupta, Diksha Kumar, Lohith Sheker, Anna Sebastian, Angie Joseph, Monika Umakanth, Stefy Abraham   Research Analyst Maahi Basvaraj, Chethan Govindaraj, Vikash Kumar, Niveditha Kanade Human Resource Head Eveline Cynthiya Accounts Joy Cantlon, Quynh Quan Advertising Phone: +44 (0) 208 144 3511 GBAF Publications Ltd Kemp House, Unit 2, 7 Tarves Way, London, SE10 9JP. United Kingdom Fax: +44 (0) 871 2664 964 Email: Global Banking & Finance Review is the trading name of GBAF Publications LTD Company Registration Number: 7403411 VAT Number: GB 112 5966 21 ISSN 2396-717X. Printed in the UK by The Magazine Printing Company The information contained in this publication has been obtained from sources the publishers believe to be correct. The publisher wishes to stress that the information contained herein may be subject to varying international, federal, state and/or local laws or regulations. The purchaser or reader of this publication assumes all responsibility for the use of these materials and information. However, the publisher assumes no responsibility for errors, omissions, or contrary interpretations of the subject matter contained herein no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the publisher Image credits: rankvandenBergh(p10,11 ),@istock. com/ michaeljung(p12), ipopba(p14,15), @istock. com/pixdeluxe(p17),, HendrikDB(p22),,27), @istock. com /ake1150sb(p35), BrianAJackson(38,39), @ monkeybusinessimages(p40-43), outline205(p45), @ / shironosov(48,49), @istock. com/ YurolaitsAlbert(p,55), Pinkypills(p59),@istock. com/canjoena(p61),,69), adynyah (p80,81),,85), monkeybusinessimages(p89), Koji_Ishii(p89), @, (p91), @ amuelBrownNG (p92), kokouu(94,95), FatCamera(p97), / YagiStudio(p103), DragonImages (p105), mennovandijk(p106-107), scyther5(p108), @istock. com / tcareob72(p113,115,117), Rawpixel(p119), @ (p122), /dimabl(p129), @ / ipopba(p131,133), / Manuel-F-O(p134), Rawpixel (p137,138)

In this edition you will find engaging interviews with leaders from the financial community and insightful commentary from industry experts. We discuss the bright future of banking in Angola with Mr. Sanjay Bhasin, CEO of Banco Economico. Get a look at the investment landscape in Hong Kong from Hing S. Tang, Ph.D., CFA, Managing Director, Head of Quantitative Strategy Business Unit at BOCI-Prudential Asset Management and celebrate the 50th anniversary of the ATM with Andy McDonald, vice president of Merchant Payments at ACI Worldwide. Featured on the front cover from left to right is the leadership team of Royal Vision Capital, Mr. Stefan Frieb, co-founder and CIO, Mr. Farooq Mahmood Arjoman, Chairman, Royal Vision Group, and Mr. Matjaz Zadravec, founder and CEO. Royal Vision Capital, a member of the Royal Vision Group, specializes in providing intelligent professional investment solutions to help professional investors with their asset management and equity interests. Using an advanced FinTech strategy and business model, they are already redefining their client’s portfolio management. For over 5 years, we have enjoyed bringing the latest activity from within the global financial community to our online and now offline readership. We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook. We have gone that extra mile to ensure we give you the best from the world of finance. Send us your thoughts on how we can continue to improve and what you’d like to see in the future. Happy reading!

Wanda Rich Editor


Stay caught up on the latest news and trends taking place. Read us online at where you can also subscribe to the print magazine so you never miss an issue.


12 137

Software investment is crucial as VAT collection enters new era

inside... BANKING


Micro-branches; the future of customer-first financial services? Peter Bell, Senior Director of Product Marketing at Marketo EMEA


Q&A: The future of mobile security in banking

Michael Flossman, Security Researcher at Lookout


What does the future hold for the traditional bank branch?


Customer Experience driving Disruption and Digital Transformation success in Banking Eric Crabtree, Global Head of Financial Services at Unisys


More with less: The evolving state of the sales function within investment banks


New wisdom for lending: Capitalising on the Digital Banking in Chile open information economy


26 38



The Future of Apps in Finance

ISenior Managers & Certification Regime (SMCR)


Clearing the fog: the top 5 ways to improve visibility and control over spend

Uma Cresswell,Global Head of HR and Talent Management, Financial Services, Savannah


Successful mergers need both management and leadership


GDPR – Risk, Restriction or Enabler? Peter Newton, Chief Operating Officer, and Akber Datoo, Managing Partner, D2 Legal Technology


Adam Jones, Head of Innovation, Altus Consulting

John Ashworth, CEO at Caplin Systems


By Paul Dignan, Senior Systems Engineer at F5 Networks

Dafydd Llewellyn, MD of UK SMB at Concur


Graham Scrivener, European Managing Director, Kotter International



Software investment is crucial as VAT collection enters new era

Jaume Carol, Senior Manager, CS. Aptean

Howard Berg, Managing Director, Gemalto UK


Software CEO’s Unfamiliarity With Open Source And Third-Party Use Places Banking And Financial Sector Businesses At Risk

New wisdom for lending: Capitalising on the open information economy Damian Kimmelman, CEO and co-founder of DueDil


Financial marketing: three ways to ensure that your global content strategy pays off

Pablo Navascués, Managing Director at Lionbridge


Minimize Checks by Maximizing Virtual Card

Seth Kaplan – VP, Senior Product Advisor, Capital One Commercial Card business

Software CEO’s Unfamiliarity With Open Source And Third-Party Use Places Banking And Financial Sector Businesses At Risk Jeff Luszcz, Vice President of Product Management, Flexera Software

Issue 8 | 7


Redefining Client Portfolio Management

Building A Brighter Future



How Much Life Insurance Is Enough? Sandra McPeak, managing director— investments, Wells Fargo Advisors



MiFID II Impact on Investment Research

Gianluca Corradi, Head of UK Banking Practice at Simon-Kucher & Partners



PricewaterhouseCoopers LLP 9 May 2017 Cynthia Chan, Director, International Business Reorganisations and Head of China Business Group, Legal Amit Unadkat, Real Estate Legal Leader | Solicitor Shalini Nilaweera, Solicitor (Real Estate)


Why demand for impact investing is already outstripping supply

David Newman, COO and co-founder, Delio Wealth

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Why communication is vital during a cyber-attack Nick Hawkins, Managing Director of Everbridge EMEA

106 What Artificial Intelligence Means For Your Customers

Rob Walker, Vice President, Decision Management & Analytics at Pegasystems


Banking in Egypt with QNB ALAHLI

interviews... BUILDING A BRIGHTER FUTURE 10 Mr. Sanjay Bhasin, CEO ,Banco Economico

113 Why Packet Capture is Critical for Financial Services

Rick Truitt, Vice President, Financial Services, Napatech

119 Don’t let spreadsheets put your

forecasting and planning at risk James Kipling, Product Manager, Quantrix



Avoiding arbitrage – the importance of web performance in forex Alex Nam, Managing Director EMEA, CDNetworks

CORPORATE FINANCE IN SENEGAL 22 Momar Ndour. Founder and Managing Director, Impaxis Group



The Investment Landscape in Hong Kong








Mohamed El DIB, Chairman and Managing Director at QNB ALAHLI

John LeclairManaging Director,Global Head of Foreign Exchange Options, BMO Capital Markets




Mr. Stefan Frieb, co-founder and CIO, Mr. Farooq

Hing S. Tang, Ph.D., CFA, Managing Director,

Mahmood Arjoman, Chairman, Royal Vision

Head of Quantitative Strategy Business Unit at

Group, and Mr. Matjaz Zadravec, founder and CEO.

BOCI-Prudential Asset Management

Andy McDonald, vice president of Merchant Payments at ACI Worldwide

Mr. Sergio Camacho, Chief Financial Officer at Unifin Financiera S.A.B. de C.V. Sofom Enr

Royal Vision Capital

Issue 8 | 9

Africa 10 Issue 8


Banco Economico is one of the top five Banks in Angola with a country wide presence of 65 retail branches, 11 corporate centres and 2 Affluent centres. The bank serves individual clients through the segments of Private, Affluent and Retail Banking. Corporate clients are served through businesses labelled as Top Corporate and Mid-sized Corporates. It also has an investment banking unit which focuses of structured and project finance. The Bank is currently in a growth phase and constantly launches new products with a view to increasing its client base, balance sheet size and profitability. Mr. Sanjay Bhasin, CEO of Banco Economico spoke with Global Banking & Finance Review about the banking landscape in Angola and the role Banco Economico is playing. How do you view the banking landscape in Angola? What impact the current economy and regulations having?  Angola has a surfeit of banks serving a population of 25 million with a huge concentration in the capital Luanda. It is likely that the sector will see a wave of consolidation. This is required to have

fewer stronger banks rather than a sector characterised by a large number of weak and marginal players. Running a Bank in Angola is expensive and consolidation is also a means to reduce costs. The current economic situation has made banking very difficult and both profitability and solvency are under pressure. The fall in the price of oil and the resultant shortage of foreign currency has reduced trade finance transactions while stoking inflation. The consequent slowdown in the economy not only impacts viability of businesses but has a direct bearing on the ability of borrowers to service bank loans. On the positive side, banks are now focussing more on home grown projects and the basic sectors like agriculture and fishing as compared to retailing and logistics. The Central Bank has been proactive in pushing the banks develop a risk management culture as well as ensuring strict compliance of global norms like KYC. The Central Bank has also been working with banks to try and resolve the restrictions being faced due to the lack of correspondent banking arrangements.

Issue 8 | 11


What are the opportunities you see for the banking sector in Angola? Angola is a country still in a developing stage. Economic development needs a lot of support both from the state and Banks. Banks have a role not only in supporting the economy but also in encouraging a better quality of project proposals as well as sectoral diversification. There is tremendous scope for growth in the medium term as the economy comes out of its current crisis and grows. This growth will encompass both the corporate sector as well as personal banking. Just the sheer number of unbanked individuals who will later come into banking promises growth. However, in the short term, banks are facing the pressure on profitability due to scarce foreign exchange and reduced transactionality. At the same time, the malaise of non-performing and bad loans plagues bank balance sheets. In all likelihood a number of banks will need infusion of capital and / or forced consolidation. How are customer behaviours and the increased movement towards cashless transactions changing banking in Angola? The use of Debit cards is widespread amongst bank customers. However, in keeping with its nature as an developing economy there is still huge room for growth. A significant part of the economy is still cash based.

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While there has been significant progress in our clients using the online access as well as the phone app, there is still some time before we see the widespread use of cash less transactions. Also, true cash less transactionality needs a lot of cooperation between various entities and the existence of a relevant eco-system. While steps are being taken to get there, as of today, the payments systems, banks and telecom providers are not yet there. Why has incorporating technology into banking been key for the bank and what challenges has it brought? How has digital banking impacted branch banking? As I mentioned earlier, banking infrastructure is quite expensive in Angola. The route to growth has to be through technology which does not have a high repetitive cost. We have been voted the best internet bank in Angola mainly due to the excellent product our team has rolled out into the market. We have also been adding more services to our online offering. It is likely that at the margin greater use of technology will reduce the footfall in our branches. But this is inevitable as can already be seen by the closure of large number of bank branches in the UK. On the flip side, certain customers who bring in large amounts of cash to be deposited at our branches are now being serviced even better.

Banco Economico continuously strives to innovate and provide the best solutions for customers. What is your strategy for continued success and growth? Our strategy is based on creating long term relationships with our customers. This we are achieving through providing a high level of service, innovative products and a competitive offering. We believe that consisting providing these elements will ensure that our customers remain with us for the long term and make us their first bank. We also work with our borrowing clients as partners where their success in business is finally our success. How is Banco Economico supporting the social economic development in Angola? Firstly the Bank conducts business actively throughout the country irrespective if certain provinces are underdeveloped. Then in the current economic context we welcome project proposals which involve local production and those which are sustainable without external inputs. At this moment the country needs to work hard towards import substitution and we actively support this drive. Finally, we are moving towards digital banking wherein we believe that a large number of unbanked will come within the arena of banking services.


Mr. Sanjay Bhasin CEO Banco Economico CEO, Mr. Sanjay Bhasin is an experienced banker with three decades of experience in financial markets covering commercial banking, trading and investment banking. Prior to Angola, he has worked in India and the UK.

Issue 8 | 13


The Future of Apps in Finance

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The world of finance is changing. Consumers are becoming more demanding for ease of engagement, while financial institutions are under pressure to transform services using advanced technology. With a host of start-ups threatening the major players through innovative approaches to the market, it’s becoming an increasingly complex landscape to navigate. The one clear theme underpinning these shifts is applications. The financial sector is set to be transformed by the evolution of apps, whether adapting working methods to achieve greater efficiency or by consumers looking to better understand and manage their finances. F5 Networks recently commissioned a report called The Future of Apps conducted by the Foresight Factory, which unveils some fascinating insights into major trends and projections that will significantly impact society over the next decade. The findings include important trends that will affect the finance industry and, in particular, the use of blockchain. With new breakthroughs in technology set to influence businesses across a variety of industries, the report sheds light on where action must be taken to capitalise on the opportunities and avoid areas of increasing threat.

Cognitive finance

New networks - blockchain

Within the consumer market, there are significant levels of interest in more personalised, predictive services when it comes to finance. This is particularly the case among Gen Y10 consumers: nearly 6 in 10 (58%) agree that they would be interested in a service that predicts their future financial situation based on current factors, such as professional performance and spending.

At a time of widespread uncertainty and distrust in so many areas of society, blockchain’s central promise of new, ultra-secure measures for certainty and authenticity, without an expensive middleman, is an incredibly compelling proposition. For many experts, blockchain is the biggest disruptor yet for the digital economy.

Within other areas of financial services, cognitive apps or cognitive computing more generally, is also being explored for its capabilities to tackle industry issues that are growing in proportion to the digital economy (e.g. fraud). Ahmed Shanab, High Performance Computing and Data Analytics Leader - Middle East, Africa and Turkey, IBM comments: “There are many banks and organisations considering how to use AI to prevent fraud, taking action against security attacks before they have happened.” However, for some experts, the mid-term will still be about helping humans to make better decisions. We are looking at the horizon closer to 10 years before AI and machine learning are really in the driving seat. Jana Eggers of Nara Logics comments: “To me, what's next is how we can empower humans ... the computer can calculate many more options and the human can do a better job at deciding between those options. Very little of what we do is actually computing; a lot of it is decision and reasoning – and computers really aren't there yet.”

To date, blockchain is best known as the technology behind Bitcoin and uptake so far is probably most advanced in the financial services sector. However, evolutions in the underlying technology to increase privacy are expanding the range of use cases. One of the many dApp concepts (i.e. de-centralised apps) emerging, envisages the use of smart contracts enabling donors to fund small businesses in Kenya using digital currency. It is the brain child of 4G Capital, which provides instant access to credit for small business growth in Africa. The money lent would be converted and disbursed to the businesses using 4G Capital's transactional system.   OpenBazaar, which is already live, aims to be a decentralised version of eBay. ‘Sellers’ download and install a programme on their computer that directly connects them to other people looking to buy and sell goods and services. Bitcoin is used as the currency for transactions between sellers and buyers.   

Issue 8 | 15

Your Bank in Angola.

More than 190 Branches More than 1,5 million Clients

Province of

Cabinda (7 Branches)

Luanda (117 Branches)



Uíge (2 Branches)

City of Luanda




Caxito Province of Luanda Viana



Lucapa N’dalatando

Porto Amboim


Saurimo (2 Branches)


Waku-Kungo Luena

Bailundo Kuito Lobito Huambo (11 Branches) (4 Branches) Ganda Caála Cubal Caconda

Lubango (8 Branches) Namibe




Catumbela Benguela (6 Branches)



Matala Chibia

Tômbua Ondjiva

Santa Clara (2 Branches)


BFA is growing with Angola. With 16 Corporate Centres, 9 Investment Centres and 166 Agencies across the country, it now serves more than 1,5 million Clients. With a competitive and wide range of financial services available and a commercial network that reaches almost every part of the country, BFA is growing to meet all its Clients’ needs wherever they are and wherever they need to be. For further information on how to start or strengthen your business relations with Angola, visit any BFA Agency, Corporate Centre, Investment Centre or go to


The ethos of dApps chimes with growing appetite in the consumer market for peerto-peer solutions, driven by a combination of distrust of institutions and a desire for a better deal or value. Across Europe and South Africa, nearly a third of consumers (32%) have used or would be interested to use a peer-to-peer lending website, rising to 37% of Gen Y.   That is not to say, of course, that more traditional approaches to transactions, proof of authenticity and cyber security will not be a significant feature of the digital economy. Blockchain continues to have a range of limitations. Analysis from the Open Data Institute (ODI) has highlighted a range of potential stumbling blocks including interoperability, privacy and the need to find information within the blockchain, among others.   However, as awareness and understanding of the new technology grow, consumers will also relish the chance to swing the balance of power back in their favour when it comes to the control of data. Financial organisations must be prepared for the potential impact on them from new entrants to the market and changing expectations about the services which can be offered.  

Based on the discussions I’ve had with business leaders in the financial sector, many firms are only just starting to reap the benefits of applications and are still concerned about the resulting security implications of moving too quickly. Nevertheless, it is essential organisations continue to assess new technologies as they enter the market and develop strategies, across DevOps, IT, security and business teams. Looking further ahead, access to growing sets of personal data, combined with the ability to process and manage such information locally, will create new opportunities for consumers to become gatekeepers over their own data. The need for greater transparency, combined with emerging business models built on blockchain technology, will drive more people to call for the financial industry to safeguard data and improve overall application security standards to retain consumer trust.

Responding to significant market changes

What’s certain is that there is growing pressure on organisations and developers to stay relevant. Demands are changing at a lightning pace and security concerns are surging. The Future of Apps report indicates how the balance of power is shifting away from businesses, creating immense opportunities for those capable of delivering apps with speed, adaptive functionality and security.

Paul Dignan Senior Systems Engineer F5 Networks

Issue 8 | 17


Micro-branches; the future of customer-first financial services? Earlier this year Lloyds Bank announced plans to shrink hundreds of its branches1, with some completely stripping out old counter sections. New "micro branches" will be staffed by just two people, who will offer support to customers using selfservice machines. While the finance industry does not have the best reputation for great customer service and engagement, Lloyds for example has recognised and responded to a profound change in customer behaviour as more and more transactions move online. Text banking, mobile applications and even real-time online chats have helped financial services operators to make giant strides in offering more efficient and convenient solutions to keep customers engaged and happy. The new ‘micro-

branch’ will again use mobile technology to both improve efficiency and appeal to their customers’ evolving needs. But while technological innovation launches a company forward, to stay in orbit financial services companies will need to focus on strong user acquisition, customer engagement and retention strategies. Aligning with this notion is the importance of putting a consumer first and working towards bridging the gap between a positive user experience and successful financial services solution. Putting customer experience first The Digital Banking Report2 has found that customer experience is a formal initiative at only 37 percent of banks. Rather than looking at new technology, such as smartphones, to build relationships, many

bankers still take a transactional view and look at phones primarily to reduce costs. From banks to remittance companies, FX brokers to online lending platforms, a company’s bottom line is impacted when it’s not meeting customers’ service expectations. While many of the frustrating factors for customers are ultimately out of the control of the company itself such as the highs and lows of the market, it is still crucial for banks to make sure they are investing in improving consumer engagement. Consumers expect quick responses, instant access to insight and more control of their finances. Embracing new technology innovations to better connect with users and offer a wider array of solutions will always have a defining impact on customer perceptions and competitive edge.

Issue 8 | 19

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AFRICA BANKING Keeping services ahead of the curve In recent years, the financial services industry has gone through tremendous upheaval as technology continues to disrupt business models. According to a new PwC global report 3, the majority of global financial services companies plan to increase fintech partnerships as 88% express concern they will lose revenue to innovators. Where Lloyds Bank may have tapped new potential in-branch, consumer demand for immediacy, money movement outside of branches and focus on automation continues to drive digital innovation at a fierce pace. Consumer-facing financial services products such as the rise of mobile wallets and app-driven money transfer options have also supercharged the industry and positioned nimble, fintech companies to be in the lead. While it may seem ever-changing, staying ahead of the innovation cycle across all aspects of the business is possible. Digital

solutions and smarter tools for all areas of a business– including marketing platforms – can aid companies to better understand their users and customers’ needs and tailor services accordingly. Adopting engagement for this new era As consumers demand that the brands they engage with – especially service organisations – serve them content and resources that are relevant to their needs, companies need a way to execute this at scale. Automation, in areas such as marketing, plays a big role in meeting this demand, helping financial services brands to anticipate their customer needs and provide relevant materials to inform them and build trust right from the start of the consumer relationship. Delivering regular customer-centric content to consumers will allow companies in the sector to address some of the pain points that customers are having and mitigate issues that may arise down the line in the brand-consumer

relationship. It also offers an opportunity to engage them in new company developments and provides an opportunity to upsell new products and services. Financial services must embrace the opportunities posed by this new era of engagement. With the correct tools in place these companies can move forward strategically, pairing data-based insights with human intuition to deliver consistent, relevant and most importantly, meaningful interactions. It’s about being aware of the technology innovations taking place across every part of the customer journey, within the financial realm and beyond. The experiences delivered by brand leaders elsewhere, such as Netflix and AirBnB, raise the bar for every business that exists to serve its customers. Banks can only hope to compete when they recognise the importance of building consumer relationships and trust.

Peter Bell Senior Director of Product Marketing Marketo EMEA 1 Ruddick, Graham. "Lloyds to shrink hundreds of UK branches to two staff." The Guardian. Guardian News and Media, 03 Apr. 2017. Web. 29 June 2017.

2 Groenfeldt, Tom. "Customer Experience In Banking Often Takes Second Place to Savings." Forbes. Forbes Magazine, 14 Feb. 2017. Web. 29 June 2017.

3 PricewaterhouseCoopers. "Increasing FinTech partnerships revealed in global survey likely to be replicated in the Channel Islands, says Guernsey partner." PwC. N.p., n.d. Web. 29 June 2017.

