C19MA

C19MA_001_COV_32647.pdf

www.europeanceo.com

europeanCEO

europeanCEO spring 2019

Nothing personal

Permission to speak freely Breaking the bank

Reports of data misuse have prompted calls for new ownership frameworks

Businesses will benefit from changing their attitude towards whistleblowers

Da l i a Ma r in

Money laundering continues to be a serious issue in eurozone countries

¨ S t e fa n Ge r l ach ¨ Gil l i a n ta ns ¨ Sophie pe r r y e r

spring 2019 www.europeanceo.com

On red alert

The online counterfeit goods market is growing. With increasing rates of intellectual property infringement harming firms’ reputations, Red Points CEO Laura Urquizu believes the adoption of brand protection technology is crucial to a strong defence AustriA €12.30 United Kingdom £4.25 Germany €5.10

Netherlands €6.95 Sweden SEK 39 Belgium €6.75

Finland €5.10 France €5.10 Greece €9.00

Ireland €5.10 Luxembourg €6.75 Spain €6.75

Italy €5.10 Portugal €7.50 Switzerland CHF 9

Poland PLN 18.75 Czech Republic CZK 140 south africa ZAR 129.90

C19MA_001_Z04_99249.pdf C13ND_001_Y08_68111.pdf

C1

C19MA_002_Z04_82492.pdf C13ND_002_Y08_87796.pdf

747-8 747-8 VIPVIP VIP boeing.com/commercial/bbj boeing.com/commercial/bbj 747-8 boeing.com/commercial/bbj

IIS_AD_European_CEO_V1.pdf

C18ND_001_X09_37824.pdf

C

M

Y

CM

MY

CY

CMY

K

1

11/2/17

4:28 PM

C18ND_002_X09_81637.pdf

C18ON_001_Z06_87158.pdf

C19MA_007_F01_01305.pdf

EuropEanCEO

editor’snote

Open secret

The world is awash with data. Our personal information, once reserved for government institutions and a handful of other organisations, is now littered across the internet, proffered to any company willing to provide the latest convenience or pay the highest price.

While this trail of information has been paved with naivety, last year’s revelations – notably, the Cambridge Analytica scandal – have dismissed any pleas of ignorance. We’re now fully aware of how much data companies hold on us, from our purchasing habits and music preferences to our political leanings.

Unfortunately, this knowledge doesn’t mean we’re any more in control: debates over the intricacies of data ownership continue to rumble on (p.96), and a unified and coherent framework is far from being formulated. In fact, disparate attempts to curtail the world’s largest tech firms – the main aggravators in the data debate – could be inadvertently harming smaller enterprises.

Amid the hysteria and outrage, it’s important to remember that the exchange of data isn’t necessarily a bad thing: Barcelona-based brand protection firm Red Points is using artificial intelligence to safeguard companies against the burgeoning online counterfeit market (p.24); personality tests are helping to match employers with the most suitable candidates (p.48); and Happn, a location-based dating app created by serial entrepreneur Didier Rappaport (p.64), is even assisting professionals in their romantic pursuits. The latter should not be underestimated, especially when you consider the staggering socioeconomic cost of the loneliness epidemic currently casting a shadow over Europe (p.62).

What’s more, keeping a lid on information is no mean feat, nor is it always the healthiest option: while sweeping malpractice under the carpet may prevent a media frenzy in the short term, it can also hinder a business’ prospects further down the line (p.52). Such myopic decision-making can be equally damaging when appointing a new CEO (p.46) or formulating a budget at the national level (p.82).

Adopting an open approach – no matter how daunting the immediate consequences – has proven to be conducive to personal and professional development in the long term. This doesn’t mean rolling over and submitting to large corporations without a fight, but rather starting a dialogue to ensure those who trespass upon our personal freedoms are aware of the costs. Information is often said to be power; wielding it will require a little more precision.

Max Tomlin Features Editor

In partnership with:

Head of Print:

Designer:

Features Editor:

Reprographer:

Production Assistants:

Marketing and Social Media:

Paul Richardson

Production Coordinator:

Richard Willcox

Helen de Beer Max Tomlin

John Hodgson Ashton Wenborn Head of Editorial:

Elizabeth Matsangou Editorial:

Barclay Ballard Courtney Goldsmith Michael Newell Sophie Perryer

Sam Millard Robin Sloan

Charlotte Gill

Omaira Farina

Web & Mobile Development:

Ben Debski Scott Rouse

Video Producer:

Head of Finance:

Business Development:

Simon Caplan Doug Crerand Malcolm Gade Michael Harris James Watson Monika Wojcik

Published by:

Tower Business Media Ltd 40 Compton Street, London, EC1V 0BD, United Kingdom T: +44 (0) 207 253 5100 www.europeanceo.com The information contained in this publication has been obtained from sources the proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © 2019 Tower Business Media Ltd. ISSN 1755-2206 Editorial on p18-23 © Project Syndicate 2019

EuropeanCEO

|7

C19MA_001_Z01_05186.pdf

DAR 90m / 295ft BEST NEW MOTORYACHT 80M+ Yachts International YACHT OF THE YEAR 2018 World Yacht Trophies FINEST NEW SUPERYACHT 2018 Monaco Yacht Show BEST EXTERIOR DESIGN 2018 Monaco Yacht Show

OCN011219 Dar Adv 210x280.indd 1

1/13/19 4:05 PM

C19MA_009_E09_80964.pdf

spring2019

contents

52

24

96

74

cover story

features

24

52

74

96

Caught Red-Handed

Lip service

Europe’s Dirty Money

Data Ownership

The rapidly growing e-commerce market has provided fertile ground for counterfeiters. Understanding the reputational damage fake or faulty products can inflict on burgeoning start-ups, Barcelona-based Red Points is helping brands protect against online intellectual property infringement with artificialintelligence-based solutions

Crying foul on malpractice is undoubtedly the right thing to do. But with corporate whistleblowers often vilified for their efforts, it’s little wonder such issues are swept under the rug. Recent research, however, suggests that providing employees with safeguards when reporting wrongdoing is beneficial to a company’s long-term health

Over the past decade, countries throughout the eurozone have struggled to rid themselves of laundered funds. With financial crimes growing in both scope and scale across the continent, finding a solution to the problem will require greater transparency and cooperation at an international level

A number of the world’s largest technology companies have profited from the information readily afforded them by their users. Since allegations of data misuse were cast into the international spotlight last year, consumers have started to explore the viability and structure of data ownership frameworks

EuropeanCEO

|9

C18JA_001_Z05_70621.pdf

HERE’S TO GETTING THERE To the highest flyers.

The ones who keep the world moving.

The companies that work across boundaries to bring us all together.

For you there are no travel issues, no travel worries or restrictions.

No problem that cannot be overcome.

We relish the journey.

But the perfect arrival is everything.

Travel like you’ve never experienced before.

Welcome to Reed & Mackay. reedmackay.com

305198_European_CEO_Magazine_Ad.indd 1

25/05/2018 12:10

C19MA

spring2019

contents REGULARS

profiles

13

Digest

All the industry, financial and management insight you need for the coming months on topical issues from across Europe 18

Comment

Hard-hitting analysis from our expert columnists, with a focus on quantitative easing, digital taxation and Germany’s innovation problem

42

64

86

110

Carole Walker

Carlos Brito

Vasiliki Petrou

Follow us on: facebook.com/europeanceo twitter.com/europeanceo linkedin.com/showcase/european-ceo

Having served for more than 30 years at Hermes’ parent company, Carole Walker knows the industry inside out. Her adaptability has kept her at the top of her game and ensured Hermes’ ongoing leadership in the delivery market

Didier Rappaport

industry outlook

management

FINANCE

WORLD VIEW

lifestyle

With an affinity for the internet and the solutions it presents, Didier Rappaport is always on the lookout for the next gap in the market.

His latest venture, Happn, is helping users find love by reprising chance meetings

Anheuser-Busch InBev is the product of a string of major mergers. Having been a part of the company since its humble beginnings, Carlos Brito is well equipped to tackle the mounting challenges facing a changing marketplace

Throughout her life, Vasiliki Petrou has excelled, whether academically or in her career.

Petrou has continued this pattern as CEO of Unilever Prestige, leading the brand to global success and empowering others along the way

30

46

68

90

116

Manufacturing

Human Resources

Asset Management

Property

Fashion

Europe is on the brink of a manufacturing recession. The adoption of flexible, digitalfocused strategies will be key to remaining competitive

Around 30 percent of Fortune 500 CEOs leave their posts within three years. As such, structured succession plans are of the utmost importance

Risk management requires more than just regulation.

Without a cultural change across all organisational levels, rules are likely to be broken

The rise of online rental agencies has led to an oversaturated property market.

To stand out, architects must create eye-catching designs

Changing attitudes towards masculinity have seen the male make-up market boom.

Corporate executives are the latest to embrace the trend

34

58

80

102

120

Healthcare

Leadership

Citizenship by Investment

Experiential Events

Culture

Gum diseases are linked to more than 50 other systemic illnesses. If left untreated, the consequences could be far greater than tooth loss

Mentoring has been lauded for transforming the business prospects of young employees. The benefits, however, extend both ways

With a rapidly developing economy, Antigua and Barbuda is fast becoming the jurisdiction of choice for second citizenship

Businesses are increasingly offering personalised, experiential rewards in an effort to incentivise staff and boost productivity

Ivy League universities are making leisure time more productive than ever by providing free online courses in a range of cultural pursuits

38

60

82

104

122

Defence

Company Culture

Government Spending

Travel

Food & Drink

Amid the exponential growth of new technologies, governments must protect their populations by adapting education strategies

Fast fashion is regularly criticised for harming the environment. Fortunately, CSR policies are now changing the industry for the better

As the Italian Government redistributes desperately needed funds away from the education sector, students are starting to fight back

Eccelsa Aviation’s fixed-base operator air terminal ensures clients can start enjoying a luxurious, private stay in Costa Smeralda as soon as they land

Veganism is taking Europe by storm. As the trend continues to dominate culinary discussions, restaurants are chopping meat from their menus

EuropeanCEO

| 11

C18ND_001_Y09_83100.pdf

C O N S P I C U O U S LY

INCONSPICUOUS

They say clothes maketh the man. At Undandy we know it´s the shoes.

WWW.UNDANDY.COM

C19MA_013_E03_01602.pdf

EUROPEANCEO

SPRING2019 NEWS & COMMENT GOING UP, GOING DOWN | THE GRID | BIG IDEA | TOP TEN | LEGAL CORNER | MOVERS & SHAKERS BUSINESS BRIEFING | FINANCIAL DIARY | CASE STUDY | WHAT THEY’VE BEEN SAYING | THE PLAYBOOK

▲

GOING UP

150 hours

THE GRID

GROWING PAINS

Hungarian overtime Hungarian Prime Minister Viktor The International Monetary Fund (IMF) has cut its forecast Orbán faced protests at the end for the global economy in 2019, pointing to a slowdown in of 2018 after increasing the yearly European GDP growth as a key factor cap on overtime from 250 hours to 400. Opponents dubbed the measure a ‘slave law’, though Orbán dismissed such objections as “hysterical shouting”.

2.2%

4%

European tourism The number of nights spent in tourist accommodation in the EU reached more than 3.1 billion in 2018, a year-on-year rise of 2.2 percent. Latvia, Lithuania and Malta were among the countries to witness the most substantial increases.

2.7%

1.9

%

GOING DOWN

0.6%

▲

8.7%

Portuguese exports Portugal saw an 8.7 percent year-on-year decline in its exports in November 2018, the largest fall since October 2009.

Recent strikes have brought ports to a halt, impacting the country’s car exports, which fell by 75 percent.

¤11.4bn

UBS’ earnings Swiss lender UBS recorded an earnings outflow of nearly $13bn (¤11.4bn) in 2018. The bank was hit by a $7.9bn (¤6.9bn) reduction in assets, combined with $4.9bn (¤4.3bn) of investor withdrawals.

Ireland

Following a steep recession in 2008 and 2009 – the result of a series of banking scandals – Ireland has staged an impressive recovery. Despite growth slowing in comparison to previous years, Ireland remains Europe’s fastest-growing economy, with a rise of four percent predicted for 2019.

