Van Verre 293 - ENG

CONTENTS VAN VERRE nr.293

TOPIC:

Inflation

HEADINGS

ALUMNI VAN VERRE

08 MESSAGE FROM CAPE TOWN:

INFLATION & INTEREST RATE INCREASE

16 Introduction   14 Shell Executive vice president & Upstream CFO Ralph Wetzels explains the global market for oil and gas, which is now in old-fashioned demand. Governments are profiting most from the inflation caused by energy shortages since the war in Ukraine. Meanwhile, Shell is fully committed to clean energy.

18 Drs. Harvey Hoogakker (19940928), banker in London for US bank Wells Fargo, finds the prospect of recession in the US worrisome, but not life-threatening!

21 Top banker Kees Hoving (19870052) works as Co-CEO Middle East & Africa for Deutsche Bank in Dubai. He predicts that the Arab States will be less than forthcoming in taking pressure off sky-high oil prices.

24 Drs. Kelly van den Muijsenberg (200090066) is Director Valuations-Deals bij PwC Nederland. “Na jaren van stijgende waarderingen, lijkt een daling toch echt in zicht.”

28 General manager Benelux Sadik Cevik (20110015) MBA heeft, dankzij lage rentes, een droomstart gemaakt met de flits-boodschappenbezorger Gorillas. Nu willen venture capitalinvesteerders ineens snel winstgevendheid zien!

31 Drs. Jim Halfens (20010057) van incassobedrijf Hakort International verwacht dat steeds meer particulieren in financiële problemen komen. “Webwinkels en energiebedrijven horen verantwoordelijkheid te nemen.”

34 Katherine Kucherenko (20080333) is Senior Investment Specialist Global Real Assets at APG Asset Management. She invests on behalf of 4.8 million pension policyholders in real estate, such as the CitizenM hotel chain and designer outlets in Roermond and Bataviastad. That gives fixed returns in volatile times on the stock market.

36 Dr. ir. Taher Ahmadi is a lecturer in Operations & Supply Chain Management at NBU. He argues that free money, with which international production chains have been heavily oversupplied, has been at the root of current inflation.

40 As innovation manager of De Volksbank, Robert Enters (19950050) protects 3 million customers from unethical practices. Account holders of SNS, ASN and Regio Bank are already burdened enough with the prices for basic necessities!

42 Taiwan controls the global chip market! Erwin den Breejen (19910197), GM Asia Operations at Pon. Bike, knows all about it. He operates from Taichung and has to deal with other inflation drivers like the zero-covid regime in China, shifts in production chains and stagnating logistics.

46 Correspondent Hanno Nicolaas Ponder (19750048) in Rio de Janeiro, interviews top banker Mark Wiessing (19770127), CEO of Rabobank Brazil. Both have experienced crazy inflation in that country. It explains the central bank's tough stance.

Gary de Vogel Msc. (20107252)

South Africa is an enemy of itself. It suffers from a failing electricity infrastructure and banks charge sky-high interest rates.

10 MESSAGE FROM HOUSTON:

Yorinde Knegtering Msc. (20120034) Pioneering? It's possible in Texas! There is a Dutch trade delegation in this vast state.

52 TUMTUM

Half a century of female students at Nyenrode! The NBU took beautiful photographs of Margaret Wijnands (19730068), Jonneke Brunet (19730025) and Ans Carels (19730012). 55 PERSONAL NEWS

SERIES

48 TOP WOMEN

Hanneke Smits of BNY Mellon Investment Management: "We are heading for deglobalization!"

Millions of pension recipients around the world depend on the performance of BNY Mellon Investment Management, led by alumnus Hanneke Smits MBA (19840086) as CEO, to execute investment strategies for institutional investors. 

 Her good news is that even with a looming recession, there are plenty of companies with high profit margins and plenty of cash. The rise in interest rates will also make it easier to select bonds that hedge long-term liabilities of pension funds. However, inflation will have to be contained!

"If you are an investor who believes Ukraine has the right to defend itself, you are probably now more open to defense stocks being included in the investment mandate."

High time for our inflation experts!

Tahe prices of hotel rooms, holiday homes and drinks on the terrace during the holidays probably made you notice that the good life has suddenly become a lot more expensive. High inflation does not seem like it will go away any time soon and the financial world is watching the interest rate increases of the American Federal Reserve and the European Central Bank with bated breath. Partly because of the sanctions policy against Russia following the invasion of Ukraine, companies are cashing in on the high prices of oil and gas, computer chips, food products and manufacturing inputs. As so often, it is families in the lower and middle classes who end up footing the bill at the pump and at the supermarket checkout. All this while governments are padding their coffers with rapidly increasing revenues from taxes and duties. High time for an international selection of Nyenrode alumni to share their vision and experiences on the theme of Inflation and Increased Interest Rates.

Ralph Wetzels (19900250) as Vice President of Shell and CFO Upstream activities, warns that the Dutch gas storage must be filled to the full 100%, otherwise it could become very cold in our country, and also with the gas consuming neighbours in Germany. Just because profits went through the roof in the second quarter for Shell doesn't take away from the fact that Ralph is working feverishly on tapping into new gas and oil fields, as well as clean energy projects. Right now, the free world needs both. He doesn't like the fact that Shell is approached critically, while in reality the giant is a pioneer in the energy transition. It has become apparent that the US has been ahead of Europe in inflation development and fighting with sharp interest rate hikes by the FED. Banker Harvey Hoogakker (19940928) of the Wells Fargo Bank explains from his office in London the interaction between the monetary situation in America and Europe. By the way, he sees a golden future for European companies in clean energy in the US! The world saw President Joe Biden pay an emergency visit to Prince Mohammed bin Salman of Saudi Arabia. Earlier, banker Kees Hoving, Deutsche Bank Emirates/ CEO Middle East & Africa, had told us from Dubai that the Arab oil states are not very keen on further opening the oil tap. Inflation and interest rate rises will affect company valuations, especially in the world of private equity and venture capital.

Kelly van den Muijsenberg (20090066), director of valuations at PwC Netherlands, explains how the calculations are made. In any case, the end of free money has come. Sadik Cevik (20110015) GM Gorrilas has to work, because suddenly his venture capitalists also want to see profit figures for the flash delivery company. Chips and components from the Far East are in short supply, driving up international prices. Erwin den Breejen (19910197) works for Pon Bicycle Group from Taichung. He has to juggle purchases between Taiwan, Vietnam, South Korea and China. Taher Ahmadi teaches Supply Chain Management at NDU and explains that an abundance of cheap money is at the root of the problems in production chains. He sees this as the real cause of inflation. Furthermore we bring Jim Halfens (20010057) as champion of effective debtor management; RABO banker Mark Wiessing (19770127) on crazy inflation in Brazil and Robert Enters(19950050) on the financial protection of De Volksbank customers.

Fascinating is the interview with Katherine Kucherenko (20080333) about investments in real estate and infrastructure at APG Asset Management, which grew out of ABP, to cope with inflation. She was born in Odessa and set up an emergency fund for Ukraine. The highlight of this edition is the interview with TOP WOMAN Hanneke Smits (19840086), CEO of US-based BNY Mellon Investment Management. She heads up eight investment companies mandated by pension funds and insurance companies around the world to execute investment strategies. She sees plenty of investment opportunities in companies with high profit margins and an excellent cash position. Meanwhile, she makes the case for better opportunities for lower class young people in the UK. This line-up shows once again that Nyenrodians, wherever they are in the world, are in strategic positions. ♦

Van Verre, Oele Steenks, chief editor

RESPONSES? josteenks@planet.nl

OF THE BOARD

CORINA BLOKLAND (20070305)

Corina Blokland (20070305) is chair of Nyenrode Alumni VCV. She did PTMSc and EMBA at Nyenrode and is an entrepreneur.

Inflation and solidarity!

So, just after the holidays the third Van Verre of this year arrives on the doormat. And what an issue it is! We live in a special and turbulent time where social, ecological, humanitarian and economic issues are very important. I know enough alumni who are closely involved in aid actions for refugees from Ukraine. I am proud that Nyenrode was able to organize a shelter so quickly. The human suffering in Ukraine is unfathomable.

Closer to home, we are increasingly feeling the consequences of the war and the international economic chain reaction that Putin's actions have provoked. The issue of Inflation and Raising Interest Rates is suddenly acute and affects everyone. As people in general, and specifically as Nyenrodians, let us have an eye out for each other and offer support where necessary. Within the association we have made important steps in recent months, with June 4 being a glorious day. We celebrated the 75th anniversary with a daytime Inspiration Festival and a big party in the evening, including the New Amsterdam Orchestra. Many alumni came during the day as well as in the evening. It was an extra important moment for us because during the lustrum celebration we signed the cooperation agreement with Nyenrode. It was a historic moment in the castle, when the VCV and the NBU opted for an intensive collaboration. We want alumni anywhere in the world to see and experience how powerful our network is. They can benefit from our circles and from career opportunities that arise in our community. We look forward to the future that the collaboration with NBU will bring. One of the immediate changes is that our Alumni Office will work more intensively with the university. This has led to the formation of a new department: the Nyenrode Development department, which includes Alumni Relations & Fundraising. We will sit closer together and carry out joint projects and events where possible. This department will be managed by Michiel Munnike beginning August 15. He is an alumnus and has worked for years at World Press Photo and in recent years at Enactus. We are

happy with his arrival. This means that quartermaster and interim Nyenrode development department director Louise Out van Staveren is handing over the baton. We want to thank her incredibly for her drive to realize the cooperation and to shape the contours of the joint policy and the new department! The NBU was not the only one to celebrate an anniversary. The NCV also celebrated a weekend this year. I myself went to the alumni day on Sunday and enjoyed everything that was organised, including the disputes. The student association of accountancy VAS celebrated its 50th anniversary on September 3rd with a drink and a masked ball. In the past few months, I have been busy with the university and the NCV to implement the culture plan that was written last year by the Heeren V. We have set up a number of working groups in which the NCV is involved. We believe that if we work closely together, we can work step by step towards a more inclusive, diverse and safe campus for everyone.

Finally, an update regarding our staff. In July, we said goodbye to our event manager Thirza van der Lugt. Thank you for your commitment over the past years and we wish you a bright future, where all your talent can come into its own. We also have two new people we would like to introduce: Dine van Dijk and Nienke Janzen. Dine will focus on the organization of the homecomings. As event manager, Nienke will mainly work on existing and new events.

Within the main board we also have a change; Nick van Straaten has strengthened our team. He is the new secretary and we are very happy with his arrival. Now that the holiday season is behind us, we are fully committed to further professionalizing the Nyenrode Alumni VCV! ♦

Van Verre, Corina Blokland Chair

The Nyenrode Art Fund Foundation will be working with Felix Guttmann (19770041), owner and organizer of the Amsterdam Light Festival. During the Goudstikker Lecture on November 29th in the castle, he will explain his organization of international light shows. They are artistic masterpieces. The intention is to hold a Nyenrode Light Festival at the estate in November and December. Here is a preview with light projections in the Amsterdam canals.

AGENDA

05-09-2022

OPENING OF THE ACADEMIC YEAR

Guest speaker is Sharon Dijksma, Mayor of Utrecht and Chair of the Economic Board Utrecht Foundation.

03-11-2022

RVA MEETING

For applications and more information: nyenrodealumni.nl and Nyenrode Alumni VCV Office, info@nyenrodealumni.nl, telephone 0346 - 291 513

The estate in Christmas lights!

NYENRODE BUILDS 50 NEW STARTUPS

As is well known, Nyenrode Business University was founded by a selection of iconic companies such as Philips, KLM, Shell, Unilever and Akzo Nobel. Ultimately, most founding fathers have a persistent pioneer as their source of origin. Albert Plesman's struggle for survival, for example, was recently the subject of a fantastic TV series.

In this era, startups will certainly emerge that will contribute to the formation of a new economic order and a cleaner planet. The NBU is taking responsibility by selecting and supporting fifty promising startups.

To that end, a startup development program was launched this summer that emphasizes team building according to a proven methodology. Teams that cross the finish line of the program receive an investment of substantial start-up capital. This is largely raised by Nyenrode alumni.

Go to SpiritOfEnterprise.nl and discover more.

KNOWLEDGE AND BIG PARTY COMBINED DURING ANNIVERSARY CELEBRATION

Nyenrode Business University celebrates its 75th anniversary on Saturday, June 4th in an unforgettable way. During the afternoon inspiration festival, a selection of top speakers gave substance to NBU's core values: leadership, entrepreneurship and stewardship. This was followed by an anniversary party for alumni, students and university staff. In the marquee, positioned directly opposite the castle, the New Amsterdam Orchestra gave a magnificent interpretation of Nyenrode's 75-year history. Candy Dulfer then opened the dance party. For everyone who was there, you can relive it on our VCV platform. And for all other alumni: see what you have missed!

ALUMNI GOLF AT DE HOGE KLEIJ.

NEW SCHOLARSHIPS AWARDED

In the academic year 2022-2023 a new batch of students at NBU will start with a scholarship. These will be awarded by the Nyenrode Fund Foundation (SNF). This is made possible by contributions from alumni to the Nyenrode Scholarship Fund, which was installed during the lustrum celebration by Rector Magnificus Dr. Koen Becking.

Scholarships are necessary to offer both Dutch and internationally talented students the opportunity to study at NBU, regardless of their financial means. In doing so, the university recognises the importance of an international, inclusive and diverse (learning) environment. Koen Becking: "By attracting these students, we want to stimulate a different way of thinking. Through their background, experiences and view of the world, they contribute to a more diverse study environment." SNF has awarded 10 scholarships for the Master of Science in Management program and three scholarships for the Bachelor of Science in Business Administration program. One student is also starting the Pre-Master of Science in Controlling through the Jan Bots Scholarship. Prof. Jan Bots, emeritus professor of Controlling, established this fund to promote the integration of new Dutch citizens.

To make the overview complete, all names of the sponsored students follow:

MSC BREUKELEN Thomas Poldervaart (scholarship cohort 1958)

Jaap ter Beek (scholarship cohort 1958) Dirk Schröder (scholarship cohort 1985)

INTERNATIONAL STUDENTS, MSC BREUKELEN

Chih Hsuan (Taiwan) Shao-Jou (Alison) Huang (Taiwan) Vidyarth Shekar (India)

MSC AMSTERDAM Floris Koevermans (program fair)

Michiel Hogesteeger (program fair)

Fabian Pusceddu (program fair) Sarah Wynia (program fair)

BSCBA BREUKELEN

Jikke Mols (scholarshipichting 1953) Kerewin Post (scholarship American Friends of Nyenrode) Rose-Marie van der Weijden (scholarship cohort 1956)

PRE-MASTER CONTROLLING Hirbod Tehrani (Jan Bots scholarship)

Would you like to support the Nyenrode Scholarship Fund and bring talented new students a step closer to realizing their dreams? Look for more information and donations on Nyenrode Scholarship Fund or contact Anouk Reitsma.

On Monday, July 4, the golf lovers among the alumni met again for the annual VCV Golf Tournament. The tournament was played on park course De Hoge Kleij in Leusden. That this top golf course inspired was evident from the good scores that were brought into the clubhouse. The main prize was a day playing with golf professional Joep van Arnhem at The Dutch, where the KLM Open was held for three years. The prize was offered by Van der Valk International. Alumni Toon Schut (19700075), Jan Meijboom (19700062) & Rob Hilbrink (19700039) can show what they can do! An extensive photo report can be found on our platform.

STUDENT BOARD NEWS

NCV LUSTUM – MET VOLLE VAART

We had the pleasure of organizing the 15th Lustrum of de Nieuwe Compagnie Van Verre for all our old and current members. Five days full of different activities took place from July 7 to 11. The lustrum started with a huge opening party, where mainly the campus lighting was present. The never before used field behind the Klaasesz buildings was transformed into a real festival area, where the DJ played on one of our own balconies. A real campus party!

Friday it was time for a more stylish day, the Polo day. With everyone dressed in white, in the afternoon the guests were transported by buses to the polo grounds of none other than Cor van Zadelhoff. Once arrived at polo club Vreeland, the guests enjoyed a great polo match, with oysters and wine in abundance on the sidelines.

Once recovered from the polo day and the subsequent party in the tent, the guests were welcomed on Saturday at Bernie's Beachclub in Zandvoort. Never before had so many Nyenrodians been together at a beach club, where everyone enjoyed various artists such as: Giuliano & Hautvast, Robér, Didier Armeni, Yes-R, Bokoesam, de Hofnar, Kav Verhouzer, and De Sluwe Vos. With the sunglasses on and the hands in the air, this party ended well again.

For those who thought that Sunday would be a quiet day, they were sorely mistaken! On this day the handball field in front of Nyenrode Castle was completely transformed into a cozy party area, where the sororities of the New Company of Distances could organize their own activities for the guests. From bitterballen, a gin tasting and cocktails to painting and pedalos in the moat, the choices were enormous. Of course there is no party without music and what could be better than music played by our own Nyenrodians?

In the tent all guests could enjoy our own well known artists, such as: Suzy Wonders & The Sunshine Miracles (with Pieter Schulting), Michael van der Knoop, Not Too Serious (with Rob Geraerts and Gijs Donders), and the Booze of Yesteryear! The last day we ended with all current members on the castle square for our own Final Dinner. Dressed in beautiful cocktail dresses for the women and black tie for the men we celebrated the last day of our 75th anniversary together in an appropriate way in front of the castle. The last songs were sung and tears were shed. What a fantastic way to end our fifteenth lustrum together.

The sense of togetherness is still the same after 75 years and we look forward to the next 75 years with all our members together. It was a pleasure to organise this fifteenth lustrum of de Nieuwe Compagnie van Verre.

We hope to see everyone again at one of our other events and for now we would like to say one last time: Met Volle Vaart! ♦

JCV AMSTERDAM

The JCV organized and hosted a special event in cooperation with De Koninklijke Industrieele Groote Club. This consisted of a breakfast session, where members of the JCV and the IGC enjoyed a morning with two inspiring guest speakers, both alumni of Nyenrode.

The first guest speaker was Niels van Buren (20080505), who shared the inspiring story of how he was the first man with Multiple Sclerosis to climb Mount Everest and how this journey gave him a different perspective on life. He is now a social entrepreneur and owner of a company that mainly employs people with disabilities. The second speaker was Sadik Cevik (20110015), general manager Benelux of flash delivery company Gorillas. (Read all about his stormy start in the interview with Sadik in this edition, ed.) During the session with Sadik, a great discussion arose between older and younger attendees about his services. It led to new insights among both generations. The JCV and the IGC experienced this event as a wonderful first step towards further cooperation.

Micha van Os, Sanne van der Kroft, Roosmarijn Kröner, Job van Duivendijk, Max Polet and Max Kasmani

HEEREN V

When the weather is nice, the barbecues are lit on campus and we enjoy student life. It is good to see that our calendars are bursting with activities and that everyone on campus contributes to a nicer living environment for each other. Our XV anniversary is slowly approaching and is eagerly awaited.

It is so very special that our association has already existed 75 years. As Heeren Vijf it is an honour to be in a lustrum year and therefore we invited all our predecessors for a drink. This event was held in the Greenhouse on campus. There was a mixed group of alumni board members, whom we had not all met yet. Moments like these are cherished by us as a sitting board.

We heard stories about their time at Nyenrode and also about life afterwards. One week later our lustrum celebration started. The current batch was present, but we also saw a lot of alumni. The mixed crowd was ready to celebrate what the N.C.V. stands for. It is hard to describe what the highlight of our week has been, as there were so many highlights.

There was a sense of togetherness at all the events. How special it was to close the lustrum on the castle square. Many emotional speeches were given and for BScBA 2019 this was the last event of their time at Nyenrode. BScBA 2020 also had an emotional time, as they are going on their exchange in the coming months.

As Heeren Vijf we are often told, "just enjoy it for a while longer," and we certainly do. Still, we did not realise how quickly time flies by and a period like this is a real eye-opener. As a college we would like to thank the lustrum committee and everyone who helped with the lustrum celebration, but also everyone who was present. We really enjoyed meeting you, our friends.

COLUMN

BY PROF. DR. IVO ARNOLD Professor of Economics Nyenrode Business University

INFLATION THEN AND NOW

Inflation has not been this high since the 1970s. A good moment for a brief review of Dutch monetary history. Does current inflation resemble previous experiences? Or is each wave of inflation unique? After the Second World War the Netherlands experienced two periods of high inflation. Shortly after the war (1945-1951) the Netherlands had to be rebuilt and there was a shortage of everything. Prices therefore rose sharply. With the guided wage policy and price controls the government then intervened in wage and price formation in the market sector. This curbed inflation. At the same time, interest rates were kept low and savings had nowhere to go. Because of this financial repression, real interest rates became strongly negative and the national debt ratio was able to fall rapidly. The second inflationary period is fresher in our memory. Because of the oil crises, inflation rose rapidly in the early 1970s, peaking at over 10% in 1975.

Meanwhile, the wage and price policy had given way to automatic price compensation, so that wage growth (more than) compensated for inflation. The wage-price spiral was born. Compared to the postwar inflation wave, capital market interest rates kept pace with inflation. Real interest rates fluctuated around zero, with a negative peak of -1.4% in 1975.