Issue 8 | 21


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Impaxis Capital is a leading Investment and Corporate Banking in West Africa, capitalizing on numerous successful transactions in advisory missions, financial structuring of complex projects and execution of quite a few fundraising operations for its customers which are companies and governments. Since its creation in 2003, Impaxis Capital has carried out financial advisory missions for large companies on strategic transactions exceeding XOF 50 billion, structured financing operations over XOF 100 billion. Global Banking & Finance Review interviewed Momar Ndour. Founder and Managing Director of Impaxis Group to discuss the business environment and corporate financing in Senegal. What are the risks and challenges you see facing the business environment in Senegal? In general, West African economies are mainly exposed to the political risk. Indeed, certain political events can impact massively the economic environment and the competitiveness of the companies. Those political risk reduces however the

perception of existing opportunities by external markets and foreign investors and totally affects the economic and financial performance of the companies. Therefore there are obvious examples that have impaired the economic growth such as the post-electoral crisis in Ivory Coast in 2010, the political and security crisis in Mali that is raging since 2012 and the recent case of the political crisis in Burkina Faso in 2014. However, there is an increasing awareness of the political decisions and events consequences on the global economy. Although, there is this raise of the public self-consciousness, we are facing more and more of a permanent consolidation of the democratic achievements and the improvement of the political environment in Africa in a global way with a more transparent organization of the elections which is one of the major scourges. On the other hand, we can also mention the economic risk. Most African economies are in a phase of economic pre-emergence. Nowadays, it is clear that African companies are dependent on the international business climate exposing them to the commercial risks on the soft commodities through the agricultural

raw materials such as coffee, cocoa, groundnuts, corn, cotton, etc. as well as the hard commodities through the natural and mineral resources such as gold, oil, iron, gas, copper etc. What are some of the current trends you see taking place in Corporate Finance? African economies are growing today in a global perspective with an average growth rates over 5% and the main objective overall of the Sub Saharan African countries is now channeled towards achieving economic emergence. Consequently, there will be an inevitable evolution of the Corporate Finance activities, integration and the development of the financial markets, an aggressive competition in the banking sector with a concentration of sub-regional and international banks. At the government level, major roads, ports, airports and energy infrastructure projects have been launched in order to bring closer the landlocked regions, make transport easier, facilitate intra-state trade and accelerate security and self-sufficiency in energy to enable industrial companies to succeed and being more competitive.

Issue 8 | 23


Momar Ndour Founder and Managing Director Impaxis Group Momar Ndour is the Founder and Managing Director of Impaxis Group, created in 2003. Impaxis Group includes four business units, Impaxis Capital (Investment & Corporate Banking), Impaxis Securities (Brokerage firm), Impaxis Investment (Private Equity) and Impaxis Asset Management (Funds Management). Momar avails over 25 years of solid experience in business development and management as a senior investment banker. Prior to the creation of Impaxis, Momar Ndour held the position of Manager of the financial institutions at Citibank Dakar before being promoted as Vice President of the financial institutions at Citibank Ivory Coast and later on as Vice President of the Corporate Bank Group at Citibank Johannesburg covering 17 countries. During his career, Momar has successfully completed a large number of structured finance transactions with an overall volume estimated over USD 200 million; as well as successful LBO operations estimated over USD 50 million.

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Through the impetus given to the new economic dynamics of African economies through the initiation of flagship development programs, we will clearly face for sure the upcoming of an extensive wave of consolidation, transmission and buy out operation of the existing companies, particularly in the financial sector across the consolidation of the banks and other insurance companies, creating bigger financial groups or conglomerates even more powerful. To cope with this dynamism in West Africa, we are also noticing a rapid growth of the IPO operations and specially the development of the capital markets, enabling the BRVM (West Africa stock exchange) to rank at the Top position of the African financial markets in terms of the market index growth in 2015.

being very close to its clients, Impaxis Capital brings its knowledge and expertise in the different sectors and offers its wide network platform of partners at the sub-regional, regional and international level.

As a leader in Corporate finance advisory in Senegal, what initiatives do you feel have contributed to your process?

Moreover, the objective of Impaxis Capital is also to detect and anticipate the occurrence of various risks that may impair or tarnish the profitability of projects.

As a leading player in Corporate Finance and Financial Advisory Services in West Africa, Impaxis Capital strength lies in its ability to think out of the box and propose nontraditional schemes for its clients on the M&A deals, structured finance and projects finance operations.

How do you ensure service quality for new and existing customers?

In addition to the strategic advice services and the fundraising operations for the financing of companies and African governments, the major innovation provided by Impaxis Capital is to address differently the ongoing issues of its clients by applying nontraditional financial structuring, using a holistic approach taking into account the local content which is critical and bearing in mind all the key factors contributing to the success while focusing on the optimization of the transaction costs. How does Impaxis Capital bring added value to client’s financial and strategic operations? Impaxis Capital provides added value through tailormade solutions to the needs of its clients. Therefore, it relies on a perfect and exhaustive understanding of their concerns and proposes them innovative solutions on the strategic advices, financial structuring, and bringing relevant partners in order to guarantee a successful execution of the transactions. Besides of

In what way does your team assist clients in managing their risk and enhance their revenue? The key to the success of Impaxis Capital lies in the approach of "customizing its financial services" for the needs of its clients. The implementation of this strategy and the solution package involves an in-depth analyzes of customers concerns and expectations, analysis of its activity and its positioning in the sector in order to better understand and address in this regard the appropriate solutions.

Impaxis Capital brings together a team of seasoned professionals, investment bankers, financial engineering experts and experienced managers with a proven track record in strategic investments and large-scale project financing in various sectors. Impaxis Capital has also a dedicated team for each transaction, from the origination of the projects to their closing phase with a full commitment and a special attention paid to the requirements of the clients. What is the long term business strategy for Impaxis Capital? The vision of Impaxis Capital is to focus on intensifying its Corporate Finance activities in SubSaharan Africa with a progressive diversification towards Asset Management, in particular with the development of the Private Equity activities, Real Estate Fund Management, Fixed Income and FX Management. Ultimately, Impaxis Capital wants to position itself as the best Investment and Corporate Bank in West African and the leader in the Capital Markets, Asset Management and Investment Bank activities.

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Europe 26 Issue 8


Software investment is crucial as VAT collection enters new era Jaume Carol, Senior Manager, CS at Aptean assesses the new software requirements for companies in light of current changes in the Spanish VAT collection system. The system for collecting VAT in the European Union has always had its critics. Concerns exist at the extent of the administrative burden the current system places on company operations. There are also accusations of inefficiency due to the fragmented procedures involved. These will be familiar issues to many Spanish businesses. When the European Commission announced its VAT action plan in 2016, part of their stated ambition was to make the current EU VAT system simpler to use and, as a result, more business-friendly. Bridging the VAT gap However, beyond this ambition, the scale of the combined EU VAT gap – the overall difference between the anticipated VAT revenue and the amount actually collected – is ultimately the driving force behind the formulation of the action plan.

Pierre Moscovici – the European Union’s Commissioner for Economic and Financial Affairs, Taxation and Customs, voiced these concerns at the plan’s launch: “We face a staggering fiscal gap: the VAT revenues collected are €170 billion short of what they should be. It's time to have this money back.”1 Immediate measures proposed include enhancing cooperation between Member States through sharing and joint analysis of information; as well as an improvement in tax compliance through better cooperation with businesses. Any successful outcome for these initiatives in the long-term are undoubtedly dependent on the modernisation of tax administrations across Europe and the degree to which this boosts individual government’s ability to fight fraud. The clear goal is to put in place definitive rules for a single European VAT area in 2017.

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Robust technology is the key There is an obvious desire to make the system more robust as a means to combat cross-border fraud, which is reaching alarming levels – with an estimated VAT revenue loss of around €50 billion a year identified in the European Union.2 Incorporating technological innovation is key to the implementation of the proposed new system. Although any technology solution is likely to provide fresh impetus to the digital economy and e-commerce, it also poses new practical challenges for businesses in how they manage their processes and procedures for VAT collection.

In 2014, the Spanish government introduced new measures to combat tax non-compliance. An increase in resources in terms of staff working hours was provided to carry out e-audits more effectively. The subsequent decrease is due to strong revenue performance, despite the VAT rate remaining stagnant. Although the tax base has increased marginally, growth in revenue collected was mostly attributable to an increase in VAT compliance.4

The Spanish government is responding to the challenges of the Commission’s action plan by further strengthening measures to reduce the VAT gap by applying a strategy to modernise VAT administration, through the introduction of a new system incorporating the ‘Immediate Supply of Information’ (SII).

The route to modernisation

Creating a system for the future

According to recently-published European Commission studies, the VAT gap in Spain has been decreasing, although at more than €6 billion it is still significant compared to some other EU Member States.3

This new system is designed to replace current VAT management procedures that are not fit for purpose and have been in operation in Spain for 30 years.

SII is another key step in the process of continuous improvement the Spanish authorities are undertaking: the mission involves upgrading systems and creating the system of the future. The government’s intention is to improve the information they gather, both to gain more effective control of the system and to focus on generating more revenue. There is no change in the law – or in how VAT is applied – the changes instigated with SII represent a shift that can be very much explained on a technical level. This initiative enables the Tax Agency to prepare the data for VAT in the same way as they currently do for income tax. The ‘Immediate Supply of Information’ accelerates the gap between recording or booking invoices and the conversion of the economic transaction. With the associated automation taxpayers can use SII to file their VAT returns in a simpler way, with real-time information. The new bookkeeping system for VAT will provide additional benefits beyond improved control. It is anticipated that the SII will assist companies in obtaining their data for VAT returns and also speed up any refund process, while allowing checks on the integrity of the data to be made much more precisely.

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Who will be affected? SII will be mandatory for 62,000 companies. This will comprise those considered large companies – who are invoicing over €6.01 million a year – though smaller companies will be included if they are part of a larger group of companies. Those applying the monthly tax rebate scheme – REDEME – will also be among these compulsory participants. However, for companies invoicing less than €6M, but included in REDEME, this will not be mandatory, so they will not have to send invoices. Any other company can also apply for SII on a voluntary basis, independent of the type of activity they carry out – or their VAT status. Although this number of participants may initially seem small, however, these companies represent 80% of the overall VAT billing. Pilot project SII was initially announced in 2015 – with the intention that it was to be effective on 1 January 2017. The problematic political situation regarding the Spanish interim government meant that initially it was impossible to approve the legal framework. However, SII was formally approved in December 2016, and it was established that participating companies must send invoices recorded and produced during the period 1 January 2017 to 30 June 2017 - the term for this is to 31 December 2017. In order to give business sufficient time to adapt to the initiative. There is an initial six-month pilot project of forty-one companies. It is still the early stages of the pilot project and, with such a limited sample of companies involved, it is difficult to transpose information or levels of voluntary participation, let alone to pass any judgement on the system’s ultimate success. As expected the situation is very fluid. Results so far have been sporadic, with only about a 50% fulfilment rate. The pilot participants may also need to respond quickly to changes as the system is adjusted in the face of any problems that arise.

Important practical concerns are also being highlighted concerning the capacity the government is providing to implement the system. Is it enough to guarantee collection and remain effective in the face of the mandatory implementation which starts on 1 July 2017? What you will need to do – immediately When the SII system becomes mandatory in July, companies will have to send the invoices recorded/produced from 1 July 2017 to 31 December 2017 to the tax authorities in eight days. They will need to keep registration books, created through electronic delivery of their billing records to the AEAT Electronic Office online. These books will cover issued invoices, received invoices and investment goods. EU invoices – either received or produced – will be submitted along with the rest of the invoices. There will also be a new book, called the – ‘Book for Special Intra-EU operations’ – that will keep record of what are classed as special EU operations. Such as, a company sending equipment to their permanent establishment in another EU country, for example a truck, which is to be used by the company in this recipient country. In the case of the internal movement of goods in the EU, the period will be fixed based on the date when the transport started or when the goods were effectively received. This information is usually not available in accountancy systems, as it is considered logistical, but it will be necessary to include it. The SII will also enable VAT calculations, the application of the reverse charge and certain additional information – which at present is not included in such books – like a description of the transactions and the VAT period. The system will also provide the means to rectify prior registry entries. The option of making summarised entries will no longer be possible. The new system allows a review of all transactions carried out by companies to check accuracy and avoid potential amendments in VAT ledgers. These commonly trigger tax audit procedures or information requests within the current system.

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Financial management software designed to meet the challenge

Mixed perspectives on SII

Companies – from SMEs to large businesses – will now find themselves making a crucial choice of effective financial management software, under considerable time pressure. The chosen software should satisfy a number of key requirements. It should be a very strong product that aligns with two worlds; combining technical detail with effective communication internally and with external agencies.

The overwhelming national advantage from introducing the SII is the long-term overall reduction in the VAT gap. This should be regarded as a first step to increased visibility of transactions in Spain; the next step might involve training tax officers to improve their analysis to prevent fraud and accelerate this reduction.

It must be powerful to meet the ongoing burden of recording and transmitting information, while being agile and responsive enough to implement any changes as the SII develops. Rapid installation is a prerequisite; as is a comfortable integration that delivers data integrity and regulatory compliance, with minimum staff training. The new software must minimise the economic and operational impact of an as yet unproven system, ideally reducing the total cost of administration and ownership. Companies are inevitably suspicious of new fiscal legislation and in particular the costs involved in implementation. How quickly the software cost will be recouped depends specifically on the scale of the company and its range of operations. The internal cost depends on factors such as the existing software that’s running on the company computer systems and how many different divisions or facilities it services overall.

On a pragmatic level, July 1st is a difficult time of the year to implement any new system as it is in the middle of the holiday season. Also electronic certification is required to send information and currently it is not clear whose responsibility or duty it is to pass on this information once collected. There are as many questions as answers. What is not in doubt is that Spain is entering a new era in VAT administration. Through a process of modernisation and standardisation the government is now the bookkeeper. There is a new pressure for companies to get it right. And the ability to do so requires careful investment in the right financial management software.

Reward and punishment The tax authorities are preparing some incentives for taxpayers, such as deadline extensions and faster refund proceedings, which should help to embrace change. And while these advantages should not be dismissed, cynics might argue that they are more of a natural consequence of introducing this system than a sign of any good will. From 1 January 2018 the term for the SII is reduced to four days. Any delay in meeting obligations through the Tax Agency's Electronic Office will result in a fine of 0.5 per cent of the invoice amount. This represents a quarterly minimum of €300 – to a maximum of €6,000. Whether penalties are applied from the beginning or there is an accommodation to be made is unclear.

Jaume Carol Senior Manager,CS Aptean

1 i 2 3 files/2016-09_vat-gap-report_final.pdf

4 files/2016-09_vat-gap-report_final.pdf

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THE ATM CELEBRATES ITS 50TH ANNIVERSARY – HOW WILL IT EVOLVE TO MEET THE FUTURE NEEDS OF SOCIETY? Andy McDonald, vice president of Merchant Payments at ACI Worldwide, who has more than 20 years’ experience in the payments industry, provides insight into whether ATMs have a well-earned retirement awaiting, or if we’ll still be using them in 50 years’ time. The ATM is about to turn 50, and your professional background means that you’ve witnessed a lot of change directly – what’s the single biggest change that you’ve seen in your time in the industry? Andy McDonald: When I started out in the industry as a vendor for ATMs, they were universally referred to as a ‘cash point’ or just the ‘hole in the wall.’ Their function? Dispensing money, primarily during the times when banks were trying to encourage tellers to turn into sellers by migrating transactions from the counter to a cash machine. For me, the biggest change is that ATMs have moved from being a peripheral or accessory to core banking services, to being completely central. ATMs haven’t changed that much, but offer a much wider range of services than they once did. As a result, for many people in the UK, a trip to the physical branch does not necessarily mean speaking with anyone directly – as ATMs have become more sophisticated self-service kiosks. The general public is also increasingly comfortable with accessing services in this way.

Though, is it fair to say that dispensing cash still remains the raison d'être for ATMs, especially those in an off-premise environment? How is the shift away from cash, toward digital payments going to impact the ATM? AM: Despite the widespread projections of a ‘cashless society,’ I don’t see the ATM heading for retirement any time soon – and I’m not just saying that because ACI powers some of the largest ATM estates in the world. In fact, I believe that the trend toward banks closing regional branches will put a greater emphasis on role and functions of the ATM, and they really will become a “bank in a box.” As a result, financial institutions must continue to invest in ATM technology, even if cash usage declines. At the global level, ATM deployment continues to rise, as emerging economies roll out estates to service their customer bases. So there will be competition between banks as to which can provide the best, and most comprehensive “bank in a box” – are there other ways in which the role of ATMs will change? AM: The increasingly competitive environment will mean that the ATM becomes a core customer touchpoint; part of banks’ efforts to provide an omni-channel service approach as part of their customer experience. Banks see that the ATM can be used to

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EUROPE INTERVIEW communicate with their own customers and those of other banks during the transaction process, with targeted messaging and loyalty benefits. In the UK at least, banks are increasingly offering their customers benefits and promotions in partnership with selected merchants. How can this approach potentially increase ‘stickiness’ – and are there any specific examples that you’ve seen work well? AM: Well, for example, Barclays and Nationwide Building Society offering football fans access to tickets, whilst promoting their own services. This creates habitual usage of a machine for customers, and increases loyalty to that bank from the customer. There is so much scope these days to personalise the experience to each customer and these promotional schemes benefits can be customized and tailored. Related, the ATM screen becomes more important than ever before, as it increasingly replaces the human teller; the screen becomes a focal point for brand recognition. What are your thoughts on fees for ATM usage – given the changing role of ATMs, as you’ve discussed. Will different models emerge?

stations and bankless branch locations. It all depends on the value of the service to the customer and how they perceive the inconvenience of travelling further to receive ‘free to use’ services. Nothing has fundamentally changed here, but by adding more value to the transaction and experience, the customer is more likely to continue to use that service and be happy to do so. Overall, the picture that you’re painting suggests evolution – rather than extinction – of the ATM. What do you see then as the main barriers to truly shifting to a cashless society, which would seem to be a prerequisite for the demise of the ATM? AM: The ATMs located all over the globe are an asset to everyone associated with them; whether they are dispensing cash, bitcoin or any other new payment service that develops over time. Customer demand for speed and convenience is the reason the ATM was introduced in the first place; it remains the main benefit today and will be in the future. The global nature of usage, accessible anytime and in real-time, enables deployers to think about what services are applicable through the ATM screen. That said, the days of looking at the message “please wait while your cash is being counted” are truly behind us.

AM: The attitude toward paying for services varies across the globe, but in UK there has been debate about this ever since independent ATM deployers started installing machines in convenience locations such as corner shops, nightclubs, petrol

Andy McDonald vice president of Merchant Payments ACI Worldwide

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Clearing the fog: Top 5 ways to improve visibility and control over spend As a business leader, it’s crucial that you have a complete handle over companywide spend. Only then can you better manage cash flow and make smarter spending decision. The problem is you can only manage what you can see. And for many companies, employee spend is far from transparent. A complete view of your outgoings is vital because it lets you respond to changing market conditions quickly and scale your operations when you need to. And it’s even more important in today’s post-Brexit environment. Uncertainty reigns supreme and survival rates among small to mediumsized businesses continue to fall. The temptation for many companies is to sit back and see how a post-Brexit economy shapes up. But doing nothing is the most risky strategy of them all. As Article 50 has now been triggered and the details continue to be hammered out, companies need the ability to adapt quickly to fluid market conditions. In fact, it could be the difference between success and failure. There’s never been a better time to take control and prepare for whatever the market can throw at you. With this in mind,

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below is what I consider to be the five best ways you can better manage your employee spend. •

Capture spend as early as possible: Despite the fact that society continues to make advancements in technology, many businesses today still handle their finance processes with a combination of paper receipts, forms and spreadsheets. This is fine for a very small business. But as a company grows, so does the administrative headache – leaving you with little visibility into your outgoing spend until it is too late. Ultimately, manual processes are slow and cumbersome, meaning finance teams only get a view of spend weeks or months after it’s occurred, making accurate accruals almost impossible.

Rather than manual processes, firms should automate their expenses and invoices. With automation, spend is captured much earlier. If workers are using an app to handle expenses, then they can submit their claims during their business trip, not three weeks later for example. And even if employees don’t submit their claims immediately – you can use data to anticipate future spend, giving you instant and accurate insights.

Reduce errors and duplications: Manual processes are also error prone, because after all when people are involved, mistakes can happen. Therefore, you need to constantly look for steps in the process where you can remove the risk of human error. Research by Concur and Vanson Bourne revealed that many finance teams are spending a whole day a week just on admin tasks. With time-consuming and repetitive tasks such as data input, the chance of mistakes slipping through dramatically increases.

Machines, however, don’t get bored and don’t make human errors. Technology can streamline the process and save you time by automatically reading data and inputting it with a high degree of accuracy. One of the most costly mistakes made is duplicate invoice payments. A third of UK finance leaders admit to having paid a duplicate invoice. An automated system can stop this in its tracks by checking every single receipt and flagging a duplicate, saving you time and money. •

Detect and stop fraud: The lack of checks and balances in many manual finance processes makes them a natural target for fraud, both


from within and out. In fact, in recent years many high-profile cases of exaggerated expense claims have highlighted how big an issue it is – just take the current Conservative election expenses scandal. It’s almost a cultural norm, and one in five (20 per cent) of employees believe it is acceptable to exaggerate their expenses.

This is difficult if it’s spread across spreadsheets and shoe boxes of receipts. But, with an automated endto-end spend process, digital copies of your receipts and invoices can be found in one place. Get your processes right, and you’ll have the ability to report all of your spend, ensuring your business complies with government regulations. •

And it’s not just internal fraud; it’s also common for scammers to submit fake invoices hoping they’ll slip through the cracks. However, there are intelligent online tools that can help. For example, built-in mileage trackers can accurately track travel expenses. Or an automated invoice service can flag invoices that don’t match purchases. These early warning systems create transparent processes – meaning you can keep a closer eye on your money. •

Comply with HMRC regulation: An HMRC investigation can be a big worry for many businesses. However, the secret to satisfying the tax inspector is to have a fully traceable and accurate audit trail underpinned by robust policies. They will want to see that spend is within policies and supported by the right documentation.

By adopting technology now and shining a spotlight on your finances, you’ll be helping to play a crucial part in future-proofing your business and ensuring its success moving forward. And what greater role can a finance leader play?

Use spend data to drive better decision-making: With manual processes, valuable decision-making data is locked in silos on spreadsheets and even on loose paper. Analysing it, and spotting trends, is time-consuming and difficult. However, if you’re able to aggregate data from multiple automated sources means you’ll be able to get meaningful insights, spot trends and take decisive action.