Germany

The gloomy outlook for the German economy, which has been struggling with decelerating industrial exports, reflects the global trend of slowing growth. Despite enjoying a nine-year upswing, the EU powerhouse’s progress could be coming to an abrupt halt.

Italy

After an initial growth forecast of one percent, the IMF slashed its projections for Italy to 0.6 percent in mid-January.

The news dealt a blow to Italy’s populist government, which had finally come to an agreement with the EU over its proposed 2019 budget.

Ukraine

With a Ukrainian election on the horizon, the IMF has downgraded its growth projections for the country from 3.3 percent to 2.7 percent. The World Bank had earlier noted that investor confidence in the country was being held back by delays to economic reforms and political uncertainty.

EUROPEANCEO

| 13

C19MA

E u r o p E a n C EO

DIGESTspring2019

big idea

20

Number of audio stories narrated

by NOA per day

Top ten Young workers at risk of poverty Percentage

The hear and now

Dubbed the ‘Spotify of journalism’, News Over Audio (NOA) aids those “struggling to find (or make) the time to engage with the full story behind the headline”.

Founded by Irish entrepreneurs Gareth Hickey and Shane Ennis, NOA collects the best of the world’s news and employs professional narrators to read stories aloud for streamers. NOA offers around 20 audio stories a day to users, who pay €8 a month for the premium service.

© NOA

1

2

3

4

5

28.2%

20%

19.1%

19%

18.4%

6

7

8

9

10

14.7%

14.1%

13.7%

13.7%

13.4%

Luxembourg

Romania

Bulgaria

Greece

Denmark

Cyprus

Spain

Sweden

Estonia

Lithuania

Source: Eurostat

Legal corner

A privacy penalty Google has become the first US tech giant to fall foul of the EU’s General Data Protection Regulation (GDPR). CNIL, France’s data protection watchdog, fined the company a record €50m on January 21, citing Google’s lack of transparent and comprehensible guidance regarding its data use policies, and its “diluted” approach to seeking consent for targeted adverts.

“The general structure of the

14 | EuropeanCEO

information chosen by the company does not enable [it] to comply with the [GDPR],” read a CNIL statement.

According to the regulator, information on how the company uses harvested data is spread across several pages, including in documents that use “vague” language. CNIL said the size of the fine was due to continuous violaValue of Google’s tions, though Google privacy fine

¤50m

The investigation was pursued after two European pressure groups, NOYB and La Quadrature du Net, filed complaints in May 2018. The groups accused Google – and other large companies – of having no legal basis to process the personal data of its users.

The decision to penalise Google reiterated “it is deeply committed is likely to heighten the concerns of to meeting [customer] expecta- fellow big tech firms, forcing them tions and the consent requirements to reconsider how they acquire user consent for data collection. of the GDPR”.

MOVERS & SHAKERS START-UPS | NEW APPOINTMENTS | ENTREPRENEURS EUROPE NEW APPOINTMENT

EUROPE ENTREPRENEUR

EUROPE START-UP

Alain Van Groenendael | CEO

Hanno Renner | CEO

PERSONIO

MOODPATH

Boasting 30 years of international experience, Alain Van Groenendael replaced Philippe Bismut as CEO and chairman of vehicle rental company Arval on January 1, 2019, bringing an end to Bismut’s eight-year tenure at the BNP Paribas Group subsidiary. Van Groenendael has been a board member of BNP Paribas Personal Finance since 2008, playing a leading role in the international development of the group.

Munich-based start-up Personio allows businesses to digitalise all HR processes, including recruitment, absences and payroll. Co-founder and CEO Hanno Renner has guided the start-up through a period of consistent growth since the company was established in 2015. Personio was named among the top 10 European start-ups with the potential to disrupt the HR industry by EUStartups in July 2018.

Berlin-based medical app Moodpath helps those who may be suffering from depression to identify their condition. This is no small feat, as 50 percent of the estimated 300-million-plus global sufferers remain undiagnosed, according to the World Health Organisation. Having raised €2.7m in funding and attracted more than 850,000 users in 2018, Moodpath is hoping to tackle mental illness once and for all.

GLOBAL NEW APPOINTMENT

GLOBAL ENTREPRENEUR

GLOBAL START-UP

ARVAL

Aicha Evans | CEO

Greg Wyler | Founder

ONEWEB

COWRYWISE

Recently appointed Zoox CEO Aicha Evans is something of a rarity in Silicon Valley – she is one of few black women to take charge of a company in the global tech hub. Born in Senegal and educated in Paris, Evans previously spent 12 years at Intel, most recently serving as its chief strategy officer.

She will now be charged with getting Zoox’s autonomous vehicle prototype on the road by the end of 2019.

Following funding rounds attracting over $2bn (€1.8bn) from companies such as SoftBank and Virgin Group, the OneWeb satellite constellation is finally set to take off in 2019.

Tech entrepreneur Greg Wyler, whose vision is to blanket the world in wireless broadband, founded the start-up six years ago in Arlington, Virginia. The company’s first satellites have now rolled off the production line and are ready for launch this year.

Lagos-based entrepreneurs Razaq Ahmed and Edward Popoola have come a long way since founding CowryWise only last year. Taking advantage of Nigeria’s emerging middle class, CowryWise’s automated financial platform is dedicated to making investments and savings simpler. The app has already amassed 53,000 users and can assist individuals of varying means, with plans starting from as little as $0.27 (€0.24).

ZOOX

BUSINESS BRIEFING Japanese tyremaker Bridgestone is set to purchase the telematics unit of Dutch navigation pioneers TomTom for ¤910m. TomTom Telematics, which provides commercial fleet operators with real-time information on vehicle locations, will retain its core technology business.

Despite data from INSEE indicating that French business morale remains at a two-year low, Paris-based private equity firm Ardian has raised a record ¤6bn for its infrastructure fund.

The fund is the largest obtained in Europe since 2006, when Macquarie raised ¤4.64bn.

German lighting firm Osram has warned investors to prepare for a disappointing earnings report in Q1 2019 after grappling with a declining Chinese market.

Revenue is predicted to fall 15 percent to ¤828m, with the company confirming that 300 jobs will have to be cut.

Swiss-based logistics company Kuehne and Nagel has bowed out of a “hopelessly overvalued” merger with Panalpina. This follows news of a ¤3.5bn rival bid from Danish firm DSV. “If the Danes absolutely want to buy... then you can’t prevent it,” said majority owner Klaus-Michael Kuehne.

International Airlines Group (IAG) has abandoned its plans to purchase low-cost carrier Norwegian after having two bids rebuffed. IAG CEO Willie Walsh also confirmed the company would sell its 3.9 percent stake in the budget airline, sending shares of Norwegian tumbling.

EUROPEANCEO

C19MA_E03.indd 15

| 15

14/02/2019 14:37

EUROPEANCEO

DIGESTSPRING2019 CASE STUDY

FINANCIAL DIARY SPRING 2019

© Volkswagen

THIS QUARTER’S SELECTION OF THE BEST BUSINESS AND FINANCIAL EVENTS THESSALONIKI

International Conference on Applied Theory, Macro and Empirical Finance

22.04.19

Hosted by the Department of Economics at the University of Macedonia in Greece, the fifth International Conference on Applied Theory, Macro and Empirical Finance will bring researchers and young scholars together to dissect the latest research on the challenges facing global economics.

BARCELONA

EU-Startups Summit

02.05.19

More than 1,200 founders, start-up enthusiasts and members of the media will descend on Barcelona for the EU-Startups Summit in May. The event will present entrepreneurs with a prime opportunity to network and share ideas, while successful founders will offer valuable tips and advice.

FRANKFURT

Conference on Financial Markets and Macroeconomic Performance

20.05.19

Policymakers and scholars will reflect on the importance of macroeconomic activity at one of the most diverse offerings in the financial conferences calendar this May. Young researchers are encouraged to submit their ideas, with travel and accommodation covered for all active participants.

“The best thing that could happen would be a revote on the Brexit… We just think it’s a very, very bad decision that will have severe consequences in the long term.”

Adidas CEO Kasper Rørsted expresses his concerns over the effects of Brexit during the World Economic Forum Annual Meeting.

“When the finance minister has said that he sees room for tax cuts if economic growth cools, then we say very clearly that the tax cuts should be made.”

Annegret Kramp-Karrenbauer, the newly appointed leader of the CDU, calls for tax cuts to reinvigorate Germany’s slowing economy.

FULL METAL JACKET

While most would agree that automation and robotics are the future, the question of which operating systems these machines should run on continues to be a point of contention.

Dresden-based start-up Wandelbots believes its new smart clothing will go some way to ending this debate: users of the company’s jacket, which runs Wandelbots’ own software and is draped in sensors, will be able to program machines without writing a single line of code.

The company raised €6m in December 2018 and already has agreements in place with Volkswagen and Infineon Technologies. Wandelbots claims its jackets can cut programming times to just 10 minutes, even when worn by individuals with no prior technical knowledge.

“We are providing a universal language to teach those robots in the same way, independent of the technology stack,” Wandelbots CEO Christian Piechnick told TechCrunch. Using the recent investment, the company plans to branch into the lucrative Asian market by opening an office in China.

WHAT THEY’VE BEEN SAYING “Volkswagen and Ford will harness our collective resources, innovation capabilities and complementary market positions to even better serve millions of customers around the world.”

VW Group CEO Herbert Diess refers to the announcement that Ford and VW will collaborate on electric, autonomous vehicles.

“We have had to balance the respect we have for our stakeholders… with the very significant cost of hiring one individual… This decision, although difficult to take, is the right one.”

Ana Botı́n, Executive Chairman of Santander, comments on the bank’s decision to reverse the appointment of Andrea Orcel.

“If France didn’t have its African colonies… it would be the 15th-largest world economy. Instead, it’s among the first, exactly because of what it is doing in Africa.”

Italian Deputy Prime Minister Luigi Di Maio continues his efforts to rile French President Emmanuel Macron.

16 | EUROPEANCEO

C19MA_E03.indd 16

14/02/2019 15:06

THE PLAYBOOK

Sustainable growth Carrefour has made a number of changes concerning sustainability in recent years and is targeting €5bn in organic food sales by 2022, more than quadruple the €1.2bn generated in 2017. The French retailer, which is part of a strategic alliance with UK grocer Tesco, announced in January that it would trial a global online shopping service based on refillable, rather than recyclable, containers. Carrefour claimed the scheme,

French retail giant Carrefour has partnered with other food and retail companies to launch the MiiMOSA Transition platform, a crowdfunding project that aims to support farmers as they make the switch to organic farming. Carrefour – alongside Danone, D’aucy and Les Paysans de Rougeline – will initially help to fund schemes worth €10m, with a view to raising this figure to €100m within four years.

NEED TO HAVE

✚ A PPS ✚ DE V ICE S ✚ T OOL S ✚ G A DGE T S

1

2

TeamConnect Wireless Bimoz Priced at around €3,000, Sennheiser’s TeamConnect Wireless case set boasts multiple connectivity options, allowing for wireless remote conferencing anywhere.

Weighing just 2kg, Bimoz’s gearless drive technology transforms any bicycle into an e-bike.

The extra-large battery enables riders to travel up to 150km before recharging.

3

Forest

Productivity app Forest helps beat smartphone addiction. Credits are earned through inactivity, contributing to the growth of a virtual forest and the planting of real trees.

CARREFOUR HAS MADE A NUMBER OF CHANGES CONCERNING SUSTAINABILITY IN RECENT YEARS AND IS TARGETING ¤5BN IN ORGANIC FOOD SALES BY 2022

NEED TO KNOW

which was unveiled at the World Economic Forum Annual Meeting in Davos, would also reduce prices for consumers, if successful.

This latest development will see the French giant lead the way for mainstream retailers in terms of increased sustainability, but perhaps not entirely for altruistic reasons, as consumer demand for socially responsible products and services is on the rise around the world.

IMPROVING CORPORATE SUSTAINABILITY 1 Change always begins at the top. A forward-thinking business strategy that embraces new technologies to maintain or improve service is the ideal way to start.

2 Be transparent about the company’s methods. Aid and encourage consumers who already use your products or services to do so in a more ethical manner.

3 Make it exciting. Sustainability objectives are often considered dull, so develop methods that make sustainability fun and accessible to staff and consumers alike.