Looking at the causes of inflation, there are many similarities between then and now. The disruption of global supply chains because of the pandemic and consumer pent-up demand after the corona crisis are reminiscent of the post-war situation. And the rise in energy prices due to the war in Ukraine has parallels with the oil crises of the 1970s. An important similarity with post-war inflation is that we are now also facing financial repression. The ECB's buying policy has for a long time artificially raised capital market interest rates.

Real interest rates are as negative now as they were in the early 1950s. There are also differences. One important difference between now and then concerns wage formation. Never before have collective wage increases lagged so far behind inflation. This is painful for consumers, who are faced with a sharp decline in purchasing power. This also affects the economy through consumer spending

In theory, the absence of a wage-price spiral is favourable for the development of inflation. This increases the chance that inflation will fall again soon. The big question, however, is whether wage formation will remain manageable. If employers can pass on higher wages in their prices, they will not fail to do so. And if inflation remains high, calls for higher wages will intensify. Automatic price compensation has been out of the picture for a while but could soon return. In Spain, half of the collective agreements signed before 2023 include automatic price compensation, compared to only 20% before the pandemic. I can already hear the Dutch worker complaining: why do they get price compensation and we don't? Workers will only be willing to moderate their wage demands if they are confident that the European Central Bank (ECB) will keep inflation low. Until now, the ECB's track record has been impeccable. Since the introduction of the euro, inflation has been too low rather than too high. But this was due more to the price-depressing influence of globalization than to the ECB's steerage. The uncomfortable fact is that the ECB has no experience with fighting high inflation. Is it realistic to expect it to raise interest rates sharply when Europe has just recovered from the corona crisis, is mired in high levels of debt, is undergoing the worst energy crisis since the 1970s and must remain united under the Russian threat? Or will the ECB continue to sit back, in the vain hope that a wage-price spiral will not occur and inflation will fall again? In the latter case, the 1970s scenario looms. ♦

Van Verre!

Het LXXVIIe Collegie der Heeren Vijf

SOUTH AFRICA IS

raised to 8.25% at the time of writing. The rate is expected to be adjusted quarterly to return to pre-pandemic levels of 10% by the end of 2023. Mortgages here are variable, unlike in many western countries. So when the central bank adjusts the rate, the next month the mortgage payment is immediately higher. Although this immediately decreases the purchasing power, it has the advantage that the housing market is immediately adjusted. So, in my opinion, a property crash is not in the pipeline for South Africa, because banks discount a potential interest rate increase in the maximum mortgage.

BY GARY DE VOGEL (20107252)

Te he Reserve Bank of South Africa recently raised its forecast of overall inflation for the year to 5.9% due to higher fuel and food prices. The Governor of the Reserve Bank warned that risks to the inflation outlook have been revised upwards. The expected inflation is therefore lower than in the Eurozone with an average of 7.9% since March. The difference is caused by the fact that electricity in South Africa is still widely generated with coal.

Despite an expected inflation rate of 5.9%, South Africans are feeling it hard in their pockets. In a year-on-year comparison, fuel is at the top with a 32.5% price increase, electricity 14.5%, and meat and bread 9.5% and 8.5% respectively.

Since the 2008 financial crisis, South Africa has never fully recovered. An annual cut in expected economic growth has become the norm. Before the corona pandemic, the 'prime' interest rate was at 10%. Prime is an indicator of the rate a bank uses for a mortgage loan. If you have a good credit score then you might get a percent discount. If you have a bad credit score then the mortgage rate can go up by as much as four percent.

Within three months of the start of the corona pandemic, the central bank had cut interest rates by three percent, at which commercial banks can borrow, which has a direct impact on prime interest rates. From a reduced interest rate to 7%, the central bank's rate has already been

Since South Africans spend a lot and use credit cards and normally buy their cars on credit, this is a hard adjustment for the country's purchasing power. Companies are already adjusting their sales forecasts for the coming year. To expect a negative sales development for such companies now is quite pithy since all products in terms of sales value have shot up, so theoretically you need to sell fewer numbers for the same turnover. In two and a half years the devaluation of the South African Rand against the US dollar was no less than 17%. Since most imports are paid in dollars, this also has a direct impact on the 'landed cost prices.' Not only the import product itself becomes more expensive, but import duties go up as well.

With the price increase of crude oil, South Africa as an economy had a surplus on its import/export for the first time. This temporarily strengthened the currency. But the reforms are slow and actually come too late. South Africa is its own worst enemy in this story. The energy crisis has been going on here for years and only recently has the government given permission to commercial companies to strengthen the national energy grid. However, the megawatt generation that has been approved is a fraction of what is needed nationally. Shortages run up to 22% of total electricity demand versus supply in peak hours. This results in regular blocks of 2.5 hours where no electricity is available three times a day and on some days 4.5 hours three times a day. With a total of 1104 hours so far in 2022, that is 46 days of non-stop electricity outages and we are just halfway through the year. In 2021 it cost South Africa in gross domestic product about $27 billion, and in terms of hours of electricity interruption, South Africa is already at the same level as 2021. So the projected impact for 2022 is 8% of GDP. If South Africa is able to come out of this energy crisis it will already be a big step forward to countering a global recession.

VAN VERRE: MESSAGE FROM CAPE TOWN - GARY DE VOGEL

The alumnus who runs an 'empire' of sports shoes and leisurewear in South Africa provides an interim update on inflation and interest rates from his base in Cape Town. Compared to Europe and the US, the recent inflation figures are not so bad. But interest rates are frighteningly high, especially compared to the paradise of mortgage rates that Europeans have known. However, the biggest danger lies in the devaluation of the South African Rand and the lack of economic governance by the government. It is incredible that half the population is officially out of work.

AN ENEMY OF ITSELF

With global interest rates picking up, safe haven currencies have become more attractive than a few years ago. Because economic reforms are too slow in South Africa, the country has experienced several credit rating downgrades by Moody's, S&P and Fitch. As a result, more South African investments in government bonds and equities are flowing out of the country. Local pension funds are also diversifying their portfolios more towards equities in Western countries, as they see two benefits: increase in share value and appreciation due to the weakening of the Rand. The interest rate hikes in South Africa are not only intended to combat inflation, they are also a means of keeping enough percentages above America and Europe to keep foreign investment attractive. Should the war between Russia and Ukraine end, risk appetite will increase in South Africa's favour.

The South African government faces a major challenge. Previous actions to create more employment have hardly had any effect. Employment is badly needed as officially no less than 46.9% of the population has no work, of which 34.9% is actively looking for a job. This is a low point. If the government is successful in tackling this problem, for example by creating more jobs in the agricultural sector, it can bring two benefits. On the one hand, employment resulting in growth of the economy and reduction of government subsidies, on the other hand reduction of dependence on imported sunflower oil and grain from Russia and Ukraine, which in itself will result in price reductions. A first step for the government would be to introduce a tax cut on healthy food and on fuel, where the amount of tax collected remains the same but where a relief of financial pain among consumers will occur. For business, there are many options to counteract price increases. After all, managers can turn several knobs at once in their arsenal of firearms. The question is, "How far do we go with this? Customers often expect their suppliers to absorb price increases. And soon they play suppliers off against each other. It is only a postponement of an inevitable phenomenon. With international freight costs still high, bulk bookings are almost a must in my business, but how far do you buy ahead without taking major risks? On the one hand, you expect prices to only go up, so in the worst case scenario you gain more margin on the same items. But a slow-down in the consumer demand can result in a doubling of imported inventory. So warehouse costs and financing costs can eat into your margins all at once. Buying raw materials upfront and keeping production slots open can be a better solution to better

managing inventory. With good resales, you can then open a product line with a specific style. The raw materials can also be used for other styles, reducing the risk of old stock.

Another solution could be local production. Our sister company Duca Del Cosma, the fantastic golf shoe brand (maybe you know it from The Dutch Open or Jumbo golf?), already makes its products in Europe, which saves transport and import duties. It's also easy to reorder if a style goes really well. For HI-TEC Africa it is a bit more difficult because certain craft skills are missing or because sports shoes are not of sufficient quality. Of course, the price of production in South Africa plays a decisive role; for the time being it is difficult to compete with the efficiency production in China or other countries in the Far East. Some clothing and accessories are already being made in South Africa and Mauritius. In the area of shoes, it is time for risk spreading. What happens if China thinks what Russia can do, I can do too? And unexpectedly arrives at 'tea' in Taiwan or Hong Kong. After all, NATO has already shown to be unwilling to deploy military weapons and troops in a country that is not a member of NATO. ♦

VAN VERRE: MESSAGE FROM HOUSTON - YORINDE KNEGTERING MSC.

IT'S POSSIBLE IN TEXAS! PIONEERING?

Also proliferating in the state of Texas is inflation, mortgage rates skyrocket, you're scared at the pump and you have to count your dollars in stores. But, the entrepreneurial climate is excellent. Alumna Yorinde Knegtering reports on her startup in perfume-free skincare for mothers and children. Meanwhile, she and alumnus Jeroen Lokin are expecting their first child. They have been living in Houston since 2021.

BY YORINDE KNEGTERING MSC (20120034)

Iended up in Houston because of a job with Shell. I was working as IT Manager at Shell in the Netherlands and was asked to move to Houston to manage acquisitions of new gas stations in the US. This was quite a challenge. The business model of Shell petrol stations in the US is mainly a franchise model. As part of the energy transition, the concern was more influence in the network and, just as in the Netherlands, to own service stations again. This is a major change involving the hiring of staff and in-store operations. What made my job particularly challenging was the timing during covid. Due to changing covid regulations in various states, almost everything (think CCTV, POS systems, pumps etc.) had to be coordinated under great time pressure with many new IT suppliers.

My partner Jeroen Lokin (Msc 20120040) worked as Finance Manager for SHV in the Netherlands and was able to get a transfer to America. Jeroen now works as Finance Manager for Mammoet in Texas. I no longer work for Shell. I have changed tack and am working on setting up a perfume-free skin care line for mothers and children. The combination of the increasing number of working mothers, climate change and the growing use of diapers around the world has created a growing demand for safe sunscreens and skin care for children. As I'm about to become a first-time mom myself, I can see that there is still a lot of room for improvement in the area of 'safe' skin care. And North America is the fastest growing market! Many products on the shelves still contain unnecessary petroleum by-products and perfumes. Before Jeroen got his Msc. at Nyenrode he did a masters in pharmacy. With help from his knowledge of formulating, I literally started making some products in our own garage in Houston.

The city is a concrete jungle and it took us a while to find our way around but everything we know in the Netherlands is here. Although Americans have less days off than the Dutch, we notice that there is a better dividing line between work and private life: evenings and weekends are for family and friends. We enjoy the sunny life in a big American city with sporting events, lots of entertainment and concerts and see ourselves living here in the coming years. In March of this year the Houston Livestock Show and Rodeo took place. This is one of the biggest events in Houston where, besides cow trade, lots of food and drinks, the biggest American artists come to perform in the Houston NRG sports stadium. We went to a Luke Bryan and For King & Country concert. Although we are not the biggest sports watchers, we occasionally go to an American football game of 'the Texans', it is always great to see the craziness of Americans during sports games. Texas has 22 million people, not very many for a state as big as Western Europe. This state is a real melting pot where, besides English, also a lot of Spanish is spoken. It is not for nothing that "TexMex" (Texan-Mexican) food is extremely popular here. The real Texans you recognize immediately, they are very patriotic and especially Texan and then American, warm-hearted and will tell you that Texas really is "bigger and better" than anywhere else. Wearing cowboy boots to the office or to a party is not a rule for a Texan but it is certainly not an exception either.

Texas is very vast and you can drive for hours and still be in Texas. There is a very big difference here between life in the cities and remote rural Texas. Where the big Texas cities are international and densely populated, the countryside, marked by drought and cacti, is really the opposite. Small villages with large traditional ranches, just as you would imagine, are still plentiful here, as are professional bull riders (this is serious business!) and cowgirls. The U.S. Bureau of Economic Analysis estimates Houston's Gross Domestic Product at $512 billion. Some of Houston's largest employers include BP, Shell, ExxonMobil NASA, Amazon, Conoco Phillips and Sysco. I hear the theme of this Van Verre is inflation and interest rate increases. There is definitely significant inflation here in Texas. We ourselves rent and rents have gone up quite a bit.

From homebuyers around us we hear the challenges that high home prices and ever increasing interest rates bring. Energy prices and prices at the pump have about doubled in recent months and we are also still regularly shocked by the price of already expensive groceries.Texas, like the rest of the US, still has a long way to go in terms of the energy transition. With almost every day sun and an average temperature of 35 degrees and power bills of $600 (!) in the summer months (by using the airco) you would expect that the roofs here are full of solar panels. Yet the reality is different, many Texans feel that energy companies and the government are solely responsible for the energy transition "cause that's what I'm paying my bills for." Yet in terms of wind and solar energy generation projects, Texas is number one in the United States and Tesla has opened a 'giga factory' here in 2021. On the other hand, it is also Texas where gas guzzling SUVs are still the most sold cars and the overhead power grid has major capacity problems. Yes, it's also Texas where the power still regularly goes out and the lights flicker when it rains.

Finally something about the opportunities for expats. The American market is so large that there is a market for everything, and that certainly applies to Texas as well. Austin and Houston have not only many large corporates but also a real start-up culture. The largest sectors in Texas are agriculture, healthcare, hospitality and retail. It is relatively easy for Dutch people to build up a business network here.

Texas has a Netherlands Business Support Office (NBSO) that maintains contact with Dutch companies in Texas. It is easy to approach the NBSO for questions or introductions and the Dutch here help each other. I have great news in this regard. The Netherlands is Texas' main trading partner in the EU and because of its large size, Texas (9th largest economy in the world) is attractive for even deeper economic integration. At this moment the NBSO is busy organizing a trade visit of the King and Queen to California and Texas in September this year. ♦

Jeroen Lokin

Inflation

AND INTEREST RATE INCREASE

EXPLANATION OF THE THEME

It began with the Russian invasion of Ukraine, or rather it began when the West imposed sanctions on Russia and international companies withdrew from Vladimir Putin's country. The latter, in turn, caused great panic by cutting off the supply of oil and gas. International energy prices went through the roof. For a while, Ukraine was also prevented from exporting grain. Everyone noticed the consequences in the supermarket. However, this is only part of the explanation for the high inflation and interest rate hikes by the Fed and ECB.

For years, extremely low interest rates and even negative interest rates, became something natural. Countless business plans were presented to investors, who would eventually be able to walk in with them. Faith in the future was more important than immediate profitability. Countries like China, South-Korea, Vietnam, Taiwan and Japan were overcharging cheap supplies to flashy entrepreneurs in the US and the EU. When the corona crisis broke out, they quickly cancelled their orders in Asia. Suddenly the cheap production apparatus was at a standstill, partly due to lockdowns in China, and containers stood idle in ports. In essence, Western countries blew themselves up with their dependence on Russian energy and on parts and finished products from Asia. Starting with the dire shortage of chips.

While employment is optimal in the US and Europe, Western consumers can hardly comprehend it. After all, they didn't get to enjoy life for two years during several lockdowns. Meanwhile, their savings kept rising. And now everything is 8 to 12% more expensive. It is clear that the central banks of the US, Europe and Brazil will firmly raise interest rates to dampen consumption.

The frustrating thing for the middle class, who work hard but have less and less to spare, is that world leaders have suddenly become responsible for inflationary trends and averting a recession (two quarters of economic contraction in a row). Politics and protection of citizens/ taxpayers do not always go hand in hand!

* Shell Executive vice president & Upstream CFO Mr drs. Ralph Wetzels

* Drs. Harvey Hoogakker (19940928) , banker in London for Wells Fargo.

* Kees Hoving (19870052) Co-CEO Middle East & Africa for Deutsche Bank in Dubai.

* Drs. Kelly van den Muijsenberg (200090066) Director Valuations-Deals PwC Netherlands.

* Sadik Cevik (20110015) MBA, GM Benelux Gorillas.

*Drs. Jim Halfens (20010057) DG debt collection company Hakort International.

* Katherine Kucherenko Msc (20080333) Senior Investment.

Specialist Global Real Assets APG Asset Management.

* Dr. Ir. Taher Ahmadi , lecturer Operations & Supply Chain Management NBU.

* Drs. Robert Enters (19950050) innovation manager at De Volksbank.

* Drs. Erwin den Breejen (19910197), GM Asia Operations of Pon.Bike.

* Mark Wiessing (19770127 , CEO Rabobank Brazil.

Inflation

AND INTEREST RATE INCREASE

BY OELE STEENKS

Question: how big is Shell?

RW: "Shell is a global group of energy and petrochemical companies, with operations in more than 70 countries. Shell is currently the number one mobility retailer in the world and one of the largest single-brand retailers. Our network has more sites than McDonalds, Zara, Carrefour, Starbucks and GAP combined. We serve more than 1 million commercial and industrial customers every day, and 32 million customers at our 46,000 fuel stations. The largest countries for this Downstream business are the US, China, Brazil, India, Indonesia, Malaysia, Germany, Canada and the UK, but we have significant positions in many other countries in Europe and Africa. In Upstream Oil & Integrated Gas we have significant positions in the US/Gulf of Mexico, Brazil, Argentina, Trinidad, Nigeria, Australia, UK, Norway, Qatar, UAE, Iraq, Oman, Malaysia and Brunei. Since the war in Ukraine, we have largely ceased our activities in Russia. From early March, we began withdrawing our involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG). We have also transferred our Downstream business in Russia. It is good to highlight our Renewables and Energy Solutions (RES) business, a very fast-growing part of Shell in which we are increasingly investing. It focuses on providing new fuels and energy solutions for a low-carbon world, with a specific focus on electricity. This ranges from generating electricity to buying and selling, storing and delivering directly to customers to power homes, businesses and vehicles. We also do a lot in hydrogen, building large production plants like Holland Hydrogen and developing a nationwide network of H2 filling stations

in

The underground storage of gas in the Netherlands will have to reach full capacity, otherwise it could get very cold next winter, in the Netherlands but also in Germany. So says Ralph Wetzels (19900250), the alumnus who is executive vice president and CFO Upstream at Shell. Rising prices at the pump do indeed generate more income for the largest operator of petrol stations in the world. But it is mainly governments that are reaping the benefits of high oil and gas prices, which are ringing in the coffers through heavy duties and taxes!

several countries. Finally, we are working on the development of the next generation of low carbon fuels."

Question: in the top ten oil producing countries we see Saudi Arabia at No. 3, Iraq at No. 4, Iran at No.6, Emirates at No. 8. And Kuwait at no.9. Is a trade expansion of Shell with these traditional oil producing states possible?

RW: "Shell continues to work closely with many governments, including some of those mentioned. We discuss new developments, increasingly focusing in recent years on how we can help governments in the energy transition. I find that Shell is well positioned, we can build on years of cooperation, there is trust and we have a lot to offer with our R&D knowledge and a unique range of leading technology solutions. I have regular meetings with governments and national oil companies; there is a lot of interest in our low/zero carbon developments, which complement their traditional oil and gas business. I also experience that many of the national oil companies, like Saudi Aramco, ADNOC, PDO and Petronas, are thinking about sustainable oil and gas projects themselves. I myself am involved in hydrogen, wind and solar projects in Saudi Arabia, Oman and Abu Dhabi."

Question: can you explain how Shell can meet the shortages caused by possible Russian export stoppages?

RW: "We have to look at this separately because the situation for oil is different from that of gas. Russian oil is extremely important for European refineries, as "Urals", a type of crude oil, are crucial for refining the products Europe needs, i.e. fuel oil, gas oil, jet, etc. Stopping the supply of Russian crude oil has meant, that all European refineries had to prepare for other crude oil and adjust their configuration, something that even now can take a few extra months. The supply chain, think of the network of pipelines, is no longer used efficiently, while refinery capacity will decrease: both could lead to an increase in fuel costs, although this is also determined by supply and demand. Shell has a good portfolio of oil contracts and sufficient network flexibility, including refining, to continue supplying products, but of course tightness can always occur. Much is written about gas in the media and it is clear that Russian gas has been the backbone of European energy supply. Now that gas supplies from Russia are falling sharply, as evidenced by the -80% in Nordstream 1, and the fact that Russia is demanding payments in rubles, there is a major

shortage in Europe. At the moment this is partly compensated by extra gas from Norway and obtaining extra LNG cargoes from Europe and the Middle East. To prepare the Netherlands (and partly Germany) for the winter, I think it will be crucial for the Dutch government to ensure that the underground gas storage facilities are full. This is currently going steadily in Norg and Grijpskerk. Sufficient LNG cargoes will also need to be secured. It should be noted that more than 75% of LNG is sold on long-term contracts, say 10 to 25 years, and that spot cargoes are limited in availability and very expensive. Norway has recently announced further gas production increases, but I myself doubt it will be enough, especially if it's a cold winter."

Question: how does Shell set the sales prices for its oil and gas? Does pricing follow daily exchange rates (markers) for oil and gas?

RW: "Shell cannot determine marker prices for oil and gas, such as Brent, Texas Intermediate, Japan Korea Marker, Dutch TTF. These are mainly determined by the interplay of supply and demand, by market sentiment, fuelled by OPEC, and general production costs. We do often use the markers in our forward and spot contracts with clients."

Question: how does the price variation by country come about?

RW: "The main factors are the markers, which can vary from country to country, transport costs, quality differences, commercial conditions - payment terms, risks, obligationsand taxes. Prices at our service stations are largely determined by daily markers, to which a location premium or discount, quality premium (V-Power) operating costs and taxes are added. Markets can be completely free, as in Europe and the US; semi-regulated, as in Malaysia or Turkey; or fully regulated, as in Brunei, which affects price. In the Netherlands prices are usually viewed daily, in Germany prices can change every 30-60 minutes."