Ultimately, in today’s economic and geopolitical environment, finance leaders are playing an ever important role in ‘steering the ship’, helping businesses to make the right decisions. It’s not enough anymore to keep the business ticking over with old processes – they simply don’t provide you with the crucial visibility you need to maintain control over spend.

Dafydd Llewellyn MD of UK SMB Concur Baker, Chris. "Expense culture: Late night submissions and exaggerated claims." IT Pro Portal. ITProPortal, 14 Nov. 2016. Web. 26 June 2017.

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Senior Managers & Certification Regime (SMCR) The aftermath of the financial crisis in 2008 revealed systemic weaknesses and ineffective ongoing supervision, leaving regulators largely unable to hold individuals accountable for the failure of the institutions they were responsible for managing. To address this lack of accountability, the Approved Persons Regime has been replaced by the Senior Managers and Certification Regime (SMCR), which places much greater importance on the culture of regulated firms and the accountability of senior individuals. The SMCR is being extended to all FSMA authorised persons by March 2018. For some Asset Management firms, this will mean having to assess and document the fitness and propriety of up to 40% of their total workforce, ranging from senior executives through to middle managers. Even for smaller firms, this might mean having to assess 20% of their employees. Asset Managers aren’t the first to face these wide sweeping changes. In 2015/2016 the banking sector went through a similar process with the implementation of the Senior Managers Regime (SMR), which proved to be a major challenge for many HR departments. At the time I was on the front lines in a Senior HRD role in Banking, and it soon became clear that this was very much uncharted territory for many HR professionals. Put bluntly, what it taught us was that many lacked the expertise or any precedent for such a complex regulatory regime. For me, it felt like ‘we were building the plane as we were flying it’.

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Yet the information that is required by the SMCR is substantially greater. Firms are having to compile references for each individual detailing six years’ worth of information about their performance record, past misconduct including criminal convictions, plus their credit history. The risk of getting this wrong can lead to serious consequences and the process of implementation is an area that will attract a lot of scrutiny by the regulator in any investigation. In a nutshell, here are some of the key issues organisations need to have on their radar if they are to successfully implement SMCR. The countdown has begun The clock is already ticking as SMCR has to be in place in less than a year by March 2018. Don’t underestimate the amount of time it will take to identify and lock down the final population to be targeted by the regime. Navigating through the organisational structure and governance, reporting lines and final decision making authority is a complex and lengthy exercise. This is further complicated by matrix reporting structures (often in different jurisdictions) all adding the amount of time that needs to be invested. This aspect alone will take a considerable amount of time and negotiation. My recommendation would be to establish the priorities first and to then review what other BAU/cyclical activities need to be delivered over the next ten months. Are there any that HR deliverables that could be deferred post implementation?

Navigating complexity SMCR is a complex process. Don’t assume that that you can ‘do this’ on top of the day job. Regardless of the size of your internal resources, the pressures on delivering SMCR are huge. In addition there are further challenges for UK subsidiaries of overseas headquartered firms with complex matrix structures and reporting lines. As an example, modifications may be necessary to avoid overseas staff being subject to SMCR approval.

EUROPE BUSINESS It’s all about the team Whilst HR departments in the financial services are well resourced when it comes to the more mainstream aspects of HR such as recruitment or learning and development, many lack experience of complex regulatory regimes. Furthermore, there is the implementation side which also requires regulatory understanding. All of this means that HR professionals need the technical capability and skills to understand, interpret and implement the regime. I would recommend that you review your current capability and the resource implications in light of what needs to be delivered and consider the option of adding specialist external resourcing/support. The Challenges for recruitment A key area to be impacted by SMCR is recruitment. For example, one major consideration for financial services firms is to decide whether or not to move certain revenue-earning activities out of London as costs of hiring will increase. More generally, it is also bound to make hiring more complex as it means compiling references for each individual detailing six years’ worth of information about their performance

record, past misconduct including criminal convictions and credit history. Furthermore, for those involved in the recruitment process just keeping accurate records will be a massive documentation issue with possible IT implications.

organisations need to change their way of thinking and operating. SMCR represents an opportunity to put in place real cultural and behavioural change at an organisational level and to strategically help shape the culture of the business in terms of increased transparency and accountability.

Governance, reporting line and control implications It is also important to take a holistic view and look at governance, reporting lines and controls as the implementation of SMCR includes the complex relationships between executive management and its reporting lines, governance and risk management structures. There are implications for Board composition and the structure of executive governance committees. This may mean revisiting the composition and structure of executive governance committees and the representation of NEDs on UK boards as all this information will factor into the overall organisational structure and design required to support SMCR. Conclusion The regime is intended to bring about fundamental changes in behaviour. It is far more than a box-ticking exercise –

Uma Cresswell Global Head of HR and Talent Management, Financial Services Savannah Uma Cresswell is Global Head of HR and Talent Management, Financial Services at executive search firm Savannah. She has over 20 years’ experience in senior financial services HR roles and particular expertise around the implications of the regulatory climate and its associated challenges. Prior to joining Savannah she held senior roles at Australia & New Zealand Banking Group (ANZ), AXA Rosenberg, Deutsche Bank, Cable & Wireless and NatWest.

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Why communication is vital during a cyber-attack Cyber-attacks are a constant threat to organisations. Nick Hawkins, Managing Director of Everbridge EMEA, discusses how cloud-based communications platforms can help an organisation improve emergency communications and recover from the effects of a cyber-attack. In today’s globalised business environment, organisations of all sizes face the prospect of falling victim to a cyber-attack or IT outage that could cause serious damage to its infrastructure and ability to operate. Despite the improvement of cyber-security techniques, criminals have developed sophisticated ways to disrupt systems and steal data. The need to prepare for cyberattacks is more important than ever. True cost of cyber-attacks According to Cisco’s 2017 Annual Cybersecurity Report1 more than one third of the organisations that experienced a cyber breach in 2016 reported a loss of customers, business opportunities and revenue. The 2017 SonicWall Annual Threat Report2 reported an increase from 3.8 million ransomware attacks in 2015 to 638 million in 2016. Cyber-attacks cost UK businesses a total of £34.1 billion3 between Summer 2015 and 2016, with each attack costing an average of £4.1 million and taking 31 days to resolve. Whilst large corporations— that invest millions of pounds in cyber-

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security—have the potential to recover easily from such a crisis, for most Small/ Medium Enterprises (SME’s) and NonGovernmental Organisations (NGO’s) cyber breaches can have more far-reaching and detrimental consequences. No business is safe On Friday 12th May, the NHS experienced a national cyber-attack. Hackers attacked the backbone of the NHS, tapping into computers, telephone lines, MRI scanners, blood-storage refrigerators and theatre equipment. Surgeons resorted to using their mobile phones to communicate with one another and critical information such as x-ray imaging was transported around the hospital on CD’s. In the NHS’s case, the malware tapped into Windows XP. Some reports state 90% of NHS trusts run at least one Windows XP machine. The NHS is becoming increasingly reliant on machines which are connected to the internet. Firewall renewal dates for PC’s will be logged, however, it is easier to forget when a portfolio of internet enabled devices need to be updated for security. With the internet of things (IoT) expected to consist of millions of new connected devices in the future – this issue will become more critical.

Investing large sums of money into cyber-security is not a prerequisite for success, as shown by a number of recent high profile cyber-attacks against large corporations all over the world—including the BBC, Sony’s PlayStation Network, HSBC and eBay. Sony lost control of its entire network. Hacker group Guardians of Peace stole personal information from tens of thousands of current and former workers and published them on the web. This included social security numbers, salaries of top executives and five Sony-produced movies. It is not just large organisations that are targeted; government departments and agencies, rail networks and local businesses regularly find themselves in the same position. When attacks occur, crucial services are compromised and the reputational impact can quickly reduce consumer confidence and brand value. Large scale attacks also have the ability to impact share price value. Planning what to do when a cyber-attack occurs is important, but how victims communicate in an attack is equally critical.


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Importance of effective communication in a crisis In the event of an emergency, effective communication is crucial. When IT systems go down an organisation needs to be able to communicate with its employees and co-ordinate an effective response. The longer this process takes, the bigger impact the crisis will have. A successful cyber-attack can affect multiple communication methods: •

If your phone and voice mail system is VOIP-based, you may lose your company phone system.

If your employee hotline runs through your voice system, this could also be lost.

If your company website is hosted in-house, it may go down, meaning customers, employees, the general public, and the media cannot find you.

If company telephone bridges are running through your phone network, they may not be available.

If the core network is compromised, every computer becomes a standalone machine with no access to company record. Human resource information, employee contact information, vendor lists, or other key phone lists may be inaccessible.

With multiple resources affected, how will you communicate? A critical communication platform can be used for the following: •

Employee information: pushing information to employees about the company status and messaging.

Conference bridges: using toll-free conference bridges for employee, vendor, senior management, Board of Directors, and other key stakeholder phone calls.

Stakeholder groups: using pre-defined groups that had been created for key stakeholders to push information via phone, text or email.

As no business or organisation is totally immune from the dangers of a cyberattack, it is vital that crisis management plans are in place to minimise impact and ensure a return to businessas-usual practice as quickly as possible.

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An effective crisis management plan consists of two key components: quick, reliable and secure communication with all employees to notify them of the situation and the efficient deployment of resources to resolve the issue. It is important that businesses consider the following questions to prepare for a cyber-attack: •

What threats could impact your organisation?

Companies have to understand the type of threat the organisation could experience and the impact it could have. For example, it could result in loss of services or data. The solution will differ depending on the threat. •

Do you have a response plan?

Cyber-attacks often happen out of office hours. An IT incident response plan must be in place to combat an attack even if it happens at 5am. An efficient response plan will include methods of communication for specific stakeholders. Alerts will also differ depending on if the attack has just occurred and if malicious code has laid dormant on the network. IT engineers require different instructions to regular employees. •

Who needs to be included in an IT incident response plan?

IT Security: is likely to fix the issue. If an organisation does not have a dedicated security team, employees must be assigned to deal with a security crisis when it occurs.


Incident Team: who is going to co-ordinate the response? Who should be contacted following a breach and how are you going to reach them? Define an escalation point. Legal-counsel: if, for example, customer credit card details are stolen, legal support may be necessary. • Who are your stakeholders? 

There are a number of stakeholders that should be considered. For example, if customer data is stolen, the following stakeholders would need to be consulted:  

C-level executives – businesses must consider when and how to consult their C-suite. For example, it may be necessary for the CEO to release a statement.

Media relations department – to ensure strategic messaging is in place when informing customers about the incident and handling inquiries from the press. Customer services – need to be informed to prepare for incoming customer enquiries. Employees – employees must be kept up to date throughout the process to ensure they are prepared for calls from customers and the press. Employees must be aware of when and how to escalate queries. Customers – organisations are legally obliged to inform customers of a data breach. The ability to communicate with customers en masse in real time is important.

How to prepare communications in your response plan •

Assess: What is happening? What is the impact? Determine the likelihood, severity, and impact of the incident

Locate: Who is in harm’s way? Who can help? Identify resolvers, impacted personnel, and key stakeholders

Act: Which team members need to act? What do they need to do?

Analyse: What have we done before? What worked? How can we improve communications?

Communicate and collaborate: What should employees do? Notify employees on what action to take and keep stakeholders informed

Power of cloud-based communications platforms As cloud-based critical communications platforms are not reliant on one network, organisations that used the platform to send out an emergency notification are assured that the message will get to the right people. Most organisations rely on internal email to communicate in the event of a crisis, despite the fact that a cyber-attack might impact the entire email network. In doing so, organisations are exacerbating the issue and potentially providing hackers with critical company information. By having a system that operates entirely independent of an internal communications network, organisations can ensure that the bilateral lines of communication between management and staff remain open—even in the event of a cyber-attack or IT outage that may compromise an internal network, or a rush of calls which may overload a telecommunications network.

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By using cloud technology to automate the time-intensive emergency cascade process, resources can be deployed far more effectively and efficiently than before, ensuring that the safety of everyone involved is better protected. In doing so, communications technologies can not only help protect business assets but save the lives of employees. In an emergency organisations cannot waste time searching spread sheets and schedules to manually notify employees. Multi-modal, two-way communication Critical communications platforms are already deployed by many businesses, local authorities and national governments around the world to warn and advise people in the event of a crisis. These incidents can range from sourcing a relevantlyskilled IT technician to repair a broken server, to engaging with the public during a terror threat. Central to the success of critical communications platforms are two key functions. The first is the capability to deliver messages using a variety of different methods – this is known as multi-modal communications. No communications channel can ever be 100% reliable 100% of the time, so multi-modality transforms the speed at which people receive the message. Multi-modality facilitates communication via multiple communication devices and contact paths including email, SMS, VoIP calls, social media alerts and mobile app notifications, amongst many others. Multi-modality ensures that it is easier to receive a message. Two-way communication makes it simpler to confirm a response. In a critical emergency every second counts, so organisations can use communications platforms to create and

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deliver bespoke templates that require a simple push of a button to respond to. In doing so, the level of response to critical notifications can increase significantly. For instance, if a cyber-attack compromises an e-retailers website, every second costs the business money. An IT engineer must be located and available to help as fast as possible. Two way communications enables the business to send an alert to the IT team giving them the option to reply with “available and onsite”, “available and offsite” or “not available”. Organisations can build a clear picture of the incident and prepare for downtime if necessary. Combined, multi-modality and two way communications transform critical communications from an incident alerting platform into a communications tool where organisations can respond smarter and faster. In situations where multi-modal communications and response templates are deployed together, response rates to messages increase from around 20% of recipients to more than 90%. Critical communications in action CLS operates the largest multicurrency cash settlement system in the foreign exchange (FX) market. Launched in 2002 and owned by the world’s leading financial institutions, the organisation operates globally and offers settlement services for 18 currencies. On average, CLS settles USD 5 trillion of payment instructions every day for its clients. CLS needed a solution that would streamline its IT incident management practices.

After extensive research CLS chose to implement Everbridge’s mass notification and IT incident management tools to provide it with a multifunctional communications platform that could send notifications to high numbers of people and devices in an efficient and reliable way. Everbridge’s platform ensures that in the event of an incident, there is no delay in informing employees and management of the situation and deploying resources to resolve it. Conclusion As technology continues to advance, cyber-attacks are on the rise and organisations need to have the tools in their armoury to be able to communicate and recover quickly in the event of a crisis. It is an organisation’s response to a cyberattack that will determine the severity of its impact. Critical communications platforms can help businesses prepare for a breach to limit downtime and damage. Companies have a duty of care to keep customer information secure. Legal implications could be applied if responsibilities are not fulfilled. An efficient, well-practiced incident response plan can maintain brand reputation and ensure a business is not forever known for the number of customer bank details or thousands of pounds worth of revenue it lost.


1 "Cisco 2017 Annual Cybersecurity Report: Chief Security Officers Reveal True Cost of Breaches And The Actions That Organizations Are Taking." Cisco Systems, Inc.N.p., n.d. Web. 20 June 2017.

Nick Hawkins Managing Director Everbridge, EMEA


3 "Cyber attacks cost UK business more than £34bn a year, study shows." ComputerWeekly. N.p., n.d. Web. 20 June 2017.

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Successful mergers need both management and leadership Shareholders of Standard Life and Aberdeen Asset Management vote in June on their proposed merger, which would create UK’s largest active asset management company and the second largest in Europe. They believe that it will create scale, financial strength and an increased breadth of investment capability, as well as an estimated £200 million in annual cost savings, but at a cost of some 800 jobs within three years - almost 10% of the combined total workforce. However, delivering those cost savings and creating a new entity where 1+1= 3 is far from straightforward. In France, a number

of mergers in the asset management sector have led to very different results. Where there are complementary skillsets, as when Natixis Global Asset Management (NAGM) acquired a controlling interest in Darius Capital Partners, or it creates a more balanced client portfolio, as when Financière de l’Echiquier acquired Acropole Asset Management, the results have been positive. In contrast, when the two companies are of very different sizes it is all too easy for what has made the smaller partner special to become submerged in the processes of the larger. This was the case when BNP Paribas Asset Investment merged operations with Fauchier Partners, and BNP subsequently sold Fauchier a few years later. The same appears to be happening following the merger of Rothschild & Cie and HDF Group.

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Research says less than one third succeed Navigating the internal dynamics and restructuring challenges associated with a merger is full of complexity. John Kotter, founder of Kotter International and Emeritus Harvard Professor of Leadership, has spent some 40 years analysing the factors that can derail the best laid plans. His research shows that 70% of large-scale transformations, including mergers, do not deliver the anticipated benefits. To be one of the 5% that fully succeed in their original large-scale transformation ambitions, organisations need to address both the management aspects of the merger (i.e. technical/business/ regulatory issues) and the leadership aspects, such as developing the vision and engaging as many people as possible in the two organisations.

share and buy in to. This is essential: a post-merger vision from the top echelons of senior leadership, or one that is focused on delivering the right response from the City, is not enough. It is vital for two organisations genuinely wanting to become greater than the sum of their constituent parts to engage their staff throughout both organisations. It is particularly important in this instance where, although there is a size difference between the two organisations, they will be merging as equals. The vision must stress what both organisations bring to the combined entity, and emphasise clearly that it is a merger, not a takeover, despite the facts that Standard Life is much larger, its chairman will preside over the new entity and its shareholders will own two-thirds of the new company.

In financial services, with stringent and constantly changing regulatory issues, it can be all too easy to lose focus on the leadership side of the equation. Deadlines need to be met, systems integrated and the highest standards of governance maintained. However, Dr Kotter’s research has shown that, to be successful, executives also need to focus on actually leading the newly combined organisation forward and creating a strong team that understands and can deliver their vision. How might this apply to Standard Life and Aberdeen Asset Management?

The two chief executives clearly know each other well and will have spent considerable time with their senior teams talking about the benefits of merging their organisations, strategically, financially and in terms of their offer to customers. Having answered the fundamental question: “what more could we become by coming together?” the combined senior leadership team needs to express this in a way that resonates with everyone at all levels and build a collective sense of urgency, excitement and alignment around a common goal. They have a sophisticated workforce, and need to communicate appropriately with them. Staff must be given permission to make the vision culturally their own, and to run with it in building the new organisation.

Obtain buy-in to the vision

Retain key staff at all levels

John Kotter’s body of work shows that the single most common factor in why mergers do not succeed is not the lack of a post-merger vision for senior leadership, but the lack of one in which everyone can

In any merger there is the potential for both attrition and for job cuts due to economies of scale, and in this case the two companies have already been open about the scale of potential job losses. Aberdeen also has some history in this

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area – three years ago it bought Ignis Asset Management, the Scottish Widows fund management arm of Lloyds Bank, which resulted in the bulk of Ignis’ 250 Glasgowbased staff being made redundant. This will not have been forgotten in the tight-knit Scottish finance community. In many sectors staff retention is ignored because human capital assets are difficult to value correctly. This is not the case with this merger, where the two companies have (according to media reports) put aside around £35m in retention bonuses to offer top fund managers once the merger goes ahead. With significant competition now from tracker-based and new low cost market entrants it is still critical to retain the very best fund managers to maintain funds under management. Asset management is after all a people business. With one star fund manager already having left Standard Life in March, effective steps need to be taken to ensure that other fund managers want to stay. But it is also important to make other staff at all levels feel valued and able to participate in the merger. Institutional knowledge needs to be retained in the short term if the new entity is to function effectively. Interestingly, we have found that in situations where it is clear that some rationalisation and cost-cutting will be inevitable, those at risk respond much better if they are engaged with the process. Although sometimes seen as inevitable, the loss of organisational knowledge capital and goodwill can be minimised if people not in key client-facing positions are able to build the new organisation together with their new counterparts. Creativity and positivity can emerge from even the most difficult circumstances if people are given the chance to have more input. This requires courage from senior leaders, who have to resist the temptation to tightly control the integration and instead trust their workforce.

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Avoid creating a survive only mentality

Enable employees to shape the new organisation

Dr Kotter’s latest thinking suggests that the way our brains are wired affects how we respond to change. If the process is not handled well, many people go into a state of panic, in which they believe the only possible responses in order to survive the change are fight, flight or freeze. Clearly none of these bode well for successful business performance.

Could this merger be one of the 5% that exceed their transformation ambitions? This is not a sudden marriage - it has been some eight years in the making, the CEOs know each other well and the top-level structure will have been prepared for the City to feel comfortable. However, a paper organisation chart will not consider the actualities of how both organisations work. The new organisation needs a degree of flexibility to enable employees to shape it.

Communication needs to motivate people through optimism, not fear. There must be enough urgency generated to spur everyone into action without creating frenetic, unproductive activity. True urgency means painting a clear picture of what’s important, what’s at stake and the role each employee can play in delivering the new future. It is vital to ensure that a majority is involved in delivering the transformation, or they will quickly become disenfranchised. There must be a critical mass of people within the organisation supporting the roadmap for change, typically way more than half, to successfully transform both parties into the new organisation. The best leaders understand that there will be varying opinions and challenges and are open to considering them to create the best of both in the new organisation. Only if disagreement genuinely jeopardises the pursuit of the newly-merged organisation’s big opportunity in its market is an immediate exit process actually required. Courage shown by senior leaders to allow staff from both teams to engage with the realities of the merger, with the emotions that entails, builds a much more engaged final organisation than the traditional nightof-the-long-knives approach.

In our work, we have observed that business transformation stands a much better chance when the newly combined organisations create more informal networked groups to run alongside the hierarchy - a kind of dual operating system. Composed of leaders at all organisational levels who have volunteered in service to the vision, the network side of the system can infuse the company with more agility, adaptability and innovation than a hierarchy alone allows. This network can quickly adapt to new ways of working and innovate processes that drive toward the company’s future goals. It can also disseminate new cultural norms much faster than is possible in a hierarchical structure. An integrated, informal network will allow key cultural traits to become ingrained in the DNA of the new company and serve to make it stronger. Organisations with strong networks running in tandem with the hierarchy already in place grow even stronger during integration. They are critical to innovation, engagement and effective execution. Shutting them off would only serve to disenfranchise employees and disable the routes for effective change. If

the new merged organisations can maintain their relationship and curiosity about the real strengths that each party brings there is the potential to create 1+1 = 3.