EUROPEANCEO

| 17

C19MA_018_E07_14889.pdf

EUROPEANCEO

COMMENT

Gillian Tans CEO, BOOKING.COM

Global taxation for the digital age

The European Commission’s attempts to target big tech firms with a digital services tax are counterproductive. In the end, it will be European SMEs that suffer the consequences The question of how to tax increasingly globalised and digitalised businesses is vital to the future health of cross-border trade and investment. Sadly, the current debate is mired in confusion and complexity, and is not helped by populist political responses that demonise digital businesses.

A prime example is the European Commission’s proposal – first published in March 2018 – to create an EU digital services tax (DST). The measure is aimed mainly at multinational tech giants whose corporate structures allow them to siphon digitally derived profits to low-tax jurisdictions.

But should the DST take effect, it will be Europe’s own startups and digital ecosystems that pay the biggest price.

As a company that operates in a globalised market, Booking.com has numerous concerns about the limited vision for the future of business embodied in the European Commission’s proposals. This is why we must oppose the DST idea in its entirety.

18 | EUROPEANCEO

Splitting the difference The proposed DST – as well as the rushed digital taxation efforts of several EU member states – reflects the outdated idea that digital companies are different from traditional businesses. As entire industries become digitalised, this distinction grows increasingly unsustainable. Attempting to maintain it threatens to cause serious long-term damage to European businesses and national economies.

Under current international corporate tax rules, businesses can only be taxed on the profits they earn in the country in which they are physically based, but not if trading is conducted through digital means. The often-heated discussion surrounding this issue has generated an image of large multinational tech firms profiting in local markets and using local infrastructure while operating without any tax liability.

This increasingly widespread narrative contributed to the European Commission’s proposals for

C19MA_019_E07_89880.pdf

an EU-wide DST, along with the wider reform of corporate taxation to cover any substantial operational presence by a digital business.

But rather than producing a tax system that is fair and supportive of business, the DST would be much more likely to erode the benefits and opportunities that the digital economy currently offers to companies and consumers.

Swing and a miss The proposal – supposedly an interim solution, pending the agreement of global measures – has two specific drawbacks. For starters, taxing businesses based on revenue rather than realised income will result in an intolerably heavier tax burden for enterprises with low profits and high turnover. Rather than hitting the targeted tech giants, a DST would most likely be a hindrance

EU leaders are too focused on curbing certain global tech brands to see the negative long-term implications a DST would have for the growth of European businesses to the many European tech startups that have become global leaders in their fields.

This innately unfair approach will distort competition, undermine enterprise and harm domestic economic growth. Unfortunately, EU leaders are too focused on curbing the corporate structures of certain global tech brands to see the negative long-term implications that a DST would have for the growth of European businesses.

The second problem is the likely creation of a patchwork of digital taxation measures, both within and beyond the EU. Although the European Commission argues that its proposed DST would prevent the emergence of similar policies at the national level within the EU, recent developments in the UK, France and Italy suggest the opposite.

Furthermore, a rushed or illconsidered digital taxation strategy by the EU could result in a template that is replicated internationally. This could lead to a patchy global tax map, with confusion, variation and forms of double taxation accepted as standard.

The consequences, in terms of the growth and survival of small and medium-sized businesses around the world, could be grave.

A global solution On a more encouraging note, the Organisation for Economic Cooperation and Development (OECD) is making good progress towards reaching a consensus on digital taxation – covering search engines, online marketplaces and social media platforms. I strongly believe that collaboration at the OECD/G20 level is essential to developing fair and transparent tax rules for businesses offering digital services. This is an approach that I fully support and that is more likely to protect the interests of businesses and economies alike.

Companies like ours operate in a truly globalised world. We are required to comply with a variety of tax laws and, like all progressive businesses in the digital era, are happy to do so. What we want is a fair, supportive corporate tax system to help safeguard growth across the board, particularly when economic conditions are challenging. Business taxation must continue to be based fundamentally on realised income, and a global consensus regarding the development of a uniform taxation framework is now essential.

Such a consensus cannot wait.

The global economy is becoming more digitalised by the day. As a European company, we want to see EU businesses grow, succeed and become leaders in this exciting new landscape. Separate tax measures – such as the DST – for digital companies are short-sighted and unrealistic, and will ultimately prove counterproductive for all. n

EuropeanCEO

| 19

C19MA_020_E08_71100.pdf

EUROPEANCEO

COMMENT

Stefan Gerlach CHIEF ECONOMIST, EFG BANK

Learning from Europe’s QE experiment

The European Central Bank’s quantitative easing programme has come to an end. The policy has earned many detractors, but it has also been fundamentally misunderstood With the European Central Bank (ECB) having recently ended quantitative easing (QE), this is an appropriate time to reflect on the policy’s impact. Three conclusions seem obvious: the ECB’s asset purchases had important macroeconomic benefits; the political costs of QE were much greater than anyone expected; and the whole episode was truly awful for Deutsche Bundesbank.

By reducing the cost of bank loans through QE, the ECB encouraged lending to small firms and households across the eurozone. That gave an important boost to economic growth, leading to marked falls in unemployment and upward pressures on wage costs. Although headline inflation rose, underlying inflation remains weak, meaning that the ECB must maintain an expansionary monetary policy.

20 | EUROPEANCEO

Let’s get fiscal QE in Europe – and elsewhere over the past decade – has disproved a number of assertions about central bank asset purchases. Chief among these is the oft-repeated claim that large-scale central bank purchases of government bonds invariably result in high inflation. Financial crises lead to a surge in demand for liquidity as financial institutions worry about the solvency of other players. Central banks can and should satisfy that demand by expanding their balance sheets, because not doing so can lead to a collapse in the money stock and a deep recession, as the US Federal Reserve demonstrated in the early 1930s.

Nor are such asset purchases illegal, as some insisted. The ECB, like the Fed and the Bank of Japan (BOJ), is not allowed to buy government bonds in primary mar-

kets. But many central banks have long relied on secondary-market bond purchases as their main means of conducting monetary policy, and in December 2018, the European Court of Justice (ECJ) ruled that such purchases do not violate EU law.

The ECJ also debunked the notion – popular in Germany – that QE is fiscal policy rather than monetary policy, and therefore off-limits for the ECB. But the Maastricht Treaty does not define monetary policy, which appears to be determined instead by what central banks actually do in practice. And here, the Fed, BOJ and many other central banks have all conducted asset purchases in a way similar to the ECB.

ECB’s policies have triggered a huge political backlash by making almost all assets more expensive. At first glance, this might seem counterintuitive: higher housing prices lead to more building activity, which increases employment; rising share prices boost the economy by shoring up the balance sheets and confidence of firms, households and financial institutions; and lower bond yields, the corollary of rising bond prices, make finance cheaper and more available to companies and households alike.

But the asset price boom also led to eye-popping increases in wealth for the richest few, which inflamed many Europeans who are still facing unemployment and painful austerity after the financial crisis. In addition, the decline in interest rates has provoked Easier said than done But while QE has been effective widespread protests by savers, and its legality is not in doubt, the particularly in Germany.

C19MA_021_E08_52196.pdf

This is puzzling, because one would expect savers to be pleased with rising asset prices. But data from the Organisation for Economic Cooperation and Development shows that German savers hold much less of their wealth in equities and much more in life insurance products than their counterparts elsewhere in Europe.

As a result, the stock market boom has passed them by and the lowinterest-rate environment has hurt their life insurance plans.

German savers blame the ECB for their difficulties, but the source of the problem seems to be their peculiar balance sheets.

Economical with the truth The political backlash was best encapsulated in 2016 by former German Finance Minister Wolfgang Schäuble, who told an audience with reference to the

While QE has been effective and its legality is not in doubt, the ECB’s policies have triggered a huge political backlash by making almost all assets more expensive Alternative for Germany party: “I told ECB President Mario Draghi: be very proud, you can attribute 50 percent of the results of a party that seems to be new and successful in Germany to the design of this policy.”

While the economics of QE has been good and the politics bad, the whole episode has been awful for Deutsche Bundesbank.

In numerous speeches and interviews, its top brass have insisted that QE is unnecessary and raises obvious inflation risks, only to see inflation undershoot the ECB’s target year after year. Bundesbank

officials have also argued that low interest rates will trigger financial instability, although this has not happened yet (and tight monetary policy can pose a similar risk). And they have doubted the legality of some of the ECB’s measures, although none of the legal challenges have been successful.

By sticking to its hardline views – despite being unable to persuade the ECB’s Governing Council to change tack on QE – the Bundesbank manoeuvred itself into a corner and lost influence and standing. That is why the bank’s president, Jens Weidmann, is not seen as the leading candidate to be the next ECB president, despite his otherwise impressive grasp of economics, top-level experience and excellent communication skills. Deutsche Bundesbank, it seems, has been the main loser from QE. n

EuropeanCEO

| 21

C19MA_022_E06_53140.pdf

EUROPEANCEO

COMMENT

Dalia Marin PROFESSOR OF ECONOMICS, TECHNICAL UNIVERSITY OF MUNICH

Unearthing the next Einstein Germany is suffering from a lack of invention. Instead of focusing on tax cuts to incentivise innovation, the government should heighten children’s exposure to groundbreaking developments Why has Germany, the land of history-making innovators like Johannes Gutenberg and Albert Einstein, not produced hightech giants like Google, Amazon or Facebook? Some blame the stigma associated with failure in Germany for discouraging innovative entrepreneurship; others point to the high bureaucratic hurdles to starting a business.

But there is another, more worrying reason why Germany has lost its innovative momentum: its potential pioneers from disadvantaged households are not getting the chance to thrive.

According to the Organisation for Economic Cooperation and Development (OECD), intergenerational earnings elasticity in Germany stands at about 50 percent, meaning that if person A’s parents earned double what person B’s parents earned, person A would earn, on average, 50 percent more than person B. With such persistent earnings differentials across generations, Germany has one of the lowest rates of intergenerational mobility in the OECD – where the average elasticity is 38 percent – and it seems to be declining.

Low rates of intergenerational mobility in advanced economies

22 | EUROPEANCEO

often correspond with high rates of income inequality. What Princeton University economist Alan Krueger has called the ‘Great Gatsby curve’ illustrates the connection between concentration of income in one generation and the ability of those in the next generation to move up the economic ladder.

Equal opportunity In the US, as high levels of income inequality – and the concomitant inequality of opportunity – impede intergenerational economic mobility, the country’s pool of potential innovators is shrinking. In The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility, Harvard economist Raj Chetty and his co-authors use big data to demonstrate this phenomenon – and the massive costs it implies.

Based on data analysing 1.2 million inventors and their parents – covering education, test scores and earnings – the study showed that 8.3 children per 1,000 from the top one percent of households (in terms of income) become inventors. For below-median-income households, that figure dropped to just 0.84 children per 1,000.

This is not because children from high-income families are

more gifted. According to The Opportunity Atlas, for every 1,000 third graders from higher-income households (the top 20 percent of earners) who score in the 90th percentile in mathematics, seven become inventors. Among children from lower-income households (the bottom 80 percent), that rate drops to just three in 1,000.

Of course, income is not the only determining factor. Only about two high-scoring girls per 1,000 become inventors, compared with six boys per 1,000. Race also has an effect, with black and Latino children, for example, being less likely than their white peers to become inventors. What lies at the root of these differences?

The Opportunity Atlas shows that communities with higher patent rates produce many more inventors per 1,000 children, but this is not because children of inventors somehow inherit a natural aptitude for innovation.

Success breeds success Instead, the answer may lie in exposure to innovation during childhood. Chetty and his colleagues found that the experience of seeing innovation happen is enough to spur children

to innovate themselves. Their research also indicates that, if girls were exposed to stories of female inventors to the same extent that boys are exposed to those of male inventors, the gender gap in innovation would fall by half.

The economic implications of these findings are profound: The Opportunity Atlas estimates that, if women, minorities, and children from low-income families invented at the same rate as high-income white men, the innovation rate in the US would quadruple.

In Germany, income inequality is lower than in the US, and Germany offers free education for all, including at the tertiary level

– a powerful social equaliser. But Germany’s rate of social mobility remains lower than that of the US – and the country is paying the price. In one recent survey, German entrepreneurs cited a lack of relevant talent as a major hindrance to start-up activity.

Clearly, Germany must do a better job of fostering innovative talent in its young people of all socioeconomic backgrounds, races and genders.