Question: as oil and gas prices are skyrocketing; what is the revenue impact of this development? And what is the profit impact?

RW: "Indeed, when oil and gas prices rise, our revenues increase, but don't forget that especially taxes for governments increase substantially, people don't realize that. Taxes on oil and gas production are often over 90%. What we are also seeing is an increase in costs, with our specialist suppliers raising prices rapidly. This is caused by scarcity of materials, equipment and people. A final impact, which I naturally follow closely, is the impact on working capital and the exposures involved. I'm talking about financing, credit risks and price volatility. Within my business department Upstream, we are talking about many billions, with the financing of joint ventures adding complexity because of proportional contributions and transfer pricing. With regard to profit, there is a big difference between the tax conditions that are often agreed per project. Usually this takes the form of so-called Production Sharing Contracts, where the tax rate depends on oil and gas prices, but also on cumulative production. The government share usually increases as more is produced. When we do an Upstream investment, it usually has a term of 20 years and more, where clear and fixed tax terms are agreed with governments."

Question: is the oil and gas crisis in Europe a short-term driver of electricity sales at Shell stations in continental Europe?

RW: "The main reason for significantly increasing electricity sales at our Shell sales stations is the fact that many more electric and hybrid cars have hit the roads. We should also not underestimate the major investments we have made in our EV network -Shell Recharge, New Motion, Ubitricity. Right now many new charging points are being added to our network every day, we already have a Shell station in London, in the Fulham area, where only EV charging is available and more will follow. We expect this trend to grow exponentially. I can already see that we will continue to increase our investments in the coming years. In my previous job, I was personally involved in the acquisition of Ubitricity, street car charging via lampposts, which I am very excited about. We are also increasingly investing in charging points at a travel destination, so at hotels, supermarkets, parking lots, sports grounds, etc. We are always interested in talking to companies about this further."

Question: what impact does the current conflict with Russia have on Shell's policy to be climate neutral by 2050?

RW: "We have developed our Powering Progress strategy which sets out how we intend to shape our company's transition to net-zero, in line with society's ambition to meet the 1.5° target. The strategy includes both short and long term targets to ensure we reduce emissions in line with the Paris Accords. The current conflict with Russia does not affect our policy of being climate neutral, but it does reaffirm the importance of what we call the "energy trilemma" of providing society with affordable, reliable and sustainable - lowest carbon intensity - energy. I see that we are continuously working on how to make the transition faster and more efficient. I refer to our investments in Holland Hydrogen, the conversion of refineries into energy hubs at Pernis and Moerdijk, our targetsetting, in which carbon plays an important role, and the termination of carbon-intensive projects. But I see that we are certainly not there yet, and will have to work even harder and I will also have to make my contribution to that as CFO Upstream."

Question: are these exciting times a real professional challenge?

RW: "These are certainly exciting times, but over the 25 years I've worked for Shell it's never been dull and I've been lucky enough to work in many countries, whether in Europe, Africa, the Middle East or Asia. Our industry is constantly challenged, whether by political developments, macroeconomic trends, technological breakthroughs, incidents or the energy transition. With regard to the latter, this really is a unique moment for society to change and Shell, as an energy provider, wants to, and should, play an important role in this. I personally find it a pity that in the Netherlands there is too little positive coverage of Shell in the media, despite the investments made in the Netherlands. I mentioned Holland Hydrogen earlier, but also the transition in Retail and the energy hubs at Pernis and Moerdijk. We can also be proud of the Energy Transition Campus Amsterdam (ETCA), in which Shell works together with many companies, startups and

academics to share experiences and technology to meet the energy needs of today and tomorrow. I also now increasingly see an important role and challenge for myself to listen to society, but also to present Shell's role and vision more clearly: there is certainly still much for Shell to do in this area."

Question: what are personal goals/tasks as CFO for 2022?

RW: "As CFO of Upstream, I am primarily responsible financially for the 30+ countries that currently contribute around 40% of Shell's cash flows, i.e. revenues. This is, of course, not insignificant. My job is to manage these revenue streams while investing for the future, including more carbon neutral projects and underground carbon storage facilities (CCUS). It is also very important that we act compliantly, safely and ethically, something I communicate very strongly and deeply within the Upstream organisation. Another important task for me is to stay in dialogue with our stakeholders, which are investors, governments, joint venture partners and suppliers; I mentioned in a previous question that I need to better explain our role in the transition. And last but not least, I am responsible for human capital, the team I work with in Shell Upstream. My experience after covid is that our working environment, our way of working and communicating, has changed; so I encourage us to keep the positive things while working virtually. I also see my teams in the office less than 50% of the week, but this varies per country. I also see that the war in Ukraine, economic uncertainty, inflation and negative feedback on Shell as a company have led to uncertainty and increased mental stress among my teams. Ensuring them a safe working environment, where they can voice their opinions and everyone is equal as part of our D&I culture, I also see as crucial to feeling successful in my role." ♦

Recession in the US?

Dr. Harvey Hoogakker (19940928) sits in the London office of US bank Wells Fargo as a spider in the web when it comes to the relationship between inflation in the United States and its interaction with the rest of the world. He sets up international loan syndicates and assists clients from Europe and Africa with their ventures into the US market. Naturally, they want to know what kind of economic climate awaits them in the land of great opportunity. Worrying, but not life-threatening, is his assessment. He shares his insights with Nyenrode alumni in a personal capacity.

BY OELE STEENKS

a Dr. I enjoyed working in Amsterdam for a few years at Kempen & Co., responsible for mergers & acquisitions. Then I moved to London to work for the American merchant bank Merill Lynch, again on the M&A desk. From there I moved to Westdeutsche Landesbank, which was very active in the leverage loans market space and the financing of emerging markets. The bank was headquartered in Düsseldorf, but had offices in London and New York. Westdeutsche Landesbank no longer exists; nine years ago, I joined Wells Fargo Bank on a senior level with some colleagues. There I became responsible for the European, Middle East and African M&A financing and lending business. I have a British wife and two daughters aged 13 and 15. So that's never boring; it keeps me on my toes."

Question: how do you qualify US inflation right now?

HH: "US inflation is worrisome, more than we've seen in 40 years. Wells Fargo in particular looks at consumer price inflation, which is currently at 8.5%. Today, the FED raised the base rate by 0.75%. We expect the Fed to push the increases through to a high of 2.5% to 3% by 2023. That's very forceful, but necessary to prevent further price appreciation."

Question: what do you expect from the ECB?

uestion: can you briefly introduce yourself to the Nyenrode alumni?

HH: “I work for Wells Fargo Bank, a US bank that combines international business and retail banks in the US. I'm based in London, where I represent the international operation. I'm responsible for EMEA (Europe, Middle East and Africa), but for my clients I take the big picture of the bank, including developments in the USA. I am not an economist, but I assist corporate clients in setting up syndications and loan structures. For this interview, I speak more as a Nyenrode alumnus than as a spokesperson for Wells Fargo Bank."

Question: great that you are so open to the international Nyenrode community; what is your relationship with

HH: "My father is Dutch and my mother is English, but I grew up in South Africa. I did the IDP program at Nyenrode. I came to the estate in 1994 to become

HH: "Europe also needs a robust interest rate hike, perhaps not as strong as we see in the US. If you want to get inflation under control, you have to correct quickly. At Wells Fargo, we would like to see the ECB take that course."

Question: are energy prices the big problem?

HH: "The price of gas oil is currently at an all time high in the US at ±$5 per gallon. But if we remove the impact of energy prices and look at inflation for private consumption in America, inflation is still above 5%. That's the highest rate since 1982."

Question: to what extent is the energy crisis a short-term inflation problem?

HH: "A fair question. On top of the difficulties surrounding international energy supplies, there is a global problem with supplies of raw materials and components. This problem is not really related to the war in Ukraine. The automotive industry in the US in particular is suffering. It is the most important sector of large consumer spending by American companies. There is also a shortage of chips and cheap consumer goods, produced in the Far East. That shortage is driving large price increases."

Worrying but not life-threatening.

Question: are American consumers responsible for inflation? Here in Europe is the idea that Americans systematically spend more than they receive each month?

HH: "Looking at the situation ten years ago, there was an overspend of 135% for spending per household, but there has been a drastic correction. It's still a popular notion that Americans overspend, but the vast majority of American households are now on a balance sheet of 100%. So that means Americans today are living with a healthy balance of income and spending."

Question: what effect will the Fed's interest rate hikes have on U.S. consumers?

HH: "The Fed's rate hikes will certainly start to reduce consumer spending, but in the meantime employment remains excellent and wages continue to rise. So I don't expect a recessionary phenomenon, as in the past where a gutter portion of Americans were out of work and couldn't afford their mortgages."

Question: back to the energy market, how do prices affect the urgency of clean energy in the US?

HH: "The US economy is not dependent on the international energy market. That may have been the case in the last century, but over the last few years the US has developed into a net exporter of oil and gas. What is true is that oil and gas are an international 'commodity' and when global prices rise, it impacts the price level in the US. If we remove Russia as a major exporter of oil and gas from the market, then of course that has an impact everywhere. But as mentioned, the US economy benefits by boosting exports of oil and gas, especially LNG. But also a company like Shell is making huge profits right now. Putin has probably provided a "shot in the arm" for the traditional business models of the established energy conglomerates. We see that the energy transition in the US has taken a back seat. The demand for energy security is currently stronger than the demand for a cleaner economy. The war in Ukraine and Russia's manipulation of oil and gas will likely become the driver for new fossil fuel exploration. In US national energy production is still 60% fossil fuels. That's still cheaper to produce than renewable energy."

Question: are those fossil fuels also what American consumers want?

HH: "What is true is that for the medium term, public opinion in the U.S. is trending toward the use of clean energy. According to Wells Fargo research, two-thirds of Americans now say they want clean energy as a priority. There has also been a realization in the U.S. that the next generation has a

right to a livable world. The US ranks 25th in the world in terms of the size of the clean economy. That's disappointing when it comes to the largest economy in the world, though. The country can make tremendous progress on environmental issues."

Question: are there opportunities there for European energy companies?

HH: "Absolutely. Much of the business that we do for European clients from our London office is advising and assisting companies in the area of clean energy production, both onshore and offshore, to start taking advantage of the huge opportunities that exist in the US, as I said, for the medium term. They have a head start with the expertise and technology developed in Europe. These include Spanish, French, British and Dutch energy companies."

Question: the additional issue is how much of that US market will China try to claim? When it comes to solar panels, it is clear that China has quite a span of control!

HH: "In general, the economies of Europe and the US want to guard against economic dominance by China. It did become clear that some high-tech industries are suffering from a security problem, because of industrial espionage by China. That relates to advanced technology built into chips. But clean energy production is technologically a relatively easy and therefore open market."

Question: how do you see the 'great economic danger' China? HH: "At the government level, there is rhetoric in the US about competition from China and geopolitical industrial espionage. However, the US is strong in exporting manufacturing techniques, machinery and tools, especially for microchip production. At the corporate level, we should not forget that China is a major consumer of the said means of production. It makes no sense to push the political understanding to the extreme, because ultimately China is a trading partner and their production of microchips exceeds the size of some national economies. According to a Bloomberg report, Chinese microchip production is the fastest growing economic activity in the world. The western world is shooting itself in the foot if there is a possible too robust crackdown on Chinese industry. In time, the Chinese market will also become increasingly open to Western companies. The growth of the Chinese economy may have weakened, largely caused by the People's Republic's zero-covid policy, but it is still growing."

Question: under President Donald Trump's America First doctrine and President Joe Biden's Build Back Better plan, the idea seems to be emerging that the American manufacturing industry needs to be reinvented. Is that realistic?

HH: "The question is to what extent the current economic situation offers an opportunity to bring the production of consumer goods back to the US. This is not a development of recent years, but a process that has been going on for decades. It makes no sense to want to reverse this situation, for example by erecting a trade barrier with China. I see it as an international economic reality, which in a sense is independent of political rhetoric. Trump started this, but Biden has maintained this course, trying to be the tough leader against China. However, the US will try to bring more diversity to the 'supply chain'. This will mainly involve alternative supplies from South Korea, Taiwan and Latin America. Politically, the US government supports Taiwan, it has historically been an important allied state, but the US will certainly not support Taiwan militarily should it come to a conflict with China."

Question: perhaps Europeans forget how important the economic block close to home is for America. For example, nine American automakers have production lines in Mexico.

HH: "Mexico and Canada are the most important trading partners for the US. With these countries there is widespread general cooperation, such as in politics, culture, trade and industry. With Mexico there is further intensive cooperation in the areas of drug control, migration, human trafficking and combating pandemics. In 2020, a new treaty was signed between the U.S., Canada and Mexico. Many Americans actually already consider Mexico an additional state of the U.S."

Question: surely an indirect economic confrontation with China seems already a reality on the American continent itself?

HH: "Brazil in particular plays a strategic role politically. For that country, China is the number one trading partner. Most of Brazil's agricultural exports already go to China. The relationship between President Biden and President Bolsonaro of Brazil will have to improve quickly, otherwise China will become a major power on the South American continent. The US is also becoming increasingly aware of the threat posed by organised crime in South America, especially criminal money that has become part of the 'normal' economy. This problem continues in the US in terms of social

security. And then there is the issue of climate security. The forested parts of Central and South America are the lungs of the world."

Question: the Chinese model has already been demonstrated in Africa. To what extent is this superpower able to engage in international price manipulation?

HH: "Here in London I deal a lot with companies active in Africa and investors in that continent. There too, we have seen for decades that China is the main investor and has control over key sectors. During the Cold War years, Africa was of strategic importance, but after the fall of the Berlin Wall, the continent suddenly became less important. The Chinese quickly took advantage of this. They are the new 'colonial masters' of Africa. They control much of the infrastructure and are deeply penetrated into the national economies of the continent. I do not believe that we have reached a point where China can manipulate the price of raw materials and semi-finished products, but it is important that China is given a counterweight in Central and South America, otherwise there is the threat of an 'African' model for those regions of the American continent. For now, it's about a better international balance between supply and demand in the 'supply chains.'"

Question: can you identify your role within Wells Fargo? HH: "I support European companies in obtaining working capital and in mergers and acquisitions. Most clients have a relationship with the US, either they have an operating business there and want to grow, or they want to enter the US market, possibly through M&A, or they want a US listing. Our service goes as far as helping European companies with loans in domestic US centers and markets as well. Wells Fargo is both a retail bank and an investment bank; so some of the retail income is deployed locally. We also set up international loan structures for large corporations that can be deployed in the US. We can use them to finance US bond loans or do business with US equity funds. Chinese capital providers are often involved in these kinds of deals. These are Chinese state-owned banks. Sometimes the roles are even reversed and we bring loans to Chinese banks. So we have to be careful with hostile rhetoric towards China, because that does not match the reality of international finance. I think the reality of these things is always more complex than the politicians of this world would have us believe. ♦

TOP BANKER KEES HOVING IN DUBAI:

THE ARAB OIL STATES ARE NOT INFLATION SAVIORS!

Since OPEC countries control most of the oil and natural gas transported around the globe, the question arises as to whether the Arabs can ease the pain of international inflation. Do they want this politically, is it practically possible, or do they have little interest in doing so? Van Verre speaks with Kees Hoving (19870052) who works as Co-CEO Middle East & Africa for Deutsche Bank. He is speaking expressly in a personal capacity. One thing becomes clear, the Arabs are increasingly going their own way and are not much affected by inflation themselves.

BY OELE STEENKS

Top Banker Kees Hoving explains that the oil states in the Middle East have no direct influence on increasing the supply of oil and gas, which could reduce the steep rise in energy prices on the world market following Russia's invasion of Ukraine. Arab oil states do not hold the key to directly alleviate the pain of fuel increases in the form of inflation between 8 to 110%. "Most oil and gas goes to countries like China, South Korea, Japan and India, for which forward contracts are usually in place. Increasing oil production takes at least several months. Furthermore, the Arab OPEC countries have not taken a clear position in the conflict between Russia, the EU and the US. They prefer to remain neutral and have declared that they do not have much to do with the war in Ukraine. When it comes to increasing production capacity, the world market can only be influenced in the long term. In Qatar, for example, there will be an expansion of LNG production, but that facility will not come on stream for another five years or so. Even then, the importance for the economies of the United States, the European Union and the United Kingdom is limited, as the Arab oil states' regular trading partners are China, Japan, India and South Korea. They are likely to remain preferred customers in the short term," Hoving says.

Leading role of Saudi Arabia

What the free west does need to take into account is the new direction the main Arab states are currently taking. Starting with Saudi Arabia. "The Saudis have drawn up a plan called

Vision 2030 that deals with a far-reaching modernization of the country. Efforts are being made to develop tourism, secondary education is being greatly improved, and the Saudis themselves are switching to renewable energy. Furthermore, the sharia has been weakened and the role of women has increased. They can now obtain a driving licence and there are also more jobs for women. This change of course is accompanied by a strengthening of the financial position. Thanks to the sharp increase in oil prices, the state-owned Saudi Aramco is now the largest concern in the world. Aramco is open to foreign investors to a limited extent. The country's stock exchange now has nearly 150 listings and is larger in terms of asset value than, for example, the stock exchanges in Indonesia and Mexico.

Most importantly, Saudi Arabia is emphatically seeking the role of leader in the region. For example, relations with Israel have undergone a radical change. The Israelis are now welcome as investors in the Gulf region. Wealthy investment funds in Tel Aviv have immediately seized this opportunity. The power of money is evidently stronger than ingrained religious differences.

Inflation

Furthermore, Saudi Arabia is an important financial backer of Egypt. I was there recently on a working visit and was struck by how relaxed bankers and investors were about the looming food crisis in Egypt. No doubt Egypt will suffer from the shortage of grain imports from Ukraine, but I sensed that the Egyptians are counting on alternative solutions, in which the Saudis will be able to play a facilitating role. Personally, I think rice imports, for example, will be an option. Also for the looming food shortage on the African continent, Saudi Arabia will probably take a number of states with Islamic regimes under its wing."

This is certainly in line with Saudi Arabia's international orientation as a member of the G20 and a prominent member of the IMF and World Bank. The country has an important moral function and can be considered the guardian of a modern form of Islam.

Hoving indicates that the Saudi Arabian Peninsula is striving for political stability. Very importantly, the emirate of Qatar has taken a pro-Western course and seems to have distanced itself from terrorism in Iraq and Iran. Something that is very much in evidence with the organisation of the World Cup that will take place in the Gulf state in December 2022.

"This may open the way to re-establishing economic ties with neighbouring Iran. That country has enormous reserves of natural gas," says Hoving. In any case, Qatar is also a very rich country, where the Qatari themselves make up only 15% of the population. The country is also home to an enormous amount of cheap labour from the Far East, which is notoriously badly treated by Western standards, although these workers

are able to keep their families alive in the homeland with their wages. The emirate has the Qatar Investment Authority investment fund, which according to financial experts is one of the top ten investment funds in the world. However, it is a ring-fenced fund, whose exact interests are difficult to assess, but it is clear that it is also powerful in New York and London."

Dubai as a top project!

Alumnus Kees Hoving is Deutsche Bank's co/CEO Middle East & Africa in Dubai, the United Arab Emirates' second-largest economy. Today it is increasingly known as the Emirates. Within the conglomerate, Abu Dhabi is the driving force in terms of national oil revenues, accounting for some 80% of GNP.

"Compared to Dubai, Abu Dhabi is a more traditional emirate that is less open to Western influences. Nor is there that much incentive because its oil reserves are good for decades to come. Rather, there are close ties with Japan and China, the top two consumers of Emirati oil," says Hoving. Meanwhile, people in Abu Dhabi will probably frown at the developments that Dubai has undergone. It is good to realize that Dubai is an emirate that has to cope without reserves of oil and natural gas. It was not long ago that it was a somewhat languishing region, kept afloat by big brother Abu Dhabi with a one-time massive gift in 2009."

"Dubai has subsequently made a number of decisions that have worked out fantastically. The emirate aims to become the best country in the world to live and work in, with state-of-the-art amenities, luxurious living and absolute safety on the streets. From the beginning the United Emirates has focused on international air travel with its own airline Emirates. Since there was relatively much space available in Dubai, the most modern airport in the world was built there. Nowadays five local airlines still use this airport. It has become so easy to fly in and out of Dubai. That has become the driving force for the tourism industry that offers the most luxurious hotels, resorts and beaches, taking advantage of the fantastic climate we have here about eight months a year," says Hoving. Furthermore, the

TOP BANKER KEES HOVING IN DUBAI:

Emirates decided to peg the local currency, the dirham, to the US dollar. This paved the way for Dubai to become an international business centre. Numerous international service providers have settled here with regional offices. Dubai has become a hub between America, Europe and the Far East. "The Emirates, and Dubai in particular, have extremely ambitious goals. For example, it has its own space program with a planned launch base on its own territory. This is almost unimaginable for such a small country. There is also the plan to make the country 60% green, using desalinated seawater. That costs a lot of energy by the way, which is relatively inexpensive here and more and more generated by solar energy. In the scientific field, every effort is made to have one of the best universities in the world, for example by cooperating internationally. To this end, scientists from all over the world are attracted with princely salaries. Certainly in the medical field, Dubai is becoming a front runner, where you can undergo operations in a luxurious atmosphere performed by the best surgeons," says Hoving.