No secret to success There is no magic bullet that guarantees success in merging complex entities, as Standard Life and Aberdeen Asset Management will find out over the coming weeks and months. However, if they focus on crafting and communicating a vision that clearly spells out the opportunities of the new business and engage the majority of employees in working out how to make it happen, then they have a good chance of being in that really successful 5%.

Graham Scrivener European Managing Director Kotter International

For more information visit

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professional. 54 | Issue 8


New Wisdom for Lending: Capitalising on the Open Information Economy No doubt the focus over the coming months here in the UK will be on our government as we begin to negotiate the terms of our departure from the EU. However, amid the political debates, we should spend one moment to consider how the millions of companies across the UK and Europe will continue to trade with each other. Private companies are the lifeblood of the UK and European economy accounting for over 60 per cent of the European economy according to the European Commission and the World Economic Forum. Yet as countries become politically and culturally more insular in their mindset, the levels of inherent trust towards businesses from other countries will dwindle. Clearly trade must continue if we are to create thriving businesses and prosperous economies. The question is, can opening-up private company information across Europe recast trust in cross-border trade in this new political and economic landscape? The idea

of private company data becoming public seems somewhat counterintuitive. After all, isn’t the ability to conceal aspects of your business’s inner workings the whole point of a private company? To be clear, private companies in this context refer to the concept of Limited Liability. It’s a commercial venture that protects its shareholders from bankruptcy. It’s arguably one of the greatest wealth creation inventions of all time. Limited liability was never intended to mean anonymous, as it’s come to have been interpreted. It was a concession - something given by society for the common good. It allows people to have bold visions and sometimes fail at achieving them but not die by them. I am here to tell you that private company data will not be private for much longer. And that that’s OK. In fact, it’s a huge opportunity for creating cross-border prosperity – with the banking and finance sector at the heart of funding its growth.

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EUROPE FINANCE The need for an open information economy Today, it is relatively straightforward to discover, as well as trade with, publicly listed companies. By law they are required to disclose ownership, group structure and financial information. Businesses use this information to discover new trading partners as well as understand the risk of the companies they are doing business with. For private companies, each country has its own register such as Companies House in the UK, each with different requirements for information. Until recently, access to this information has not been consistent across different countries, creating friction for businesses wishing to understand and trade with private companies. Without this information, companies are often pricing risk through conventional wisdom, yet without the confidence which can be delivered through context and information. In the same way as not being able to find out on LinkedIn who we are about to walk into a room and meet, not having visibility of a company’s profile creates more hurdles to engaging them as a trading partner. It is my belief that an open information economy is fundamental to recasting trust in business post-Brexit and to driving financing in the right places.

The need for a new wisdom for business lending Today, the banking sector simply isn’t lending because of stricter regulatory pressures. And when they are, they may be lending to the wrong businesses. Access to finance continues to be a significant concern for small to medium sized enterprises (SMEs) compared with large enterprises. More SMEs experience issues with bank loan financing compared with corporates. This is worrying for two reasons. First, SMEs account for over 60 per cent of the EU's GDP. Second is according to the European Banking Authority's recent study, large companies – with the least loan rejection rates – can be riskier to lend to.

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EUROPE FINANCE As expected, the smallest firms have the highest risk of default during an economic downturn. But most interesting is that the “M” in SMEs – the medium-sized firms – are consistently the best performers during a downturn. In fact, they are far less risky players compared with large firms. Our view is that this is a problem involving information friction. There is not enough information about private companies to price risk effectively. This has created a trust bubble between finance providers and large companies, often publicly listed, that already have a wealth of publicly available information. Open, frictionless information is key to recasting trust between finance providers, businesses, and trading partners. If lenders had richer information on each of their customers around the competitive marketplace and ownership, this may encourage more lending to support their customers’ growth ambitions. For example, a bank can now use a due diligence technology platform to better understand the risk and return of a company seeking financing to expand its operation after securing a significant contract with a new German customer. Businesses can equally use the technology to seek new trading partners and more efficiently market to new prospects beyond their borders.

The UK is leading the way This is an issue which has been recognised by the European Union, who under its Horizon 2020 research innovation programme, highlighted the need for more open information access for private company information across Europe. In many ways, the UK has been a great test bed for democratising information in this way. Companies House was amongst the first to open its datasets up through its API, allowing financial technology companies such as ourselves to map company information with other data sources such as credit ratings, to create comprehensive company profiles. The good news is that we’re beginning to see other European countries including France, Germany, Benelux and the Nordic countries following suit. Together with the UK and Ireland, that’s 40 million business profiles that are being opened-up, making it easier for businesses to engage in new cross-border trade deals and to access liquidity. We can expect to see more countries do the same in the coming year. It is a positive start, but what we need is more consistency and greater depth of information across different countries. There are opportunities in any type of market, but the best opportunities can be found in a bearish market. However, for lenders and businesses to capitalise on the opportunities in front of them, they must do so confidently with their eyes wide open. In these times of uncertainty, an open information economy can bring together businesses through the common language of data, and recast trust across borders.

Damian Kimmelman CEO and Co-Founder DueDil

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W W W. L E A R N T O T R A D E . C O . U K


GDPR – Risk, Restriction or Enabler? The prohibitive fines associated with the EU General Data Protection Regulation (GDPR) are creating a stir. However, despite the high level of potential liability stemming from it, this is an immensely pragmatic regulation that is focused on both safeguarding the rights of the individual to control their personal data, and enabling organisations to utilise that data in a secure and lawful way. Critically, by encouraging organisations to move away from the restrictive anonymised data model toward the newly introduced concept of pseudonymised data, GDPR provides organisations with a real opportunity to better understand their data and its value. Peter Newton, Chief Operating Officer, and Akber Datoo, Managing Partner, D2 Legal Technology explain why it is time to change GDPR thinking.

Pragmatic Approach Almost every headline associated with the forthcoming GDPR focuses on the punitive fines that potentially could be applied once the regulation comes into force in May 2018. And there is no doubt that figures of up to 4% of annual turnover or 20 million Euro focus the mind. But let’s take a step back: The GDPR is actually one of the most universally agreed and pragmatic regulations devised in recent years. It recognises today’s data driven economy and adopts an extremely practical approach to balancing individual concerns regarding personal data with lawfully unlocking the value organisations can derive from that information.   The underpinning objective of the regulation clearly has commercial interests in mind: enabling individuals to better control their personal data will allow companies to make the most of the opportunities of the Digital Single Market by reducing regulation and benefitting from reinforced consumer trust. So why the universal melt down?   The data protection principles of the GDPR have not changed from previous legislation; in fact, the new regulation enhances them. And, to address the over-reaction specifically, high fines are likely to be given to organisations unable to prove data accountability and responsibility. A recent statement from the Information Commissioner’s Office (ICO) says: “If an organisation is put under scrutiny they will need to demonstrate that the failure was a one off or stemmed from a risk that would be considered unforeseen rather than a consequence of a systemic fault”. There is an implicit acceptance that breaches will occur at a certain point, and if

a company can provide demonstrable proof of intent to follow the principles / comply with the GDPR, this will be a significant mitigation against massive fines in the event of a breach.  

Pseudonymised Data

One of the biggest changes is the implicit requirement within GDPR to move away from anonymised data. It relaxes the definition of irreversibility, and links it to the state of technology at the time. The GDPR instead encourages the use of pseudonymised data. Essentially a security technique that splits, stores and processes key identifiers separately and controls access to safeguard the data, pseudonymisation minimises the harm to the individual in the case of a breach, and also allows organisations the potential to link data sets and re-identify for legitimate use. For organisations, this step away from anonymising data is incredibly significant. The fact is that although anonymised data does not fall under data protection legislation, doing so significantly reduces its value. Why retain any data if its inherent value is inaccessible because it has been anonymised? Data held about individuals that is required for Know Your Customer (KYC) or marketing – from website hits to email addresses – could also be useful in other contexts, such as, for example, Anti Money Laundering (AML) compliance. Indeed, the value of most data held by an organisation is inherently linked to the extent to which it can be shared. Anonymising this data undermines both its use and, potentially, other compliance activity.  

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EUROPE BUSINESS By introducing the concept of pseudonymised data, GDPR is actually encouraging organisations to manage data properly, to ensure the individual pieces of data related to an individual are stored and processed separately. For example, an email address stored within a marketing database is retained in a separate location to a credit risk report, so that should a hacker access one database, it is only one portion of an individual’s data that is compromised, minimising the harm to the individual and as a consequence the risk to the organisation in a breach scenario. By pseudonymising the data in this way, organisations can also bring individual characteristics together as required – such as KYC or due diligence – but limit the breadth of information that is accessible by, for example, marketing. Taking this approach both safeguards individual data and enables an organisation to explore that information for legitimate business use.  

Achieving Separation

The process of achieving this degree of separation is fairly straightforward from a technical perspective, and is a constituent part of Privacy by Design and Privacy by Default, both mandatory under the GDPR. The challenge – and opportunity – for organisations is to undertake a complete and robust assessment of existing data resources. What data is held? Where is it located? Who has access? What is it being used for? What consent has been given for its use? It is only once this extensive data map has been created that organisations can begin to determine the way forward. The process of creating this data map is fundamental to understanding an organisation’s current resources of personal information – something that many risk underestimating. From shareholder information to contact information held within legal contract data, information about charitable donors or insurance case records, every organisation collects – and therefore must safeguard some degree of personal data.  Akber Datoo Managing Partner  

This data mapping process is essential for GDPR compliance but also provides a significant operational benefit. Once a company understands its data resources, it has the chance to determine just how much of this information has value and the source of that value. A significant proportion of data retained by organisations has no value – it has been kept simply on a ‘just in case’ basis, often without being subject to any legal retention requirements. This GDPR compliance exercise provides an excellent opportunity to rationalise data retention strategies and minimise data volumes, reducing data costs.


Data is without doubt the currency that now underpins the digital economy. But its value is intrinsically linked to excellent governance and an accurate understanding of its purpose and value to the organisation. GDPR is being implemented in reaction to a changing data world and while the fines are attention grabbing, it is the immense practicality of this regulation that organisations should be actively embracing as an opportunity to better understand their data.

Peter Newton Chief Operating Officer D2 Legal Technology

D2 Legal Technology

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MiFID II Impact on Investment Research Do this as a second title: MiFID II implications on Investment Research. Avoiding price wars and focussing on value is key for the success of the industry in a post-MiFID II world. Make this paragraph stand out separate from the article some how at the beginning as it summarzies the article: The Research industry is at a pivotal moment due to the imminent implementation of the MIFID II regulation. There is a widespread view that this will disrupt the industry, bringing down profitability. However, Simon-Kucher & Partners believes that there will always be a need for high quality research and that the players who adopt a smart differentiation strategy will stand out from their competition, increase market share and generate better profits. This begins the full article: January 3rd 2018 is a seismic day for the Investment Research industry which will experience a radical change in the very fundamentals of its business model. From this date the new MiFID II regulations require buy-side clients (i.e. Asset

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Managers and Hedge Funds) to pay an unbundled commission for purchasing Research products and services, clearly separated from execution fees. The current logic ‘I will give you the research for free, if you trade with me’ won’t be applicable anymore and will instead be considered as a prohibited ‘inducement to trade’. Until now, research has effectively never been priced and sold as standalone product. Separating research from trading is likely to push the industry into a period of discovery and intense negotiations among players in the market since there is no reference point to begin the contractual discussions. Consequently, banks are facing a situation often seen far more frequently outside financial services – the launch of a new product in the market. There is an increasing concern that the result of this fundamental shift in perspective will ultimately trim banks’ profits and cause significant consolidation in the industry, reducing the number of research providers. After the discovery phase, as the research products become more and more ‘mature’, the expected status quo situation will likely see the emergence of a handful of global


research providers on the one hand and on the other a number of specialised players that defend a market niche. Those stuck in the middle will ultimately need to decide whether to step up their investments to join the first group or to devote all their resources to create their own niche. In any case, there seems to be no room for everyone and, for those who make it, profits won’t probably return to pre-MiFID II levels. Although the overall picture looks gloomy, we at Simon-Kucher & Partners think that not all hope is lost! Far from it. Even accounting for the extreme industry consolidation scenario happening, which it may not, we are convinced that this will in the end increase the willingness of buy-side institutions to pay for highquality services. And if the buyers are willing to pay more for quality, banks need to position themselves so they can price accordingly… which can be easier said than done without a clear strategy and strong buyer insights. Of course, from the perspective of the bankers on the sell-side, their clients have a high bargaining power and will use it to extract favourable conditions. However, even buy-side firms have a lot to lose if they are not careful and push too hard for price reductions that hit the quality of the research. Ultimately, Investment Banking is a relationship-based industry and it will always remain so. Relationships between banks and asset managers are so intertwined that the negotiations around research costs will always take into consideration the big picture. Buy-side firms, for example, have to evaluate the trade-off between paying a higher price on research or burning bridges completely, risking the loss off a preferential channel for capital raises or bond emissions. However, in the new world quality will take on more importance than it did previously. When everything was free of charge, quality didn’t really represent

a factor in decision-making. Next year, when funds’ or consumers’ money will be spent for purchasing research, the classic demand and supply dynamic will become prominent. If the content generated by a sell-side provider is considered of better quality, demand for it will increase, and considering a limited supply, price will necessarily rise and so will profitability. Investment banks must not make the mistake of considering their research products as ‘commodities’. This is the key for transforming the challenge ahead into an opportunity. Research should not be perceived solely as a report, an analyst call or a visit to a CEO, but rather as the process for generating investment ideas, and ideas have tremendous value. Unfortunately, history doesn’t seem to have been favourable to players that have gone through a situation similar to that which banks now face. In similar instances the existing players’ fear of losing market share has led many industries into damaging price wars. It will be bad news for banks if they too launch into the mutually assured profit destruction of tit-for-tat prices cuts that will ultimately see valuable research sold at Poundland prices. Simon-Kucher & Partners’ 2016 global pricing survey of more than 300 bankers across 25 countries found that the majority of the respondents acknowledge that their industry is undergoing a price war. What’s even more interesting is that 89% of respondents blamed their competitors for triggering it. The thinking is ‘they started it, we can only follow suit by decreasing our prices’. This is exactly how the commoditisation process begins and when prices go down it is extremely difficult, if not impossible, to bring them back up. Global leaders in the sell-side space should ponder whether crushing competitors with extremely low prices is the right strategy or is it better to resist the temptation and keep prices economically sustainable. Competition dynamics are multi-faceted - a bank might be ranked

top-3 in a particular asset class, but fall below the top-10 in another one. An aggressive strategy in one asset class is necessarily going to trigger a retaliation somewhere else, thereby contributing to lower profit levels for every provider. In our opinion, banks need to face the regulatory challenge by simultaneously assessing their relative strengths vis-a-vis their competitors, and quantify the value they deliver to buy-side clients. Focussing on the value delivered from their research, and measuring the relative power to charge a fair price for it is key in ensuring a profitable future for the industry. In this transition year, it will be of outmost importance for investment bankers to focus on their negotiation capabilities to strike satisfactory deals during talks with asset managers and hedge funds. Having a clear view of the overall profitability of the relationship with the buy-side will also be important in avoiding disruptions in other businesses that banks have with the same clients.

Gianluca Corradi Head of UK Banking Practice Simon-Kucher & Partners Gianluca Corradi, Head of UK Banking Practice at Simon-Kucher & Partners ( Simon-Kucher works with many of the world’s leading banks and other financial institutions on pricing and marketing strategy

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28 | Issue 7


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Mr. Vish Govindasamy, Group Managing Director, Sunshine Holdings Plc

Maryam Al Shorafa, VP - Head Of Corporate Communication & Marketing, Ajman Bank

Mr. Muhammad Hanif, CEO, PT Mandiri Manajemen Investasi

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Dr. Edem Bart Williams, CEO, Nordea Capital Limited

Mr. Joseph Chan, CEO, AsiaPay

Ms. Kristine Umali, Commercial Attache and Director, Embassy of the Philippines Ambassador Evan P. Garcia of the Republic of the Philippines in the United Kingdom Gilda E. Pico, President and CEO, Landbank of Philippines Ms. Catherine Rowena B. Villanueva, First Vice President, Corporate Affairs Dept, Landbank of Philippines Jocelyn Cabreza, Executive Vice President, Landbank of Philippines Phil Fothergill, Journalist and Video Producer (left to right)

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Middle East

68 Issue 8


REDEFINING CLIENT PORTFOLIO MANAGEMENT Having a vision of a disrupting force for incumbent Financial Systems and Corporations bolstered by a unique combination of an advanced financial technology (FinTech) and a team of industry experts, and bringing it to reality is the beaten path of Royal Vision Group. Royal Vision Capital, which is a member of the Royal Vision Group, specializes in providing intelligent professional investment solutions to help professional investors with their asset management and equity interests. With an advanced FinTech strategy and business model, they are already redefining their client’s portfolio management and

have demonstrated outstanding returns for the past 12 months, since the opening of their professional and regulated fund, the Intelligent Fund. Mr. Matjaz Zadravec as the founder and CEO, Mr. Stefan Frieb as the co-founder and CIO, and a world-leading persona, Mr. Farooq Mahmood Arjomand as the Chairman of the Royal Vision Group, are the three main contributors to the success of the company. Global Banking and Finance Review spoke with their leadership team to find out more about the Royal Vision Intelligent Fund and their future plans for development.

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The Royal Vision Intelligent Fund experienced strong performance over the last 12 months. Can you tell us more about the fund performance? “We challenged ourselves to target a 24% net annual return rate with a volatility of less than 10% and as of May 2017, we have attained 23.18%, which aligns perfectly with our prognosis made at the beginning of the fiscal year”, says Mr. Matjaz Zadravec. In the past 12 months of the establish regulated fund, the Intelligent fund, has proven its methodologies for asset risk control and overall trading strategy, which has its foundation in our developed FinTech quant model, named the Two Brain System. Mr. Matjaz Zadravec adds, “We are very proud of our past performance and the technology we have developed. Especially when comparing the fund performance to global benchmarks, we are delighted to see we are outperforming many of our competitors.” What is your unique strategy and how are you using it in the Intelligent Fund? The Royal Vision Intelligent Fund benefits from its own unique trading and supervision quant system, the Two Brain System, which continuously monitors all global financial markets and naturally adapts to the trading cycles. Alongside,

the trading team bestows qualitative input which additionally boosts the overall performance.

secondary qualitative form, where an expert additionally monitors the execution of each trade” says Mr. Stefan Frieb.

Co-founder and CIO of the Royal Vision Group, Mr. Stefan Frieb, replies “We have developed the unique strategy and mechanism of the Two Brain System, as a combination of an artificial intelligent quant model and its expert user.” Mr. Stefan Frieb continues, “This smart system, derived from an augmented reality concept, combines real and computerbased models to deliver a real- time snapshot of the financial market leading to immediate investment decisions.“ This tool classifies Royal Vision Group as one of the most aggressive FinTech challengers in this type of industry.

“The algorithm acts on constant adjustments of fund allocation, resulting from real- time adapting technical analysis models of current market conditions. Hence, the algorithm can find markets which offer a generation of high alpha at low risk. Secondly, portfolios are continuously evaluated based on riskto-reward characteristics with tactical weighted data, which is then offered to our team of experts, who direct the final trading decision. This system also functions well because of the type of active strategy we are using.” Mr. Stefan Frieb adds, “We trade intraday using auto/stop loss principle within the risk parameters, where the daily exposure never exceeds 1% of available assets. Besides the core trading risk measures, we have also implemented an outer risk safety layer to protect the funds of our investors, which is a type of cumulative risk safety of maximum exposure of 10% of client’s assets.”

How does the Intelligent Real-Time Risk Management system work? “We always develop our services based on risk precautions, therefore the whole concept of the technology resides on risk-safety mentality approach first, and afterward we maximize the return performance. We have implemented a real-time risk management system into the quant model itself, one resides in the core algorithm which powers the intraday trades, and the other part sits in a

Royal Vision Capital Leadership Team Pictured from left to right Mr. Stefan Frieb, co-founder and CIO, Mr. Farooq Mahmood Arjoman. Chairman, Royal Vision Group, Mr. Matjaz Zadravec founder and CEO Mr. Farooq Mahmood Arjomand enriches the company with his high-achieving experiences and respectful business knowledge in high-level networking, private banking, corporate finance, investment consulting and trade services. Being the founding member of EMAAR Properties, the largest real estate development company in the United Arab Emirates, Mr. Farooq Mahmood Arjomand has great input and overview on how the hyper-level business functions, since one of his many projects portfolio also features the Burj Khalifa, the tallest building in the world. With his astonishing accomplishments, he actively leads and supervises Royal Vision Group in achieving the business goals.

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The co-founder and Chief Investment Officer, Mr. Stefan Frieb, has led different types of trading teams and has developed, reviewed and executed many different key quantitative strategies and investment models for leading industry players, such as Goldman & Sachs, JP Morgan and Deutsche Banks as the Head of Trading in the European region for the past two decades.

What are the four primary portfolio classes that make up the Intelligent Fund? “The fund regulatory enables our fund managers to buy, sell, or sell shortlisted securities worldwide, such as futures, future options, currencies, equities, commodities and any other financial instruments with sufficient liquidity. Depending on the technical analysis models of current market conditions provided by our quant model, it can identify markets which offer a generation of high alpha at low risk. Accordingly, the portfolios are continuously evaluated based on risk-to-reward characteristics with tactical weighted data. On average the four primary portfolio classes are European futures, US futures, futures options, and equity” Mr. Stefan Frieb What type of support do you offer to the investors? Mr. Matjaz Zadravec replies “We strive being frontrunners in our financial industry in terms of products and services provided, which are reliable and safe for the intended users, meeting all obligations and continually learning and improving in all spheres to pursue the moving target. Our interests are always aligned with the interests of our investor, being transparent with pure revenue sharing and giving the

Mr. Stefan Frieb co-founder and CIO Royal Vision Capital

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freedom of full monthly liquidity with no hidden charges. Going back to the roots, our goal is to provide the highest possible return, while still having the control over the risks we are taking. When it comes to our client support, each investor has a dedicated manager, who tries to understand the needs and frequently reports all updates back to the investor on a constant basis. To ensure complete transparency, our services are using the most recognized service providers in the industry, such as Apex Fund Services and Ernst & Young auditing.” What are your future plans for development? Mr. Matjaz Zadravec kindly responds. “We always have something cooking up in the Royal Vision Group Research and Development Department, where we are constantly evolving the quant model strategy and business models which support the company to make our business even leaner and meaner. Apart from constantly improving ourselves, the other focus is on increasing the AUM to get established in the financial industry and get more recognized by Institutional Investors.”