Judging by the findings of The Opportunity Atlas, this can be achieved through, say, tailored mentoring and internship programmes that increase children’s exposure to innovation.

Germany must do a better job of fostering innovative talent in its young people of all socioeconomic backgrounds, races and genders

Getting inventive As it stands, Germany’s efforts to boost innovation focus on new tax incentives for research and development. But shaving a few percentage points off the taxes paid by leading inventors – who earn over $1m (€878,635) per year, on average – is unlikely to have an appreciable impact on their behaviour. If the talent pool remains limited, tax incentives to promote innovation are more likely to simply increase the earnings of those who are already innovating, rather than increase the overall number of innovations.

Compounding this effect is the fact that it becomes more challenging to reach new frontiers as the total amount of knowledge grows. According to one estimate published by the National Bureau of Economic Research, producing the same amount of new knowledge today as 80 years ago requires some 20 times the number of researchers.

This implies that if Germany – or any country – is to reach its innovative potential, it will need a people-focused strategy. And that strategy must emphasise equality of opportunity and exposure to innovation, especially among the highest-scoring children. n

EuropeanCEO

C19MA_E06.indd 23

| 23

12/02/2019 14:07

C19MA_024_D04_36814.pdf

the turning point

The market for online counterfeit goods has grown hand in hand with the unrelenting rise of e-commerce and social media. As businesses grapple with increasing rates of intellectual property infringement, brand protection technologies are proving essential to a robust defence, according to Laura Urquizu, CEO of Red Points

C19MA_025_D04_65252.pdf

C19MA_026_D04_17543.pdf

Caught red-handed

lobalisation and the rapid development of technology have presented the world with countless benefits – from free trade to a more even playing field for companies of all sizes. But over the years, one negative side effect has emerged: a booming counterfeit market.

The unstoppable rise of e-commerce has only intensified the mushrooming growth of the counterfeit goods industry. Market research firm Euromonitor International has estimated that e-commerce will become the largest retail channel in the world by 2021, accounting for 14 percent of total retail sales. In some parts of Europe, digital retail sales are set to outpace in-store shopping as soon as this year.

The sheer size of the online counterfeit market is shocking: according to the latest Global Brand Counterfeiting Report, it was worth $1.2trn (€1.05trn) in 2017, with online intellectual property (IP) infringements accounting for as much as $323bn (€281.5bn) of that total. IP infringements are especially rife on trusted online marketplaces and social media websites.

As the fake goods industry grows and fraudsters improve their techniques, high-end brands and littleknown start-ups face an equally daunting challenge.

“The truth of the matter is that online sales make fakes even harder to spot,” said Laura Urquizu, CEO of brand protection technology firm Red Points. With the volume and quality of online fakes making it increasingly difficult for brand owners to protect what is rightfully theirs, artificial intelligence (AI) technologies could provide a revolutionary solution.

Automating brand protection Traditionally, companies have dealt with any issues of IP infringement or brand protection through in-house lawyers or contracted legal services. But today, as sales on e-commerce marketplaces and social media platforms begin to dominate the retail landscape (see Fig 1), these conventional solutions are struggling to cope with the increased level of counterfeiting occurring in the market.

With this changing landscape in mind, Urquizu believes machine-learning tools – such as computer vision and natural language processing – can help brands organise information and detect fakes quicker, allowing for the automatic enforcement of IP rights. “Contrary to a service-based approach, only a scalable technological solution can significantly address the challenge [presented by IP infringement],” Urquizu told European CEO. Barcelona-based Red Points has emerged as a unique leader in IP infringement and brand protection thanks to its AI-based solution, which aims to save businesses time and money on online counterfeiting issues. The company’s cloud-based, software-as-a-service (SaaS) 26 | EuropeanCEO

technology detects and removes online IP infringements through advanced keyword-monitoring systems, which are managed by clients via a simple platform. By using machine-learning technology, companies also benefit from a brand protection service that is constantly evolving and learning to highlight the most important potential incidents to rights owners.

“When brand protection is automated, it can take, on average, as little as four-and-a-half hours from detection of [infringement] to takedown – a process that typically takes days or weeks when done manually,” Urquizu said. “Speed and accuracy are key when it comes to effectively fighting online counterfeits, and this can only be achieved with smart technology.”

Every day, Red Points’ proprietary software removes more than 100,000 incidents of illegal products and related content from the internet. Its technology currently helps more than 400 customers tackle fake content across over 100 global markets with a 96

Fig 1: Global retail e-commerce sales EUR, Trillions 5 4 3 2 1 0

2014

Source: Statista

2015

2016

2017

2018

2019

2020

2021

Note: 2018-21 values are estimates

Above Health workers prepare to destroy counterfeit medicines seized in Beijing, China Right Faulty toys are seized in Paris, France

C19MA_027_D04_59896.pdf

Caught red-handed

Red Points in numbers:

2011 100+ 400+ 100,000+ Founded Markets

Customers protected

Incidents of illegal products and content removed per day

96% €22.8m Success rate

Total venture capital investment received

percent success rate. As a result, the company, which was across a proliferation of third-party sites”. The figure founded in 2011 by intellectual property lawyer Josep represented an increase of more than 80 percent on the Coll and entrepreneur David Casellas, has attracted OECD’s 2008 findings. In the EU, counterfeit products $26.2m (€22.8m) of investment from venture capital make up as much as five percent of imports.

A 2017 study by Frontier Economics suggested the firms such as Eight Roads and Northzone.

“The online counterfeit market moves very fast,” total value of counterfeit and pirated goods could rise Jessica Schultz, a partner at Northzone, commented to $2.81trn (€2.45trn) by 2022, while the total domestic at the time of the company’s investment in Red Points. production and consumption of counterfeit and pirated goods could reach between $524bn “There is a clear gap in the market for a (€456.7bn) and $959bn (€835.9bn). The technology solution that is scalable and study also estimated that net job losses flexible to the demands of the brand related to counterfeiting and piracy could owners, and has strong relationships with the online properties where IP The unstoppable reach as high as 5.4 million by 2022.

Due to the digital nature of online infringements are a problem.” Schultz rise of counterfeiting, virtually no market is safe added that the SaaS model for dealing e-commerce from this impending threat. According with counterfeits was “highly effective” has only to the OECD, fake products are found and had a real competitive advantage intensified the in every category, from handbags and compared with service-led options. mushrooming perfume to machine parts and chemicals.

Davor Hebel, a partner at Eight growth of the “Many people think luxury goods are Roads, which has invested almost $6bn counterfeit counterfeiters’ main targets but, in fact, (€5.2bn) into growing technology and goods industry these products are estimated to account healthcare companies to date, said: “[Red Points] is exactly the kind [of company] we like for no more than five to 10 percent of all counterfeit to invest in, scaling fast and with the ambition and goods,” Urquizu told European CEO. According to the OECD, footwear is the most copproduct to become a global industry leader.” ied item, but infringements can also occur on produce such as strawberries and bananas. The market for fake Tackling social media The counterfeiting market is constantly growing and cosmetics is particularly large and, according to Red changing. In 2013, the Organisation for Economic Points’ data, just over half of all IP infringements in this Cooperation and Development (OECD) revealed that category were found to originate on either Facebook trade in counterfeit goods accounted for 2.5 percent of or Instagram. The research also showed that social global imports – nearly $500bn (€435.8bn) – with the media posts would often redirect consumers to e-comgrowth of digital IPs leading to an “expanding problem merce sites like eBay, AliExpress or Wish, where the for brand owners in securing copyright protection counterfeit goods would then be sold. » EuropeanCEO

| 27

C19MA_028_D04_38049.pdf

Caught red-handed

“Counterfeiters’ presence on social media and e-commerce is difficult to deny,” Urquizu said. “In fact, they have been growing rapidly. However, online platforms aren’t the enemy... All major social media and e-commerce platforms have reporting tools for counterfeits and bad-faith accounts.”

A dangerous game According to a 2015 survey conducted by brand protection firm MarkMonitor, 24 percent of consumers across Europe and the US had bought at least one product online that turned out to be a fake. While it’s easy to quantify the impact of these counterfeit products on the global economy, it’s worth noting IP infringements aren’t only bad for business: they can be harmful to consumers, too.

Counterfeit auto parts can fail, knockoff pharmaceuticals can make people sick and fake toys can injure children. Even goods that are less obviously harmful can have associated health risks due to the lack of quality control or certification protocols undertaken during their manufacture. Fake cosmetics, for example, have been found to contain extremely dangerous chemicals, such as lead, arsenic and mercury, as well as E coli, animal faeces, paint stripper and cyanide. A danger to the environment also exists, as the toxic substances found in fake products can contaminate soil, water and food.

Red Points deals with a diverse set of brands – from baby products and cosmetics to wind turbines – but Urquizu has previously said the company sees the strongest performance of its anti-counterfeit technology in the toy, design and furniture, fashion, and sports equipment markets.

One brand Red Points has worked with closely is Beautyblender, the cosmetics company behind the eponymous make-up sponge. In a case study published on the Red Points website, Shelley Swallow, Director of Trademark and Copyright Compliance at Beautyblender, revealed how the company turned to Red Points after low-priced counterfeits of its products had started appearing in staggering numbers on social media websites, including Facebook and Instagram. As a result, the rate of IP infringements became too difficult for the company to keep up with.

MVMT, an online-only watchmaker and another user of Red Points’ services, revealed that it was worried about losing customers who were complaining about the quality of the company’s products after unknowingly buying counterfeit versions online. For these digitally focused, fast-growing companies, dealing with IP infringements by monitoring e-commerce websites and social media for counterfeits can take up a large chunk of company time and resources. To make matters worse, fake products can have a devastating impact on a brand’s burgeoning reputation.

Even the existence of fake products online reflects badly on a brand: according to Red Points’ research, 81 percent of consumers believe their opinion of a brand would sour if they saw counterfeits online, negatively 28 | EuropeanCEO

Above Counterfeit shoes are processed by France’s National Directorate of Customs Intelligence and Investigation Left Fake Converse shoes are displayed at a press conference in Hong Kong following their seizure Right Imitation products found on Alibaba’s Taobao app ahead of China’s annual Singles’ Day online sales event

effecting their buying behaviour in the process. “It wouldn’t [have] been possible to grow so fast having to fix [counterfeit] products [on] our own,” Swallow said.

Raising a red flag Urquizu, who joined Red Points as CEO in 2014, said the market for online IP infringement solutions has changed a great deal in the past decade, with new entrants increasingly able to challenge incumbents by offering disruptive and innovative technological solutions. This has led to an intensifying global race for leadership in the brand protection industry, with companies around the world raising millions of euros to enhance their technological capabilities.

At the same time, the speed of development at which online counterfeiters have moved has been equally impressive. This has kept constant pressure on the industry – not only to use the most advanced information technology to collect as much data as possible, but also to process and understand that data quickly in order to offer clients real insights and predictions.

“The market’s response to the growth of online IP infringements has been, quite frankly, fascinating to be [a] part of,” Urquizu said.

Due to the digital nature of online counterfeiting, virtually no market is safe from this impending threat

C19MA_029_D04_31763.pdf

Caught red-handed

IP infringements aren’t only bad for business: they can be harmful to consumers, too innovation and bringing the best-in-class talent to our business,” Urquizu said. “In this way, we hope brands will no longer have to worry about the risks of piracy, counterfeiting or brand abuse.”

Counterfeit goods market:

€1.05trn €2.45trn €281.5bn Total value (2017)

Predicted value by 2022 Value contributed by online IP infringements

2.5%

Contribution to global imports

5%

Contribution to EU imports

5.4m

Estimated job losses by 2022

Red Points itself has changed tremendously since Urquizu took up the mantle of CEO. “When I joined the initial founding team in 2014, Red Points was still [in] its infancy and the company’s main focus was copyright infringements,” Urquizu told European CEO. “Upon my arrival, I took the decision to expand our brand protection remit and shift to our current… SaaS model.”

Since then, the company’s size has surged from just 10 employees to 170. Last year, Red Points opened new offices in New York to help with its international expansion in the US and Canada. It has also worked to bolster its brand protection portfolio with the launch of a new product that helps companies monitor distributor compliance.

Online distributor compliance software enables a company to manage its distribution partners’ behaviour across all digital retail channels. Red Points’ automated solution, for example, offers price-monitoring technology that allows firms to detect when a competitor is selling a product below the agreed price. Further, it identifies partners who are out of stock, automatically sending offers or notifications.