Disposing of criminal money

He welcomes the stricter monitoring of Dubai's international reputation: "This state has attracted an enormous amount of money, the origin of which was not really questioned by the local authorities for a while. Dubai used to be one of the safe havens for drug money, but recently this has changed. There have also been extradition treaties for Dubai-based criminals, which are also being complied with.

This is more than compensated by the extremely attractive job market that comes with it. When companies look for highly skilled professionals in Dubai, applications from all over the world immediately flood in. These people are attracted not only by the fantastic salary they can earn here, but also by the level of employers and the social climate. It is guaranteed that a woman here can walk the streets alone at four in the morning," assures Hoving.

Returning to the theme of inflation and interest rate increases, it can be seen that the leading oil states in the Middle East and

certainly the Emirates itself are less sensitive to inflation, although there are too many consumer goods that are imported from China.

"Here the Covid measures apply in China, as we have seen particularly in Shanghai, as a limited price driver. Of course the energy crisis in Europe and the US, the food markets and the Covid measures are all hanging in the balance in China, but my assessment is that developments in China are relatively heavy here," says Hoving.

He also points to the continuity of the extraction of scarce metals in China that are fundamental for the production of chips, batteries and mobile phones. Stagnates in that production, as recent events have shown, the Western prosperity is directly threatened by a lack of crucial components.

"As a banker, I have insight into the mining of cobalt in Congo-Kinshasa, which represents enormous value, but is also a commodity with a high risk factor."

All in all, Kees Hoving follows the development of inflation and interest rates in the capital markets intensively but he seems at the time of this interview not too worried about a global recession.

"Personally, I expect inflation to be capped during 2022 in the major free economies. Here in the Emirates, we are facing inflation of 3-5 per cent, which in itself is bearable for such a rich state. But that doesn't take away the fact that much will depend on the food harvests during this summer and on the temperature development in the coming winter. If it gets really cold in Europe for a long time, the world could suddenly look very different," says the alumnus/banker in Dubai. ♦

VALUATION EXPERT KELLY VAN DEN MUIJSENBERG:

years of rising valuations, a decline really does seem to be in sight."

Kelly van den Muijsenberg (200090066) is Director Valuations-Deals at PwC Netherlands. With financial markets so volatile, clients frequently knock on her door to get the latest insights on valuations. There is still great interest in investing in tech companies, but the current uncertainty means that more factors are taken into account than ever before when making a deal. Kelly got acquainted with valuations at Nyenrode and, through the alumni network, eventually made this her profession.

BY OELE STEENKS

Question: on what statistics does PwC base projections for rising interest rates and increasing inflation?

KvdM: "We mainly use market data for inflation as provided by the ECB and IMF. We also use other public sources such as so-called 'inflation-protected bonds' that are traded and on the basis of which the 'implied inflation' can be determined. However, in the current market this should be viewed with healthy scepticism. The inflation that is ultimately included in valuations is highly dependent on the extent to which a company's forecasts are affected, in terms of costs, investments, ability to pass on to customers, etc. So unfortunately there is no single source that gives the answer. For the interest rate in valuations, we mainly look at the yield curve of a German Government bond. This is a commonly used standard in Europe.

We use a term of twenty years. The other Big Four (accountancy firms, ed.) often do as well. For valuations in USD, we also use the 20-year US Government bond. As PwC's valuations team, we ultimately look at the overall picture of a valuation - projections, terminal value, discount rate, (implied) multiples - and ensure that the assumptions are coherent.

Question: there are the necessary rules of thumb in circulation regarding business valuations, to what extent is the use of rules of thumb still appropriate in the current financial climate?"

KvdM: "There are indeed rules of thumb in circulation, but I cannot give an opinion without further context as multiples are very sector and company specific. At PwC I focus in particular on technology and media companies. At tech companies I have regularly seen implied multiples that were many times higher than what rules of thumb prescribe. Many companies invest in technology that will only pay off in a number of years, so EBITDA is currently still limited, while the business potential is high, which in turn leads to high multiples. In such cases we obviously look at the profit forecast, but also at the growth volume and the question of how scalable the company is. With many of these types of companies, sales multiples are used because of limited or even negative EBITDA. If you want to make a good valuation, I recommend looking at peer companies instead of generic rules of thumb. At a software club, for example, we look at software companies that are listed on the stock exchange or

have recently made a transaction. This analysis produces an implied multiple (multiplication factor, ed.) which we take as a starting point. In most cases, we also prefer to carry out a Discounted Cash Flow (DCF) valuation based on multi-year forecasts of the company to be valued."

Q: The financial press is reporting that many tech companies have put their acquisition or IPO plans on hold. What is your reaction to this?

KvdM "During the past few years with extremely low interest rates combined with high appetite for tech companies, higher implied multiples were paid for tech companies. Due to the low discount rate, the ratio of future earnings to return was very favorable. With the sudden rise in interest rates, high-growth tech companies are now valued lower as cash flows are often far into the future. This is reinforced by the current market sentiment, where investors seem to have lost all patience with 'high growth' companies where profitability is only a few years away. This is reflected in the stock markets, where tech companies have fallen sharply in value. So is this the right time for a tech company to do an IPO (Initial Public Offering, ed.)? I can't give any advice on that, but it's clear that an IPO is more challenging now."

Question: is the value development of tech companies linked to international financial uncertainty caused by Russia's invasion of Ukraine?

KvdM: "Not necessarily. It ultimately depends on how much 'exposure' a company has to the Russia/Ukraine conflict. The awareness in the market that certain tech companies were potentially overvalued has been around for some time and, as mentioned, the market sentiment towards high growth companies has changed considerably over the past six months. We have seen for some time that strategic buyers, relative to private equity, thought valuations were very strong. But we have continued to see deals over the last year that paid very large multiples, driven mainly by the high cash positions of private equity companies looking for good investment opportunities. Tech companies were still very hot, to say the least. With the current developments, it does beg the question how this will be in a few months time."

Question: the share price of listed companies is very volatile. How important is stock market sentiment and what does this mean for multiples?"

KvdM: "Equity markets are very volatile right now. As mentioned, there is a negative market sentiment regarding growth stocks.

"After

There are so many factors at play, such as rapidly rising interest rates, high consumer demand that producers can barely meet, a shortage of chips, a shortage of staff, increased energy prices, looming food shortages, a lack of raw materials and geopolitical tensions due to the war in Ukraine. It's a completely different world than it was six months ago. It is dangerous to blindly apply the multiples that were in place until recently to current deals."

Question: companies can present great business plans, but the global scarcity of staff creates a new kind of uncertainty. Do you agree?

KvdM: "The labour factor has definitely become more important. With business plans you now certainly have to ask whether there is sufficient capacity to carry them out. The advantage of a DCF analysis compared to rules of thumb is that this can be made very transparent. With a DCF, we focus on the question of how realistic the projected income is. How realistic is the outlined growth curve and how realistic is it that sufficient sales people can be attracted? And whether the development team at tech companies, for example, can be scaled up quickly enough to take the required steps? We look for detailed answers to these kinds of questions. We can all put a 20% growth in turnover with a levelling off to 5% on an Excel sheet. The point is to make the connections between the various forecasts on a turnover and cost basis transparent and realistic. Ultimately one number or a limited range comes out of a valuation, but a seller and buyer should know what exactly has been assumed here."

Question: the economy now seems to be dictated by geopolitical issues, such as Putin's war agenda, the strengthening of NATO both in terms of territory and combat strength, Russia's manipulation of oil and gas supplies and China's political stance. How does this affect company valuations?

KvdM: "Clearly, whether or not a Western company can or will trade with Russia affects on a valuation. Incidentally, geopolitical developments are always taken into account in the DCF method.

We use several assumption models, in which we calculate an upside and a downside scenario. This means that on the upside, we assume the most favourable business scenario and on the downside, we assume in consultation with our client that certain countries are excluded from the sales opportunities. This all listens very closely and is obviously much more complicated for companies that either sell a lot to Russia or buy a lot of materials from Russia, versus companies that have little or no link to Russia -but can still be affected by certain supply chain issues."

Question: do you see shifts in relative value between sectors? And is there any difference here between listed and private companies?

KvdM: "Since December 2021, we have seen listed companies depreciate by 20 to 25%. We would therefore also expect a similar depreciation in privately financed companies. However, the ratios can vary a lot. Take Shell, for example, which is now being rewarded by the investor market for its interest in fossil fuels, while high-tech companies are dangling at the bottom of stock market indices. So here too a thorough analysis is important. Much will depend on interest rate movements in the coming months. We are now (June 2022) around 2% for European interest rates, but those in the US have risen to almost 4%. Are continued central bank rate hikes necessary? In any case, short-term inflation expectations remain high."

Question: if interest rates rise or stock prices fall sharply, how quickly will PwC come up with updated business valuations?

KvdM: "If a deal is being worked on, this is obviously done immediately if the reason for the fluctuation is expected to have an impact on the target. Incidentally, we do not issue 'analyst reports' like investment banks, such as JP Morgan, which frequently do this to give an opinion on the expected intrinsic value of a company in relation to the share price. As such, we only make valuations when there is a trigger. This can be deal related, but also for other reasons, such as the financial reporting of a company or for tax purposes. In such non-deal related cases, we basically consider the situation at the time of the valuation date and facts that took place after the valuation date - such as a starting war - are usually not taken into account. For all valuations done on a DCF basis we determine an Equity Market Risk Premium (EMRP) which is included in our discount rate. The EMRP is the expected return of an equity holder relative to the return of a risk-free investment. To determine the EMRP, we switched internally from quarterly reporting to monthly percentages, given the volatility of the market."

Question: is an inflation with a range between, for example 2 and 5% by definition unfavorable for a valuation?

KvdM: "We expect commodity prices to rise rapidly, making high consumer price inflation likely. On the other hand, we also expect wages to rise sharply to compensate employees for higher prices. Especially as the labour market is undergoing a war for talent. How this ultimately affects a valuation therefore depends very much on the company and to what extent these trends apply. Incidentally, it does make a difference which part of the world you do business from; there are still plenty of countries in the Far East that have moderate inflation and can pass on price increases to consumers in Western economies, especially when it comes to luxury products with low price elasticity. Premium products such as iPhones may become more expensive, but at a certain price level some of the Apple clientele will have to drop out."

Question: these are uncertain times, many entrepreneurial alumni will want to get their sheep on dry land. What should and shouldn't they do to create a favorable starting point for a sale?

KvdM: "Ultimately, in preparation for a sale, a good strategic story must always be presented. This has not changed. How can the buyer create value, what are the future prospects and how realistic are they? The difference is that in recent years there was an awful lot of money in circulation. But investors are now much more critical in their investment choice and the number of investments is currently declining. So good preparation and a strong sales pitch is crucial."

Question: what is the final conclusion?

KvdM: "Based on the share prices, you can assume that the value of most companies has decreased, but with every company and in every sector it is currently important to prepare valuations with the necessary caution. A DCF method makes it clear which parameters ultimately drive the valuation outcome and thus determine the implied EBITDA multiple. The use of multiples of listed companies or transactions prior to spring 2022 cannot be applied just like that. It may of course still be the case that some companies have a significantly higher value than last year even in difficult times, but across the board a decrease in value would not be unreasonable."

Inflation

Question: what did you study to be able to do this work?

KvdM: "I did the master's programme in financial management at Nyenrode, after which I did the Executive Master of M&A and Valuation at the University of Groningen from PwC. The special thing about the Nyenrode programme was its pragmatic nature and the business cases that were presented. This gives you a broader picture than the theory books offer. And of course there is the network that Nyenrode offers. I still have a lot of contact with my sorority, year club and some committees. Unfortunately corona got in the way of the last lustrum trips, but we will undoubtedly make up for this."

Question: what role did the Nyenrode network play in your choice of valuation issues?

KvdM: "A very big role. I did Hotelschool The Hague - which by the way still has been a very good basis for my current role - and when I had to choose a discipline at Nyenrode, my fellow student Marleen Merx (20080065) recommended Financial Management. I started working at Capgemini Consulting but after two years I was ready for a new challenge.

Via Nyenrodian Hind el Gaidi (20080022) I came into contact with PwC Valuations and I still work here with great pleasure. Without these two ladies I would not have reached the position I am in today."

Question: you are married to a Nyenrodian; how do you match professionally in the same house?

KvdM: "That has certainly been Nyenrode's best return on investment. It is great to start a family with someone who is cut from the same cloth. Professionally, we benefit a lot from that because we complement each other because we both have our own expertise."

Question: what qualities must you possess to do your job conscientiously?

KvdM: "Being critical, daring to keep asking questions, but above all, being empathetic. It's not just numbers, it's ultimately a people business. The interests of our clients but also the team I work with are very important to me."

Question: how do you shake off any stress from your job?

KvdM: "At work, I am good at keeping things in perspective and setting priorities, and with my background in hospitality management, I am very stress-resistant. This combination with two young children aged 1 and 3 is sometimes a challenge, but that's part of the tropical years. My always positive mindset helps a lot!"♦

Kelly van den Muijsenberg

GENERAL MANAGER SADIK CEVIK:

GORILLAS OFF TO A FLYING START DUE TO LOW INTEREST RATES

The modern city dweller no longer likes to go to the supermarket, but orders the groceries via an app and has them delivered at home. Since we are all in a hurry, it has to be delivered within ten minutes. The German concern Gorillas has responded to this consumer need with the help of an impressive investment of venture capital. Alumnus Sadik Cevik MBA (20110015) is general manager Benelux of Gorillas. He explains how the flash company deals with high prices and rising interest rates.

BY OELE STEENKS

Question: How did the young history of Gorillas turn out?

SC: "I can't say anything about turnover. For the total company, we have grown from zero to 15,000 employees in two years. It shows how fast it has gone. For the Netherlands, in the last 12 months at headquarters level, we have gone from zero to more than 100 people. We have a workforce of 3,000 here."

Question: in which countries does Gorillas operate?

SC: "Gorillas focuses on five countries: Germany, France, Netherlands, UK and the USA, where we are focused on New York. That's primarily a strategic positioning to possibly expand the business across the U.S."

Question: how was the financing?

SC: "Gorillas was funded with venture capital. We have gone through four rounds of funding: seed capital of $1.5 million, followed by investment series A and B, where we raised $44 million with series A and $290 million with series B. We've raised $1.5 million. With the last series C we raised $1 billion in capital. The financing was arranged from our headquarters in Berlin. The Company has grown tremendously. After 8 months we had unicorn status, which means that Gorillas was worth 1 billion euros at that moment. Never before had a company in Europe reached that 1 billion valuation in such a short time. At our last funding round we were valued at 3 billion euros."

Question: as alternatives present themselves for venture capitalists due to rising interest rates, the pressure on companies with a future earnings model suddenly appears to be increasing. Does this also apply to Gorillas?

SC: "Due to the great interest from venture capitalists, we have not had to take out any loans. Naturally, the financiers require a profit development, so that they can eventually bring the company to the market. With private equity, the horizon is usually four to five years; with venture capital, the rule of thumb is between five and ten years. Investors who want to recoup their investment first can get out with an IPO (Initial Public Offering). The problems with inflation in Germany have caused venture capital parties to place more emphasis on profitability versus growth. That interference came mainly from the Tech world. We had to let some 300 people go at the head office in Berlin. People who were actually there to push the expansion. Here in the Netherlands we had to let go of a few people in Amsterdam, because the city more or less blocked the expansion of our business model. Those people mainly worked on renting and setting up premises, which we use as local distribution centres."

Question: how will sustained inflation affect Gorillas' operations?

CV: "If inflation continues, we will certainly see an impact on consumer behaviour. We will keep the customer's interest in mind, matching our prices with those of supermarkets. I expect the change for our audience to be less eating out in restaurants or grand cafés and cooking more with our products. We will make more use of Jumbo products with ordinary daily products, in order to also attract the lower income brackets. Inflation affects us most on the investment side. We were able to benefit from low or even negative interest rates, which made us an excellent investment option. The yields in the equity market were also extremely low, with yields below three percent. That is why venture capital became proportionally more interesting. Now that inflation is rising and with it interest rates, you see that venture capitalists have different expectations. They want to collect returns faster to counteract rising market interest rates. This leads to more emphasis on profitability instead of growth. Venture capital generally looks at what a company is worth per financing round. We now have people in-house who constantly monitor the valuation. I myself have a masters in M&A Valuation, so of course that helps."

Question: how did Gorillas benefit from the corona crisis?

SC: "In general, we have seen that during the corona crisis, home delivery of groceries has taken off. That has been an added advantage for us to lay the foundation for Gorillas."

Question: what scale and infrastructure must a city have to be attractive to Gorillas?

SC: "The most important thing for us is density - how many customers live within a one-kilometre radius, how quickly can we get to those potential customers? Then we look at the composition of the population. We need a relatively young population for a quick adaptation of the Gorillas model. In student cities, the number of customers usually grows quickly, but in a city like Haarlem it takes a bit longer. There we see that customers order for higher amounts. Of course, that has everything to do with the local affluence of the population."

Question: what role does the smartphone of orderers play?

SC: "We don't have a website; it's a mobile only app. The customer orders from the menu in the app, after which we do extremely fast order picking in the mini-hubs in the cities where we operate. The hubs are logistically optimized, so the runners are at the front and we have wide aisles for the order pickers. It takes one and a half to two minutes to pick the order and prepare it for delivery. We then deliver the groceries within a radius of one to one and a half kilometres. You can even walk that in ten minutes. We know we want to get to the customer very quickly, but the delivery time is not always the first USP. For us it is a crucial part of the revenue model, because with our method a cyclist can deliver three to four orders within ten minutes. Our delivery costs are relatively low; it's an efficient system of shopping, which is also sustainable because we don't pollute or cause unnecessary traffic from customers who go shopping by car."

Question: what is the crucial USP: delivery time, variety of orders, price or customer friendliness?

SC: "Our customers are attracted by the exclusive range, it's all about exclusivity on the platform. We try to build a unique business with unique products. We agree exclusivity with local suppliers or producers of upcoming brands. The assortment can differ per city. In Rotterdam we work with Jordan's Bakery and in Amsterdam with Juice Brothers. We don't give discounts on the assortment because we can't sustain that in the long run. "

Question: how does the Gorillas model work on the procurement side?

SC: "We have a strong partnership with Jumbo in the Netherlands and an excellent working relationship. The Van Eerd family is also an investor in Gorillas. We can benefit from the purchasing advantages of one of the largest supermarkets in the Netherlands. This makes our position in this country strong. In Germany, we do not have such cooperation in the retail chain. There we work from our own distribution centre. On the other hand, the German company can conclude its own contracts with suppliers. Here, Jumbo supplies us from their distribution centres. We also have partnerships with local food suppliers in certain cities. We are now located in 16 Dutch cities."

Question: what promises does Gorillas make to the customer/orderer?

SC: "We are more set on the LIDL model than the Albert Heijn model. LIDL has made huge cuts in the variety of products, they offer a single type of tomato, a type of potato etc. If customers don't care so much about the brand, for example nuts or toilet paper, LIDL only offers the house brand. Therefore they have much less turnaround of goods and leftovers and more freshness. We picked up that concept and determined which premium brands we want to keep in there for our audience. On top of that we decided per city which premium local products we could add. For example, local dairy products, straight from the farmer. We have given our range a local twist, but still charge supermarket prices. That's roughly how our concept works."

Question: in Amsterdam, Gorillas had to close a darkstore by order of the municipality. The policy there is to banish darkstores to industrial areas. Is this a blow to Gorillas’' business model?

SC: "Amsterdam has taken a very extreme approach to speed camera operators. We can't open new hubs in the city centre and we won't get new permits. Apparently there is no room for dialogue, while we have been very proactive. The only thing we can do now is wait until after the municipal elections and start talking to new politicians. We are not much different from pizza deliverers, flash orders from Albert Heijn or from Gall & Gall. However, we are not treated as normal entrepreneurs. Don't forget that there are 250 supermarkets in the city of Amsterdam and often we are in a building next to AH or JUMBO. They attract much more traffic to the stores. I think what's sauce for the goose is sauce for the gander, we should just be treated the same. Rotterdam, Utrecht and The Hague fortunately have a very different municipal approach. In Rotterdam, the municipality thinks along with us, along the lines of how we can make buildings for our darkstores extra beautiful. They realise that, especially in a student city, our service meets a need and that the concept must be made to fit into the logistics of the city."

Question: with the labor market suffering from scarcity, what should Gorillas do to keep its workforce in order?

SC: "We have two target groups for the recruitment of delivery people, students and creative people who like to work for a hip brand like Gorillas. Then you're talking about DJs, artists, writers who can earn extra money at Gorillas. We have a very good collective agreement, where we pay much more for the age group 18 to 20 than comparable companies. We also pay pension, so we have the monetary part well in order. Besides, flash delivery is a fun job, especially in the summer. Some young people go to the gym, with us you can enjoy cycling on an electric bike. Some young people also have the ambition to grow into a head office position. The average supermarket in the Netherlands can't offer that."

Question: how is your career to date?