Mr. Zadravec says “In this day of age, this is important more than ever to use the mentality “client comes first”. Our integrity, constant innovation on our business models and always being on the lookout for new emerging technologies are necessary to keep the highprofile investors satisfied with our financial performance and having an overall positive client relationship”.

Mr. Matjaz Zadfravec Founder and CEO Royal Vision Capital

Past professional experience of over 20 years in corporate management, investment management, financial restructuring, merger and acquisitions, business development, sales and marketing, leading different companies in different regions as their CEO, and having a sharp eye for improvements has motivated Mr. Matjaz Zadfravec to start a company, which offers more than just a standard “copy/ paste” of a slowly degrading old business models in the financial industry, thus the establishment of the Royal Vision Group.

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Q&A: The future of mobile security in banking What security challenges will the banking industry face over the next few years? The use of mobile in all aspects of life is growing, from the near daily use of banking apps through to accessing work remotely, so it’s become a viable, and currently very profitable, channel that hackers can target in order to steal sensitive data. Over the last several years we have seen threat actors expand their traditionally desktop focussed arsenals to now include a mobile component. This was the case with the actors behind the successful SpyEye and Zeus desktop families who released Spitmo and Zitmo respectively. It isn’t just the established cybercriminal gangs that are breaking into the mobile space, we’re also seeing a number of new players deploy mobile banking trojans like BancaMarStealer / Marcher, Cron, and MazarBot. Leaked source code for an earlier banking trojan known as GMBot has meant that the barrier to entry for threat actors looking to have a mobile capability is quite low. It’s now more critical than ever that banks upgrade their cybersecurity measures to include mobile, so end users are protected regardless of the channel they use to bank with.

How do these attacks work? It tricks the user by introducing an overlay, essentially a fake login page which looks identical to what a user would see when browsing to the bank’s legitimate website or when using their official mobile application. Once the device has been infected, the trojan is sophisticated enough to identify which banking applications are on that device, or

what banking website a victim is currently viewing, and uses that information to display a corresponding overlay. Visually there is nothing to indicate to the end user that they are entering sensitive information directly into a malicious application.

Where are these attacks coming from? These attacks are not always set up by experienced actors. Malware packages are often being sold as a service. More and more of these actors have no experience in creating these tools and instead buy or rent them. This was very much the case with BancaMarStealer, also known as Marcher, which Lookout researchers first saw being used in Eastern Europe before being sold globally as a service. Since emerging its use has exploded and Lookout has seen it deployed in Russia, France, Germany, Austria, Poland, Spain, The Netherlands, The United Kingdom, Australia, Canada, and The United States.

What can banks do to protect customers that use mobile banking? Mobile transactions authentication numbers (mTANs), require online transactions to be accompanied with a specific token that has been sent directly to a user’s mobile device. However, Lookout has seen some banks in the West move away from mTANs in favour of physical non internet connected two-factor authentication tokens. These require users to physically enter their banking card and pin, which in return provides a short-lived code that is tied to the specific transaction they are making. This approach makes it more difficult for attackers to attempt to make fraudulent transactions from a compromised mobile phone.

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MIDDLE EAST BANKING If banks upgrade security measures to include twofactor authentication, will consumers be free from hackers and safe to handle their finances online? This would definitely go a long way towards mitigating attacks and in the short term adversaries in this space would be more likely to first target customers of banks that didn’t provide these security controls. In the long term, it would force threat actors to invest in redesigning how they exploit targets in order to make fraudulent transactions and access their bank accounts. At this point in time it’s unclear what this would entail however, as we’ve seen time and time again in the security space this is a continual game of cat and mouse between attackers and defenders.

Over the last couple of years we’ve seen numerous applications being released that allow customers to quickly transfer money between one another. PingIt, Swish Payments, Apple Pay, Google Wallet, and even via Facebook Messenger are a few examples of this type of money transfer and there are a number of apps for handling cryptocurrencies. As banks continue to refine their security controls, we are expecting to see malicious actors expand their capabilities to go after these apps when they compromise a mobile device.

Michael Flossman Security Researcher Lookout

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We alth Management

Inve stment Banking

Brokerage Ser vice s

Asse t Management


What does the future hold for the traditional bank branch? Big names in banking are permanently closing the doors on thousands of branches across the world, leading to some commentators expressing doubts over the place of the bank branch in the digital world. Consumers are increasingly used to managing their finances via the internet or smartphone applications. But the reality is there is still a place for bank branches, so long as they continue to innovate and evolve in the wake of ever more fintech start-ups. Firstly, there are some banking functions that still need to be done in person, which banks can champion. Take the customer enrolment stage, for example, which can be a confusing and lengthy process. There are some aspects of the customer journey which simply cannot take place on a mobile platform, such as the acquisition of certain biometric credentials. New innovations on the market allow customers to use advanced services in-store, including

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the use of self-service terminals to print payment cards securely and on the spot. This offers customers instantaneous and convenient any-time card renewal – no 7-10 working day waiting period for a new card and PIN. So how can banks ensure they stay relevant? Embrace the digital transformation Banks must embrace the digital transformation to stay ahead of the game in 2017. With regulatory challenges like PSD2 on the horizon in the UK and the KYC issues it’s likely to raise, banks need to invest in building easy to use, seamless portals which simplify the enrolment process. They need to strike a balance between meeting new regulatory requirements on customer data and constructing a convenient digital onboarding process. Once an effective enrolment journey is in place, banks need to consider the best way in which to deliver an omnichannel strategy. That means first-

class mobile apps, making intelligent use of customer data, and ensuring every step of the customer journey, from smartphone to the bank branch, is a connected one. For instance, Al Rajhi Bank, Saudi Arabia’s leading financial institution, has installed self-service kiosks, which allows customers to receive payment cards on the spot. It’s a much speedier and more convenient and much more modern card issuance strategy, enabling staff to provide personalized support when the person is in the bank branch.

Personalisation is key The bank branch is becoming less crucial to the customer journey, but it’s still possible to engage with customers and foster healthy relationships in the age of digital banking. In fact, there are more opportunities for banks to encourage brand loyalty. Personalisation should be the key theme. Customised bank cards


and real-time marketing offers based on individual user data are just some of the ways financial institutions can engage with their users. There are ways banks can modernise, such as offering PIN codes by e-Channels which allow customers a fast and interactive way to activate and use their payment card as soon as they have it in hand. IoT is infiltrating every sector, including banks, and branches need to embrace IoT to remain relevant. In a time where consumers demand convenience and an always-on personalised service, such as mobile banking apps and contactless payments, IoT has the potential to create numerous opportunities for banks. A truly personalised experience can be developed through data regarding customer behaviour and demands, creating a new level of customer intimacy. This can then be used in-branch to streamline customer experience by simplifying options available to them and always being prepared for potential issues.

Focus on security The downfall of banking shifting online and towards apps is security risks and threats, including data integrity attacks, phishing and card skimming. There’s also a trust issue – the more people bank online and on mobile, the more they risk becoming separated from their provider. Trust needs to be established through constructing multi-layer protection as well as creating the perception of security. Layered banking security involves securing data in the cloud through techniques like encryption and cryptography, and equipping mobile apps with strong software security. CNP fraud needs to be tackled by encouraging a move away from static card information, looking at dynamic solutions. DCV, which involves a security code that changes continuously, makes it very difficult for a fraudster to acquire card details. The advantage of bank branches here, over fintechs, is their longevity within society which has established security and respect.

What is needed from bank branches is a reinvention to link the virtual and physical worlds seamlessly, which will occur as they transform and acquire new technologies. Banks should explore installing IoT-enabled equipment and digital banking portals in branches, which focus on customer experience – for example, enabling payment mean activation within just ten minutes from enrolment. With mounting competition from fintech startups, banks need to rely on the strengths of their branches to provide them with the advantages required to keep them alive. It’s all about giving customers control over how they bank.

Howard Berg Managing Director Gemalto UK

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Banking in Egypt with QNB ALAHLI Mohamed El DIB, Chairman and Managing Director at QNB ALAHLI discusses the banking sector in Egypt and responds to our questions about QNB ALAHLI. QNB ALAHLI has been in the Egyptian market close to 40 years. When you first began retail activities you operated 7 branches. You now have over 200 branches. What are the biggest challenges and opportunities you see facing the banking sector in Egypt? How is QNB ALAHLI contributing towards the growth and progress of the industry? We have succeeded over previous years to maintain our robust financial strength in terms of growth, profitability and low non-performing loan ratio despite the continuous changing environment given Egypt’s challenging economic situation and the regional instability, this is a strong evidence of the resilience of our business model as we continue to offer new products and services to best suit the changing market and generate sustainable growth and profit as the bank provides dedicated products to the various market segments , with competitive offering. And in terms of customer satisfaction we managed to establish strong bonds with our various clientele whether large domestic corporations, subsidiaries of multinational companies, medium caps, as well as SMEs and retail.

As Egypt is passing quite well with its ambitious economic reforms program, we see lots of investment and business opportunities in all economic sectors which offer strong potential for the banking industry. The Bank is also focusing on financial inclusion initiatives and see good growth opportunities in retail banking as well as SMEs, very small and micro enterprises business. Our ambitious strategy in the Egyptian market aims to further expand and reach all our customers in all governorates of the Republic, an area where we have already taken huge steps, as QNB ALAHLI has reached more than 200 branches in different governorates. We aim to cover more areas with new branches with the same level of service that our customers are used to and more, at the same time strengthening all branches with state-ofthe-art banking technology while relying on our highly qualified and trained staff to deliver superior customer satisfaction. The Bank also has been paying increasing attention to digitalization by investing in new technology and introducing digital solutions to its clients. The Bank has maintained its position in the Egyptian market, achieved remarkable growth in loan portfolios, increased market share, increased returns, and maintained asset quality. This is a direct result of its strategy as a business partner committed to its clients through balanced policies to work through the usual challenges, all of which aim at positioning

QNB ALAHLI as first choice for customers through excellent customer service and the delivery of high quality products and services covering large segments such as corporate banking or retail through the bank's subsidiaries all directly contributing to the welfare of the economy. Finally, we are keen to stay in a close proximity and close relationship to our clients with access to up to minute information, which has helped in approaching clients as a universal bank offering a long list of products and services maximizing our return while still generated value to our customers, with strong operational efficiency, and prudent risk management where returns are maintained at good levels The bank knows quite well that its successes could not have been achieved without dedication of its 5400+ employees. Thus, the bank is keen on investing in its manpower and developing their skills to cope with the latest global banking systems through an organized training plan that covers all the bank employees as a key of success for any institution. Has the demand for credit from corporates increased? Yes, especially for capex financing given the slowdown in investments during the past few years. In addition, financing for short term working capital needs is growing given the increase of material and operating costs.

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In what ways does your corporate banking division assist clients in managing their risk and enhance their revenue? We pay high attention to advising corporate clients on solutions to their financial needs offering them advice on available alternatives, and guide them to reach optimization of their resources maintaining a good balance and minimizing financial risks. While we do that for all corporate clients, we have a dedicated team to advice clients on major projects and investments. Can you tell us more about QNB ALAHLI’s unique business model used for SME clients? QNB ALAHLI is a leading bank in approaching the SMEs. We developed products, packages, financing programs, and advisory services to fulfil the banking needs of this sector and help them develop and grow their businesses. As we strongly believe in the importance of this sector, and its positive contribution to the national economy we have availed teams of trained specialists and Relationship Mangers capable of serving this sector in our branches. In line with the Central Bank of Egypt unified definition of Small and Medium Enterprises and subsequent initiatives aiming at developing this sector, the bank has introduced different types of financial and non-financial banking services catering for the special needs of this specific segment. We have a dedicated business line that serves this promising segment, and we have been paying increasing attention to the very small and micro enterprises segment as well. How is technology impacting the way you do business? Over the past few years, technology was one of the main issues on the bank management’s table, as it proved to be

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one of the best ways to help us reach out to new customers and provide the best service possible for long-term customers, as well as an efficient medium that facilitates availability of our premium products and helps our clients develop their businesses and manage their daily accounts, a feat which helped the bank to accomplish tremendous achievements. As technology is constantly evolving, adapting to these continuous technological developments is vital to the survival of any institution. At QNB ALAHLI, we are always keen on merging these new tools and applications in our day to day operations, as well as, in the products and services offered to our customers to help them achieve more with less effort accordingly; We re-launched our Retail Internet banking service that offers our clients full visibility of their accounts, cards, loans, and deposits, allowing them to perform transfers within their own accounts or to other beneficiaries inside QNB ALAHLI as well as external transfers to other banks, all performed instantly, and conveniently with the highest security standards in the industry. A new mobile phone banking application was also launched, this new application gives access to our customers to inquire their accounts, transfer between own accounts, and get the latest offers and discounts as well as other information such as QNB ALAHLI branches and ATM’s locations, we are putting the final touches to launch QNB ALAHLI E-Wallet which will  offer our clients a variety of payment services to cope with the quick pace of life by redefining the way we perform our daily financial transactions.QNB ALAHLI E-Wallet will allow bill payments directly from mobile devices  in a convenient, fast and secure way. This year proved as usual the pioneer role QNB AA assumes in the market as it launches for the first time in Egypt QNBAA m-Visa, a seamless and secure solution for instant mobile cash payments through smartphones in partnership

with Visa, the global payment technology company. M-Visa is expected to contribute to the growth of easy and secure digital commerce for financial institutions, traders and consumers as well as accelerate Egypt's direction towards a non-monetary economy. At the start of this year you launched mVisa. Can you tell us more about this service and the benefits? QNB ALAHLI has recently launched m-Visa service in cooperation with Visa International. m-Visa will play a great role in expanding the field of accepting digital payments as it’s considered a perfect solution for a number of problems and dangers that face merchants when dealing with cash. Cardholder can capture QR code through their smart phone camera to perform the transaction and debit their cards. Worth mentioning that QNB ALAHLI is the first bank to launch this service in MENA region, which confirms the bank’s leadership in availing the latest innovative solutions in the Egyptian market and specifically in the field of digital payments building on the widespread of mobile phones with a subscriber base of around 96 million subscribers. The tool provides convenience and almost no interest cost on the client side while it is a secured medium of payment. Can you tell us more about your agreement with Mubasher Financial Group and what this means for investors?  The  Agreement with Mubasher company  offers clients of both firms who are interested in stock market trading opportunities to sign up for trading accounts on the Egyptian Stock Market through Mubasher while they can do that through opening a bank account with any of QNB ALAHLI branches all over Egypt, benefiting from our wide range of banking products and services


Mohamed El DIB Chairman and Managing Director QNB ALAHLI

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The Investment Landscape in Hong Kong BOCI-Prudential Asset Management represents the powerful collaboration for dynamic wealth management. Founded and headquartered in Hong Kong, the Company offers a broad spectrum of investment products and services, which include Hong Kong mandatory provident fund scheme (“MPF”), pension funds, retail unit trusts, exchange traded funds, institutional mandates and other investment funds. In addition, the Company also manages discretionary investment portfolio and charity fund for both private individuals and institutional clients. In October of last year at the London Stock Exchange Studio, Global Banking & Finance Review journalist Phil Fothergill interviewed Hing S. Tang, Ph.D., CFA, Managing Director, Head of Quantitative Strategy Business Unit

at BOCI-Prudential Asset Management to discuss the investment landscape in Hong Kong and their success. Phil- Dr. Tang, welcome to London and thank you for joining us today. Let’s talk more about the company if we may, your main organization “BOCI-Prudential”. Tell us a little bit about the History and how that operates today” Dr. Tang- We’re joint venture between Bank of China International and Prudential plc in UK. We set-up the company in 1999 and started as a Pension Manager. Over the years, we developed our products and now we offer comprehensive products to both institutional and retail clients, mainly we are still pension fund managers but we also focus on different things.

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Phil- As a leader in fund management in your part of the world, what distinguishes BOCI-Prudential would you say from other organizations in the same area? Dr. Tang- I think we are unique in the sense that we have two distinct investment teams. The traditional one, covers Equity and fixed income by using traditional, fundamental approach and we do have a Quantitative Strategy Business Unit which employs quantitative methods to manage global equity. Phil- You mention about QSBU to give the shorter version of Quantitative Strategy Business Unit, tell us a bit how that works and what is the benefit of it? Dr. Tang- QSBU is a kind of Business Unit within the company, so we do have our own business development colleagues and the portfolio managers, equity analysts and the researchers. We try to offer a wide range of quantitative strategies to our clients in the region. Phil- Now I Know that you provide a broad range of investments solutions, how do you monitor client’s success and give them support? Dr. Tang- Well we believe in what we call insightful quant strategies. Insightful means, we believe in a combination of deep economic insight with robust quantitative process, which will give us a better chance to achieve a superior

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performance. Our economic insight tells us which asset class we should go into and we try to articulate a robust investment process to tap into that asset class, so hopefully the disciplines and then the insights will help us to give a more robust performance and after we discover the clients and their concern, we will employ a reputable risk model to control the risk and hopefully to achieve the return. Phil- Is it how you go about selecting and helping clients find the right kind of funding for their investment? Dr. Tang- That’s right, I think that different clients have different needs. First, we have to understand client’s needs and their risk tolerance, these kinds of things. Then we articulate the investment methodology and risk strategy. Phil- Let’s look at Hong Kong itself, what would you say the challenges and opportunities were in investing in the Hong Kong area through your business? Dr. Tang- Hong Kong is obviously still a financial hub in the region, we are an open economy so one of the challenge in terms of investment is the correlation among different markets or even among different asset classes increase significantly this year, this probably reflects the many years of easy monetary policies. So, if anything happens to one market it will easily affect the performance of the other

markets. Given the Hong Kong Investor in particular in the pension they are exposed to global economy, global equity and global fixed income so as a fund manager I think we have to pay extra attention to these issues. Phil- You did mention about easy money reforms and so on and like every country there are regulations and restrictions what are the issues and challenges would you say? Dr. Tang- I must say, our regulators are working real hard. Basically, on one hand we need to keep our regulatory standard up to date, compared to the global economy and environment but on the other hand I think one of our edges is actually to work closely with the mainland regulator. For example, we see a huge opportunity coming in November of 2016 with the Shenzhen-Hong Kong Connect. We already connected Hong Kong stock and Shanghai stock a year ago, which was hugely successful. Now with the Shenzhen-Hong Kong Connect coming, I think global investor should be able to access the China A-share market very easily, so this is really big thing you know. Phil- So you feel that the system will make things easier going forward then? Dr. Tang- That’s right absolutely, China is opening the economy and the equity markets, so I am sure that China and rest of the world will benefit from this.


Phil- And we all know because it is always in the news that you know China being one of the world’s biggest economies always making the headlines there have been challenges recently, how would you see from your point of view the economy in China at the moment?

down but new china is really robust and I actually expect really significant progress down the years.

Dr. Tang- I would say China is quite big, in terms of size and diversity, so people always talk about downside but they are probably focused on the old China. Now we have two China or two economies within China. One is the old one, focused on resources intensive industries, exports kind of things right but the new china is more like healthcare, IT, consumption and services you know. They are quite different, the old, I agree may be slowing

Phil- Definitely the new way of thinkingly, lets come back again to, your own in operations and the QSBU that you mentioned a moment ago. What future plans do you actually have for that?

Phil Fothergill

Phil- So exciting times are ahead then you think? Dr. Tang- Yeah, for the new one.

Dr. Tang- That’s a very good question. I think we come to a stage where we should think ahead of time, that’s why I am calling ourselves a Quant 2.0, kind of evolution. Basically, we try to incorporate

all this artificial intelligence or other advanced techniques to generate more alpha sources. Give our fund managers and resources to focus on ideas generating. We call ourselves insightful Quant, so I would love to see my people focus more on the insight part and let the machine and the robot deal with the quant part hopefully that will be very interesting and fruitful in future. Phil- Well I hope it turns out to be ----as you say and in the meantime, once again thank you for coming to London, Congratulations on the award, it was excellent to talk to you today. Dr. Tang-Thank you.

Hing S. Tang Ph.D., CFA, Managing Director, Head of Quantitative Strategy Business Unit BOCI-Prudential Asset Management

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Customer Experience Driving Disruption and Digital Transformation Success in Banking We are living in a new age – the age of the customer. Banks are being disrupted by market forces, increasing compliance requirements, and new technologies such as Blockchain, real-time payments, tokenization, and APIs. But most of all, banks are being challenged by the increasing expectations of customers, who are no longer satisfied with inconsistent service over the multiple channels of the bank. In line with this, the majority of banks are struggling to move forward from their established banking models. In fact, studies have shown that while 96 per cent of bankers agree that banking is evolving to become a series of inter-connected digital financial services within a secure and regulated ecosystem, only 13 per cent see themselves as prepared and equipped to support such an ecosystem.

Customer centricity is paramount when creating digital transformation strategies and the rise of challenger banks targeting specific customers, as well as new payment solutions is urging a seamless relationship between technology and experience. True transformation requires new ways of working, thinking, and positioning, but how do we actually get there? I looked at three core developments in banking, and how customer centricity is built into the development road map to drive adoption success in their integration– both internally and externally. 1.Omnichannel digital banking for a seamless customer journey Customers are demanding that banks know who they are, understand their financial needs, and offer speedy and

relevant responses to questions and requirements. Consistent service over all the touchpoints of the bank (whether mobile banking, internet, branch, or contact center) is necessary to provide a truly exceptional, frictionless customer experience. The entire customer journey must be taken into consideration to ensure customer satisfaction, customer loyalty, and customer lifetime value is achieved. 2. Improved security without compromising the customer experience Security and customer experience have often been at odds with one another. Banks today need to fortify omnichannel security and stay on top of regulations without compromising the customer experience. This is made possible through working with effective partners or developing internal teams to deliver:

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Risk-based adaptive biometric and behavioral profiling: to securely identify customers, authenticate access, and validate transactions in real-time

Financial crime artificial intelligence: to prevent fraud by detecting and resolving issues in real-time Identity-based micro-segmentation techniques and encryption: to mitigate cyberattacks from outside or within the banking institution by rendering devices, data, and end users undetectable on networks

In product design, insights can pinpoint most-relevant products and services at unprecedented scale and speed

In customer service, analytical models connect customer responses and call center activity to improve processes and customer satisfaction levels

3. Advanced analytics to drive enterprise efficiency

As the banking sector navigates through this period of unprecedented disruption and transformation, banks have the opportunity to reinvent themselves. This reinvention has the potential to go beyond digital transformation to business transformation – adding value across the organisation.