“In the years to come, our core focus will continue to be to expand our global footprint by leveraging our existing technology while continuing to invest in product

Dynamic ecosystem Although Red Points is eyeing a speedy ascent to the international stage, a culture of technological innovation has already developed in its home city of Barcelona.

The city now ranks among the best in the world for tech entrepreneurship, and it’s certainly one of the top spots for start-ups in Europe. What’s more, Barcelona boasts the fourth-highest volume of business investment – behind only London, Berlin and Paris – having raised €722m in 2017.

The city is home to more than 1,300 start-ups, 22 percent of which are focused on the SaaS industry. A Financial Times analysis of business school alumni from around the world, meanwhile, found that around 26 percent of MBA students from Spanish schools went on to set up their own companies, a percentage that was ahead of all other countries.

“The combination of highly qualified talent from around the world and an environment that encourages innovation has led to success stories,” Urquizu said.

“In the future, I expect this trend to continue, with even more innovation and investment coming to companies based in Barcelona, [helping us to compete] with our counterparts in Silicon Valley.”

As one of few female CEOs in the Spanish tech sector, Urquizu believes there is much that must be done to educate the industry on the benefits of having women driving growth in leadership positions. While the number of women in the tech sector remains low, Urquizu believes the tide is slowly turning: “The one piece of advice I would give to aspiring female tech leaders is, don’t wait for someone to give you the next big opportunity – you have to be active and make your own path forwards.”

As Red Points goes from strength to strength, Urquizu’s focus remains on developing the best technology: “Technology is our weapon against the spread of online IP infringements worldwide.” And it’s hard to argue with her: the groundbreaking developments coming out of the brand protection sector today could be key to preventing counterfeit goods from poisoning e-commerce markets and devouring businesses around the world. n EuropeanCEO

| 29

Industry Outlook

Manufacturing

From product to service

With the European manufacturing industry on the brink of recession, companies must employ new digital and service-focused tactics to ensure they remain competitive, writes Sophie Perryer Generating around 14 percent of Europe’s GDP, the manufacturing industry has long been known as the backbone of the continent’s economy. From agrochemicals to automobiles, food to face cream, Europe’s manufacturing capacity not only supports and drives countless businesses, but also makes the continent an attractive trading partner for the US, China and other economic powers.

But change is afoot. Increasing automation, the shifting of labour to Asia and a push towards the digital economy have all stolen slices of the manufacturing sector’s pie, which looks set to shrink further in the coming months. While this may boost the continent’s digital capabilities to a newly competitive level, the shift away from manufacturing also spells trouble for Europe’s low-skilled workers, many of whom rely on steady jobs within the sector for their livelihood.

On the brink Although European manufacturing has been on a steadily declining path for the past decade, 2018 saw a dramatic drop in output for much of the eurozone. IHS Markit’s Purchasing Managers’ Index (PMI), a key economic indicator for the manufacturing industry, fell for the fifth straight month in December 2018, reaching a new low of 51.4. A reading below 50 indicates an actively shrinking industry, while a reading of between 50 and 55 highlights a sector that is dangerously near recession.

News website Government Europa noted in a January 2019 blog post: “December’s reading marked the lowest for European factories since February 2016, as new orders fell by the highest rate since 2014; hiring of new employees was minimal; and backlogs were run down for a fourth month.”

Italy and France showed the most dramatic decline – both were given individual country readings of 49.2 and 49.7 respectively. In Italy, business confidence in the sector fell to a sixyear low and new orders for manufactured goods plummeted, while France saw the fastest fall in output since April 2015, attributed in part to the gilets jaunes demonstrations. Meanwhile in Germany, the eurozone’s largest economy, the PMI slipped to a worrying 51.5, the 11th time that it had declined in 2018.

“Forward-looking indicators like the... PMI have long been flagging weakness in the industrial sector, driven initially by weaker external demand,” IHS Markit’s Chief European Economist, Kenneth Wattret, said in a briefing seen

by European CEO. “They continue to point to difficult conditions going forward, [and] the broader question facing the eurozone is to what extent the weakness in the industrial sector and exports will cross-infect domestic demand, generating a harder landing for the economy.

Our GDP growth forecasts for 2019 and 2020 (currently 1.4 and 1.2 percent respectively) have been below consensus for some time, reflecting the likelihood of such spillovers materialising.”

A powerful rival The success of Europe’s manufacturing industry is directly linked to its, and the rest of the world’s, demand for commercial and consumer goods, which has grown exponentially over the course of the 20th and 21st centuries. However, where Europe was once the go-to trading partner for countries such as the US for manufactured goods, it now has much cheaper alternatives in the Far East. Likewise, where European businesses may have once opted to produce goods within the continent, many have turned to China. A perfect trifecta of reduced

labour and materials costs, along with a greater available workforce, makes the Asian nation a natural choice for companies seeking faster and cheaper production.

China’s automobile manufacturing market in particular has seen vast growth over the past 20 years – in 1999, the country produced 1.8 million vehicles, compared with 29 million in 2017. In that same period, Germany’s manufacturing output has remained relatively static, rising from 5.69 million in 1999 to a peak of 6.14 million vehicles in 2011, before falling to 5.65 million in 2017. “For a lot of European manufacturing companies, if all they do is make a widget, or some industrial heavy machinery, it’s very difficult to compete on cost with lower-cost regions like China,” explained Paul Miller, Senior Analyst at Forrester Research.

From a commercial point of view, continental loyalty will always bow down to profit margins.

30 | EuropeanCEO

C19MA_C03.indd 30

13/02/2019 15:06

Industry Outlook

Manufacturing

Increasing automation, the shifting of labour to Asia and the digital economy have all stolen slices of the manufacturing sector’s pie

Moreover, with increasingly capable technological innovations being developed every year, a greater proportion of manufacturing work that was previously completed by human workers is now automated. For instance, Foxconn, the largest contract electronics manufacturer in the world, automated 10,000 human jobs last year and is planning to increase automation in its Chinese factories by 30 percent by the end of 2020. Robotic labour is far less costly and more efficient than its human equivalent, making it a natural choice for many manufacturers.

The tech factor Increasingly, European manufacturers are realising that the source of sustainable growth is not endless cost cutting, but rather the racking of digital services alongside an existing

product. Miller proffers German manufacturer Kaeser Compressors, which has a background in the production of compressed air machines for hospitals and building sites, as an example.

In the past few years, the company has shifted its business model almost entirely from selling machines that make compressed air to renting compressed air by the litre. “All of the maintenance and consumables, and all of the issues with getting machines to and from sites, all becomes Kaeser Compressors’ problem, not [its] customers’ problem,” Miller explained.

This means the company is able to charge a premium for the air itself as it’s a much more valuable, hassle-free product.

By shifting the business model from making and selling a product to delivering a service, manufacturing companies are able to preserve their revenue and eliminate cost-

based competition with rivals. But this then presents an issue with labour, in that current employees don’t necessarily have the digital capabilities to pivot effortlessly to this new business model. Manufacturing has traditionally been seen as a safe haven for Europe’s lowskilled workers, as the process-driven, manual nature of most employment in the sector can be learned on the job, and does not require any prior academic knowledge.

Shifting to a digital, service-driven system, then, requires a comprehensive reskilling of a company’s workforce. Firms across Europe have already embarked on this ambitious undertaking, supported by a number of governmental and Europe-wide initiatives, such as the European Commission’s Horizon 2020 plan. In the Netherlands, the government’s Smart Industry initiative focuses on providing workers across the manufacturing sector with the technological skills they need to remain valued employees both now and in the future.

“There’s a very clear recognition that [this upskilling] is a shared responsibility between governments, employers and employees,” Miller said. “These workers don’t necessarily have to have a degree, they don’t necessarily have to be computer programmers, but they do require a new set of skills, and it’s about these three stakeholders coming together to try and understand how to deliver on that.”

By collaborating to reskill these workers, a whole host of issues, from forced redundancies to having to pay out unemployment benefits, can be eliminated.

To remain competitive, companies must recognise that business models are not monolithic, and must be prepared to be as flexible as possible in the face of challenging market conditions. They must also identify that the source of revenue is changing, from being driven by manufacturing to now originating in the service economy. By understanding these shifts in the sector and taking steps to get in front of them, manufacturing firms can ensure they remain a valued part of the European business landscape in the years to come. n EuropeanCEO

C19MA_C03.indd 31

| 31

13/02/2019 14:58

C19MA_032_B02_01428.pdf

INDUSTRY OUTLOOK

Energy

Hanno Schoklitsch Founder and CEO, Kaiserwetter Energy Asset Management

Energising the market

The renewable energy sector has come on in leaps and bounds in recent years. But with global investment plateauing somewhat in 2018, maintaining a high level of interest will be vital to the industry’s continued progress When we imagine the future, we think of renewable energy powering all processes, both industrial and domestic. We picture the technical and financial possibilities presented by emerging technologies, such as the Internet of Things (IoT), big data and the cloud. Put simply, we envisage a smarter, more efficient society that holds sustainability at its core.

What we tend to miss, however, is that such a future is already here.

In the face of decarbonisation, renewable energy has become the best alternative to the high cost of nuclear power, with only 14 countries now considering building new reactors.

The preferred renewable energy options – solar and wind – have reached parity in price and performance with conventional sources, proving their competitiveness across international markets. What’s more, costs continue to fall and the successful integration of new technologies into energy assets is progressing at a good pace, bringing them closer to meeting the three priorities of modern consumers: reliability, affordability and environmental responsibility.

For the first time in history, the cost of producing clean energy is below that of conventional sources, according to estimates by asset management firm Lazard. This cost reduction – which, according to Kaiserwetter data, has been around 80 percent since 2010 – is due to 32 | EUROPEANCEO

technological improvements and a broad base of project developers, especially investment funds and banks. With further developments on the horizon, investing in renewable energy projects has never been such an attractive proposition.

Avoiding hurdles Despite heightened interest in renewable energy technologies, it’s essential that this focus – and the associated investment that comes with it – be sustained in order to ensure the sector’s momentum is not lost. In 2018, investment in renewables stagnated, making it more difficult to meet the targets set by the Paris Agreement – a treaty that aims to significantly curb the rise in global temperature.

While Bloomberg New Energy Finance found that global investment in clean energy exceeded $300bn (€264bn) for the fifth year in a row in 2018, last year’s total of $332.1bn (€292.3bn) represented an eight percent decrease on 2017’s figures. At Kaiserwetter Energy Asset Management, we are well aware of the challenges that lie ahead in 2019, and are committed to doing all we can to make it easier for companies to invest in renewable technologies. That’s why we’re basing our business model on digitalisation, combining the opportunities proffered by IoT devices, predictive analytics and machine learning to

aid in the management of renewable energy production facilities.

This move towards digitalisation and automation will help investors achieve the highest possible returns on investment capital in clean energy. To allow this to happen, we have developed ARISTOTELES, a digital IoT platform that utilises SAP Leonardo capabilities to manage renewable energy assets from various sources, such as wind, solar, hydroelectric, geothermal, biomass and natural gas.

Put simply, ARISTOTELES enables various investment funds, infrastructure funds, banking institutions and facility operators to manage the technical and financial performance of their renewable energy portfolios. Through this cloud-based, digital IoT platform, we’re able to aggregate technical, meteorological and financial data to create a structured database. Algorithms are then used to provide easily digestible information in the form of key performance indicators, helping to maximise the performance of individual assets and entire portfolios.

Harnessing technology Thanks to these processes – and an intelligent study of information, digitalisation and the IoT – Kaiserwetter can now offer investors the chance to extend the intrinsic value of energy assets while also obtaining the highest returns

C19MA_033_B02_16140.pdf

Industry Outlook

Energy

and minimising the risk of transactions. This, in turn, will help boost the international scope of sustainable energy and its development.

With ARISTOTELES, each client can control its multi-country asset portfolio through a standardised, tamper-proof database, keeping risk to a minimum. This infallible IoT platform helps investors protect their investments, while also maximising the transparency and return on assets with lasting effect. What’s more, ARISTOTELES does not require any kind of interference with an organisation’s existing IT infrastructure, as it relies on a data-as-a-service business model.