SC: "After Nyenrode, I worked for several years in investment banking at J.P. Morgan and Rothschild. They were pretty tough jobs because you give advice at senior level on mergers and acquisitions or strategic issues. I then worked for three years for the Oliver Wyman consultancy firm in Amsterdam. I advised a.o. on mergers and acquisitions in the retail business. From there I was asked to work for a pharmaceutical company, where we set up a buy and build of several pharmacies. We acquired companies across Europe and put them into a single entity called Atida. It's an online pharmacy platform. Within Atida, I set up a startup and developed proprietary pharmacy brands. I've been general manager for Gorillas Benelux for over a year now."

Question: what elements of the Nyenrode education made you suitable for this work?

SC: "I came to Nyenrode through a Nyenrode scholarship. I participated in an online business game and won. For me it was the first introduction to entrepreneurship. We worked on setting up fictitious companies, creating business cases or giving advice to entrepreneurs. There I already decided to eventually become an entrepreneur and thought about the experience I needed to get to that point."

Question: what kind of personality should you have as general manager of Gorillas?

SC: "You have to have a kind of obsession for such a task. Otherwise you can't stand up to the 75 years of experience of the big supermarkets. I work on it 24/7. I have managed to build a strong leadership team and the foundations of Gorillas are in place. Perhaps in a follow-up phase there will be room for more work-life balance, but I think due to inflation and the threat of recession, that follow-up phase is now a little further away." ♦

DEBT COLLECTION GURU JIM HALFENS:

"Webshops and energy companies should take responsibility!"

Alumnus Jim Halfens (20010057) is considered an expert on payments and collections. It is the measure of the consequences of inflation and sharp price increases. He takes a close look at Dutch payment problems, which he finds relatively unremarkable. He also makes some pointed observations about doing business with China and African countries, among others. Entrepreneurs are too inclined to write off delivery fraud. Jim proves with the international debt collection company Hakort that many down payments can be recovered, if you can get the right lawyers on the spot!

BY OELE STEENKS

Drs. Jim Halfens and his brother René are serial entrepreneurs who have worked hard in recent years in the legal sector at home and abroad. By now, the brothers have built up a group of companies with three law firms (Van As Advocaten), an interim company for lawyers and jurists (A2 Legal) and an international debt collection agency, which collects unpaid invoices all over the world (Hakort International). The brothers have also set up a collective for legal support for entrepreneurs (Legal Parrot). The brothers are perhaps best known for their Divorce Hotel divorce formula, which was created as a fun side show. With the accompanying television show, this flash divorce format has become a huge success and has already been sold in five countries. Although divorce can often lead to payment problems, we will leave such an open door in this interview. As CCO within the group, Jim is ultimately responsible for all commerce. He emphasizes that he is not a lawyer, but an entrepreneur in legal matters. However, he does appear to have a keen eye for the current consequences of inflation and interest rate rises, which are the focus of this issue! He has the thoroughness that characterizes a true Nyenrodian.

Question: to start with, can you give an impression of the extent to which debtors get into trouble under the current inflationary climate in the Netherlands?

JH: "We do both private and business collections, with the latter category having more revenue significance for us. Private individuals will increasingly run into problems. That is in line with expectations. Looking at the business sector, there is still sufficient liquidity to meet obligations. For example, a lot of money is being earned in the hotel and catering industry at the moment, on which there are tax debts. But at the moment I see no indications that things are going completely wrong in the Netherlands with regard to payment obligations for businesses."

Question: which part of the Dutch population has sufficient stretch in the monthly checking account to pay the sharply increased prices for daily groceries and energy bills?

JH: "As an employee you are dependent on salary increases, which to some extent have to keep up with inflation. As an entrepreneur, you set your own rates. So for people with an ordinary job or benefits will find it quite difficult if there is insufficient compensation. On the other hand, there is scarcity in any labor market, so a zzp'er can say if you want me to come, my hourly rate has increased from 95 euros to 135 euros per hour."

Question: what is the overall payment security of Dutch households?

JH: "It's good to know that we do international debt collection with our company Hakort International, so I have a good thermometer for payment morale in the world. The Netherlands is still doing well with payment security, but in Belgium, for example, there is a boom in bankruptcies. Mediterranean countries like Italy have traditionally had a difficult time paying bills, although relatively speaking you can see an improvement there after the Corona crisis."

Question: Can you give an indication to what extent debts can still be systematically incurred in the Netherlands after the AFM has tightened the rules for screening borrowers?

JH: "Of course it is positive that you cannot borrow unlimited amounts in the Netherlands, but I don't know if you know people who have applied for a mortgage recently. That procedure is the negative side of the story. You get almost full due diligence when you apply for a mortgage. So yes, the protection against irresponsible lending has gotten better than it used to be, but the current practice means that people can't get enough money, for example, to move on in the housing market. Let me put it this way, I think it's generally good at the moment, but I wouldn't be in favour of further tightening the rules."

Inflation

Question: can debtors who get into trouble fairly indicate that budget help is needed?

JH: "If it concerns private individuals with a minimal income, it makes no sense to impose interest rate increases from here to Tokyo on top of the debt and to keep increasing the collection costs, because those people will never be able to pay. There are still too many examples of a man who is unable to pay a EUR 300 debt and is soon faced with a EUR 1 000 debt. That makes no sense, of course. For that category you have to get there faster at the front door."

Question: what new methods are there to prevent problematic debts?

JH: "Generally speaking, when the dialogue stops with a defaulter, the bailiff is called in and a debt restructuring process awaits. We need to get people to indicate earlier that they are having trouble paying their bills. First and foremost, municipal coordinators are responsible for this. They can often make arrangements before legal proceedings are initiated. We also see new initiatives emerging in the courts to prevent bailiffs from coming round the corner. Courts now employ debt assistance coordinators. This means that the case is not dismissed, but that someone who has to appear before the court is guided to the appropriate municipal authorities immediately after the verdict is passed."

Question: or is there still the fear that if you ask for help, the bailiff will be on your doorstep in no time?

JH: "Indeed, many defaulters put their heads in the sand out of fear. If those people start communicating a little faster, there is usually still a lot that can be resolved in practice. What many people do not know is that if you have a debt of one tonne and you can give good reasons why you will never be able to repay it, but you can borrow part of that tonne from friends or family, you can apply to the court for final discharge. That's a very old system, but that's where you should take the defaulter by the hand a little bit better from time to time."

Question: does it make sense to improve communication on debt at the national level?

JH: "Now that inflation is causing problems for the lower and middle classes in the Netherlands, the government has to do something. I think clear information is needed. For many people it is nice to know that there is a hotline for sudden debts. That can prevent a lot of hassle. Let's face it, inflation is only just starting. The first batch of individuals who switched to a new energy contract is still fresh. It's a current problem that needs to be addressed quickly."

Question: with inflation picking up so strongly, can webshops actually still allow payment on credit, or is this actually a lucrative model given the interest rate hikes ahead?

JH: "Many people who get into trouble go to Wehkamp and order a plasma screen TV and a set of Bose speakers on credit. They then put them on Marktplaats to get some extra income. That is, of course, a vicious circle, in which webshops have to take their own responsibility, because there are very high usurious interest rates. A webshop can say, only when you have two orders directly paid, you may order on credit. If an individual always orders on credit, then you just know who you're dealing with."

Jim Halfens for the Divorce Hotel.

Question: can you indicate how inflation and interest rate increases will affect, for example, the private leasing of cars?

JM: "I don't expect the biggest problems to arise there. Of course the rates go up with inflation and rising interest rates, but generally there is a good system of credit checks. I have a number of clients in the car leasing sector, but I haven't seen anything crazy happen yet. Usually this is done by direct debit, until the moment the money is no longer there. The question is when that moment comes. Occasionally we see criminal situations, where the car is lost and cannot be traced. But for the decent contractor, payment problems are usually perfectly solvable."

Question: is a picture of evictions imminent or is this a drastic depiction?

JH: "Most owner-occupied houses in the Netherlands have a considerable surplus value in relation to the mortgage obligations. That leaves room for making arrangements, but fortunately I don't see that increasing at the moment.

Tenants may face problems due to possible dismissal if we find ourselves in a recession. In general, much needs to be done about the rental market, because people in Amsterdam often live on 50 square meters for a rent of 1500 to 2000 euros. That's not good."

Question: do you see mortgage borrowers' payment behavior changing?

JH: "No, Dutch payment morale is good. We are comparable here with the Nordic countries, where the payment morale is very good."

Question: to what extent can energy companies support households in absorbing price increases?

JH: "We have several energy companies as customers. These are golden times for the big names like Essent, Fattenfall and Eneco, because they earn more because of the extremely high prices. I think it would do those parties credit if they took some of the acute pain for individuals. In more cases sudden energy debts could be waived, in case of normal consumption.

I fear, however, that this is wishful thinking. In addition, there is a large number of small energy suppliers operating on the domestic energy supply and demand exchange. These companies have much less security of existence, especially in times of scarcity, so they will not be very accommodating to defaulters."

Question: do you already see the willingness of Dutch people to work less part-time to support household finances?

JH: "We don't see that willingness. We mainly see problems with childcare. People want to work more, but either there is no childcare, or there is no childcare capacity, or the childcare itself is too expensive. If you want to work 20% more to meet your obligations, and you end up with a net reduction in income, nobody will do it. You then lose your rent allowance and other tax benefits. It really is a ridiculous system in the Netherlands. It puts too many people on the handbrake."

Question: to what extent has the classic model of payment reminders, dunning letters and bailiffs had its day?

JH: "My brother and I took over Hakort, an international debt collection practice, five years ago, and if you look at developments in the field of debt collection now, a lot has been automated, so anyone can do your debt collection, but hardly anyone collects the outstanding debt.

In Colombia, for example, if I want to collect a debt, I call our lawyer in Bogata and he goes to the debtor on a scooter, urging him to sign this demand letter. It is very old-fashioned, but it is the only thing that works. So for really bad payers, calling in a lawyer and bailiff is the method that works. Internationally, we do that on a commissions basis."

Question: what can a Dutch entrepreneur who orders parts in China and makes a down payment for them, but then does not receive delivery because of corona, blocked supply lines or problems at the container port, do?

JH: "First of all, you have to deal with Chinese law, because that's what you signed up for. You would then have to engage a Chinese lawyer to contact the supplier to see what legal steps are possible.

That process can take a long time and the costs can be considerable. However, what I increasingly advise is to send an invoice to the supplier for the costs incurred and for the loss of turnover, and to collect that invoice again. A lawyer will say, well that's nice and flat. But I assure you this works in a large number of cases. I just finished a case like this and recovered a ton for a client. As you point out, these types of collections are very common in China, because a huge number of entrepreneurs get their products or parts for manufacturing from China. South Africa and other African states are also among the problematic countries, often involving the supply of fruits, vegetables and flowers. In short, products that are perishable. Many entrepreneurs tend to write off receivables, but then say give them to me.

I can easily collect receivables in many countries and I do that on a no cure no pay basis. China and Africa are difficult, but we always score on good receivables. I happened to have a case in Nigeria and we won it. We succeeded because I was able to call in a lawyer who went out to investigate the matter personally. He found out what kind of company it was, where it was locatedbecause in many African countries there are no street namesand what its financial position was. I call that the pre-legal process and on that basis we filed a claim and collected it.

We can advise clients on assessing delivery reliability and payment practices when doing business around the world. It's important for a business owner to have a good understanding of the country they want to do business with; much revolves around the national law under which deals are done. In collections, we often try to work outside South African law, for example." ♦

Question: APG AM invests in real assets. Can you tell us more about that?

KK: "APG AM is one of the world's largest investors in Real Assets, a collective term for real estate, infrastructure and natural resources. For our pension fund clients, we invest in private and listed entities. We also work with foreign asset managers in large investments. In my role, I contribute to achieving the investment objectives of our pension fund clients and Asset Owner Partners. These are foreign asset managers who co-invest with us through the allocations to our strategies."

Question: what makes APG AM unique?

KK: "APG AM has a Real Assets portfolio of approximately 80 billion, diversified across regions, sectors and risk groups. We have both the scale and the skill to close and execute large and complex transactions with the agility and speed of a boutique investment firm. While some parties focus on one particular investment structure, we move across the spectrum of structures including direct investments, funds, co-investments, club deals and joint ventures. Depending on the investment, we can also make investments anywhere within the capital stack, the capital structure. But we particularly focus on equity and equity-related instruments. We have recently won many awards with our approach, including the IPE Real Assets & Infrastructure 2022 Investor of the Year Award."

Question: Inflation and rising interest rates are big challenges for pension funds. What does that mean for investment strategies in general?

PENSION

FUND INVESTOR KATHERINE KUCHERENKO:

all, keep looking at the long

Katherine Kucherenko (20080333) is Senior Investment Specialist Global Real Assets at APG Asset Management. How does APG ensure on behalf of its 4.8 million pension fund clients, also in the long term, a good collective pension in a liveable society, despite the difficulties the financial markets are facing? We talk to Katherine about the adjustment in the investment strategy for Real Assets.

"Above all, keep looking at the long term," is her key message. Katherine was born in Odessa and came to the Netherlands at a young age. In 2003 she studied at the High School in Utrecht, after which she studied at Nyenrode and in Oxford.

KK: "Interest rates are going up and that means the value of the liabilities is going down, the funding ratios are going up, so that's positive. We come from a 'lower for longer' situation where pension funds didn't have to worry about inflation, which was reflected in their asset mix. Inflation has not been an issue in Europe for a long time. The current inflation rate of 8-10% is substantial and the question is whether investments are now well positioned with this inflation scenario. And now that funding ratios are rising, the question is: what to do with the interest rate hedge? Pension funds with high funding ratios want to avoid interest rate risk. Every asset class behaves differently. Global equities and bonds have previously shown disappointing returns during periods of high inflation. Real assets are generally a more attractive category: cash flows are stable and inflationary pressures are transmitted, the assets are relatively resilient. From a historical perspective, by the way, it is not yet fully demonstrated because there is little data on infrastructure returns in the 1970s; it is a relatively young asset class."

Question: you are looking at megatrends, where does this situation present opportunities?

KK: "We have identified five megatrends that provide long-term direction for our investment strategy. During the pandemic we found that these trends are not only still relevant, but are actually accelerating. Thanks to this approach, we are well positioned to weather the 'four seasons' of the economic cycle. This also applies to the current economic situation. But even in these times there are opportunities: asset valuations at the time of acquisition are lower and there is less competition, allowing us to maximize the value of the pension assets. Eventually, this cycle too will pass. Together with APG, ABP is celebrating its 100th anniversary this year. In the past 100 years, the fund has seen many downturns: the Great Depression, the Second World War and the Global Financial Crisis in 2008. Obviously, this

"Above

term."

period of high inflation requires a lot of focus and care when making investment decisions, but we look much further ahead than the next decade and work continuously to be resilient and agile for the next 100 years. For example, with infrastructure investments, the thirty - forty year horizon is not unusual. The complexity of the Asset Liability Management analysis, the ALM, in this uncertain period does not pose any problems for the time being; thanks to mathematical models, various economic scenarios are being mapped out. There are a few more scenarios now than there were in the 1970s."

Question: you mention infrastructure as one of the Real Assets. Can you give some examples of recent investments?

KK: "We invest with the aim of achieving long-term, stable returns for our clients. Our portfolio is fully diversified. By transport you can think of airports, toll roads, ports, trains and railways; in the case of social infrastructure there are hospitals and schools. In utilities, energy transition is now an important theme. We invest both in energy generation, such as wind farms in Oostflakkee, Krammer and the German Merkur, and in energy saving through efficient energy transport and storage. We recently invested in the Dutch company Groendus, which is active in, among other things, solar projects, smart metering services and sustainable energy solutions. For renewable energy, the current situation is even positive - their energy capacity has become more valuable. To make use of the new technologies, our society needs access to high-speed fibre-optic networks. APG AM is one of only a few parties in the world capable of handling the scale and complexity of these types of transactions. Some examples of recent investments are the KPN network in the Netherlands via Glaspoort and the Orange network in Poland. Together, these give just under 3.5 million households access to fast and reliable internet."

Question: APG is number 1 in the PERE top 100 Global Investor, the list of the largest real estate investors worldwide. Can you give some examples of your investments?

KK: "At Real Estate, we invest in 'mature' sectors and entities, but also help start-ups to develop their new concepts and platforms and make them successful. For example, for our largest client ABP, through an investment in Vesteda, we manage 2.5 billion worth of rental properties in the Netherlands. Over a decade ago we co-founded the hotel chain Citizen M, which now has more than 20 hotels and prospects for many more locations. More recently, we launched a new lifestyle and hospitality brand, The Other House. With two locations in London: in South Kensington and in Covent Garden. We believe that both business and leisure travellers are looking for more flexibility, style and personal service; the brand responds to this.

In the retail property sector, we own Batavia Stad, Roermond Designer Outlet, Cap3000 in Nice and Bicester Village in Oxfordshire, among others; the latter is a retail property location with the highest turnover per square metre in the world."

Question: APG AM is known as a frontrunner in sustainable investments. How is that reflected in your investment strategy?

KK: "We always invest with a strong focus on the highest ESG (Environment, Social and Governance, ed.) standards. Elements of return, risk, cost and ESG factors are continuously weighed throughout the investment process in order to achieve superior

risk-adjusted returns and to beat medium- and long-term benchmarks through active management. In 2009, APG AM co-founded GRESB (Global Real Estate Sustainability Benchmark) and has beaten the benchmark every year since. GRESB certification is now also mandatory for all new investments. Additionally, in 2019 APG AM co-developed 'CRREM' (Carbon Risk Real Estate Monitor) and it has since been embraced by the entire real estate sector, with the aim of measuring and managing transition risk to align with the Paris climate goals. In addition, we are continually discussing sustainability with all stakeholders, a recent example being a pop-up store in Batavia Stad where the conversation about sustainable clothing was initiated.

Question: interest rates, inflation, war. What is the most positive outcome we can hope for?

KK: "Getting inflation under control is difficult for the Central Banks. The ECB and the Fed are going to raise interest rates, but will they go through with it? They may not raise interest rates sufficiently and central banks may continue to lag behind. With high inflation and low economic growth we will end up in stagflation. Especially in the Eurozone this is a big risk. If stagflation continues there will be another interest rate hike. This 'Stop & Go' situation is difficult for investors. You have to continuously anticipate the actions of central banks. What would help enormously is an end to the conflict in Ukraine. Political uncertainty in Eastern Europe is negative for the economic outlook. Our task is to keep an eye on the very long term and ensure an optimal spread in the portfolio. This includes a real asset strategy. That helps us minimise the longterm negative effects of inflation and rising interest rates."

Question: you mention the conflict in Ukraine. That obviously affects ongoing investment decisions. But also you personally. What is your take on the conflict?

KK: "It is incredibly sad that in 2022 people have to lose their lives in the fight for ideologies. We learn very little from history and governments are still unable to cooperate with each other. There is a constant clash of ideologies and the conflict in Ukraine is the result of this. This conflict is much more complex than it is often presented. It is perpetuated by all parties. Again, it is important to look beyond a decade: 100 years ago, much of the territory being fought over today did not even belong to Ukraine, and in 100 years, the geography may look very different from today. Whether the preservation of territory is worth human lives or not, there are differing opinions on that and this creates a great divide."

Question: and then you live far away, what can you do?

KK: "Before the conflict I went to Odessa almost every year. Now I could be there, but since Ukraine is currently isolated, there are few opportunities to get there. What affects me and everyone else is the suffering that is currently increasing by the day. In order to do something about this, together with some like-minded people within the financial sector, I have set up a fund, 'Finance for Ukraine' which supports small-scale initiatives by local volunteers who help hundreds of people and animals in need every day (www.financeforukraine.com ed.). Should there be, hopefully, a positive development in the near future, the fund will focus on rebuilding the country and creating opportunities for Ukrainian talent. This is a very small contribution we are making to ensure that the world will look a lot better in 100 years than it does today." ♦

Inflation has a lot to do with the problems that have arisen in the international production chains. The threat of recession does not come from a lack of enterprise money, explains Dr. Ir. Taher Ahmadi. He is a lecturer in Operations & Supply Chain Management at NBU. The underlying problem is that governments have pumped a lot of free money into the economy, which now can't be used for business because of a lack of chips and other components. That drives up prices!

BY OELE STEENKS

TAHER AHMADI (NBU)

Question: what is the relationship between inflation and supply chain management (SCM)?

TA: "Supply chains are dynamic systems that can have complex structures. To understand and analyze such systems, we need to simplify them. One form of simplification can be to represent supply chain configurations in terms of supply and demand sides.

For convenience, we can explain inflation based on a supplydemand model. In short, inflation occurs when there is an imbalance between supply and demand such that excess demand chases a shortage of goods or limited services. In my opinion, the main cause of current inflation is a combination of the lack of supply on the one hand and too much market demand on the other. The lack of supply is due to multiple global supply chain disruptions caused by a range of factors. I mention Covid-19 lockdowns, climate risks, global energy crisis, congestion in seaports, shortage of fleet capacity, labour shortage, global shortage of chips. Too much demand in the market is due to the high growth of money supply.

This comes from injecting free money, as was done by governments especially during the Covid-19 pandemic to support businesses."

Question: what is the medicine?

TA: "To resolve this imbalance, central banks like the European Central Bank (ECB) and the Federal Reserve (Fed) can reduce liquidity in market demand by raising interest rates. But the big question is how such an aggressive monetary policy can solve supply distortions when that is precisely the main cause of inflation itself. It is noteworthy that if central banks go too far in raising interest rates, the global economy faces a degree of recession!"