Advanced analytics are a must for banks today. By delivering actionable insights, advanced analytics can improve operational and sales efficiency, and realize cost reductions across multiple functions. For example:

For every bank, finding the right digital transformation solution to integrate into tomorrow’s digital banking ecosystem, with customer experience as a cornerstone for development, can be the key to tomorrow’s success.

In marketing, analytics can boost campaign performance by using historic data to identify target customers, revealing high impact messaging and relevant solutions

Eric Crabtree Global Head of Financial Services Unisys

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Avoiding arbitrage – the importance of web performance in forex Speculating on foreign exchange (FX) is no longer the preserve of billionaires and fund managers. FX is the largest market in the world, and thanks to the immediate effects of currency fluctuations on the price of imports and the cost of holiday souvenirs, it’s more understandable than many other types of trading. There is also less of a barrier to entry – many types of investment or trade require a third party to be involved to actually make the transaction, or need a minimum amount of capital to be invested. Forex, on the other hand, is as simple as an online auction or ecommerce purchase, and is available 24/7. Buying shares in a listed company means waiting until the exchange is open, whereas currency can be bought around the clock. It’s the biggest market in the world with over $5 trillion traded every day1. While 95%+ of this is currency traded by corporations and banks, the retail market, while less than 5%, is still huge. This combination of demand and ease has led to the creation of online portals to buy and sell currency. These portals are aimed at those looking to dabble in forex, as well as those more serious about following trends and making predictions - just as online gambling has opened up betting to a wider audience than those willing to brave high street betting stores. But these online portals run a particular risk, akin to a gambling site taking bets on a race that has already finished. Arbitrage, the practice of buying currency from one site at a particular price and then selling it instantly at a better price elsewhere, can mean big losses. With zero risk for whoever is performing these trades, and the ability to trade a lot of money at once, the potential losses can be staggering.

A delay in updating exchange rates could be ruinous if a customer takes advantage of this difference in exchange rates of competing platforms to make a profit. Thanks to the automated nature of these trades, milliseconds matter. Software is used to scan for opportunities to buy and sell and make trades automatically. A delay of a just a few milliseconds could be enough for a trader to make a huge profit – and for a forex broker to make a huge loss. Businesses being able to offer up-todate, accurate prices on their website is good, but for forex it’s actually vital for the survival of the business. Exchange rates change so quickly that every millisecond counts. Unfortunately, if a website is not hosted close to the user, then out-of-date data such as exchange rates can be more than just a few milliseconds out, but a few seconds. Local delivery of content, either by hosting at a local datacentre or by caching by a content delivery network, is most often the solution to long loading times. Simply by cutting down the distance from the user to the content, the time to load a page is drastically reduced. Content can be served in milliseconds rather than seconds. This caching of content will fix help fix issues for a website that only relies on static content, but it doesn’t help with a forex pricing engine. The constantly changing nature of these prices means that local caching is useless. Were data to be cached, the information would be instantly useless, a historical record rather than the up-to-the-second accuracy forex demands. Another complication is the fact that pricing information is often nonbrowser based traffic.

The answer to this again lies with content delivery networks, but it needs to be one with the capability to accelerate the engine so that the forex website displays up-todate-pricing. Accelerating website content means accelerating the “application layer” - but speeding up a pricing engine means accelerating the “network layer”. The CDN should also, of course, accelerate static content by caching to offer an overall pleasant and fast customer experience – a fast pricing engine on a slow website is no good. The retail forex market is likely to become more competitive in the future, and forex providers will likely feel the impact of regulation such as PSD2. As such, it’s vital that they remain competitive and protect their business from those who would exploit it, by being as real-time as possible. And, of course, have a fast, responsive website that does not frustrate users won’t hurt either!

Alex Nam Managing Director EMEA CDNetworks

1 McLeod, Gregory. “Forex Market Size: A Traders

Advantage.” DailyFX, 23 Jan. 2014, education/trading_tips/daily_trading_lesson/2014/01/24/ FX_Market_Size.html. Accessed 19 June 2017.

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More with less: The evolving state of the sales function within investment banks Transformation is occurring in almost every department of investment banks. Systems are being consolidated, client interactions are being automated, and costs are being cut. But what exactly is at the root of this transformation, and what does it mean for the traditional bank sales team? What’s behind global banking transformation? The political landscape across the globe is placing increased control on the way banks conduct business. In seeking to protect the interests of bank shareholders and customers, the regulatory authorities are acting to limit the amount of a bank’s capital available for speculative investment, and demand greater price transparency in all stages of the trade life-cycle. The two specific areas of transparency relate to: competitive pricing (how a bank’s price compares to what’s available in the broader market), and price construction (how much of a premium over the basic cost a bank adds for risk, service and margin). Different

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regimes have given rise to different rule sets (Dodd Frank, Volker, MiFIDII), but these are the underlying principles at play. Decreased opportunity and increased costs The immediate implications of these regulations for banks are that they withdraw from some markets in which they’re not allowed to allocate too much balance sheet capital at risk, and that they must undertake drastic reconfiguration of internal and external systems to remain compliant. This is a double-whammy. The former reduces the opportunity to generate profitable revenue, and the latter adds cost. Increased customer exception In addition to regulatory issues, banks are facing increasingly technology literate customers. Our highest expectations of what technology can deliver are informed by the capability of our hand-held devices, and our experience of interacting with intelligent websites. E*commerce in retail

banking allows us to check a balance or do a money transfer, but rarely wow us with the user experience. Most Single Dealer Platforms (SDPs) fall somewhere in between, but expectations of what can be delivered by banks to their corporate clients far exceed what they get today. It’s no surprise then that most banks are now appointing senior roles with a focus on ‘digitisation’. With broad remits spanning traditionally siloed product and client organisational structures, these new digital officers are tasked with driving digitisation and automation throughout the bank. Regulation and digitisation dominate the agenda for sell side institutions and are driving rapid transformation across the industry.

But what of the sales team? Partly in response to raw economics and the natural economic evolution of businesses to compete with one another, and partly to fund the costs of


implementing the regulatory regime, all banks are seeking to cut costs. In all whitecollar industries, and particularly banking, cutting cost is a euphemism for cutting people. In trading, greater emphasis is placed on systematic, or API based trading away from manual human traders. Trading rooms used to be thrilling places to visit. Now they’re dull. Similarly, in distribution, senior managers expect the same amount of client business to come from fewer sales people, or that sales managers protect and grow their customer business with the same number of sales people. On top of that, the combination of regulatory and economic pressures is causing banks to be far more selective about the customers and segments they want to target. How can sales automation help? The opportunity that any kind of automation presents is in improved efficiency of both manual and cognitive processes. If a customer can self-serve on an e*commerce platform (or in a supermarket), there’s a clear reduction in labour costs.

Given that much trading activity is API based, and e*trading technology has hollowed out massive efficiencies by eliminating human traders, the quest today for greater efficiency is in sales automation. The key drivers are improved service to customer, and empowerment of the sales relationship (taking the power back from the trading desk). Whereas the sales person was at worst a relationship-savvy postman, sending interests to the trading desk with a fracture in client-specific knowledge about price sensitivity, the salesperson is now empowered to act in the client & bank’s interests. This is all manifested in tradingon-behalf-of (TOBO) functionality and carefully designed motifs. Sales efficiency is not just about cost reduction, it’s also about getting more out of the sales people that are still employed. To do that, there must be workflow improvement between sales and trading

desks. With a quest for efficiency however, the ability to track and therefore measure sales behaviour (how much spread/ discretion is being offered/traded away) becomes critical as a control device. It’s important to can better hold risk within the bank rather than allowing it to be traded away outside the bank (in the case where worst-of-all-worlds the sales person is empowered to send the risk wherever he likes, inside or outside the bank). So how can sales teams do more with less? •

Give smaller customers a screen to do it themselves

Picking up the phone and talking to a bank has been the customer to sales channel preferred by corporate customers and smaller banks forever. It also remains the most efficient channel for high touch, structured products whose very nature demands an iterative, consultative sales process.

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However, many corporate customers deliver little revenue and profit to the sales desk, so the trend has been to replace that relationship with a screen. In the future, we predict that human salespeople will only serve the biggest clients, and/or their high margin structured product needs. Banks will send lower profit customers to callcentre or SDP exile. •

Be proactive by using analytics

Another trend is to force the salesperson to be more proactive, rather than waiting for the phone to ring. This can be achieved by leveraging pre-trade and post-trade analytics. By analysing what a customer has habitually done in the past, the salesman can nudge and suggest that they do the same in the future. Amazon has this nailed of course – it knows where people go after they’ve left browsing and buying footprints.

Mobile technology

The use case for mobile technology is less about execution (although that is starting to happen) and more about eliminating cumbersome human processes. Banks are adopting mobile apps for order amendments, confirmations, settlement notifications and watch-lists. Already common place in their retail divisions, treasury functions are hurrying to catch-up and be ‘with-it’. •

Conclusion Traders have been largely eliminated by computers. It’s only a matter of time before most low-skilled sales jobs are eliminated too. A bank’s single dealer platform is becoming its principal distribution channel.

Cross-asset view

Constraints on balance sheet capital at risk have turned banks through 90deg. Whereas the product silos were targeted to sell as much of their thing as possible, banks now need to take a total view of capacity and let that inform how much inventory they can sell. As a result, they must reconfigure their sales teams towards a horizontal crossasset, rather than vertical single-product focus.

John Ashworth CEO Caplin Systems

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UK Property – Opportunities for Overseas Investors Amidst Brexit negotiations, European elections and the UK election next month, the UK property industry is experiencing an unsettling time. However, the “Brexit discount” coupled with the weak pound has attracted overseas investors who have swooped in to secure real estate assets at competitive prices. Chinese Investors In the months following the EU referendum result, there was an increased flow of capital into the UK, especially from Asia, with Chinese investors securing some of the biggest deals in the City office market – 88 Wood Street, EC2 for £270 million, 20 Moorgate, EC2 for £155 million. Although China is not the biggest overseas investor in the UK market, it was anticipated that this Chinese investment would continue and grow in an economic climate that has significant advantages to buyers with foreign currency, and that its interest in London in particular would help offset the reduced demand in the regions. Capital Controls

face closer scrutiny and approval must be sought from several internal ministries. There are also tightened restrictions on the amount of money that can be transferred out of the country without state permission and a limit on how much can be spent on a single transaction. Targets for such “closer scrutiny” include “extra-large” foreign acquisition valued at $10 billion or more per single transaction, real estate investment by state-owned investors above $1 billion, and investments by any Chinese investors above $1 billion in any overseas project which is unrelated to such investor’s core business. In addition, some other deals are also caught: overseas direct investments made by limited partnerships, investments in overseas-listed companies that are less than 10% of total equity, and Chinese capital trying to participate in the delisting of overseas-listed Chinese companies etc.

Also, while the capital controls are in place, interest from Hong Kong (who are not subject to the same controls as mainland China) in UK assets could increase – see Hong Kong listed China Resources Land seeking its first property acquisition in the UK with the £307 million purchase of London’s 20 Gresham Street, EC2. UK property remains a solid bet for investors looking to generate income returns. China’s trading links with the rest of the world are stronger and closer than ever before, and its interest in UK property remains high. It is thought that the capital controls are a temporary measure and that the Chinese government will allow its companies to diversify their investment portfolios more freely in the future. Certainly in the short term there appears to be no real decline in desire for the returns UK property continues to offer.

Recently, the Chinese government has relaxed some of the controls which is a positive move. The restrictions on overseas funds transfers subsist and the need for approval from different government departments remains. The layers of bureaucracy coupled with a high demand for approvals slows the process down, and could result in Chinese investors losing out on target deals.

Faced with an exodus of funds overseas, China has been making moves to control capital outflows and strengthen foreign currency reserves since November 2016. It was feared that the controls would put a large dent in Chinese investment in the UK.

It is also thought that recent CEO changes in some of the large Chinese corporates could contribute to a dip in deal flow with the new leadership bringing in strategic changes and suspending investment targets while “bedding in”. Impact on UK market

These controls do have a detrimental impact on a Chinese investor’s ability to act quickly and also to acquire a variety of assets. Any overseas investment will

Despite these current investment barriers, in the UK there is not a great deal of evidence that these are having a significant effect on Chinese investment.

PricewaterhouseCoopers LLP 9 May 2017 Pictured:

Cynthia Chan Director, International Business Reorganisations and Head of China Business Group, Legal Co Authors not pictured:

Amit Unadkat Real Estate Legal Leader | Solicitor Shalini Nilaweera Solicitor (Real Estate)

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Financial Marketing: three ways to ensure that your Global Content Strategy Pays off Localisation of marketing content is no longer perceived as a luxury in the financial services industry: research demonstrates a clear link between language and buying patterns. As global marketing professionals are acutely aware, it is not a question of whether you invest in localisation, but how you make the investment. Yet, the most effective strategy isn’t always clear. So, what are the main pitfalls – and how can they be avoided?

Localisation and the link between language and buying patterns Like other sectors, the financial services industry is evolving to meet the challenge of digital transformation as they seek to engage with global markets. Localisation is no longer seen as a luxury designed to portray a certain image to a particular audience – now it has moved to the top of the agenda for C-suite executives and marketing teams. Organisations across all industries have come to recognise the clear link between language and buying patterns: as research carried out by Common Sense Advisory shows1, 72% of customers in all industries spend most or all of their time on websites in their own language. The same proportion would rather buy a product that is offered in their own language, while 56% say that information in their own language is more important than price.

Why do global content strategies fail? The imperative to localisation marketing content across markets, languages, devices and channels brings with it crucial challenges for organisations right across the financial services sector: namely, how best to manage and make the most of content, engage with local sales teams in different regions around the world and – crucially - generate an actual return on the marketing investment. The most effective strategy isn’t always clear, and not all organisations enjoy the same success when it comes to implementation. There can be many reasons why investment in global digital marketing fails to pay off, but among the biggest obstacle is the decentralised approach taken by many companies. This can lead to a lack of coordination between central and local marketing teams, result in duplication of cost and effort when it comes to creating and translating content, and undermine brand consistency and control. So what can executives and marketing teams at financial companies do to avoid these pitfalls? Here are three factors worth considering:

1. Automation and system integration are key to streamlining processes Automation is crucial for more efficient processes, as it eliminates the need to manually transfer content for translation. This in turn allows for faster deployment of global campaigns and content, quicker global engagement and conversion, and ultimately greater global growth and revenue. The trend in recent years towards the use of content management systems is an example of streamlining through integration. Systems that incorporate multilingual capabilities from the outset avoid the need to introduce manual processes at a later date or, worse still, to start from square one with a new system – thus completely writing off the time and money invested. An integrated approach is therefore crucial. I have found in conversations with clients that the most successful integration model is one that is based on a central production hub and technology platform. Different “features,” such as translation, sales, web content and data reporting, can then be “plugged in”.

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2. Web content management: navigating the decision-making minefield One major factor hampering efforts to centralise and integrate processes is the current marketing technology landscape. This has become extremely complex in recent years, with an estimated 4,000 different technologies available, requiring a huge amount of analysis for decisionmaking. It is hardly surprising, then, to see companies end up with a dozen different systems, both new and legacy, running side by side. What’s more, by the time one has been implemented, the next update has already come along, and so the whole cycle begins again. I believe that the web content management market will begin to consolidate as organisations gravitate towards just a few players, such as Oracle, Adobe and Sitecore. These companies, widely regarded as “leaders” in web content management, offer strong ability to execute – thus ensuring the effectiveness of their clients’ ambitious digital business strategies. What’s more, they have the completeness of vision to enable new customer-centric models to succeed on conceptual, communicational and architectural levels.

3. Decoupling: how to do more with less A further factor to keep in mind is that, when it comes to the all-important marketing budget, it is possible to do more with less thanks to a concept known as “decoupling”. This means that while a digital marketing agency creates ideas for a campaign, the execution and production is outsourced to a provider such as a localisation partner. I know from experience that a partner company with the right linguistic expertise and technology capabilities can, for instance, implement multilingual email marketing campaigns for clients across geographical locations, and then report back on the data gathered. The costsavings for the client can be substantial. Localised content is a vital part of your digital marketing investment: make sure you reap the rewards If you are a marketing manager at a large financial services organisation, localised content will almost certainly be a core element of your digital marketing and technology strategy. By ensuring that your system has multilingual capabilities from the outset, outsourcing production processes to specialist vendors and decoupling the creative process from the execution of ideas, you can cut your costs substantially – and take a big step towards reaping the rewards from your investment.

Pablo Navascués Managing Director Lionbridge

1 Donald A. DePalma, Vijaylaxmi Hegde, Robert G Stewart: Can’t Read, Won’t Buy, February 2014

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ANTIAUTOMATION: THE IMPORTANCE OF PEOPLE IN PROCESS If you have paid even the smallest bit of attention to any business or technology news sources recently, you’ll almost certainly have come across at least one article promising the death of employment as we know it, and the rise of AI and software driven processes. Robotic Process Automation (or RPA for those in the know) is one of the key phrases being thrown around in this context. Despite undoubted improvements in automation, there is still a lot of manual activity going on in most operations; copying and pasting, reading hand written documents, comparing spreadsheets and entering data are still common. At a basic level, RPA looks a bit like a traditional enterprise workflow system, but has some clever programming within it which allows businesses to automate away some of these more basic and labour intensive tasks. Another area receiving significant attention is the contact centre where the proliferation of chatbots offers the potential to slash the workload of front line staff. Firms are moving beyond basic text-based interfaces to introduce computational logic which automates some basic functions within these text interfaces. Take the example of a retail bank. A huge proportion of the inbound calls they receive from customers will be focussed around easily automatable tasks; resetting a password, viewing a balance or finding out what a customer’s most recent transactions were.

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So great; chatbots, RPA and a range of similar technologies will help us automate away a swathe of ‘lower value’ work. Which leaves us with a question; “what do we do with the people who had previously completed these tasks?” The cynical response would be to wheel in the axeman and reduce headcount (and thus costs). Whilst that may help to push a business case through, there is a problem with this approach. While the automation of tasks brings about cost savings for your business, it doesn’t inherently improve your customer’s experience with your firm. Because it is relatively easy for your peers to copy any automation you develop, this can lead to a zero sum game where the only net impact is a reduction in headcount. A more rounded approach would be to use this new technology as a people enabler which allows companies to deliver maximum customer value. Assuming we get to a point where, through a range of clever technologies, we have freed up between 20 and 50% of our operations staff, we should stop thinking about simply reclaiming their cost, and start to think about using this resource to improve customer communications. At a basic level, we could start to see optimistic strategies about multiskilling staff move beyond PowerPoint and into the call centre. This however, is only one improvement and there are a range of other ways in which we can improve how we communicate with our customers by helping our staff work smarter.


Many firms have been developing enhanced CRM capabilities, and often enriching these with data from external services, to build personality profiles for their customer base. If you can apply the same personality diagnostics to your call centre staff or business development team, you can seek to understand which staff member would be best placed to talk to which customers. Increasingly, CRMs are also providing information for life stage changes and more effective data for the management of customer relationships across longer timer periods, allowing communications with them to be more pertinent and timely. Building on this base, we could go a step further by inspecting recent communications with a customer to understand their likely mood when they make contact. Are they buoyant after being told their investments have soared in value, or depressed about the recent loss of a loved one? In an ideal world, you would have different staff members deal with bereavement cases to those dealing

with withdrawals and bonus payments. CRM and telephony technology has improved enough to make this possible and additional data sources such as device identification, GPS and digital body language could help even further to position the right staff at the right contact points. The march of technology is endless and automation of basic tasks in the workplace will see continued attention over the next few years. Assuming your business can keep pace with this technological advancement, you will almost certainly have to answer the key question, what do we do with the savings? Instead of going for the easy option of reducing headcount, maybe it’s time to think about reinforcing and improving the long term relationship with your customer base by drastically improving the service you deliver them.

Adam Jones Head of Innovation Altus Consulting

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What Artificial Intelligence Means For Your Customers At the moment, it seems that everyone, everywhere is talking about artificial intelligence (AI). There’s no escaping it – AI is no longer confined to futuristic sci-fi blockbusters or computer laboratories. It has woven itself into our daily lives. From virtual assistants on our mobile phones and laptops to more advanced machines that effortlessly outwit humans when playing complex games like Go, artificial intelligence is already here today. There is, however, huge untapped potential for financial services institutions. A study1 carried out earlier this year by Narrative Science, in conjunction with the National Business Institute, suggests 32 per cent of financial services executives already use artificial intelligence technologies, such as predictive analytics. But how can AI be used in a way that their customers will understand and appreciate?

Fear of the unknown Using AI to truly add value to a business is more challenging that it may seem at first glance. Firstly, many customers don’t really understand what AI is. And in many cases,

they don’t realise that they are actually already using it in their day-to-day lives. Pega recently carried out a global study2 of 6,000 consumers and discovered that just 33 per cent of respondents thought they had previously encountered AI. However, 77 per cent of them said that they use technologies such as virtual home assistants, intelligent chat bots or predictive product suggestions – which all take advantage of AI. This research points to quite an alarming gap in knowledge – if financial services consumers don’t know what AI is or how it is used, it could lead to developing negative perceptions or becoming fearful of using the technology when interacting with their bank in the future. This was reiterated by the survey, with just 35 per cent of consumers saying they feel comfortable with businesses using AI to engage with them. People tend to fear what they don’t understand, and this was certainly reflected in the study. 72 per cent admitted that they were fearful of the changes that AI could bring, with a staggering 24 per cent expressing concerns that the rise of AI will lead to robots taking over the world!

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AMERICAS TECHNOLOGY Reassuring consumers

The future of AI

This knowledge gap and resulting mistrust around AI poses a significant obstacle to financial services organisations if they are to use it effectively. To win customers’ trust, banks need to de-bunk the myth that AI is a futuristic and mysterious new invention and reassure them that there’s no reason to fear it.

As the technology continues to evolve and is embraced by financial services institutes and consumers alike, a further myth that needs to be de-bunked is that humans are the benchmark against which AI behaviour should be measured. Much of the confusion surrounding the use of AI arises from the misconception that the experiences of interacting with machines should be measured against that of interacting with other humans.