Thanks to this functionality, investors, banks, insurance companies and energy providers can concentrate on managing their dayto-day business operations, safe in the knowledge that ARISTOTELES is handling their energy portfolios for them. Further, by simplifying corporate structures and replacing the bn functions of existing Global investment in control departments, ARISTOTELES often clean energy in 2018 saves organisations money in other areas bn of their businesses, too.

Green bond The maximisaissuance in 2018 tion of wind and solar (as of October) farms goes hand in

€292.3 €115.3

The move towards digitalisation and automation will help investors achieve the highest possible returns on investment capital in clean energy

hand with the use of cutting-edge digital technologies – ARISTOTELES is playing a significant role in this regard. Such advances are part of the reason renewable energy is now more competitive, efficient and cheaper than ever before.

Delivering returns The renewable energy market moves considerable amounts of money worldwide.

According to Nordic banking giant SEB, green bond issuance in 2018 had reached $131bn (€115.3bn) by the end of October – almost exactly the same quantity issued at the same time in the previous year. At the head of these sustainable investments are groups mainly operating in the eurozone, the US and China.

Although funds continue to focus mostly on

Europe and the Americas, Asia is becoming an increasingly attractive market.

Many investors have argued that, in order to regain confidence in the market, it is essential to have technological operators that understand the investment situation on a local level. Our awareness of technical advances, comprehensive business structures and the evolution of markets – and their regulations – sets Kaiserwetter apart from the crowd in this respect.

Digitalisation is a key and indispensable element to the recovery of this confidence, as well as to the expansion of renewable energy technologies into all countries and markets. As Industry 4.0 sees the management of energy assets combine with everyday business processes, technical and financial data will be stored in digital platforms. As a result, the sector’s information technology assets will increasingly become a determining factor in which types of assets renewable investment funds choose to pursue.

Innovative techniques such as advanced data analytics are greatly impacting the returns on renewable energy investments, while minimising the risks. It is in this area that Kaiserwetter plays a critical and indispensable role.

ARISTOTELES is a technological manifestation of our expertise in this sector, making investing in clean energy both an ethical choice and a smart one in terms of business. n EuropeanCEO

| 33

C19MA_034_B04_88760.pdf

Industry Outlook

Healthcare

The mouth is an integral part of the human body and a key puzzle piece in overall health

Word of mouth

driven ultrasonic instruments to ensure the procedure is painless.

When gingivitis is not treated, however, it can advance to periodontitis, which is a serious infection of the tissues around the tooth. To treat it, we utilise a thorough deep-cleaning method known as scaling and root planing, which ensures the plaque and tartar build-up below the gums – in so-called ‘periodontal pockets’ – is scraped from the root surface. For this, we use a combination of ultrasonic instruments and curettes, which are the gold standard in periodontology.

Oral health is often a taboo subject. But with gum disease far more prevalent than many of us realise, a greater willingness to discuss the symptoms and seek professional treatment could improve the oral hygiene of millions of people around the world, according to Dr Goran Jovičević, Founder of Zagreb Implant Dentistry Our mouths are full of bacteria – as many as 700 different strains, in fact. As a result, improper and irregular cleaning can cause bacteria to build up, forming a sticky layer known as plaque. This collection of bacteria is one of the main causes of gum disease, triggering a local inflammation that affects the tissue around the teeth, gums and jawbone.

While plaque may sound pretty harmless, in reality it is the underlying cause of many unwanted and, at times, embarrassing symptoms: bad breath, changes in taste, swollen or receding gums, bleeding gums and, eventually, tooth loss. Gum diseases – formally known as periodontal diseases – are connected to more than 50 other systemic and chronic illnesses, the two most common of which are diabetes and cardiovascular disease.

European CEO spoke to Dr Goran Jovičević, the founder of Zagreb Implant Dentistry, to learn more about the health implications of periodontal diseases and how such conditions can be treated.

Why are more people suffering from periodontal diseases?

First of all, I want to be very clear and offer words of comfort and encouragement: if you’re suffering from gum disease, you’re not alone.

34 | EuropeanCEO

In term of prevention, what can individuals do better?

Hygiene is the cornerstone of oral health. At our dental practice, we teach individualised oral hygiene protocols to each of our clients. The condition of our teeth and gums varies from person to person; so should the oral hygiene routine we perform at home.

In terms of early diagnosis, bleeding gums More than 10 percent of the global population should be a red flag. Don’t overlook it or keep your fingers crossed hoping the condition will has a severe form of periodontitis.

One of the main reasons the disease is go away – it can only get worse if you don’t treat becoming increasingly prevalent is due to the it. Remember, healthy gums don’t bleed. fact people are unwilling to talk about the problem and seek professional advice, most probably What sets your practice apart from because the symptoms are rather unpleasant others in the industry? to talk about. Unfortunately, periodontitis is I’m a specialist in periodontology, which means a taboo in modern society – here at Zagreb I’ve trained for three additional years to proImplant Dentistry, we’re working to change that. vide area-specific surgical and non-surgical To those suffering, you can rest assured treatments. At Zagreb that some form of gum disease affects a numImplant Dentistry, we ber of your neighbours, friends and close relatailor our treatment tives, so there’s no need to feel embarrassed. As of the global plans according to the general population gets older, the number population suffers the patient’s needs of people affected by periodontitis will only from periodontitis and systemic health, grow. With this in mind, it’s important that as well as the extent of people start to talk about the condition and the disease itself. seek treatment. After all, the mouth is an I consider myself blessed to work in a pracintegral part of the human body and a key tice that provides a whole range of dental serpuzzle piece in overall health. vices, as it presents me with the opportunity to positively impact patients’ overall oral hygiene.

Once we achieve periodontal health, we restore How do you treat patients with the function of chewing and aesthetics, too. As periodontal diseases?

Treatment depends on the extent of the dis- a result, our patients always leave Zagreb with ease. Sometimes, the inflammation is mild and a healthy set of pearly white teeth. n superficial – this is known as gingivitis. Gingivitis is treated through professional plaque F or f ur t he r inf or m at ion and tartar removal, for which we use power- www.zagrebimplantdentistry.co.uk

10%+

C19MA_001_Z03_45072.pdf

Industry Outlook

E-Commerce

Subscribing to a new business model

Subscription-based strategies have emerged as a way for companies to turn conventional markets on their heads.

The industry has grown rapidly, but will it continue to deliver? Courtney Goldsmith investigates It used to be that subscriptions were only for magazines and newspapers. Today, the subscription e-commerce industry has grown into a major disruptor in the retail sector. Companies deliver boxes to consumers containing everything from a selection of curated snacks or socks to luxury dog treats and vinyl records.

The trend, which was ignited in the US, has now spread to Europe. Growth has been meteoric, prompting major retail brands to get involved too. The market has more than doubled each year for the past five years, according to a 2018 report on the subscription e-commerce industry by management consulting firm McKinsey & Company. But recently, as an influx of niche products floods the market, the growth of some of the industry’s best-performing segments, such as food and beauty, has faltered. As the subscription sector’s growth slows, questions are being raised over whether the industry is finally beginning to mature, or if the business model was merely a bubble that is ready to burst.

Breaking the status quo The 2018 McKinsey report identified three broad categories of services: curation, replenishment and access. Curation subscriptions are the most popular, accounting for over half of all subscriptions. As the report said, they “seek to surprise and delight” by presenting consumers with personalised items in a category that they wish to explore further, such as apparel, beauty or food.

The main selling point of replenishment subscriptions, on the other hand, is the con-

venience of automating the purchase of household staples, such as razors, contact lenses or vitamins. Dollar Shave Club and Amazon’s Subscribe & Save are among the biggest names in the segment. The last – and least popular – type of subscription service is ‘access’, which gives subscribers discounts or perks, as with healthy snack company NatureBox. Mark Livingstone, CEO of British healthcare subscription service Pharmacy2U, has spent the past 15 years in a succession of subscription-based e-commerce businesses. He thinks they have the power to upend a number of traditional retail markets. “I fundamentally believe that [brickand-mortar institutions], in almost every way, will be disrupted by online subscription,” Livingstone told European CEO. However, with more and more niche businesses hoping to recreate the success that food and beauty boxes achieved, it is likely some will learn the hard way The subscription that there is not an equal opportunity e-commerce for ever y market market in in subscriptions. numbers: Livingstone, who was a founding investor in healthy snack generated by compa ny Gra ze sales in 2011 and was also the cofounder and former CEO of DVD-by-post generated by firm Lovefilm until it sales in 2016 was bought by Ama-

€50m

€2.3bn

zon, knows a thing or two about identifying markets that are ripe for disruption. These are typically large markets with a long history of being monopolised by traditional brick-and-mortar shops.

In Livingstone’s case, he began his recent foray into pharmaceuticals after conducting six months of research that comprehensively showed consumers wanted an easier and more convenient way to receive their prescriptions.

Having become CEO of Pharmacy2U in 2016, Livingstone now aims to turn his repeat prescription delivery company into a £1bn (€1.1bn) business in just three years.

Playing with your emotions Although the subscription business model made a name for itself in the US with companies like Dollar Shave Club and monthly beauty boxes Ipsy and Birchbox, European companies have popped up to rival their successes. Popular examples include Germany’s HelloFresh, highend beauty box Glossybox, UK-based Graze and men’s toiletries firm Cornerstone.

36 | EuropeanCEO

C19MA_C08.indd 36

13/02/2019 15:25

Industry Outlook

E-Commerce

The internet fuels compulsive shopping due to its convenience, anonymity and the illusion that one is not really spending money

McKinsey’s survey of the more mature US market revealed that 15 percent of online shoppers have signed up for one or more subscription service. In 2011, the industry’s largest players generated just $57m (€50m), but by 2016 that had increased to $2.6bn (€2.3bn). One explanation for their popularity – especially for curated boxes – is the psychology of online shopping.

Psychologists have long understood that the internet fuels compulsive shopping due to its convenience, anonymity and the illusion that one is not really spending money.

For subscription boxes, the quick thrill of making an online purchase is amplified by a cycle of emotions, as described by marketing professors Louise Grimmer and Gary Mortimer in an article for the Conversation: “We go through a number of emotions with subscription boxes. There’s anticipation (eagerly awaiting the delivery of the box), curiosity (what will the box contain?), surprise (upon opening the box) and joy, delight, satisfaction and sometimes disappointment upon discovering the array of products contained within the box.”

Then, the cycle immediately starts up again ahead of the next delivery. Grimmer and Mortimer compared the rush of dopamine that consumers experience when anticipating and opening their subscription boxes to the emotions felt by gamblers.

Slow growth Research by marketing intelligence firm Hitwise found that online visits to top subscription service websites have soared almost nine-fold from 4.7 million visits in April 2014 to 41.7 million in April 2018. While niche categories like apparel subscription boxes have continued to grow at double-digit rates, more traditional markets, such as beauty and food, have slowed. This mixed success can be seen in some of the industry’s recent initial public offerings (IPOs). For example, Blue Apron, one of the most popular meal-kit services, was heavily hyped ahead of its listing on the New York Stock Exchange in 2017, but it became the worst-performing major IPO of the year as its share price tumbled. By the end of 2018, its share price was less than $1 (€0.88), having started at

$10 (€8.83). However, Stitch Fix, a personalised clothing subscription service, listed just a few months later with far better results. The company’s share price was set at $15 (€13.28) and now tends to sit in the mid-to-low 20s.

Despite the emotional pull consumers feel for subscription boxes, the McKinsey report argued that the requirement to sign up for a recurring order dampens demand and makes it harder for firms to acquire customers. Churn rates are high for subscription boxes, with consumers quick to cancel any service that misses the mark. “Consumers do not have an inherent love of subscriptions… Rather, they want a great end-to-end experience and are willing to subscribe only where automated purchasing gives them tangible benefits, such as lower costs or increased personalisation,” the report said.

Livingstone believes the subscriptionbased business model is a long-term trend that still has a lot of room for growth: “As a consumer, just not worrying about things and knowing that you’ll be receiving something on a frequent basis without you having to remember, I think, is a massive 21st-century… trend.” One way growth could occur is through the introduction of established brands into the subscription e-commerce market. For example, to compete with popular razor subscriptions, P&G launched Gillette on Demand in 2017 and Unliever bought Dollar Shave Club in 2016 for $1bn (€870,000). Meanwhile, beauty shop Sephora created Play! and Walmart introduced Beauty Box to get its foot in the door of the subscription market.