Question: in the global economy there are long production chains; how do they affect the level of inflation?

TA: "On the supply side, inflation leads to higher raw material costs, transport costs, production costs, energy costs and compensation packages for producers. If some chain partners cannot increase their selling prices because of their position in the market, they may go bankrupt and disrupt the entire supply chain. Clearly, a longer supply chain can lead to higher inflation with increased risk. After all, everyone wants to raise prices along the chain to maintain their positive profit margin and remain profitable. In this sense, we will have a supply line of inflation! Therefore, supply chain disruption fuels inflation and this share of inflation can disrupt downstream product flow and subsequently amplify overall inflation in the market!

On the demand side, inflation reduces the purchasing power of customers. They have to prioritize their purchases. For example, they spend more on essential products than luxury products. As a result, inflation leads to a drop in demand for some nonessential products and this development in turn disrupts the upstream cash flow in their supply chains.

If you look at these three flows - product, cash and information flows - they are correlated. For example, during the great recession of the last century, cash flow was disrupted; however, it also resulted in the disruption of product flow because there was not enough money to be spent by consumers. To make a long story short, inflation can change customer buying behavior and disrupt supply chain cash flow in some industries. In turn, the change in customer buying behavior can cause a demand shock and lead to more inflation for some products with more demand, while the associated supply remains the same because of capacity constraints."

Question: what is the effect of rising interest rates? TA: "Rising interest rates increase the cost of capital. Chain partners that rely on bank loans to run their business will have higher costs and in the worst case, they may go bankrupt. This leads to a disruption of downstream-going product flow and upstream-going cash flow in the supply chain. Raising interest rates also increases the cost of holding inventory.

As a result, supply chain partners tend to hold less inventory to reduce inventory management costs. Consequently, lack of inventory in the supply chain can disrupt the smoothness of downstream product flow. At the same time, what is happening on the demand side? Interest rates go up and so the central bank squeezes liquidity in the market. In other words, there will be less money in the pockets of consumers that they can spend on goods and services, so there will be decreasing demand. Needless to say, this phenomenon affects upstream cash flow. In the worst case of a recession, when cash flow is disrupted, the downstream product flow will also be disrupted."

Question: SCM seems to function in an open international economy; unexpected international problems such as the covid pandemic in China and the war in Ukraine are causing serious stagnation in supply chains that cannot be anticipated in automated SCM models. True or false?

TA: "From a globalization perspective, it's right. As global instability increases, through, for example, the Covid-19 lockdowns, the US-China trade war, the armed conflict between Ukraine and Russia; expect more stagnation in the current international supply chain. For example, it has been shown that as many as 169 industries have been affected by the ongoing global shortage of computer chips. This shows how companies in different industries are connected on one side and how the global supply chain is vulnerable on the other. The current global supply chain structure will be changed, it was discussed at the G7 summit and other global forums.

This is especially true for industries that have other industries with a high impact on the national economy and security as customers. The deglobalization of the supply chain can take various forms, such as reshoring or nearshoring. This can be a long-term plan for companies that have a global supply chain and want more control over it. This move is not a trivial one and it requires a lot of effort, time and investment.

However, with short- and medium-term change, companies need to look for new SCM models to survive today's broken global supply chains. Unlike conventional SCM models based on cost efficiency and responsiveness concepts, the new SCM models should be based more on agility, resilience and sustainability concepts as disruption becomes the new normal."

Question: it is very likely that automated price increases will continue; could this increase profitability in the medium term?

TA: "I don't believe so, because to some extent everything is connected to everything else in the global economy. As selling prices rise in more and more industries, production costs will rise in response. Some industries may get away with a slowdown; but sooner or later they will all be affected. With current high prices expected to remain longer due to the aforementioned disruptions, companies will have to look for new strategies to fight inflation."

Question: which countries in the Far East can be seen as an alternative to Chinese production and supply?

TA: "Due to the uncertain business environment caused by the US-China trade war, companies are moving part of their global supply chain from China, as a global manufacturing hub, to other countries in the Far East, such as Vietnam, India, Singapore and Malaysia. The success of these countries in this mission depends on how their governments and policymakers provide support and incentives for such transitions."

Question: microchips have become a scarce commodity; can you explain what an effective SCM model will provide as a benefit?

TA: "The global shortage of computer chips as an integral part of modern technology has affected the production of goods and services from a wide range of industries. With the increased

dependence of products such as cars, aircraft, medical equipment, home appliances, smartphones, laptops, TVs, PCs, printers, game consoles, toys, robots and military systems; on computer chips, the demand for chips is skyrocketing and their impact on the global economy is significant. Therefore, a more reliable and diverse semiconductor supply chain is a necessity. Semiconductor manufacturing can be divided into three main steps: design, manufacturing and ATP (AssemblyTesting-Packing). The US is a world leader in semiconductor R&D, while most of the manufacturing and consumption is done in Asia. Here I want to highlight three opportunities that can help with the global chip shortage. First, diversify the production of the chips around the world. This means shifting some of the production steps to the US and EU. In this case, more secure chip delivery to US and EU companies will be guaranteed, as it is much easier to control manufacturing aspects with onshore production. However, before making such a decision, we need to ensure a continuous supply of silicon, spotless facilities, and reliable and large sources of electricity and water. Promoting domestic chip production in the EU and US will require support and incentives from policy makers. The US plans to offer $52 billion incentives to chipmakers when they open their new facilities in the US.

In this regard, Samsung's plan to invest $17 billion in a chip plant in Central Texas, Intel's plan to invest $20 billion in a pair of new plants in Arizona and Taiwan Semiconductor Manufacturing Co.'s (TSMC) plan to invest $12 billion in a facility in Arizona are some examples. The second is vertical integration of the supply of chips. Companies with goods or services that depend on chips may start producing computer chips themselves to meet their demand. For example, Volkswagen plans to produce computer chips to become more independent from the global supply chain and compete with other rivals over the limited global supply of computer chips.

However, this option requires a huge initial investment by Volkswagen. The third option is to redesign products that require chips. Companies that need computer chips as inputs to their operations can focus on their product development and see how they can change the product design to use the available version of computer chips.

For example, Peugeot decided to replace digital speedometers with more old-fashioned analog ones in its new 308 car model in response to the global shortage of computer chips. Similarly, Tesla rewrote its vehicle software to support other available alternative computer chips."

Question: the US has exported high-tech machinery for chip production to China; is it conceivable to bring this company back to the US?

TA: "No doubt, semiconductors are key to economic and

national security. Chip demand is going through the roof and existing global capacity is lagging far behind! US tries to ban semiconductor machine manufacturers from selling leading machines to China. According to Bloomberg, the US is urging the Dutch government to ban ASML from selling its lithography machines to China. These machines are the essential technology in making large chunk chips by chipmakers around the world. Logically, chipmakers are expanding their capacity by setting up new facilities.

The purpose of the US $52 stimulus plan is twofold. To bring the chipmakers to the US territory on the one hand and prevent them from going to China on the other. Keep in mind that the semiconductor industry has a global supply chain and of course the People's Republic plays an important role as a major customer, but not as a major producer so far. China has long term plans to be self-sufficient in its domestic chip consumption. However, it is behind schedule!"

Question: should the leading Western European countries, such as Germany and the Netherlands, work to bring home the production of various commodities, using processes of automation and robotization?

TA: "In this case, a trade-off must be made based on the importance and benefit of the products and the additional cost or investment required. In my opinion, products related to national health and safety, for example personal protective equipment known as PPE products, should be reused and given a full domestic supply chain at any cost. For other commercial products, I don't think so because it can significantly increase operational costs and lead to the loss of market share. For Western companies, in an extreme case, the main raw material for production comes from countries in the Far East and the final product is also sold mainly in markets in the Far East!"

Question: does NBU excel at training managers and entrepreneurs in SCM? TA: "I do believe so. In NBU's organizational structure, we have a Marketing and Supply Chain Management (M&MSC) Center with SCM experts. For example, I am responsible for teaching Operation Management (OM) in the BSc program and Operation and Supply Chain Management (OSCM) in the MSc program. Depending on the level of the program, we use different educational tools and methods.

We try to help students understand the fundamental OM and SCM terminologies. Furthermore, we make sure to develop critical thinking and problem solving skills. This is done through lectures, class discussions on current SCM problems and opportunities, business cases, business games, group work, and presentations. In short, we help students and trainees develop their own OM and SCM perspectives that enable them to connect the dots in today's dynamic business environment." ♦

AT DE VOLKSBANK

ROBERT ENTERS:

"We exist to help people move forward."

In these times of rising interest rates, De Volksbank, of which the state is the sole shareholder, accepts lower returns in order to maintain the human scale.

Alumnus Robert Enters (19950050) is innovation manager of the parent company of SNS, ASN Bank, RegioBank and BLG Wonen. He protects three million customers against unethical practices when opening savings accounts and taking out loans and mortgages.

BY JAN VINCENT MEERTENS

Dr. Ing. Robert Enters studied Aerospace Engineering and Nuclear Engineering at Worcester Polytechnic Institute in the U.S. state of Massachusetts. Aerospace was the profession of the future. There were all kinds of plans to establish bases on the moon and elsewhere. He added nuclear physics because he believed that you had to have your own energy with you on the planets, and that had to be nuclear energy. He graduated cum laude at Worcester but was by no means alone. Because of the Cold War, the West had invested heavily in space programs. But even during his American studies, international relaxation led to the scaling down of these programmes. Enters decided to take management courses, including at Nyenrode, where he obtained his MSc in 1996. He is now innovation manager at Volksbank, the parent company of SNS, ASN Bank, RegioBank and BLG Wonen. As a bank with over 3 million customers, Volksbank wants to distinguish itself with the social impact it makes. And the bank is about more than just money, its motto is banking on a human scale. Robert is mainly concerned with long-term developments. Analyses of what's coming our way and what to do with it. And the question is: where do you want it to go, should we want it that way? Key concepts in his work are #ethics, #futuring and #societyandculture.

Question: banks, including Volksbank, are making increasing use of technological innovation. You work with algorithms, among other things. Yet 'banking on a human scale' is a core value. Doesn't that value come under tension with technology?

RE: "In my position as innovation manager, I realized that ethics are becoming increasingly important. We live in a world in which more and more is technically possible, and we no longer do things because we have to, but because we can. Laws and regulations are lagging far behind, so we have to take responsibility ourselves and ask ourselves whether we should want the things that are possible. As ethics officer, I assess, for example, the use of artificial intelligence (AI) at Volksbank in relation to the ethical principles we apply. The AI models are broadly used for marketing, human resources and also risk management to identify money laundering, for example. My role is to create ethical awareness in all layers of the Volksbank banks when using AI. I work closely with the data scientists who develop AI and help them to monitor the ethical principles. One of those principles is that as a customer you know that you are exposed to algorithms that can influence your decisions. We also want to exclude discrimination, of course. We use several methodologies for these purposes, including the algorithm audit by Cathy O'Neill, author of Weapons of Math Destruction."

Question: that sounds threatening to an average Dutchman?

RE: "Many people overestimate how smart artificial intelligence is. It's like driving backwards through the rearview mirror. You pump out data from the past and try to recognize patterns. But you can't actually predict anything, we don't know where it's going. AI continues to develop, of course, and regulation is essential. The problem is that there are too many people in government who have no understanding of artificial intelligence.

There is a high degree of humanity in the bank, which is also why the data scientists themselves have come forward with their need for guidance. They were modeling and seeing where things could go wrong. They weren't okay with that. They want that to be looked at. It's typical of Volksbank that there's a lot of room for initiative to do what's right."

Question: what does it mean that the government has different hats at the table with you, as shareholder, privacy watchdog and investigator?

RE: "We are not always happy with the requirements set by the government. On the one hand, the APG says we are not allowed to use certain data, while DNB and the Ministry of Justice say you have to use all means to combat fraud and money laundering. It also hands out fines for that. But then, in practice, privacy quickly falls by the wayside. And that's a sticking point. We're not an investigative agency, but we're used to it. The culture within Volksbank and its brands, which naturally have their own signature, is that we exist to help people move on. We have a strategy of shared values, not just shareholder value. But this also creates an area of tension. Because the shareholder is the State, and it simply wants to see a return. Our management opposes this because we want to continue to bank on a human scale. To that end, we accept a lower return on equity. Unfortunately, this is an ongoing battle with our shareholder."

Question: we are in a perfect storm. The climate, the war in Ukraine, inflation, labor imbalance. What's coming at us in your vision?

RE: "We are indeed in a perfect storm. It will continue until 2050. We are at the end of a series of waves of the industrial revolution and there is an overall regime change going on. But societies are still stuck in old structures. Structures that gave us a grip on our environment and helped - and still help - to generate physical power with which we can produce and move around.We have always been busy strengthening ourselves physically. And we have only recently begun to strengthen our intelligence, to strengthen our own thinking. We're in a transition from strengthening physical strength to strengthening mental strength. That's a whole different game, it takes different things. Most people haven't figured that out yet, so there's a lot of misunderstanding and resistance. People think linear, they think everything goes on. But that is not the case, we are going through a gigantic trend break. The chaos is only going to get worse, we ain't seen nothing yet."

Question: until recently there seemed every reason to be optimistic, until corona ambushed us?

RE: "The pandemic is not a coincidence. At the end of a cycle everything is coming along and there is a sort of hosanna atmosphere. The wars breaking out now are two systems fighting. The old dictatorial industrial system that clings to physical power and demands obedience. And the system that breaks away from that and experiments with freedom, letting curiosity run its course. You already saw it in business, where disruptive companies emerged that are opposed by established companies that have everything to lose. It used to be the same way. Immeasurable companies like Standard Oil that had to be broken up because they became too powerful. Now the same questions are being asked. Shouldn’t Amazon be broken up? What about Meta? Freedom has created excesses and society, through the government, must intervene. This is going too far, we don’t want this anymore.”

Question: what does this mean for consumers who bank with Volksbank?

For mortgages and savings?

RE: “A mortgage is not necessarily the concern of the consumer. That’s the bank’s concern, they lent money. It is the savers who should have concerns about their money. We used to advise customers to save as much as possible, especially customers who bank with our brands. With higher inflation, we have to go back on that. It is not unwise to also invest for the medium term. Ultimately, companies will pass inflation on in their prices and maintain their profits, so investing can be a hedge against inflation. Savings always lag behind. But our banks are always

careful and will not do anything in crypto, CDO’s and other complicated products any time soon. De Volksbank is of course a commercial organisation, but with a human touch.”

Question: do you think there is a chance that the big disruptors like Meta and Amazon will take over banking from traditional banks?

RE: “Ultimately, money is a matter of trust. That’s why I don’t think the big cyber organizations, like Meta and Amazon, will take over the role of the bank any time soon. The trust in those organizations is lacking. There will also always be things that are determined by a government, or that governments agree with each other. Of course, it is possible that governments agree to recognize a particular cryptocurrency and cooperate in a valuation. But I don't believe a free market can emerge, without government oversight, that replaces the banking system. A global digital currency is theoretically possible, but only if it is initiated by central banks and thus governments. It just doesn't seem realistic to me. Different economies develop at their own pace and the strength of their currency in relation to that of others indicates the relationships between economies. The Euro already causes many problems within a relatively homogeneous Europe. Germany's economy has developed differently from Italy's, for example, let alone Laos'. There are waves and systemic changes, but the basic functionality of banking has existed in various forms for 6,000 years."

Question: these are big topics you're dealing with. How do you go about it at home and in your spare time? Do you let them go, or do you want to bring your children into that broad view of the world?

RE: "Right after my studies I went to the kibbutz to create space in my head and to get a different perspective on daily life. Now we indeed take the children with us to let them see and experience more of the world. We have two sons, Coen aged 13 and Max aged 15. We enjoy nature, but also see how the country struggles socially and economically. For instance with refugees and immigrants from surrounding countries, with the past and with still a lot of poverty. These are also instructive themes for the children so they realize that we have it very good in the Netherlands. We have also been to Costa Rica, Mauritius, Egypt and Lapland with the boys. But also closer to home. Schiermonnikoog and Vlieland are our favourites. The ferry works as a kind of transition from daily life to holiday mood. Furthermore, one of my hobbies is designing games. Board games or card games. I also use this kind of knowledge around futuring, namely the necessary 'gaming' principles and scenarios that help you think about the future. I like to read, like the books of the fantasy series 'Wheel of Time'; yes, also my choice of books is mostly about future and fantasy. Professionally, 'Exploiting Chaos' by Jeremy Gutsche and 'The Value of Everything' by Mariana Mazucato." ♦

"At the end of the day, money is a matter of trust."

SPIDER IN THE WEB OF INFLATION DRIVERS!

Pon.Bike is an international market leader in the bicycle industry. The basis for its success is the management from Taiwan of a complex network of parts production in Asia. Alumnus Erwin den Breejen (19910197) is general manager Asia Operations. In practice, he has to deal with many of the factors that fuel Western inflation, such as the shortage of chips, covid measures in the People's Republic of China, geopolitical tensions in the region and rising labour costs in mainland China.

BY OELE STEENKS

The Den Breejen family eating out in Taiwan

Question: how is inflation developing in Taiwan and in the East Asia region?

EdB: "Inflation here in Taiwan, but also on the Chinese mainland, is not so bad. Think of a percentage between three and four percent. That in itself is a healthy development, because part of your turnover comes from price increases. Look at Japan, where there has been no inflation for twenty years. Those were lost years for economic growth. It is also necessary to bear in mind that in East Asia, the population is ageing considerably, which is having a dampening effect on demand. About Taiwan itself, I can say that wages are not rising fast and that the local currency, the new Taiwan dollar, is extremely well guarded by the central bank."

Question: a major driver of Western price increases is the stagnant supply of microchips. Taiwan supplies about half of all microchips. What has happened in the last two years that has disrupted production?

EdB: "I live in Taichung, which is also known as the world capital of mechanical industry. From my base, I have a better overview of the problems that have arisen with chip manufacturing than the average newspaper reader. When the corona pandemic broke out in the People's Republic of China, many clients from the US and Europe cancelled orders deep into their supply-chain in Asia. Those abrupt actions greatly affected chip manufacturing in Taiwan. Clearing the backlog now will take about three to five years, mainly due to long lead times on machines used to make wafers and chips.

One exception was Toyota. That company immediately determined that chip manufacturing was a critical part of the supply chain. So Toyota kept ordering, while many other world producers postponed their orders. Keep in mind that the latest generation of cars needs 5 times more chips than the previous ones. So the expectation that chip demand would experience a dip turned out to be wrong, autonomous demand actually picked up sharply."

Question: was this a punishment for the just-in-time principle in logistics?

EdB: "On condition that you have the container shipments under control, you can agree on a long time horizon with the suppliers in the Far East and precisely plan the production of parts and the assembly of products, so that they are shipped on time. When orders were suddenly cancelled by Western clients, after which shipowners reduced the number of sailings, things started to grind. Backlogs had to be made up more quickly, which led to the delivery problems we are now experiencing internationally. So Western companies did contribute to the scarcity of their own parts."

Question: The Taiwan Semiconductor Manufacturing Corporation (TSMC) is worried about a brain drain to the People's Republic of China; what do you make of that?

EdB: "In Taiwan, it is the company you want to work for as a talented engineer or manager. The bonuses can amount to sixty times a month's salary. TSMC is surrounded by a cluster of companies that do more or less the same thing and take over the production of previous generations of chips. The People's Republic of China is indeed pulling good chip technicians from Taiwan from all sides. For this purpose the Chinese are setting up shell corporations in

Taiwan. The government here has a special investigation unit to intercept Chinese shell companies as quickly as possible. That has become a cat and mouse game. Also, engineers nearing retirement are lured to China with huge sums of money to work there for a few more years and attract new talent from Taiwan. In retaliation, TSMC managers and technicians receive a stamp in their passport forbidding them to travel to China for five years. Virtually the same regime is being imposed on former TSMC senior management as on former military personnel."

Question: are you personally affected by interference from the Taiwanese government?

EdB: "I have set up a few corporations in Taiwan. That goes very smoothly, until you have to prove, that you are not acting on behalf of Chinese investors. That involves a big pile of paperwork."

Question: TSMC is building new chip factories in Japan and the US; how essential are these investments?

EdB: "Taiwan recognises that it is good to spread the risk, but the production in the US is not the latest generation of chips. Here, the press is also suggesting that Taiwan is giving away some of its dominance. But there is a limitation here on the number of employees, the amount of land and the availability of clean water, which is needed in the chip industry. What is happening now is that TSMC is developing production space in Taiwan itself for its latest generation of chips. With that, the company is not even in a battle with China, but with Samsung in South Korea."

Question: what is the lifetime of a generation of chips?

EdB: "The lifespan is extremely long. The bulk of the chips used in products worldwide were developed 15 years ago. So they can be moved around the world. The run-up to a new generation of chips takes about five years. We are now at a density of two nanometers, while we are coming down from three nanometers. However, it will become increasingly difficult to make them even smaller. The dependence on the main supplier for the chip machines, namely our Dutch company ASML, is becoming increasingly important. I was on the plane back to the Netherlands last Friday; then a third of the seats are occupied by people from ASML."

Question: the production of microchips requires the presence of plenty of clean water. Taiwan has a long history of abundant rainwater, but the country faced its first drought. Is it likely that Taiwan will also be affected by climate change?