A good place to start demystifying AI is by defining it clearly. Pop culture is often guilty of depicting AI as incredibly advanced, self-aware technology rising up against humanity, like something from The Terminator films. No wonder people are worried! Thankfully, the reality is far tamer. The term ‘artificial intelligence’ simply refers to computers and machines that are capable of intelligent behavior. These have been around since the 1980s as advanced business rule engines, data-driven predictive and machine-learning predictive analytics. If any organisation today boasts ‘innovation’ simply in investing in AI, then (provided they haven’t created something that’s capable of passing the Turing Test) either they don’t understand what AI means themselves, or they’re lagging behind the times. This must begin by demystifying AI and educating customers on the many important benefits it can bring, especially when transforming the financial services industry. Pega’s study shows that almost 70 per cent of consumers are willing to embrace AI if it can make their lives easier. It clearly demonstrates that as long as the benefits of using it are explained fully, there is a tangible appetite for the technology. Customers shouldn’t be kept in the dark about AI; businesses need to proudly shine a light on the many different ways it has already benefited them, from better customer engagement to faster and more effective business operations. By removing the fear and confusion that currently surrounds AI, companies can become more open-minded about exploring the possibilities opened up by AI.

After all, the vast majority of your customers will – knowingly or otherwise – have already been relying on artificial intelligence to interact with businesses for many years now. They are engaging with AI on a daily business, whether that’s by using a customer service chat bot or simply receiving a personalised product recommendation via email. Financial services institutions need to prioritise changing the perception of what constitutes AI if they are to make full use of it in the future.

Besides some specific applications – most notably customer service, where human interaction is key – it will become more and more important that businesses aren’t tempted to strive for “human-like” technology. In the near future, AI will be capable of vastly outperforming humans in a number of tasks in terms of speed and quality. This will result in them becoming able to add far greater value. However, financial services institutions must be careful not to play into the existing fear that surrounds AI by allowing their customers to assume that machines will ultimately replace humans. They need to focus on emphasising that the role of machines will be to support humans within financial services organisations to make them more effective and reach their full potential – not to overthrow them! To achieve this, and to experience the wide variety of tangible benefits that artificial intelligence offers, it is critical to educate your customers now. They’ll be able to embrace the future once they really understand the vast potential of AI.

Rob Walker Vice President, Decision Management & Analytics Pegasystems


“The Rise of AI in Financial Services.” Narrative Science, narrativescience. com/Offers/The-Rise-of-AI-in-Financial-Services. Accessed 19 June 2017.


“What Consumers Really Think About AI: A Global Study.” Pega, 14 Apr. 2017, Accessed 19 June 2017.

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FX Options with BMO

Capital Markets Global Banking & Finance Review spoke with John Leclair, Managing Director, Global Head of Foreign Exchange Options at BMO Capital Markets about their forex options and the current state of the forex market. Looking back at the first quarter of 2017, how would you assess the current shape of the market? The first quarter was a difficult market to trade in all asset classes. The year began with a continuation of the Trump reflation trade and a long USD bias.  That proved short lived even as the Fed sounded more hawkish and raised rates.   The FX market came to the (correct) conclusion in January that Trump’s tax reform would not occur in Q1. In addition to that uncertainty, markets are waiting for more clarity on economic numbers out of the US.   We seem to be at a point where it is very unclear how the rest of the year will unfold.   As well, geopolitical events in in Asia and Europe added to that uncertainty.  As we begin the second quarter, we are seeing rates in decline, equities sell off and the USD lose ground.  I don’t think many predicted those three in tandem.  Looking forward, the market focus now seems to have turned its attention toward two large events that could quell the global appetite for risk; North Korea and Trump’s possible misconduct.

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AMERICAS INTERVIEW What impact has regulatory compliance had on operations? The FX market continues to be driven by regulatory changes and market events. The development and final version of the FX Global Code of Conduct was widely reviewed during the quarter and is set to be released on May 25th.  March 1st saw the general implementation of margin requirements for non-centrally cleared derivatives which was a significant undertaking by most FX participants.  These regulatory requirements continue to shape the functioning of the FX market, promoting best practices and sound financial management.  However, the market volumes have continued to decrease as has the market volatility outside of specific geopolitical events such as Brexit and the French election. This has caused liquidity dislocations, with significant FX market moves tied to unexpected announcements or voting outcomes.  Overall the market continues to function well. Let’s talk for a minute about BMO Capital Markets global presence. BMO very much has a global presence.   We have feet on the ground in the major trading centers, including 3 offices in mainland China so we are well equipped to effectively handle client requests whenever they arise.  As well, we have offices across Canada and are able to offer our clients a very thorough and in depth analysis of the Canadian market.  We are very proud that we are consistently ranked as the leader in the FX market for the Canadian Dollar.   Can you tell us more about your trading base and the advantages your trading platform offers investors? As a major Canadian bank, we are all things CAD to our global client base which is the foundation of our trading base.  We have been strategically investing in our US platform for years.  We are bringing new products online and continuing to develop our electronic offering to our multi-segmented client base.  As these products mature in development, we market them globally to our European and Asian clients.   We also like to emphasize BMO’s long history and solid credit rating as this really appeals to our clients.    What are some of the resources BMO Capital Markets makes available that help traders understand market performance and create a daily trading plan?

BMO Capital Markets has an economics team in Toronto that provides daily and weekly publications along with post-event analysis of economic data and events. In addition, BMO has a cadre of equity, fixed income and FX market strategists embedded within their business units in New York and London. These strategists all have regular and bespoke publications.   Our strategists are recognized globally and are always involved in our client solutions.   What types of ongoing support do you have available for clients? Our clients are at the centre of all we do.  BMO’s success has been built on partnering with our clients in a strategic and long term relationship.  Our salespeople, strategists and economists are always available to our clients.  Our strategists are very good at breaking down market breaking news and translating that information quickly into trading views and ideas.   As well, we regularly have our traders speaking to clients who can have insightful information as it unfolds in the market.  Looking at your business strategy for this year, are you launching any new products or services or entering any new markets this year? We are always looking at ways to expand our breadth of product offering, particularly when it is driven by our clients who are looking for innovative ways to manage and hedge exposures in their portfolios.  The BMO Metals group continues to develop and implement dynamic and static strategies to assist clients with exposure to precious and base metals.  Our products include spot, forwards and options.  We also offer financing capabilities with the ability to lease, consign, and borrow base and precious metals.  As well, we are investing in more MBS/ABS and US Investment Grade products, in both secondary trading and increased distribution.  Further, we plan on leveraging our BMO China Capital Markets activity by becoming the first Canadian to offer Chinese Government bonds to our global client base. “The opinions expressed in this article are the author's own and do not necessarily reflect the view of BMO Capital Markets and/or its parent and affiliates.” 

John Leclair Managing Director Global Head of Foreign Exchange Options BMO Capital Markets John Leclair is the Managing Director, Global Head of Foreign Exchange Options and has responsibility for the firm’s idea generation, execution and management of FX derivatives.

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Under the current and future global regulatory landscape, firms participating in electronic trading of financial instruments— including proprietary trades, buy-side firms, sell-side institutions and trading venue operators—all face increasingly stringent requirements around the monitoring, capture and storage of electronic order and trade-related data.

truth. It provides visibility across the board. Financial services firms cannot rely on a sampling of data; they need 100 percent of the data. It’s how operators and engineers plan network throughput, routing preferences and the path of least resistance for a trade. In short, 100 percent packet capture has become a necessity.

From a pure monitoring perspective, firms need high visibility into their order flow, both to monitor performance and to respond to security alerts such as possible breaches. From a regulatory and compliance perspective, they need to be able to capture and store all electronic messages with highly granular timestamps, so that when required to perform forensic analysis into past order and trade history, they can sequentially reconstruct all trading-related events.


In light of such diverse and complicated requirements, how should firms approach the task of building robust solutions that can sort and store so much information? The first step is to capture data on the network. Data (or packet) capture is critical because it is a single source of

Some financial services firms assume that they can buy the equipment themselves and piece a solution together to save money. However, there are a myriad of challenges optimizing any accelerator card with an appliance; it requires experience and skill that these firms typically lack.

It may be a necessity, but that doesn’t necessarily make it easy. Yes, there are many open source tools available that can help organizations in need of packet capture at low speeds – but trades are conducted at high volume and velocity. In addition, standard network interface cards (NICs) cannot capture all packets at the high speed of today’s trades.

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For many financial firms, moving toward a field-programmable gate array (FPGA) solution is a wise choice. FPGA technology supporting FPGA-based network acceleration cards (NACs) is an exciting evolution in integrated circuit design. FPGA technology provides an advantage in trading. When a trade is made, confirmation is received in a manner of nanoseconds. This is not terribly important for an individual conducting small transactions, but it’s crucial for high-frequency traders or proprietary trading. These high-frequency users need a technology that will stamp the packet when it leaves and when it comes back so they can see how quickly a trade is authorized, as it is very important for traders to be able to see when their trade was confirmed. FPGA allows an egress stamp on a packet. Another FPGA benefit relates to forensics or post-analysis for security reasons. Sometimes it is necessary to look back in time to investigate an attack, and being able to search within a particular time window is incredibly helpful.

A Closer Look FPGA technology has enabled the design of very flexible hardware platforms, supporting a broad range of existing and new use cases for the financial services industry, all with an extended lifetime/horizon. First, it is important to establish what to expect from an FPGA-based NAC. Any FPGA-based NAC hardware platform should support:

Ethernet link speeds and types available currently and in the near future, through attractive front port connectivity.

Different FPGA size configurations, providing the customer with the right cost/feature ratio options, enabling competitive product offerings.

Historically, FPGA-based NACs have deployed physical layer (PHY) devices in the data path between the FPGA and the Ethernet front port. The discreet silicon PHY device handles the physical layers of the Ethernet protocol stack. However, with the introduction of the latest 20nm FPGA families, the FPGA technology is on par with the current and near-term future Ethernet link speeds, obsoleting the need for the PHY companion devices. New NAC technology implements a PHY-less, FPGA-based NAC design. This industry-pioneering option to operate two FPGA process nodes on the same hardware platform has been enabled through footprint compatibility from the FPGA vendor. The hardware platform is currently supported by a 2 port 100G feature set and support will shortly be followed by the release of a 2 port 40G feature set. From a multi-link speed customer perspective, a PHY-less, FPGA-based NAC design offers a number of benefits. It can source many different product variants with the same NAC part number, which reduces the amount of required hardware qualification resources. Its ability to collect volume on one or a few NAC part numbers saves on logistics and cost. An FPGAbased NAC can introduce multi-link speed product variants, eventually handling all major link speeds and types, on the same ports, through dynamic reconfiguration. Finally, it restricts the required knowledge base to one platform. This technology is a vast improvement on previous NAC designs and is bound to take its place in financial services networks around the world.

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Another year at the top.

For the third consecutive year, Deutsche Bank has been internationally recognized for its commitment, competence and for the financial advice that provides to its Clients. This award, once again received, is proof that we are doing our job properly. Our customers will always be the focus of our dedication. Best Bank for Advisory Banking Portugal 2017. This award is of the exclusive responsibility of the entity that attributed it: Global Banking & Finance Review. “This advertisement has been approved and/or communicated by Deutsche Bank AG or by its subsidiaries and/ or affiliates (“DB”) and appears as a matter of record only. Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available on request.”

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Important Questions

board because they end up costing five to six times more per appliance. In addition, a firm can have the most expensive and extensive analytics available, but if it does not have the underlying platforms to support them, then the data is not accurate –which makes it essentially useless.

Financial institutions and trading organizations have important questions to ask as they consider high-speed solutions. They first need to answer in-house questions, including: • • • • • •

Will this be a global or local design? Do we need any outsourcing help? What type of support structure do we need? What kind of load will we have across the link? What network speeds are needed? How many appliances are we looking at?

Finally, ask if the solution will work with third party applications. If not, this could cause serious issues – especially if a firm has proprietary software that only works with company X and cannot integrate with company Y.

There are also important questions to ask providers.

The Total Package

The first is, “How much experience do you have in this industry?” The financial industry is bound by many specific regulations and laws, so experience is important.

Because trades need high-speed networks, ask the provider if their solution is able to do 20G write to disk without drops. At lower speeds, 100 percent packet capture is a commodity; not everyone can say the same at high speeds. Also, be sure to ask about scalability. Financial services firms can no longer risk buying equipment and solutions that are not scalable.

High network speed is critical for today’s financial services firms. Regulatory requirements and trading competition demand the fastest and most reliable network possible. Firms cannot afford dropped packets; the network solution must offer total packet capture without a reduction in speed. Use the questions above as guidelines for architecting a system that serves the firm and its customers while meeting all regulations.

Ask if the provider has analytics of its own or is compatible with open source analytics. More and more financial services firms do not want these analytics to come on

Rick Truitt Vice President Financial Services Napatech Rick’s experience spans 25+ years in networking and technology markets, including senior executive roles in several companies. Prior to joining Napatech, Rick became a principal in March 2011, helping launch nPulse, which subsequently was purchased by FireEye. Rick previously held VP roles with Endace, Premiere Global Services and Equant. He also worked with Dynatech Communications, S.W.I.F.T. and the U.S. State Department. Rick started his career in the United States Navy, Defense Intelligence Agency, Pentagon, and he holds a B.S. in Business Administration.

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Don’t let spreadsheets put your forecasting and planning at risk

Good planning and forecasting is not something that can be achieved overnight. The organizations which consistently succeed constantly iterate to improve their processes; they take the things that work and ditch the things which don’t work, offer limited value or are simply holding them back. There are many best practices that every organization should follow, the most important of which I expand on later in this article. But first, we need to look at a systematic issue likely to be present in every organization in some form – including your own. I am talking about spreadsheet risk.

Think outside the cell Spreadsheets are used in almost all areas of business, in nearly every industry and every sector. The inherent flexibility of the two-dimensional table we have grown familiar with has ensured that whether you work in the front-office, advising clients or selling investment products, in the middle office analysing risk and compliance, or in the back office managing the plethora of services and products that today’s businesses utilize, you’re almost certainly going to be using a spreadsheet of some kind, often on a daily basis. With the use of spreadsheets so widespread, risk officers should be fully aware of the damage an erroneous table, figure or calculation could cause to a business. But are they taking these concerns seriously enough?

Often small errors are shrugged off with little thought, and the framework which enable errors to propagate are frequently ignored, but we have seen – and will continue to see – how such errors can be catastrophic for businesses1. Perhaps the scariest thing about spreadsheet risk, is that you may not even know that your forecasts are based on bad assumptions. The error may not be in your spreadsheet, or the spreadsheet you got your assumptions from – but in the ad-hoc market forecast done by an anonymous intern, three years ago. Of course, no one bothered to audit and check the calculations. Why would they? No one ever saw the output of that model becoming one of the cornerstones of strategic decision making at the highest level – and yet it can, and does, happen.

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AMERICAS TECHNOLOGY Thankfully, there are some measures your organization can take to ensure you are doing all you can to provide accurate forecasts and plans.

Right question First and foremost, you must ask the right questions. Instead of getting distracted by fancy calculations or complex methodology, which can lead to a cumbersome unwieldy model – try to stick to answering the questions which are most important for you and your organization. Too often organizations get hung up on revenues, profits and dollars – are these really the core drivers of your business? Perhaps, perhaps not… Be sure to explore often forgotten metrics such as units, customers and conversions. It can be easy to get carried away once you start to build out a new plan, but ensuring you always ask yourself “do I need to answer this question” will go a long way to improving your capabilities.

Right data With the questions decided, it’s time to start thinking about where you’re going to get your data from. With the rise of the ‘big data era’, the first thing in most people’s minds is “more data is good data”. This is simply not true. Sometimes you don’t need to use all the data as this can overcomplicate the model and increase the likelihood of errors being introduced. Always make sure you make a direct connection to the underlying data (often called the ‘single source of truth’). The outdated method of copying and pasting data from source to input is a recipe for

disaster as if the source data changes, not only are you now working from old data, but anyone who relies on the output of your forecast is also out-of-sync with the current situation. Investing early to create the single source of truth and then providing the right tools to use that data effectively, pays for itself multiple times over as your capabilities and ambitions grow.

Right structure You’ve got the data and you know the questions you need to answer but how can you appropriately structure your model to be flexible and scalable yet robust? We live in a multidimensional world, with many organizations operating across multiple regions, selling a variety of products. Combining this with the need for your plan to allow for multiple scenarios through dynamic ‘what-if’ – this makes the model structure extremely important. Businesses aren’t static, they’re evolving entities, constantly changing the products they offer and the ways in which they sell these products. Your model needs to be flexible enough to adapt to these changes as they happen, with minimal effort (ideally automatically)! Failure to address this early on often results in a huge amount of re-work to re-engineer the spreadsheet – giving even more chance for errors to creep in.

Right logic

Just as the intern had never anticipated the model they built during their summer placement would have ended up in the boardroom three years later, explaining the intention of your calculations in plain English goes a long way to ensuring that your model is future-proofed. We’ve all opened spreadsheets years later, where without context, the information on screen may as well be Hieroglyphics!

Right tools Professionals are moving away from off-the-shelf tools. The tool of choice for graphic designers is unlikely to be Paint. Likewise, it is improbable that the professional software engineer uses notepad for their day-to-day coding. It may sound simple, but whether its visualization tools such as Tableau, or a full enterprise level business modeling platform such as Quantrix, using the right tools for the right job will ensure that efficiency killers such as formula writing, error checking and auditing are all alleviated through the use of professional features such as natural language formula writing, built-in audit trail and a visual dependency inspector. Multi-dimensional modeling tools are on the forefront of financial planning and forecasting – the inherent nature of today’s global businesses means the questions asked of analysts often exist in a multi-dimensional problem space. Don’t let habit be the reason you put your forecasts at risk.

Arguably one of the most important aspects to good planning and forecasting is allowing others in your organization to draw insights. For this reason, it is important to make sure the logic your model uses is both understandable and well documented.

James Kipling Product Manager Quantrix 1 Wailgum, Thomas. “Eight of the Worst Spreadsheet

Blunders.” CIO, CIO, 17 Aug. 2007, article/2438188/enterprise-software/eight-of-the-worstspreadsheet-blunders.html. Accessed 19 June 2017.

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Why Demand for Impact Investing is already Outstripping Supply

Traditionally, the primary focus for investments has been the financial return. However, recently the focus has shifted to a different type of reward, ones rooted in creating a social or environmental benefit. Impact investing puts investor capital to work directly in organisations, companies or projects whose core mission is to generate financial return alongside a measurable social impact, and it is joining the mainstream. According to the Global Impact Investing Network1, the market for impact capital, currently sized at $60 billion, could grow to $2 trillion over the next decade. It is a way of addressing some of society’s most pressing issues without sacrificing on return. And with high-net-worth (HNW) investors being increasingly motivated by emotional and philanthropic factors, it is no wonder that impact investing is seeing such a surge in interest.

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Impact investments are made across the globe in a diverse range of sectors and using various financial instruments. Whether the investment is in developing economies, sustainable farming, reforming healthcare and education, micro financing, climate change or one of the many other socially responsible causes, the key is that the investors are able to see a measurable impact in return for the money they’ve put in. Impact investment has attracted a wide variety of investors from fund managers and individual investors to NGOs and religious institutions. The level of involvement in these investments can vary but in general we are seeing a trend towards more investors wanting to be active and hands on with their wealth; impact investing provides a great avenue in which to do this.

AMERICAS INVESTMENT As philanthropy and the importance of corporate social responsibly (CSR) is ever apparent in business, impact investing addresses a challenge associated with traditional philanthropy – the reliance on temporary or limited grants and donations. These one-off donations, unlike impact investing, have no continuous capital impact. Impact investing is a much more sustainable and long-term form of philanthropy that provides ongoing capital. It gives entrepreneurial investors the opportunity to use their passion or expertise as well as their money to really get stuck into a project where they can see the tangible impact of their efforts, both socially and financially. It harnesses the efficiency and discipline of private capital markets to address the root causes of social and environmental problems and this prospect excites many of today’s high-networth investors. Social impact funds and direct investing are both options within impact investing. Social impact funds bring the benefit of an experienced manager to guide you through the process. They have direct responsibility for managing and monitoring the opportunity. Funds also allow for cases to be singular or multiple. On the other hand, direct investments allow the individual to have greater control and say to impact the sector they want, in the way they want. It is a more hands-on way of impact investing that allows investors to have a more tangible impact. Preferences will depend on the particular investor and the level of involvement they desire. Within impact investing, there are a range of expectations with regard to the level of return. Some investors intentionally invest for below-market-rate returns, others pursue competitive marketrate returns. It really is specific to the individual and their strategic goals. However, whatever the goals, impact measurement is central to the practice of impact investing and the growth of this market. Measurement legitimises the practice, mobilises greater capital and increases the transparency and accountability for the impact delivered. Of course, in practice this can be quite complicated and that’s why it is essential

that a strong measurement impact framework is in place from the off-set and is adapted over time. There are IRIS standards and GIIRS ratings in place but there is still no agreed minimal data that should be collected by impact funds. It is up to the individual firm, project, asset manager or investor therefore to ensure there is sufficient data collected to be able to measure the real impact of the specific investment. There are a number of reasons for the rise of impact investing. Social responsibility is becoming more and more important in today’s society. Consumers are increasingly seeking more sustainable products and the costs of renewable energy are plummeting. Therefore, the ability to generate a strong financial return from impact investing is higher. Women and millennials are leading the way for impact investing. According to a United States Treasury survey2, millennials are investing in organisations that prioritise the greater good more than any previous generation. They invest in ways that match their lifestyles and beliefs and are happier knowing the money that passes through their hands is being used for something positive. As we are amidst the greatest intergenerational wealth transfer ever known, this group of investors is ever growing and so impact investing is only likely to continue to increase in popularity. Interestingly, while the demand has grown to be strong for investments with social impact, it is already outstripping supply. Although the number of potential investment opportunities has increased in recent years, there is a shortage of high-quality investment opportunities with track records in this field and a lack of appropriate capital across the risk/return spectrum. Technology could play a role in solving this problem. Technology such as the use of online platforms can increase access to opportunities by overcoming geographic and jurisdictional boundaries. It can improve transparency and track record information which will then naturally progress over time. Ensuring that there is a high level of reporting and monitoring is essential. An improvement

in pre and post-investment support is also necessary to ensure that projects are investment ready. Overcoming this challenge will help boost the continued growth of impact investing. It is likely that demand for impact investment opportunities will continue to rise and, looking ahead, it’s important that there is a development of strong opportunities across the different impact themes. We need greater transparency and metrics so we can understand the impact these investments are actually having, this will encourage further investment in these projects. Insightful reporting is key. Investors should also not underestimate the importance of finding a wealth manager or advisor who understands the impact field. Impact investing is very specific to the objectives and preferences of the individual investor and can be fairly complex so it is important that the managers and funds fit the specific financial impact goals. There has been great progress in impact investing and with this comes the potential to make a real positive change in the world by addressing some of the most pressing social and environmental issues.