As these big-name brands enter the market, subscription businesses are increasingly becoming household names in their own right.

At the same time, they provide a home for niche ideas that would normally struggle to survive without the unique selling point of recurring deliveries or personalisation.

While it appears the boom time for subscription services may be coming to an end, the market will remain an exciting place for ambitious companies to shake up traditional business strategies as it matures. n EuropeanCEO

C19MA_C08.indd 37

| 37

13/02/2019 15:44

C19MA_038_A06_29801.pdf

Industry Outlook

Defence

Protection through education International security faces a new threat landscape.

To remain protected amid the exponential growth of technologies, countries must address their education strategies, writes Dr Jean-Marc Rickli, Head of Global Risk and Resilience at the Geneva Centre for Security Policy Just before Christmas on December 19, 2018 – one of the busiest times of year for air transportation – Gatwick Airport was forced to close for 36 hours. During this time, more than 1,000 flights were cancelled, affecting in excess of 140,000 passengers. The reason: a drone was flown illegally over the airport’s runways.

Although two individuals were arrested and later released with no charges, at the time of printing, no one has yet been convicted for the crime that is estimated to have cost at least £20m (€23.7m) for the airport and various airlines. In order to prevent a repeat of such a chaotic scenario, Gatwick Airport has spent £5m (€5.7m) on a new anti-drone system.

Little under a month earlier, He Jiankui, a Chinese researcher and entrepreneur involved in two biotech start-ups, posted a video on YouTube claiming that newborn twin girls Lulu and Nana were resistant to HIV. He also claimed to have genetically modified their genes at the embryo stage by deleting the CCR5 gene, which is known to assist in white blood cell function and is key to the development of HIV. He allegedly used the gene-editing tool CRISPR-Cas9 to achieve the feat. This technique was first harnessed for genome editing in 2013 and offers a relatively quick, easy, reliable and cheap way to target specific genetic sequences. Since then, biohackers have used CRISPR-Cas9 to treat various viruses, such as herpes, or to promote muscle growth outside of any ethical or medical framework.

38 | EuropeanCEO

These two seemingly unconnected incidents demonstrate the possible security implications of emerging technologies, which harbour greater disruptive potential as they become cheaper and more accessible.

New threats Drones have been in development since the 1950s, but they only became commercially available in the early 2010s. Commercial drones can now be found on the internet for a few hundred euros or, with additive manufacturing technology, can be created with 3D printers.

Similarly, CRISPR technology was invented in the post-sequencing era of the 2000s. The first sequencing of a human genome cost $2.7bn (€2.4bn) and took 13 years to complete; today, the process costs around $1,000 (€879) and can be carried out in just 24 hours. One US company has even revealed plans to commercialise a technique that costs $100 (€88) and sequences the human genome in a matter of hours.

One of the key characteristics of emerging technologies is that their growth and Cost of human genome sequencing: reach is exponential.

In computer science, for example, Moore’s bn Law suggests the 2003 processing power of computers will double roughly every 18 2019 months. Last year,

€2.4

€879

however, it emerged that the processing power used in the largest artificial intelligence models had doubled every 3.5 months between 2012 and 2018. This represents a more than 300,000-fold increase, far greater than the expected 12-fold increase based on Moore’s Law. The great pace at which these technologies are progressing presents new threats.

Knowledge is power Exponentiality creates huge challenges for international security. First, it widens the scope of people having access to emerging technologies. Traditionally, only nations could wield power internationally; nowadays, with emerging technologies, any one person can potentially have a strategic impact. Think of whistleblowers Edward Snowden and Chelsea Manning, who stole volumes of data – ranging from hundreds of thousands of documents to a few million – that no individual could ever have dreamed of until recently. Companies are not immune to such behaviours either.

While the scope of potential threats widens to the individual level, exponential growth represents a huge challenge to governance.

The human brain is wired to think in linear terms. In the face of exponentiality, however, policies based on linear principles will become increasingly irrelevant as time passes.

Faced with these challenges, anticipation and foresight will be key to any organisation, be it a nation state or a company. As such, we need to shift our education system so as to create not only ‘hyper specialists’, but also polymaths – people who are able to see the big picture and think in strategic terms. For this revolution to occur, a change of mindset in education will be required – one that will value cross-disciplinary tuition across engineering, humanities and sciences (both hard and social), as well as continued training throughout entire careers. n

C18ND_001_Y06_14996.pdf

C19MA_040_A07_06173.pdf

INDUSTRY OUTLOOK

Defence

In five years, our world will be different; in 10 years, it will be unrecognisable

The pathway to progress

The technologies required to unlock the rich rewards of digitalisation have existed for years. In order to progress, however, we must breed a culture of trust and collaboration, writes Gareth Williams, Vice President of Secure Communications and Information Systems at Thales UK We live in an increasingly connected world.

Technologies such as big data, artificial intelligence and the Internet of Things are growing year on year in both prevalence and capability.

But with greater connectivity comes greater risk; while integrating innovative technologies has myriad benefits for any business, it also exposes it to the possibility of cyberattacks.

If a firm is sharing information via online networks, for example, any resourceful hacker with an internet connection could also gain access to said data, regardless of how well protected you think it may be.

In the modern era, it’s not enough to simply reinforce firewalls and update antivirus software. Unidentified gaps in security are likely to be left unprotected, making them an easy and undetectable entry point for cybercriminals.

All is not lost, however: there are a number of simple steps companies can take to ensure they are exploiting the full capabilities of technology without falling victim to its frailties.

System update There’s no denying that maintaining access to a wide range of information networks boasts countless advantages: it can reduce costs, increase organisational agility, improve decision-making and open new revenue streams for corporations of all shapes and sizes. Just like every other area of business, data management is constantly changing. As such, it’s imperative that 40 | EUROPEANCEO

companies keep pace, whether that’s by updating key sources used to collate data or changing the way information is stored internally.

Similarly, cybersecurity is a never-ending process. Any lapse in antivirus protection renewal or network filter updates is like giving hackers a master key to the information a business has so carefully collated and stored.

It is essential, therefore, that companies invest in robust protection systems.

The best way to keep up to date with cybersecurity technologies is to engage a firm of digital protection specialists. Not only will they guarantee that security systems are resilient enough to withstand even the craftiest of cybercriminals, they’ll also provide guidance on best-use practices to ensure technological infrastructures are used to their full potential.

Importantly, companies must engage cybersecurity firms specialising in their particular market. This will ensure they have the appropriate knowledge to prepare the business for anything that crosses its path.

Digital defences To counteract the increased cyberthreat landscape, security firms are continually introducing new technologies to the market. Identity warrants, for example, assign connectable devices a unique and unalterable cryptographic identity. This technique is accomplished by using the unclonable features of silicon devices

or by injecting private keys into tamper-resistant zones within hardware devices.

Often incorporated as an automated step in the manufacturing process, identity warrants bring greater security to many operations, including the upgrading of remote software, the management of connected devices, the prevention of illegal connections, and collaboration with third parties. They make it practically impossible for any device to be cloned and are a great hardware consideration for any business.

On the software side, blockchain has become a much-hyped technology within the cryptocurrency world, but it can actually be used to safeguard any sort of data. Each block in the chain is an unalterable, permanent and publicly accessible set of data. As a result, everyone can see new data when the chain is updated, safe in the knowledge that the information is true. This can be particularly useful in cases where trust is already low – when competitors collaborate on a high-value project, for example.

Public-key cryptography, meanwhile, is used for the fast, secure transmission of data on a large scale. It must be supported, however, by a complete and trusted set of policies and procedures governing the creation, management, distribution, issue, storage and revocation of digital certificates – the so-called public key infrastructure.

There is no doubt that we are going to see substantial changes in the age of digital disruption. You can expect to see increased supply chain efficiency and accountability, ‘just-in-time’ maintenance, easier collaboration and the more effective use of assets. In five years, our world will be different; in 10 years, it will be unrecognisable.

We have the technology; the demand is clear. All that is required to open the door to this bright new future is digital trust. ■

C18ND_001_X02_17048.pdf

Connecting 7 billion stem cell donors everyone a potential lifesaver

The future belongs to those who prepare today

Find out more accellerate@precious-cells.com precious-cells.com Precious Cells International

PRE239_European_CEO_Advert_210x280mm.indd 1

@Precious_Cells

06/10/2017 09:52

CEOprofile Carole Walker C E O | H e r me s E ur o p e

Delivering results

Artificial intelligence and data analytics are changing the face of the delivery market. As CEO of Hermes Europe, Carole Walker has embraced these new developments without compromising on sustainability The delivery and logistics industry can be an unforgiving one. Millions of parcels can be delivered on time and without incident, but it only takes one example of poor service to tarnish a company’s reputation. Websites and local newspapers are often awash with stories of birthdays and Christmases ruined by deliveries gone wrong.

Mistakes are part and parcel of the delivery trade, but some couriers appear more committed to reducing instances of poor service than others. Since its founding in 1972, Hermes has acquired plenty of knowledge regarding what works well and what doesn’t in the rapidly changing logistics industry. One of the reasons the firm has been able to adapt to new technologies and shifting consumer trends is its excellent staff – not least of all, Hermes Europe CEO Carole Walker.

Walker has been with Hermes’ parent company, the Otto Group, for more than 30 years, starting out in change management

roles on behalf of retail business Grattan, before becoming CEO of Hermes UK and then of Hermes Europe in 2017. With experience working in customer service, warehouses and distribution centres, Walker has covered the main operational areas associated with the logistics and delivery sectors. But she remains open to learning new things.

The delivery industry has experienced immense disruption in the past decade, with the rise of e-commerce firms, low-emission vehicles and data analytics all having an impact.

Under Walker, however, Hermes Europe has navigated these challenges while still posting impressive growth figures. With new competitors emerging all the time, her stewardship will be needed more than ever in the coming years to ensure her company stays on the right track.

values are changing when it comes to delivery. A 2018 survey of consumers found that 94 percent of respondents were more likely to make an online purchase if free delivery was offered but, equally, 40 percent said they would pay if it meant that their package would arrive the next day. Juggling these conflicting demands puts logistics firms such as Hermes Europe in a difficult position.

“As soon as retailers started offering free delivery, consumers no longer [associated] any value with the physical delivery of the parcel to their home,” Walker explained to European CEO. “And when you think about the value chain that’s involved in delivering parcels to consumers, there is a substantial, infrastructure-heavy network that goes into that – and therefore a cost. I think this is one of the major conundrums facing the industry. How do we continue to satisfy customers that want free The full package One of the biggest challenges Walker has faced deliveries, when there are just as many that at Hermes Europe is the fact that consumer want it fast – next-day or even the same day?” »

cV born: 1966, UK

Hermes |

education: Business Administration, University of BradforD

in numbers

1987

2001

2009

2017

Carole Walker joined the Otto Group, where she held a number of management positions before being given responsibility for warehouse pick, pack and despatch

After completing her MBA, Walker was appointed as Parcelnet’s director of operations, becoming managing director three years later

Parcelnet was rebranded as Hermes UK, with Walker as company CEO. During her time in charge, the business became the second-largest delivery company in the UK

After transforming Hermes UK into a multichannel delivery solution, Walker became CEO of Hermes Europe, where she assumed responsibility for Otto Group’s European logistics

1972

800m

¤500m

¤100m

founded

Total investment by 2020

parcels delivered a year

spent on personnel by 2024

42 | EuropeanCEO

C19MA_D05.indd 42

12/02/2019 15:25

C19MA_043_D05_20341.pdf

CEOprofile

Another test facing Hermes is how to cope with increased demand. Online shopping has caused a boom in parcel deliveries all over the world, and it is hardly surprising that couriers are struggling to keep pace. In 2018, Amazon called on entrepreneurs to start new delivery companies to cope with the added demand.

Walker said Hermes Europe is “typically seeing between 15 and 20 percent annual growth for its products and services”. While this is impressive, it is not easy to maintain.

By 2020, Hermes plans to invest approximately €500m across all its business units – an amount that Walker understands will be necessary for Hermes Europe to continue meeting its customers’ high expectations. “The investment is hugely important,” Walker explained. “It’s a substantial increase on the previous three years and will be necessary as e-commerce is set to grow hugely in the coming years. We need to invest in capacity, hubs, depots and the final mile, and we need to continually deliver a better customer experience. We are redesigning processes and offering customers more choice – these are all areas that are critical in order to become the carrier of choice for consumers.”