EdB: "A typhoon in Taiwan brings as much rain in three days as falls in the Netherlands in one year. Last year there were too few typhoons and there was indeed a drought, and it turned out that the maintenance of the necessary reservoirs was poor. The soil consists of quite loose sediment. You have to dredge to keep the reservoirs at capacity and the government had pretty much let that slip. There is the concern that the precipitation pattern is a little more erratic. This has certainly affected chip production. Last year was a real wake-up call and stringent measures were taken. Water had to be delivered to the chip factories in tankers. That did result in a loss of capacity. However, the factories responded with lightning speed by building recycling facilities for the water they use in the manufacturing process."

Inflation

Question: how important are environmental issues for Taiwanese producers? The country emits 11 tonnes of carbon dioxide per inhabitant, while 4 tonnes is the international average?

EdB: "A country without a manufacturing industry will end up with a lower carbon footprint per inhabitant. Moreover, environmental legislation here is reasonably adequate, but there is room for improvement in terms of enforcement. There are no bribes. In that respect, the country has made real progress in the last 15 years. It's not like Vietnam, where every government agency comes along and starts talking about 'coffeemoney' themselves."

Question: Taiwan imports 97% of its energy fuel needs from abroad, which are oil, gas, and coal. How does this dependence affect Taiwan's local economy?

EdB: "Taichung has the largest coal-fired power plant in the world and it's noticeable in the air. Taiwan realizes that they cannot keep this up for another 15 years. For decades, the country has had one of the lowest energy rates in the world. Just two weeks ago rates were raised by 8%. People are considering playing with energy tariffs that can vary as factories produce cleaner. And there are huge bets on solar and wind. The entire west coast of Taiwan is being filled with wind farms."

Question: what is the relationship between Japan and Taiwan?

EdB: "The two peoples get along well. Here they get along much less well with Koreans. You see Japanese and Taiwanese companies working together to counterbalance the speed of development in South Korea. This is partly due to the fact that Taiwan was a Japanese colony for 50 years, from 1895 to 1945. The older generation can make the comparison with the government that the Chinese general Chiang Kaishek established on the island of Taiwan with his political movement, the Kwomintang (KMT). In his wake, two million Chinese fled the communist insurgents on the mainland. Chiang ran a reign of terror on this island for 25 years. He was internationally regarded as the leader of mainland China until 1971, but then followed the UN's recognition of People's Republic of China. Chiang's son introduced a more democratic model, but many original inhabitants of Taiwan still prefer the Japanese State Model."

Question: what accretion is there of Western companies in Taiwan?

EdB: "This is mainly due to the demand for clean energy. When I sit on a plane, there is a contingent of Germans and Danes who provide wind energy above the surface or above sea level, and a contingent of Dutch and Belgians who provide the foundations. Furthermore, there is a rapid Western accretion into the biotechnology sector."

Question: how does the Pon.Bike production network in Asia work?

EdB: "We have a large number of suppliers in Asia. For our premium brands, we only have parts made in Taiwan, China, Vietnam, South Korea, Malaysia and Singapore. These preferably go to Rotterdam by container. We ship thousands of containers a year, after which we assemble the e-bikes and bicycles in Europe at the Gazelle factory in Dieren, the Kalkhoff factory in Germany and the Cannondale factory in Almelo. We also have a factory for assembling high end sportbikes in Mainz. At the moment we are building a huge bicycle factory

Tens of thousands of parts for shaft assembly in Europe

in Lithuania, sending one and a half million parts a day from Asia to the West. I must admit that recently we have flown over more parts than we would like. Only for the top brands Cervélo and Cannondale, so road bikes and mountain bikes, we assemble the bikes here for the American market. The higher transport costs are factored into the selling price."

Question: Taiwan has an army of 180,000 men and 1.5 million reservists out of a population of 21 million. Relatively speaking, this is a huge burden on the Republic of China. How does industry feel about this?

EdB: "There are a lot of military bases on Taiwan, but quite a bit of the military is deployed to clean up the effects of the 10 to 12 typhoons we have here a year. However, we are seeing an increase in combat readiness. People have started calling up reservists on a quarterly basis for new training in the last two years."

Question: what disadvantages has Taiwan suffered from the strict covid policy of the People's Republic of China?

EdB: "Many of our suppliers in Taiwan have production facilities in Shenzhen or just outside Shanghai. These are regions that have been hit hard by lockdowns. Creative solutions have been found within the factories, but that is of no use if the logistics around it are dead. Nothing can get in and nothing can get out. I was impressed by the creativity of the Chinese, who quickly transferred parts to factories in Vietnam to complete their orders. Some have doubled the number of production to work past the covid measures."

Question: is Vietnam trying to take over China's role?

EdB: "Many Chinese factories have automated processes and transferred their old machines to Vietnam. This is going to cause a big problem, because Vietnam has a young population of 100 million, but there is a shortage of skilled labour. We are already seeing a dip of at least 20% in productivity in our business. If you go from Vietnam to Cambodia, for example, you have another 30% drop in productivity. It takes several years of intensive training to narrow this gap. Another factor is the often lack of industry clusters in Vietnam, which provide a comparative disadvantage compared to regions in China."

Question: where are the batteries for pedelecs produced?

EdB: "In terms of volume, the People's Republic is the largest supplier of cells, but in terms of quality, Japan and South Korea are the market leaders in cell production. Panasonic, LG and Samsung are ultimately the big suppliers. To build battery packs we have suppliers in Eastern Europe, mainly in the Czech Republic and Poland. The best known supplier of e-bike systems in the European market is Bosch, which also assembles in Eastern Europe. For us, electric bikes are a huge international growth market, but we (like the competition) are not growing as fast as we would like because of the scarcity of batteries."

Question: wages in the People's Republic have increased dramatically in recent years, especially for engineers and high tech workers. Is this a competitive advantage for Taiwan?

EdB: "The main issue is the payment of social security contributions. In China these have risen to 45 to 48% of gross wages. These are

western values and they have had quite a price driving effect. Compare that to Taiwan where the difference between gross and net wages is only 18%."

Question: how does Pon.Bike do business monetarily in Asia?

EdB: "Like many companies, we do business primarily in US dollars, which are easy for us to hedge against the euro. We agree a bandwidth with our suppliers in advance for the exchange rates to convert local currencies to US dollars. If exchange rates fall outside the bandwidth, a price correction follows automatically. That is fair to both sides.

Question: what is the tax regime like in Taiwan?

EdB: "The profit tax for companies here is 20%. The VAT rate is very low at 5%. One advantage is the backlog of tax payments. Tax payments often only come one and a half years after the fiscal year is completed. This is a competitive advantage for startups, because the first tax assessment only comes after 18 months. Furthermore, there are good means; you can get tax-breaks for the first five years when establishing knowledge-intensive industry. If you are less wanted, these tax-breaks are not granted, but if you are really very wanted, they are extended again after five years!"♦

Newsflash: Pon.Bike recently bought the Dorel company with brands like Cannondale, GT and Schwinn, which sells exclusive road bikes in the US. Regular bikes via Wallmart and Amazon are also in the pipeline.

Professional road bikes for Team Jumbo Visma

Inflation

FFor current inflation, we use the inflation rate based on the Consumer Price Index (CPI) with a 12-month comparison. In June 2022, that rate stood at 11.7%. How can this relatively high rate in Brazil be explained?

MW: "Let's look at the short-term effects of various developments that have taken place, including higher commodity prices for oil, metals and raw materials, as well as higher energy prices in Brazil. On the one hand, these are influenced by the higher oil prices. On the other hand, due to low water levels, the generation of electricity from hydropower had to be supplemented by more expensive energy from gas or oil-fired power stations. In addition, the covid pandemic caused disruptions in the global supply chain, so that deliveries and shipments of goods only got underway with long delays. Another factor is the fact that many consumers have postponed spending, hoarded money and have more freedom to spend. Just look at the chaos at airports. Higher oil prices and the high exchange rate of the US Dollar against the Brazilian Real have led to a consumer sensitive increase in petrol prices of 70% to 80% in the last 12 months. Analysts estimate that 70% of Brazil's inflation is imported and 30% is caused by domestic factors."

Historical inflation over the period between 2011 and 2022 stands at 6.5% for Brazil; so how should this rate be qualified?

Rabobank banker Mark Wiessing:

"BRAZIL'S CENTRAL BANK IS CRACKING DOWN ON INFLATION."

Brazil is a country that has a crazy history of inflation. Both our correspondent Hanno Nicolaas Ponder (19750048) and top banker Mark Wiessing (19770127) have experienced crazy years there. As a result, the Brazilian central bank is now pursuing a tough interest rate policy to bring inflation back to the desired range. Hanno interviews alumnus Mark, who is Regional Head South America and CEO of Rabobank Brazil. An instructive and sometimes comical conversation.

BY HANNO NICOLAAS PONDER

MW: "Historically, inflation in Brazil has been between 4 and 6%, at least if we measure it from the "Plano Real" in 1994. The interest rate (Selic) levied by the Brazilian Central Bank (BCB) was somewhat forcibly lowered at the beginning of the pandemic. At that time inflation was historically low, around 3%, and secondly there was the impact of the pandemic. Appropriate measures were taken to prevent the economy from collapsing. Selic was then brought to 2%. What we are seeing now in 2022 is an exceptional situation, which is also being fought by exceptional means. The situation has been reversed; high inflation to which the BCB took immediate action and we are now at a Selic of as much as 13.25% year-on-year. In this context, it is important to stress that "inflation targeting" is the main driver in the BCB's policy. The central bank's target here is between 3.5% and 4.5% and as soon as inflation is even above a tolerance band, the BCB takes tough measures. This central bank looks less at economic growth, employment and "sustainability", as the FED and ECB do. Brazil is all about inflation control and they are very consistent. So consistent that the BCB was 15 months earlier in raising interest rates than the FED and ECB, both of which until recently were still applying rates based on an expansionary monetary policy."

In the early 1980s Brazil entered a period of extreme inflation. The government began to borrow irresponsibly to keep the rapidly expanding economy intact. This happened in an era of rising interest rates. The national currency Cruzeiro went into a deep fall. In 1994, hyperinflation reached 2076%. How fresh is that nightmare still in the minds of Brazilian politicians, bankers and businessmen?

MW: "This nightmare is certainly still fresh in the minds of leaders in politics, banking and business and also explains the BCB's focus on "inflation targeting." Because if you abandon that principle you go back to an undesirable situation. But as so often in Brazil, "what makes sense rationally does not always make sense politically."

Under President Itamar Franco, the Plano Real was introduced, which partially put the Ministry of Finance under receivership, introduced the new currency Real and pegged that new currency to the $. A Real was thus made equivalent to a US dollar. How did this rigorous concept work out?

MW: "Eventually, this helped reduce inflation which was above 80% on a monthly basis. There is a joke from that time that says it is better to take a taxi than the bus because you only pay the taxi at the end and the bus at the beginning of the ride. In those days it was a sport to put your money aside at the beginning of the day on the "overnight", you had 3 credit cards each with a different payment date, but you were also spending 25% of your management time dealing with inflation."

From 2004 to 2013, Brazil was booming until the value of its oil exports suddenly halved and there was corruption at the state oil company Petrobras. What exactly happened?

MW: "What wound up the "Car Wash" prosecution was a criminal scheme between politicians, high-ranking Petrobras officials -appointed by the political leaders at the time- and the major Brazilian construction companies, who operated in a cartel and paid bribes to political parties and politicians to win big Petrobras contracts. This coincided with the 2014 FIFA World Cup for which several stadiums and other infrastructure projects were built and executed by the same construction companies in a similar scheme but with politicians in the states. This eventually led to the fall of ex-President Dilma, the collapse in popularity of the PT (Workers' Party) and from which the current President Bolsonaro derived his popularity."

After that incident, to what extent have Brazil's presidents been responsible for new inflationary problems in the country?

MW: "After President Dilma was deposed, Michel Temer took over as Vice President of Brazil and he did a good job including introducing the Fiscal Responsibility Act. Bolsonaro basically started with liberal policies, implemented Pension Law reform, but is now at the end of his reign. His proposals to increase social benefits, which the Fiscal Responsibility Act basically ignores, do not send a good message. In addition, he has adopted a markedly different political policy than he promised at the beginning of his tenure."

What is the outlook for inflation in Brazil now?

MW: "The BCB expects inflation to come down but the impact of high interest rates will be felt for some time. You will see inflation coming down in 2023 and 2024 but it also depends on what else happens in Brazil. This year we have elections, and Congress just approved the government's proposal, to increase social benefits until the end of this year. This measure is actually the same as the "fiscal maneuvers" of ex-President Dilma, who was ousted in 2016 for it.

For economists, this is worrying as the deficit in the government budget is increasing, which in turn has an impact on inflation. In other words, if no action is taken on government finances, there is a high risk that interest rates will remain high for much longer than is desirable. The BCB expects inflation to be 8.5% for the whole of 2022, 4.7% for 2023 and 3.25% for 2024. This assumes that the government has its fiscal house in order. Incidentally, the BCB has gained more independence in recent years and can therefore pass tough measures if it is thought to be appropriate."

How does the war in Ukraine affect the Brazilian monetary position, because of the link between the $ and the Brazilian Real?

MW: "Basically, this influence is neutral to slightly positive. On the negative side is the fact that Ukraine and Russia are the largest suppliers of fertilizer used in Brazilian agriculture. Brazil has sourced enough of this to secure agricultural production through the 2022/2023 season and there are signs that other suppliers such as Canada and Morocco could fill the gap. So this impact seems neutralized. On balance, higher oil prices are good for the country because Petrobras is a major exporter of crude oil, which is good for the trade balance and currency stabilization. The elimination of grain supplies from Ukraine and Russia strengthens Brazil's position as an exporter of food commodities."

Brazil shows exemplary climate records apart from logging in the Amazon. Almost half of domestic energy consumption is renewable; 83% of electricity comes from hydroelectric plants and carbon dioxide emissions are about half the world average per person. Is this a favorable time for the Brazilian government and companies to borrow with an ESG bonus/discount?

MW: "This relates more to large local companies than to government, which is much further from the sustainability story. Large companies regularly borrow on the basis of "green loans" or "sustainability linked loans" where interest rates are offered that depend on compliance with the agreements you make in the area of sustainable value chains, deforestation, water management, and social initiatives in the locations where factories are located. This is a relatively active market in which Rabobank also operates. Another emerging market is the carbon credit market. This offers tradable credits as soon as you can demonstrate that you have contributed to reducing CO2 emissions. This is a market that already exists, particularly in the sugar and ethanol industry, and is slowly being developed on a voluntary basis in other sectors. A lot is going to happen in the future. This is also important as a signal to foreign countries where people have a negative perception of how the government deals with ESG. In practice, the Brazilian business community is very active in the field of sustainability. Incidentally, the Brazilian government still endorses the ambitions of the "Race to Zero" campaign established by the UN in 2019."

Will Brazil become relatively more attractive as an investment country, now that power blocks like the US, the EU, Russia and China are threatening to put each other in a sort of stranglehold?

MW: "Indeed, the geopolitical landscape now looks completely different: US versus China, Russia versus the Western world. Brazil has traditionally, in recent years and under various governments, always taken a neutral course and as long as one maintains this course it can be relatively positive for Brazil. In Europe people are not happy with Brazil's neutrality in the conflict with Ukraine, but on balance this course is beneficial for Brazil."

Brazil is a rich country with a surplus of oil, iron ore, copper, gold, bauxite and precious stones. To what extent does the country succeed in exploiting this position financially, particularly in this era of international scarcity?

MW: "The higher commodity prices are good for the country and its exporting companies. The agricultural sector is experiencing the best times ever partly because of the weak currency. As mentioned earlier there is a relative advantage in oil for Brazil; in metals it will depend on what happens, especially in China, but overall Brazil is in a good strategic position."

For major exports such as sugar, beef, coffee, orange juice, chicken and chemical products, China has increasingly become a major trading partner. Is there a danger that China will take over a large part of the Brazilian economy, as is the case in many African countries?

MW: "We see China looking at Brazil as a key supplier in food, meat and metals but don't see the trend you see in Africa. There, for example, roads and other projects are built by Chinese contractors who don't hire local workers but use Chinese crews. We don't think that danger is there." ♦

TOP WOMAN: HANNEKE SMITS

Millions of pension recipients around the world depend on the performance of BNY Mellon Investment Management, led by alumnus Hanneke Smits MBA (19840086) as its CEO, to execute investment strategies for institutional investors such as pension funds and insurance companies. Now on share in a short time about 20% have lost their value and a recession is looming, Hanneke looks to the specialist expertise of the eight investment firms under her to help customers get the upcoming investment opportunities by means of a active asset allocation and equity selection. The good news is that there are plenty of companies with high profit margins and lots of cash. The rise in interest rates will also make it easier to select bonds for those long-term liabilities of pension funds. However, inflation will have to be restrained!

BY OELE STEENKS

Question: today is July 19, the warmest day ever recorded in London, while the whole world seems to be heating up. The big question is whether a global recession is inevitable or can adjustments be made just in time?

HS: "We think the risk of a recession has increased, but it is not yet entirely inevitable. We need to focus on the question, what will it take in the leading economies over the next 12 months for a recession not to happen? First, inflation will need to fall significantly to acceptable levels. What matters is what the US Federal Reserve Board is going to do. Will there be aggressive interest rate hikes now that could trigger a recession? At the same time, expectations in financial markets that more interest rate hikes are coming should ease. At the same time, consumer spending should slow so that spending matches supply. Inflation has so far been fueled by the surge in oil, gas and food prices. However, consumers have emerged from two years of corona crisis and are now looking to spend. On the business side, we now eagerly await the second quarter results of the world's major corporations. These will provide important direction for business and consumer confidence in the international economy. The impact of the end of almost free investment money; the impact of the war in Ukraine and the impact of an overheating labour market, which will fuel inflation with wage increases, are now coming together and will be reflected in companies' results. What we need to see is a sort of balancing act between the aforementioned conditions. The cost of goods will have to come down and the international logistics chain will have to get back in order. During the corona pandemic we saw containers of medical supplies waiting unused at the wrong ports. Industries must be able to rely on being able to produce immediately, which will prevent price increases. Furthermore, the PRC will need to get out of the lockdown pattern. We have all seen that economic growth in China has almost come to a standstill. After all, the Chinese are the largest producer of consumer goods in the world. The world needs to get rid of the scarcity created by China's lockdown policy as soon as possible. The labor market will have to cool down. During the corona crisis, we noticed that many people withdrew from the labor market; it is important to see if there is an opposite trend so that more people will work to cover household expenses. This would allow companies to further solve their capacity problems. All in all, with today's knowledge, a recession is not inevitable, but at the same time, the necessary factors will have to undergo a positive adjustment. "

Question: have you ever experienced such a confluence of circumstances before in your career?

HS: "I started in private equity in the early 1990s. Then we were slowly coming out of a recessionary period and there were high

interest rates. The economy was developing at a moderate pace then. And of course I experienced the great crisis of 2008 in the financial world. The big difference was that the economic problems then were caused by the banking world itself. It started, of course, with the unrestrained underwriting of irresponsible mortgages and the piling up and reselling of 'bad debtors.' And with easy lending to households to speculate in the stock markets, driving up stock prices with no economic rationale, it was a real asset bubble. What makes this time challenging is the correlation between asset classes. For many investors who rely on a traditional 60/40 asset risk allocation - meaning 60% invested in equities and 40% in bondsthis traditional approach is not currently immune to interest rate movements and the threat of recession, as we see return on investment declines across all asset classes in the face of rising interest rates and equity market volatility. This makes it more difficult to realise the differences between 'asset classes', bringing profit amounts closer together. As a result, we are working with many clients to move from a risk-based investment approach to one that focuses on investing with tangible results."

Q: Can you elaborate on this shift?

HS: "We are coming out of a remarkable period of stock market growth where many investors were used to being able to match benchmarks across financial markets through passive investment strategies that work like 'index trackers', which we also offer ourselves. In this period of a market downturn, investors no longer just want to follow the market and are moving more towards investing for an outcome, whether that be income protection, inflation protection or tax efficient investing, for example. We call this 'outcome investing', for investments where the financial outcome is predetermined and very different from the classic 60/40% approach."

Question: does it also temporarily limit the growth potential of the world economy?

HS: "My generation grew up with the idea of a steadily growing economic world. We all benefited from the outsourcing of manufacturing to China that began in the 1980s. It ushered in an era of globalization and for the past 15 years Western consumers have been able to spend at very low interest rates and very low inflation. Now we see some of these global trends reversing. The era of easy money lending is at least over. We are now entering an era of decoupling global trends, towards deglobalization! World powers are retreating to their own territories. Be it in the US with an America-first economic policy, the UK leaving Europe with Brexit, and more recently Russia trying to restore its historical political and economic sphere of influence. This is similar to the approach in

Newsflash: BNY Mellon Investment Management had $1.9 trillion of assets at June 30, 2022. under management'. In calendar year 2021 revenue $2.834 billion.

"We are heading for deglobalization!"

HANNEKE

SMITS

China aimed at emphasizing and strengthening the economic dominance of the PRC in the world. This worldview is so different from the international atmosphere of increasing unity that emerged after the fall of the Berlin Wall in 1989. It was then that the idea arose that the world could become 'a better place' through international cooperation."

Question: what does BNY Mellon advise pension funds, sovereign wealth funds and insurers as a way out of this development?