David Newman COO and co-founder Delio Wealth Delio Wealth is a complete white label platform solution for private assets, that helps organisations and their advisors enhance their offering through connecting private deal flow with high net worth capital.

1 Impact%20Investor%20Survey_Web.pdf

2 “Forbes.” Forbes, Forbes Magazine, forbes/welcome/? m%2Fsites%2Fsarahlandrum%2F2016%2F11%2F04%2Fw hy-millennials-care-about-social-impact-investing%2F&ref URL=&referrer=#21e50a6f59c0. Accessed 19 June 2017.

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Leasing in Mexico Mr. Sergio Camacho, Chief Financial Officer at Unifin Financiera S.A.B. de C.V. Sofom Enr discusses the current role of leasing in Mexico. Unifin Financiera S.A.B. de C.V. Sofom Enr has been in operation now for over 20 years. Can you tell us a little about the history of Unifin? Unifin was founded in 1993 by Mr. Rodrigo Lebois. In 1995 the “Tequila Crisis” hit Mexico and Unifin was no exception, however due to seven years of

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hard, strenuous work Unifin started to pick up its business. In 2001, Mr. Luis Barroso joined the company as CEO, from then on, Unifin’s growth has been steady and constant for more than 15 years. Unifin started out as a leasing company which focused exclusively on vehicles, now it has evolved and diversified its asset base to include different types of machinery and transportation among others. Not satisfied with staying in its comfort zone and striving to expand and meet the market´s evolving demands and opportunities. Unifin added two new business lines: factoring in 2006 and then auto loans in 2013.


To support said growth and always having in mind our sound financial health pillar, Unifin became a pioneer in the Mexican financial arena. Back in 2006, we were the first company to issue the country’s first-ever leasing portfolio securitization (Ps. 200 million). We continue to issue securitizations, 16 in total, being our last one the biggest leasing portfolio securitization (Ps. 3,000 million) in Mexico issued last April. These securitizations along with bank loans, public debt, and a strong cashflow generation support Unifin’s incessant growth. Regarding international debt, on May 10th, Unifin successfully issued its third 144A/Reg S. bond for (US$ 450 million). Unifin has also accessed the equity capital markets, through its IPO which took place on May 22, 2015 and was oversubscribed 7x.

What role does leasing play in Mexico and how has the industry evolved over the years? Unifin is a very important player in Mexico, it has even been named the number one independent leasing company in Latin America by The Alta Group. In Mexico, banks do not have a stronghold on leasing, the SME market which contributes slightly more than 50% of Mexico´s GDP is greatly underserved deriving in an important and robust growth potential and expansion opportunities for the company. To attend the SMEs, we have opened 13 regional offices throughout Mexico where 58% of the country’s SMEs are located.

What differentiates Unifin from our competition is the fact that we are a one-stop-shop which simplifies the leasing process thus increasing purchasing options to our customers. Another aspect with continuous evolution is our credit analysis, which encompass 16 different scorecards that are constantly reviewed and modified to face market’s changes in addition to our different credit committees. Also, it is important to highlight our client base of more than 7,000 clients with an asset diversification across diverse industries and geographic zones. Our largest customer represents less than 1.3% of our portfolio. What are the biggest opportunities and challenges you see facing leasing in Mexico? As with every business, there are challenges and opportunities, and leasing in Mexico is no exception. The Mexican market must overcome the stigma of the country’s economic past and open-up to the benefits of leasing. The leasing business in Mexico has the potential to grow 10 times in the upcoming years given the low penetration and the underserved SMEs sector compared to other Latin American countries. Why should individuals and businesses consider leasing? How difficult is it for them to receive financing?

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AMERICAS INTERVIEW Leasing presents various benefits to individuals and businesses such as tax advantages (monthly/rent payments are tax deductible), also, our clients know since day 1 how much they will be paying as a monthly rent as well as the final residual price. This is a very efficient way to finance their capital assets in the long term, without compromising their respective balance sheets. Banking services have a very low penetration in Mexico specifically in the SMEs market.

What are your future plans for development and continued growth? As previously mentioned, the SME sector is greatly underserved, therefore we plan to continue growing through our three main business lines (leasing, factoring, and auto and other loans), by expanding our regional presence throughout Mexico, increasing our recurrence rate through customer satisfaction as well as cross selling within our different product lines.

Mr. Sergio Camacho Chief Financial Officer Unifin Financiera S.A.B. de C.V. Sofom Enr Mr. Sergio Camacho is the Chief Financial Officer at Unifin Financiera S.A.B. de C.V. Sofom Enr. He has more than 19 years of experience in various companies such as Mexico´s Central Bank, Kimberly Clark de México S.A.B. de C.V. and Fermaca Global. He holds a degree in Economics and a Master’s in Business Administration with a specialization in Finance from the Instituto Tecnológico Autónomo de México (ITAM), as well as a degree in Global Management Program from Harvard Business School and has currently attended the Emerging CFO: Strategic Financial Leadership Program imparted by the Stanford Graduate School of Business.

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The best prize is to excel yourself You don’t become a leader by trying to be better than the rest, but because day after day you try to excel yourself. This is how SegurCaixa Adeslas, with over 6 million clients, has managed to become the no. 1 health and accident insurer, the fastest-growing organisation in the non-life top 5 and also leader in distribution, with the biggest bank insurance network. This is what enabled us to win the Best Insurance Company Spain 2017 prize and motivates us even more to carry on excelling ourselves.


How Much Life Insurance Is Enough? If something were to happen to you, would your family have enough life insurance to continue living the way they do today? Experts say many families need 70%-90% of their current gross income1 if something were to happen to the breadwinner.  It’s not a fun topic, but one that is very important and can help your family in a time of need. Check your life insurance needs as your financial situation changes. Examples include: -         Family grows -         Education funding -         Career advancement -         Salary increases -         Change in mortgage expenses What you need to consider Your Financial Advisor can help you with a strategy designed to help you anticipate the many options if you were to die. You’ll want to consider immediate expenses, income replacement and available assets. Think of your life insurance in terms of the income it can provide.   Immediate expenses As a starting point, the average cost of a funeral in 2014 was $7,1812. There might also be probate fees or other funeral costs. If your family will keep your home, you will need to figure in the remaining cost of your mortgage, insurance, taxes and maintenance. If your family will sell, think about the cost to rent or what a new mortgage would be. Remember, selling a home may trigger capital gains taxes. Consult your tax advisor regarding your circumstances. Next, take a look at your credit card debt, car loans, education loans, and other outstanding liabilities. Think about unexpected emergency costs like income lost due to work absence, medical expenses or home repair.

If your children are going to college, this is the last item to set aside for immediate expenses. You will also want to figure in the cost of future college education for younger children. The estimated average yearly cost of tuition and room and board for 2016 is: -         4-year public school: $20,846 a year -         4-year private school: $45,170 a year3 Income replacement You will want to replace the income you would have been earning for your family. You will need to take a look at how many years your family will need support and the average rate of return on investments.   Retirement savings If your retirement savings can be liquidated, it might provide cash flow for your family. These can include an IRA, 401(k), annuities, and other retirement accounts. If your retirement plan allows, your survivor may receive a single payment of the entire balance (fully taxable to the survivor) or roll over the entire balance into a traditional IRA to continue to the potential of tax-deferred growth. Contact your Financial Advisor and tax advisor for more information.   Social Security For most families, Social Security provides only temporary benefits. Become familiar with how long your family would be eligible for benefits. The time and the amount of benefit might be so small it is not worth including in your calculations.   Available assets Take a close look at what your family could choose to liquidate, including any stocks, bonds, savings accounts, etc. What other assets do you have, including inheritance, commodities, rental property, etc.?

If you own rental property or a vacation home, your family might keep it or sell it. If kept, all related expenses will need to be calculated just as with a primary residence, including mortgage payments, insurance, taxes, and maintenance. If sold, there will be selling expenses and taxes due upon sale. Other considerations Your Financial Advisor can help you take a look at your current standing and develop a strategy for planning for your family. This is just a starting point for discussion and planning of life insurance needs. You will want to analyze the costs and assets for each spouse to plan for a variety of possibilities.

Sandra McPeak Managing Director—Investments Wells Fargo Advisors

1 2012 Replacement Ratio Study TM, Aon Consulting 2 2014 National Funeral Directors Association, http://nfda. org/about-funeral-service-/trends-and-statistics.html

3 Total yearly costs for in-state tuition, fees, books, room and

board, transportation, and miscellaneous expenses. Source: Trends in College Pricing. ©2015, Inc. Reprinted with permission. All rights reserved. collegeboard. com.

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Focussed on our clients’ success, we have confirmed once again our outstanding client experience by being named “Best Private Wealth Management Company Canada 2017” for the second year in a row.

Desjardins Wealth Management Private Wealth Management is a trade name used by Desjardins Investment Management Inc. and Desjardins Trust Inc. Discretionary portfolio management services are provided by Desjardins Investment Management Inc., registered as a portfolio manager and as an investment fund manager. Trust services are provided by Desjardins Trust Inc., federal trust and financial planning firm.


Minimize Checks by Maximizing Virtual Card It is astounding that organizations still rely on a technology that came into its own in the 16th century, but that’s exactly what they do when they write a check. Not surprisingly, the disadvantages of using checks are many. Fraud is first and foremost. According to the 2017 AFP Payments and Fraud Control Survey, 75 percent of organizations experienced check fraud last year, up from 71 percent in 2015. Cost is another drawback. According to the RPMG 2015 Electronic Accounts Payable Benchmark Survey Results, the cost of issuing a check for invoice and payments processing, including such direct and indirect costs as labor, equipment, materials, postage, and bank fees, is $31. And finally there is uncertainty. Once a check is in the mail, issuers never know exactly when it will arrive or when it will be cashed. When organizations issue large volumes of checks, the impact of uncertainty on their cash flow can be significant. It is clearly in an organization’s best interest to minimize their use of checks. As a result, more and more organizations are adopting virtual card. According to the RPMG report, spending using virtual cards is growing steadily. It reached $72 billion in

2015 and is projected to hit $110 billion by the end of the decade. Measured against check, the rationale for maximizing the use of virtual card is compelling. Fraud protection is the heart of virtual card technology. One-time numbers are issued for specific, carefully defined transactions, and each step in the payment process has its own associated security measure. The financial benefits of virtual card are straightforward as well. In addition to eliminating the cost of checks, organizations benefit from the extended float associated with credit cards. Add to that the value of the rebate — typically 1 percent, although some programs offer up to 1.5 percent — and the savings add up. Finally, virtual cards give buyers payment certainty and enhanced control of their cash flow. Virtual card numbers are issued directly to vendors, sidestepping the vagaries of the mail.

Organizations should also recognize that, from an internal perspective, virtual card adoption is a broad-based initiative affecting the operations and processes of other groups besides accounts payable. Implementing virtual card will require cooperation and in some cases contributions of time and resources from treasury, IT, and procurement among others. Given these facts, organizations planning to maximize the use of virtual card as a way to minimize the use of check should keep these tips in mind: •

Establish clear goals that match organizational priorities. Organizations should clearly enunciate the kinds of benefits they hope to gain by encouraging virtual card adoption while making a careful estimate of the spend they can reasonably expect to convert from check to card.

Develop a targeted supplier acceptance plan. Organizations should develop a set of talking points that enunciate the advantages for suppliers of virtual card, establish incentives to encourage adoption, and reach out to suppliers, starting with the groups most likely to enroll.

Approaching Virtual Card Realistically While the superiority of virtual card to check is clear-cut, organizations should approach the transition realistically. They should view virtual card not as an immediate replacement for checks but as an attractive substitute that they can deploy on a caseby-case basis.

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Select a provider with a simple yet powerful solution. The ideal solution should combine an advanced features set with flexibility and ease of integration.

Such preliminary analysis will help guide the implementation of virtual card, while encouraging buy-in from colleagues and leadership.

Maximizing Virtual Card Adoption: Establish Clear Goals That Match Organizational Priorities Because of the inherent versatility of virtual cards, preparation for their adoption gives organizations the ability to think strategically about paying their vendors. For instance, if their goal is to maximize rebate from card, they can offer to pay vendors net 15 instead of net 30 as an incentive for their converting from check to card. This strategy still preserves cash flow because of the standard 30-day cycle and 14-day grace period associated with card. So buyers will be able to pay early while extending their days payable outstanding beyond what would be possible with check. These same terms make virtual card an excellent choice if their goal is to maximize their days payable outstanding.

The bottom line: Before they implement virtual card, organizations should have a strategy in place that describes how they will use this methodology to maximize the return on their payments. Simply being able to enunciate these advantages is a first step to securing organizational buy-in. The second-step is to determine the magnitude of this return. To begin, organizations should produce a file that lists each vendor paid during the past year, along with the number of invoices it has submitted and their total. Their virtual card provider can then compare the information in this file to card databases and identify vendors who currently accept card. Providers can then apply their own analytics to determine which of these vendors, given industry trends and the amount of spend, are most likely to accept virtual card. An organization’s procurement team can supplement this information with insights about its specific supplier relationships, such as suppliers who are heavily dependent on its business or who value fast payment terms. Such preliminary analysis will help guide the implementation of virtual card, while encouraging buy-in from colleagues and leadership for the initiative.

Maximizing Virtual Card Adoption: Develop a Targeted Supplier Acceptance Plan The next step for an organizing intent on maximizing its virtual card usage is to determine its messaging and roll out a graduated supplier acceptance initiative. The argument for suppliers accepting virtual card instead of check is clear-cut: the benefits can be measured in certainty of payment and reduced costs. For vendors accepting virtual card, the days of waiting for checks to arrive, depositing them, and waiting once more for them to clear are gone. Compared to checks, virtual cards offer instantaneous access to funds without the processing costs or the security risks of checks. These advantages are sufficiently compelling that many vendors — especially those who are dependent on the buyer for a significant portion of their revenue — will adopt virtual card. For others, the interchange fee suppliers pay on each card transaction is a disincentive. In these cases, offering accelerated payment in return for virtual card acceptance may make a difference.

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AMERICAS FINANCE The segmentation required to establish the overall benefits of the virtual card program provides a framework for the supplier enrollment plan. Simply put, buyers in concert with their virtual card providers should devote more resources to communicating with suppliers they have identified as strategic targets and pursue less intensive initiatives for each successive segment. Buyers should also put a plan in place to ensure that new vendors accept virtual card. For instance, organizations can state in their RFPs that their preferred method of payment is virtual card and that a vendor’s willingness to accept cards will be a factor in evaluating its proposal.

Maximizing Virtual Card Adoption: Select a Provider with a Simple, yet Powerful Solution As the previous steps makes clear, there is no underestimating the importance of a knowledgeable virtual card provider in planning and implementing a virtual card program. But it is equally important that this provider offer a virtual card solution that is simple yet powerful. It should offer such advanced features as: •

Buyer-initiated payment, which offers buyers greater security and control by enabling them to push payments directly to suppliers’ bank accounts without using a card number at all.

Out-of-band authentication, which requires users to login with a PIN number sent via phone, email, or text.

Integrated payables, which enables buyers to send one file to their provider with multiple payments and multiple payment types (virtual card, ACH, wire FX, etc.)

The ideal virtual card solution should also be flexible, offering numerous ways for buyers to create payments (including secure FTP) as well as customizable reconciliation options. In effect, it should enable organizations to adhere to payment processes that are already in place and cause as little disruption as possible. A final criterion is ease of integration with an organization’s financial systems. Those virtual card solutions that require just a handful of data fields to generate a payment are most likely to be compatible with file-export formats found in most accounting systems. The resulting ease of use is also like to boost virtual card usage by maximizing the satisfaction of a group that is critical to the success of the virtual card program: the end user in accounts payable. Checks were designed for a single purpose — to increase the efficiency of payments. A simple but powerful virtual card solution, implemented with clear goals and objectives and backed by a targeted supplier acceptance plan, not only increases the efficiency of payments many times over, but it translates account payables into a tool that can be used strategically. Given the fierce competition and rapid change that characterize our modern business environment, minimizing check and maximizing virtual card can be a crucial source of competitive advantage.

Seth Kaplan VP, Senior Product Advisor Capital One Commercial Card business

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SOFTWARE CEO’S UNFAMILIARITY WITH OPEN SOURCE AND THIRD-PARTY USE PLACES BANKING AND FINANCIAL SECTOR BUSINESSES AT RISK Times have changed in the software industry, and the management and best practices methods that were used just 10 years ago are no longer sufficient to protect your software product from new threats. Some of these new threats force software vendors to take profitable products off the market, or are the result of being hacked due to a software vulnerability they didn’t even know they were exposed to. So, what’s changed? Our industry has moved from one where almost every line of code was written by scratch, to one where more “wiring” than “coding” is being performed. The things being wired together are thirdparty components of all purposes and origins. These include open source and commercial components (also commonly known as libraries). These components have rules and obligations that you must respect in order to use them legally. These rules are known as the software’s license. Additionally, as time goes on, software vulnerabilities are discovered in these components, and if a company does not work to upgrade or remediate the component, they may find themselves at risk. In fact, open source and commercial component security and compliance risk is reaching epidemic proportions – threatening the very integrity of the software supply chain. As much as 50 percent of the code found in most commercial software packages is made up of open source or commercial components. Most software engineers use open source software (OSS) and commercial, third-party components to expedite their work – but they don’t track what they use, understand their legal obligations for using that code, or the software vulnerability risk it may contain.

The Great Unknown Worse yet, most software executives have no idea that this is going on. And if they don’t know what components are used, they can’t ensure the proper processes and automation are in place to address third-party security and compliance risk. It is important that senior management confer with their chief technology officers, security officers and engineers to understand the state of their third-party compliance and security operation. Banking and Financial Sector This is particularly of importance in the banking and financial sector. It goes without saying that any industry tasked with managing billions or trillions of dollars must keep abreast of new threats. Traditionally software was built line by line, file by file, by paid employees of the company who were creating the software application in question. In some cases, a few third-party components would be brought in to the product, typically through a commercial contract. It was very easy to know what you wrote, versus what you licensed in, since you would have paperwork or license keys that needed to be managed. Over the last decade or so, the software industry has greatly changed from this model. There has been a significant movement to using large amounts of third-party software components, especially ones of an open source origin. The availability of millions of high quality, free-of-charge software components has made it possible to build applications where more than half of the application was actually written by people not employed by your company.

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This change has happened faster than management best practices have been able to keep up. The knowledge of what tasks are required to get into legal compliance is lacking in most organisations. Additionally, without a system in place to keep track of the hundreds to thousands of third-party components you use (also known as the “Software Bill of Materials”) it is impossible to know if a reported vulnerability affects your product. Recent vulnerabilities that have affected the financial industry included ones targeting the OpenSSL and Struts 2 open source components. While most organisations were pretty sure they were affected by these vulnerabilities someplace in their organisation, they were not able to quickly discover the exact product or location before it was too late. Time for Education As with other security and compliance tasks, there is not a single solution to addressing the business processes required to manage these actions. At the heart of putting in place a solution is enacting an education program to help all levels of your organisation understand the obligations required by open source and third-party software. At the most basic level, anyone tasked with building or managing a software product should have at least a passing understanding of open source licensing, compliance obligations and what your organisation’s processes and requirements to manage them are. The act of deploying or distributing software often requires a long list of obligations to be followed (such as giving credit in about boxes, or sharing source code used to build the application) but current data shows that most organisations are out of compliance with even the most basic view of license compliance. To successfully manage these obligations, development teams must be given time to actually comply with the requirements. Any organisation that doesn’t have explicit gates or time allotted to confirm compliance, should not expect to be in compliance!

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Open Source Review Board No matter the level of education, and time set aside in the schedule, there will still be questions that can’t be answered by line-level engineers. This is the place that an Open Source Review Board (OSRB) can be used to manage requests for assistance as well as set policy for the proper use of third-party software. While they are commonly known as “Open Source Review Boards”, they are often tasked with managing both open source as well as commercial, third-party components. The OSRB is commonly comprised of representatives from legal, engineering, security and other interested parties. Additionally, the OSRB can be a loosely organised group of individuals meeting in an ad-hoc manor, all the way to a highly structured dedicated team. Best Practices and Obligations An important part of building this knowledge and putting these lessons into practice is to confirm that best practices and obligations are being followed. Confirmation that each application has the appropriate attribution or license disclosure is very important. Making sure that you are using the most recent patched version of a software component is important to stay ahead of vulnerabilities in the field. Managing well known components like OpenSSL, which have periodic disclosed vulnerabilities, is an important aspect of staying safe. Also important is discovering embedded components and less commonly seen ones. This level of detail helps remove risk with every new component that gets discovered. More and more companies are finding they are required to provide open source disclosures and enact vulnerability patching schedules based on contracts signed with customers, vendors and commercial suppliers. The financial industry also finds itself needing to follow regulations and certifications. Many of these require true an understanding of who actually wrote the software and how it was assembled. The software supply chain has grown very long in the last decade, and you are not always

able to get things documented or fixed quickly due to this change. You will also find that you may be responsible for all the vulnerability and compliance problems you inherit from this supply chain. To put is simply, the buck stops with you. Through educating your development community, proper discovery of your third-party dependencies, and continuous management of these dependences and their potential vulnerabilities, you will be able to stay ahead of security and compliance issues in your products. Additionally you will be better able to take advantage of open source’s benefits beyond just cost savings. By understanding the OSS development model, you can create new open source packages, contribute to existing ones or better manage your use of them. Without management’s attention none of this can get done. Your developers and your customers will greatly benefit from your time and guidance.

Jeff Luszcz Vice President of Product Management Flexera Software

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01-04-16 18:09

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