HS: "As a collection of independent asset managers, it is important to note that within BNY Mellon Investment Management we do not have a 'house investment view' on the development of the investment landscape. Instead, we let our investment firms form their own opinions based on their specialist experience of their asset classes. Our mission is to optimize investment opportunities and outcomes based on this shared thinking to meet our clients' desired outcomes. We do not give one-dimensional advice but listen to the client's investment goals. What kind of risk diversification do they want and how much risk are they willing to take? Based on our clients' mandate, we select the right investment strategies from our investment companies, such as Insight in fixed income, Newton in equities or Mellon in index. Therefore, each client's needs and goals are very different and often depend on their individual circumstances and goals. Again, the market environment has changed significantly for companies with the era of cheap finance over, with a rising US dollar and with Europe in a difficult position. This is against the backdrop of an inflationary crisis due to the sharp rise in oil, gas and food prices. And a process of de-globalisation is underway. In this constellation, we look very closely at the companies and stocks that can perform well or benefit from this transition. But we also weigh broader themes such as ongoing automation, mobility and climate change that affect all our lives. So depending on a client's risk-spreading profile, the underlying choice of investment options has really become crucial at this point. When it comes to equity investing, we are looking for companies with high profit margins and decent financial reserves. Secondly, we are looking for companies that offer some form of dividend. In addition, it's important to have geographical diversification, which also extends to corporate holdings in emerging markets."

Question: do circumstances change the call for good business performance, Environment, Social Responsibility and Governance (ESG)?

HS: "We see no change in the long-term commitment of those clients who also want to invest for a purpose. The ideological underconstruction of that vision is still there, and it only increased during the pandemic, as the world became more attentive to climate change and social issues. In addition, the war in Ukraine caused major investors to partially rethink stakes in fossil fuels or the arms industry. Investors focused on ESG outcomes, or responsible investing as we call it, have long avoided investing in certain sectors, such as defense. However, if you are an investor who believes that Ukraine has a right to self-defeat, you are now likely to be more open to defence stocks being included in the investment mandate. So the alternative sentiment of no investment in the arms industry has shifted for that client under current circumstances. The same reasoning applies to interest in fossil fuels. This may contribute to a worsening climate in the short term, but it reduces Western dependence on Russia. I am not saying that these

adjustments in investment principles apply to all investors. The beauty of the current situation is that governments have become more aware of the importance of the energy transition in the shorter term and need to speed up the provision of incentives. In addition, many investments in renewable energy are local in nature, which means that there is also a national security benefit associated with wind or solar energy. It is clear that wind power from the North Sea is in principle a safer choice for the UK or Scandinavia, than buying oil from Saudi Arabia. All in all, the demand for ESG has not changed that much, but the way of thinking about ESG has changed since the invasion of Ukraine. That may change again in the coming months."

Question: the differences between rich and poor, between educated or less educated, between employment and unemployment, between food or food shortages seem to be widening in this period Can companies improve this and can investors benefit from this in the medium term?

HS: "In general, this burden falls on the shoulders of both the public and private sectors, which must work together to combat inequality. It is not always about the difference between developed economies and developing countries. The challenge will be to devise creative ways to mobilize private sector investment and support companies/organizations best positioned to deliver tangible success in this area, through diverse and inclusive distribution models that are more efficient, competitive and have socio-economic impact in local markets. As investors, the companies we want to support are those with the most resilient business models that can better withstand the higher inflationary environment and disruptions caused by the pandemic."

Question: how do the investment companies under BNY Mellon Investment Management work as a total package for large investors?

HS: "We work with eight investment companies, all of which have their specialisation and are driven by separate leadership teams, with their own investment teams, research staff and sales teams. We describe our approach as specialisation at scale, with each investment company being a leader in a particular type of asset class. Insight is an international leader in fixed income, particularly in liability investments. Most of Insight's clients are pension funds, for whom we hedge their future financial obligations with investments in bonds. The horizon is ten to twenty years, during which Insight deploys knowledge and experience with fixed-return investments. Insight can also implement various strategies for long-term fixed income. Walter Scott specializes in global equities with a high conviction investment approach, in that capital is invested in a small universe of stocks expected to grow significantly over a number of years. Newton Investment is a leading investment company and a leader in responsible investing focused on equity and multi-asset investing, with investments in a variety of asset types. At Newton in particular, clients' ESG goals can play an important role. Then there is Alcentra, which specialises in loans to companies, both in the liquid and unlisted markets. Incidentally, we have just announced that we are going to sell Alcentra to Franklin Templeton. Mellon is our US indexing and ETF business. We are very pleased with the new ETFs we have launched, both passive and active, including the first true zero fee ETFs in the U.S., which are doing well. These trackers offer clients an excellent way to benefit from a lowcost, liquid and tax-efficient investment vehicle. Dreyfus is the investment company active in the cash management markets. We also own Siguler Guff, an international private equity investment company. And finally, we own ARX Investimentos, a smaller investment company in Brazil. While many institutional clients work with a single strategy as offered by one of the investment companies, it is also common for us to be able to set up a combination of different strategies for institutional and intermediary clients,

where they are served by two or more investment companies, but where communication with the client is through a centralized BNY Mellon sales team in one of the 35 offices we have set up in financial centers around the world."

Question: what is happening from the offices of BNY Mellon Investment?

HS: "From our BNY Mellon Investment Management headquarters, spread across offices in New York and London, we support the international distribution of our services to many of the most sophisticated institutional investors in the market, including sovereign wealth funds, private foundations, insurance companies, large multinational corporations and state pension funds. In both offices, we have teams of economists who can help investment firms interpret economic conditions. They can also help sales offices explain to clients specific economic conditions and investment risks and opportunities. Especially in these volatile times, we develop positive and negative scenarios and discuss them with the client. Depending on the outcome of these discussions, the client gives us an investment mandate that may involve the investment expertise and capabilities of one or more of our investment companies. We like our investment companies to use their own expertise, scenarios and sales policies. In this way, clients benefit from the power of independent thinking, because each firm does not think alike. It's no accident that we create a competitive environment within the BNY Mellon Group, where investment firms are encouraged to adopt entrepreneurial policies and maintain their own investment culture. My job is to ensure that we as BNY Mellon Investment Management, so as a whole, navigate the current environment while investing for the future on behalf of our clients. Centrally, we provide our investment companies with 'seed capital' to develop innovative new investment solutions that clients are looking for. In this way, we can help investors worldwide achieve their investment goals. We use our experience and our position as an important part of the market structure to do this, after all, we are one of the largest institutional investment managers in the world and part of the oldest U.S. bank."

Question: about half of the BNY Mellon Investment group is of American background and the other half is of British origin. How does this affect the management of the whole?

HS: "Any time there's diversification within a team, whether it's geographic, or gender specific, or in attracting people from different backgrounds in terms of nationality, education and age, you get more diversity of perspectives and opinions, and you should achieve a better company culture and results. From a financial revenue standpoint, we're also pretty diverse, with part of our revenue coming from the United States and the other half coming from the rest of the world. We have the great advantage of having a sales team in 35 countries, and also being able to operate with that global perspective for customers. This is especially true in the Asia-Pacific region and having a presence in cities like Hong Kong, Seoul, Tokyo, Sydney and Singapore."

Question: from 1992 you have been an investment director at Pantheon (5 years), Adams Street (17 years) and Newton Investment (4 years) and then the last two years as CEO of BNY Mellon Investment Management . What's so great about asset management?

HS: "I am by nature a curious person who likes to think about long-term developments. What intrigues me is how companies and business people are able to turn trends and technologies into products and services with investment value. I am also fascinated by the question of whether end-users can actually benefit from a product or service. I love talking to customers and putting myself in their position. Also, when it comes to delivering a result or beating a benchmark in the stock market, ultimately a person at a pension fund decides to work with us. I feel at home in a complex composite environment and enjoy contributing to solving complex issues."

Q: You are the founder of Level 20, an initiative to get more female senior investment managers into the private equity and venture capital business; what drove you to do that?

HS: "After working as an investment manager and Chief Investment Officer for 25 years, I took an 18-month sabbatical. As I had held more senior positions, I had realized more emphatically that at the top of equity firms there were really only white-skinned men in management positions. I am a passionate advocate of diversification and have encouraged many talented young women to pursue careers in private equity. I supported some of them as a mentor, but at some point that could no longer fit into the schedule. This was the reason to contact female colleagues in the relatively small private equity world. With eleven women we founded the Level 20 organisation in 2015 of which I was chairman for two years. The focus is on offering cross-mentoring, where talented women can get a mentor from another investment firm, with whom they can talk about their work experiences and get advice in a confidential atmosphere. I'm no longer involved in the organisation, as I felt it was time to move on to other initiatives. But it is a success. Level 20 now has about 100 sponsors and 3000 members. Although, we haven't reached our goal of 20% women in senior positions yet, but we have reached the goal of involvement in PE organizations."

Question: in the meantime, you have also shown social commitment by founding Impetus, an organisation that helps underprivileged British youngsters on their way. Can you explain that?

HS: "I had parents who encouraged me to get and finish a good education, to achieve something in life. In the Netherlands, most young people have basically equal access to secondary and higher education. In the UK, it's different. Here, a teenager's future depends heavily on the possibility of going to a private or public school. In addition, there are around 2 million young people in the UK who do not go to school, are not in vocational training or do not have a job. Impetus seeks to improve this situation by working with the tools of private equity. We have put together a portfolio of charities in which Impetus invests. These charities try to engage young people by getting them to join a football or rugby club, for example. From there they can be inspired to go to school and finish it. Then help them get their first job. I am happy to do my bit to help solve the youth problem. I have been chairman of Impetus since 2018 and am now in my second term."

Question: can you tell something about your personal background?

HS: "I was born in Sittard, where my father René Smits worked for DSM. However, most of my youth was spent in the Utrecht area, where I went to the municipal grammar school. My original ambition was to study classical languages. Together with my father, who was one of the first venture capital investors (Oranje Nassau Participaties/Halder Holdings) in the Netherlands, I went to an information day at Utrecht University. I was over the moon about studying, but my father had listened carefully to a session where they talked about the career opportunities for a classicist. He lovingly guided me towards studying economics or business administration. I chose Nyenrode because there was a campus, there were American students and there were exchange programs with universities in the US and Europe. This also allowed me to do something with my passion for languages and travel."

Question: what is your personal life like in the UK?

HS: "I live in London and am married to an Englishman. We have two sons, one of whom is already studying and the other will go to university in September. Then we have a daughter who will be with us for another year or two. For the past 16 years my husband has looked after the family, so I have been able to give all my attention and time to my career."♦

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THREE WOMEN OF THE SECOND HOUR!

Nyenrode Business University was a male-dominated institution for a quarter of a century. Since 1972, women have been entering the campus. On the occasion of this anniversary, NBU is publishing three double interviews with an alumna and a current student. What was it like for the women who were among the first to study here?

How did the men react? And how different is it in the year 2022?

Speaking are Margaret Wijnands (19730068) and Charlotte van Rijt (20200851), Jonneke Brunet (19730025) and Rika Zaat and Ans Carels (19730012) and Renée Smulders (20190817). Margaret, Jonneke and Ans came to Nyenrode in the second year that women were welcome. Charlotte, Rika and Renée are currently studying at NBU. Thanks to photographers: Nancy Poeran (19990133) and Hester Doove.

Support emergency medical fund Ukraine

Ukrainian banker Olena Urmey (19990431), who works for Credit Suisse in New York, runs an emergency medical fund for her motherland. It's called RAZOM Emergency Response. It works with local volunteers and partner organizations to provide humanitarian aid, immediately deployable medical equipment and hospital supplies every day in affected towns and villages. RAZOM is also evacuating children with disabilities and their families to safer areas. In addition, RAZOM continuously raises awareness of the horrors of the Russian invasion. For more information, please visit www. razomforukraine.org/razomemergency-response/

Margaret Wijnands: "Soon it felt like we women had always been there."

Ans Carels: "We heard still left at home the kitchen sink?"

Jonneke Brunet: "We were given tips on how best to behave as girls."

AMSTERDAM BUSINESS FORUM DEAL

In 2018, the company Denk Producties brought former US President Obama to Amsterdam. Over 60 Nyenrode alumni attended this once-in-a-lifetime seminar at AFAS Live. Now Denk Productions is back with the Amsterdam Business Forum, the leadership event of the year. On September 19th speakers from the national and international business top come together in AFAS Live. Alumnus Hans Groen (BBA 1981), seminar guru who is actively involved with ABF, has ensured that our alumni can participate at a special rate: two tickets for the price of one! Claim your seat now and grant not only yourself but also your partner, client or colleague a special experience! You can register via nyenrodealumni.nl!

COLUMN

KAPÉ BREUKELAAR (19860015)

HONORARY DOCTORATE IN PHILOSOPHY

Marguerite SoetemanReijnen (19850161) is Chair of the Board at AON Holdings. After Nyenrode she attended law school and studied at Harvard Business School, of which she is a member of the alumni board. Truly a woman of influence! Now she has also received an honorary Doctor of Philosophy (D.Phil.) degree from Rai University, India. Soeteman received the title together with fellow honorees from all over the world. We mention among others former (Vice) President of Ecuador Rosalía Arteaga, former EU Commissioner Violeta Bulc and Malaysian Minister of Plantation Industry and Resources YB Datuk Zuraida Kamaruddin.

Source: Linked Marquerite Soeteman-Reijnen

Hendriek

She was nineteen years old when her father suddenly died. He was not older than 53, a farmer's son who had made it to a successful manufacturer of sauerkraut and canned foods in Noord-Scharwoude. We write 1924 and in thirty years Burcht Conserven has been built up into a flourishing company. The family has to find a successor. The eldest daughter, Grieke, is already married and has just given birth to a daughter. Of the four children still living at home, daughter Hendriek is the eldest. Two women managing a large factory in 1924, which was unique. In an online archive I read that selling was in Hendriek's blood: "Because of her great salesmanship and talent she gained great renown." The company flourished under these two women.

In 1930 fate strikes again. Her eldest sister Grieke dies, aged 30 and mother of two young children. As it was then, the widower Harrie remarried two years later to his sister-in-law Hendriek, then 28 years old. The sorrow becomes even greater when, after only seven months of marriage, Harrie too dies in January 1933. Hendriek is now mother of two young children who are actually her nephew and niece. Thanks to the family business they have no financial worries and the children grow up without worries. Until May 1940 when the Second World War breaks out.

Hendriek proves to be an intransigent person and soon she distributes underground magazines, forged identity cards and coupon books. When in the summer of 1942 the persecution of the Jews began, she took in a classmate of her son Peter as a hideaway. Ernst Bernardini was sixteen years old at the time. Before the war he had fled as an Austrian Jew to the still neutral Netherlands. The attic at the Frans Halsplein in Haarlem is an ideal hiding place. In 1943 Hendriek was arrested, the children left in haste for the family in NoordScharwoude. After three months of captivity Hendriek is released and the family is reunited. She picks up where she left off and takes people into her home again. Among them are the later prime minister Barend Biesheuvel and Clarien Rietberg, who becomes Van Leeuwen Buizen's CEO after the war. Ernst Bernardini also survives the war, returns to Austria and eventually becomes a Supreme Court judge there. Hendriek maintained a warm bond with all these special people in hiding for the rest of her life.

Immediately after the war Hendriek is appointed leader of the Domestic Forces in the district of Haarlem. She also becomes a lieutenant in Prince Bernhard's brigade, making her one of the first female army officers. She devoted herself for many years as board member of the 40-45 foundation. She was a proud bearer of the Resistance Memorial Cross. Hendriek was my grandmother. As a grandmother she was also unyielding, always enterprising and afraid of nothing and nobody. Her past in the resistance came up sometimes and as a grandchild you knew that grandma had been 'good' during the war. When on May 4th this year the newspaper Trouw dedicated an article to the underexposed role of women in the resistance, she was on the cover of the supplement De Verdieping. You see a proud woman in officer's uniform, complete with beret. To her right is a picture of Hannie Schaft, also from the resistance in Haarlem. A tribute she would have been proud of. ♦

Kapé Breukelaar (19860015)

BBA Nyenrode, is partner of investment company Amlon Capital. He previously wrote for De Telegraaf and was a regular contributor of the television programme Kassa.

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Museum medal for Henk de Geus

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OPUS MAGNUM OF PHOTOGRAPHER FRANS LEMMENS

Top photographer

Frans Lemmens (19710024) already ran the photo club at Nyenrode and now he is reaching a provisional peak in his career as a landscape and nature photographer. NL365 is a unique coffeetable book that offers a new view of the beauty and variety of The Netherlands every day. Lemmens lets iconic images go hand in hand with modern themes. The book is a feast for the eyes! Frans will be at the 50+ Beurs in De Jaarbeurs in Utrecht from September 13th till 17th. Every day he will give a lecture with tips and tricks to make the most beautiful landscape photos yourself. Especially for our Van Verre readers, Frans is giving away 3 copies of NL365. Send an email to info@nyenrodealumni.nl and you will receive this beautiful book at home!

Gay at the Industrial Grand Club

Being LGBTI and moving in dignified circles. It is possible in

Amsterdam. The Koninklijke Industrieele Groote Club proves that. Chair Douwe Lodewijk (19800515) – openly gay – strives for more openness within the apparently closed stronghold. We are open to a complete

NYENRODE RUGBY TEAM TAKES WIN

During the Whitsun weekend 2022 the international rugby tournament Amsterdam Rugby 7s took place in Amsterdam for the 50th time. It really is a prestigious tournament in the rugby scene. The Nyenrode rugby team was led by alumnus Hasan Akman (20040002) and went home with the win. Incidentally, the team consists of professional rugby players who come to play by invitation.

color range of people and who is reading this and would like to see the club from the inside: send an email to chairman@igc.nl.'

(Source: Gay News 357 pride 2022)

Banker of the year

Gezinus Knijp (19990085) is a sustainable lending adviser with ING, Flevoland branch. He was named SME Banker of the year by ING Netherlands: "Empowering people to stay a step ahead in life and business," as they say in technical jargon.

The married couple Henk (19610035) - cattle fodder giant

and Victoria de Heus-Zomer have been awarded the Prestigious Museum Medal. The couple received the royal decoration at Nyenrode University from State Secretary Gunay Uslu of Education, Culture and Science. They have shown exceptional commitment to Dutch museum collections. Works from the De Heus collection hang in the Albert Heijn building.

BORN PRIVATE

Scarlett Rose de Kunder 01-06-2022

Daughter of Laura (20100061) and Richard (20100054) de Kunder the Owen's sister

DECEASED

Dirk Stroband (19610081)

Hans Neijzen

Henk Elshout (19480017)

Cor Hagoort (19460029)

Anne Jonkhans (19780524)

Fop Smit (19720054)

Eugene van Hoye (19580039)

Melle Staal (19600098) John Dirks (19560020)

COLOPHON

VAN VERRE

VAN VERRE is the official periodical of the Nyenrode Alumni Company of Far (VCV), Association of Nyenrode and is published every three months in a circulation of 5,900. 64th volume, September 2022, number 293

MAIN EDITORIAL BOARD

Oele Steenks (19720057 BBA) - josteenks@planet.nl

ART DIRECTOR

Roos Jonker - ter Kuile

COORDINATION

Simone Daniëls (19960021)

EMPLOYEES

Liselotte van Dedem-Staal, Yorinde Kngetering (20120034), Jan Vincent Meertens (19770073), Hanno Nicolaas Ponder (19750048, Gary de Vogel (20107252), Collegie der Heren V, JCV, VAS Bestuur

COLUMNISTS

Prof. Dr. Ivo Arnold (NBU) Kape Breukelaar (19860015)

EDITORIAL ADDRESS AND SECRETARIAT

Nyenrode Alumni VCV Office Nyenrode Business Universiteit Straatweg 25 3621 BG Breukelen t: (+31) 346 29 15 13 e: info@nyenrodealumni.nl w: nyenrodealumni.nl bank: ING Bank Breukelen IBAN: NL54 INGB 0657 3453 50, BIC: INGBNL2A

FRIENDSHIP FOR LIFE

John Dirks (19560020) was in the Netherlands to celebrate his birthday with family and friends and to visit Nyenrode. On Monday, July 11th he came to the castle with his son Dave to meet Esther Bergervoet (19880009). John and Esther know each other from the internship she did at Polaroid in Boston, the company for which John worked for many years. They always kept in touch and regularly visited each other in the Netherlands and the USA. Afterwards the visit turned out to be very special. Unfortunately, John Dirks passed away a month after his trip to the Netherlands.

The contribution is 75,- euros per year, partner membership is 20,- euros per year.

ADS

Nyenrode Alumni VCV Office t: (+31) 346 29 15 13 e: info@nyenrodealumni.nl

SUBSCRIPTION

As a member of Nyenrode Alumni VCV you will receive Van Verre for free. ISSN 2405-626X

NUMBER 294 – DEADLINE 24 oktober 2022 – THEME Doing business in the Arab world

The digital editions of Van Verre in Dutch and English can be found at nyenrodealumni.nl. The content of the magazine may be indexed by search engines such as Google. The platform also provides the most up-to-date information. In addition to Van Verre, members also receive the digital newsletter eight times a year.

The editors reserve the right at all times to refuse, shorten or otherwise edit copy. Posting a manuscript does not imply that the editors always endorse its content.

All rights reserved. No part of this publication may be reproduced, stored in an automated database or published in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Nyenrode Alumni VCV.

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