The extra financial injection that Hermes Europe has planned for the near future will not only benefit the company’s customers.

Over the next five years, Hermes Germany will invest €100m in personnel costs, with delivery staff at Hermes and its service partners set for a wage increase. With her many years of experience managing teams large and small, Walker understands that Hermes Europe must look after its employees if they are to look after customers’ packages in turn.

Outside the box Like most industries, the logistics and delivery sectors have faced disruption from technological developments in recent years. As online shopping has become more popular, customers have begun demanding faster, more convenient delivery services. Investing in new technologies is the best way to achieve this.

“As we’ve embraced digital, customers’ time horizons have become more instant,” Walker said. “The consumer is now in control and they expect a wide range of service offers.

For example, they expect their suppliers to

Hermes is leading the way in terms of its tests of emissions-free deliveries, whether they involve electric vehicles or cargo bikes

respect the fact that they can change their minds halfway through a delivery process.”

To meet these new customer demands, Walker has championed digital innovation at the company, with smart route planning proving to be particularly effective. The new software was introduced in Germany last year and can automatically adjust to any changes that occur during the course of the delivery route. The new innovation should provide significant productivity benefits and enable drivers to give customers a more accurate estimate for delivery times.

“With the implementation of smart route planning, we are already seeing a number of improvements,” Walker said. “We are seeking to get real-time traffic data into our routing, [so] that we can make our couriers as efficient as possible. Following the initial tests we have carried out, we’ve witnessed a 34 percent reduction in customer complaints. Drivers are also feeling the benefits. It now takes less time to train a new driver, it is easier to be a good driver and therefore easier to promote quality and loyalty. There is a real shortage of drivers, so making it easier to be a great driver is a really important aspect of what we’re using our innovation for.”

These new technologies do come with risks, however. Hermes Europe is no longer simply a delivery firm – it is also a data storage one. In order to build the models that will enable it to improve its customer service, the storage, transportation and management of customer data has become increasingly important. A number of high-profile businesses have struggled to maintain their cyberdefences against attack – whether it’s from disgruntled employees or external actors. Walker is committed to making sure Hermes Europe does not join them. By making customer centricity a primary aspect of the business, she ensures that securing data is too.

Far and wide Another reason technology is required more than ever at Hermes is the complexity of its parcel delivery network. To facilitate crossborder deliveries, the company has a number of strategic partners and a recently created business unit, Hermes International, to bring together all of the organisation’s international activities in one place. Even so, integrating different partner systems and keeping track of changing regulations can be challenging across borders.

44 | EuropeanCEO

C19MA_D05.indd 44

12/02/2019 15:49

Walker has championed digital innovation at Hermes Europe, with smart route planning proving to be particularly effective

Hermes’ robot delivery service

“We have a whole network of partners, systems and services, and we position ourselves as a truly global service,” Walker told European CEO. “We have a sister company called BorderGuru, a start-up that began around four years ago, that provides software that can calculate the tax and customs duty needed for an individual parcel. The system allows customers to calculate their fees within the online checkout and pay it as a single transaction there and then, avoiding any delays.”

All these journeys, whether long or short, have an environmental effect, but Hermes Europe is fighting hard to reduce its impact.

The delivery firm has invested heavily in its parcel shop network – it now has the largest in Europe – which has been shown to result in much lower carbon dioxide emissions when compared with home delivery. A number of other initiatives have also been employed.

“In terms of electric vehicles, we have many different concepts and pilots that we are running,” Walker said. “The largest is our strategic partnership with Daimler – we have committed to putting up to 1,500 electric vehicles into all German cities in the coming years. We are also testing the new Mercedes eActros, which is a 25-tonne long-distance [electric] truck. And at

the other end of the scale, we have our e-cargo bike tests in Berlin.”

Currently, Hermes is leading the way in terms of its tests of emissions-free deliveries, whether they involve electric vehicles or cargo bikes. The Otto Group has a very high degree of sustainability entrenched within its DNA, and Walker is making sure this is shared with Hermes Europe.

Leader of the pack With e-commerce set to expand to include up to 70 percent of retail sales within the next two to three decades, Hermes Europe is expecting double-digit growth. Under Walker, the company has its own innovation radar – involving artificial intelligence, automated solutions and robotics – and the company certainly needs to be focused on the future. The industry is only going to become more competitive.

Amazon has already launched its own delivery service, Shipping with Amazon, in selected markets, and other hi-tech firms including Google are testing their own services.

Making sure Hermes remains competitive in this increasingly congested field is vital if the company is to retain its good reputation among customers and clients.

“More and more CEOs are willing to talk to their service providers about distribution, as they see this as a means to compete,” Walker said. “According to recent research, 60 percent of customers have bought goods from one e-commerce provider over another because they feel their delivery options are more convenient for their needs. More than half say deliveries always define whom they shop with. So these are fundamental parts, not only of the delivery experience but also the retail experience.”

As a group, Hermes already delivers close to 800 million parcels a year, but the growth of e-commerce and the logistics and delivery market means this figure is only likely to go in one direction. This will provide challenges, but ones that Walker is already relishing.

Under her stewardship, Hermes Europe will continue to invest in infrastructure, technology and customer experience to grow at least in line with the market.

No matter how much positive customer feedback Hermes Europe receives, Walker’s message to her team is always the same: “You’re only as good as the last parcel you delivered.”

It’s an ethos that insures against complacency.

Even after more than 30 years in the industry, Walker refuses to take anything for granted. n EuropeanCEO

C19MA_D05.indd 45

| 45

12/02/2019 15:45

C19MA_046_C02_86488.pdf

M a n a g eme n t

Human Resources

Stepping aside

Appointing a new CEO can be a lengthy process, but it needn’t be an arduous one.

A structured succession plan provides companies with the best chance of finding the right replacement, writes Barclay Ballard In December 2018, a source at UBS suggested that outgoing CEO Sergio Ermotti could remain in place for a further two years while the Swiss bank considered candidates to replace him.

Clearly, appointing a new chief executive is not a process that should be taken lightly.

It is understandable if an organisation wants to take its time to replace its CEO. After all, the person sitting at the top of the corporate ladder holds huge sway over the company’s direction.

The rest of the board can also influence its trajectory, of course, but the CEO is often regarded as the difference between success and failure.

Replacing a CEO is never easy. Sometimes there isn’t an internal candidate of suitable experience, or external candidates are deemed too expensive to recruit. Occasionally, CEOs simply don’t want to leave their posts, even when the industry they inhabit has developed far beyond their level of expertise. Given the difficulties that come with replacing a CEO, companies should ensure their succession plans remain under constant review – it is impossible to predict when they will be needed.

Top of the tree From the outside, it may seem as though the CEO is little more than a figurehead. For some companies, that may be the case – sign this, approve that, etc. But in many organisations, 46 | EuropeanCEO

they have a much more hands-on role. In this situation, even a planned departure can cause a noticeable loss in investor confidence. When the transition is abrupt, the financial damage can be severe: a 2010 study by Morten Bennedsen, Francisco Pérez-González and Daniel Wolfenzon found that CEO deaths were associated with a 1.7 percent decline in operating return on assets.

What’s more, some CEOs have become synonymous with the businesses they run, such as Elon Musk at Tesla and Jeff Bezos at Amazon. Every statement these individuals make – whether a keynote speech or a pithy tweet – is analysed to gauge their companies’ next steps and whether they are worth investing in. Replacing such iconic entrepreneurs is always likely to prove disruptive, but even organisations away from the media spotlight find it difficult to replace an outgoing CEO. “The chances of failure are not insignificant – 30 percent of Fortune 500 CEOs last less than three years,” Claudio Feser, a senior partner at McKinsey & Company, told European CEO. “This is a clear indication that a number of issues have not been thought through in advance of the succession process.

At McKinsey, we are very strong proponents of having a structured process in place.”

Although the succession process can be undertaken in a variety of different ways,

it should definitely be formulated well in advance of a CEO’s departure, involve a thorough assessment of potential candidates, and be aligned with the company’s future business strategy. In addition, it is a good idea to communicate with investors, employees and customers about the company’s plans.

A clear and transparent process can prove reassuring when there is a major change at the top of an organisation.

Common mistakes One of the major quandaries businesses face when looking to replace their CEO is whether to go for an internal or external appointment.

Research from the Adelante Group, an Australian leadership advisory firm, indicates that internal candidates generally fare better, with data showing external appointments are twice as likely to fail as those promoted from within.

Despite this fact, Melissa Lamson, an industry thought leader who has written extensively on the subject of corporate management, believes the correct approach varies on a company-by-company basis: “It all depends on how healthy an organisation is as a whole. If there is a negative atmosphere, a new leader from the outside may bring some much-needed fresh air.

“It also depends on whether the company has a sophisticated succession planning

M a n a g eme n t

Human Resources

30% UBS CEO Sergio Ermotti

of Fortune 500 CEOs last less than three years

process. If an appointment from within is to work, it remains essential for businesses to cast a wide net internally, have a mentor programme and to have considered diversity at the leadership level.”

It is certainly important that businesses do not allow their succession planning to become myopic. It is easy for biases to creep into the process and reduce the likelihood of a successful appointment. Sometimes, CEOs fall into the ‘more of me’ trap, hoping for a successor in his or her mould. Conversely, they can – whether consciously or not – promote a candidate that is ill-prepared to take over, prolonging their own stay at the top.

Another issue that frequently plagues businesses looking for a new CEO is the false belief that there is a candidate out there who is ready to slot straight into the role. “The CEO succession should not be so much a selection process as a development process,” Feser said.

“The succession isn’t finished with the appointment – this should be seen as a midpoint. After this, the board needs to help the new CEO to develop and grow to his or her full potential.”

The ideal CEO profile should not only pair well with a company’s current needs, but also its future priorities

Amazon CEO Jeff Bezos

Internal development programmes are an absolutely vital aspect of CEO succession. Once a new chief executive has been earmarked, a transitional period can help ensure they are ready for the position when they take the reins for good. A rotation system that allows the new appointment to get to grips with a wide variety of different roles across the business can also prove helpful. After all, CEOs are not born – they’re made.

Always on the lookout Not all CEO departures are easy to plan for.

Corporate misdemeanours can bring tenures to an abrupt end, as was the case when allegations of personal misconduct were levelled at former WPP CEO Martin Sorrell last year. Ill health can strike equally fast. The threat of a sudden change at the top means businesses should always be prepared.

“The succession planning process is not a once-in-a-lifetime thing,” Feser said. “It needn’t be torturous to select a new CEO if the right process is in place and you have a number of candidates [whom] you have developed and... are familiar to the board. Every large organisation should have a fall-back plan should the CEO leave tomorrow. If you have an ongoing succession programme – like you have with performance management – and a good view of the candidates, CEO succession should not provoke a crisis.”

CEOs themselves also have a role to play in preparing the company for its next step.

Leaders may want to begin divesting responsibilities long before they move on, ensuring that any change is gradual rather than abrupt.

Collectively, the company should review its leadership on a regular basis, particularly as industries are constantly shifting – a chief executive with cutting-edge ideas can quickly become out of touch.

When looking for a new CEO, businesses should assess the culture and values of their organisation and make those explicit to potential candidates. The appointment also needs to be forward-thinking: the ideal CEO profile should not only pair well with a company’s current needs, but also its future priorities.

A competency model looking at experience, accomplishments, performance and leadership should be employed, but this needs to take place long before the CEO departs. If a company begins its search for a new chief executive after the incumbent has stated their intention to leave, then it may have already left it too late. n EuropeanCEO

C19MA_C02.indd 47

| 47

13/02/2019 09:54

MANAGEMENT

Human Resources

Getting personal

Personality tests have become a staple in the corporate hiring process. Do these tests provide helpful indicators, asks Courtney Goldsmith, or should businesses base tough decisions on more scientifically proven measures?

On a scale of one to five, with one being ‘strongly disagree’ and five being ‘strongly agree’, how much do you trust the results of a personality test? Regardless of your answer, if you want a job at a Fortune 100 company, your career could depend on how you score on one.

Businesses use personality tests to assess where a prospective employee’s strengths and weaknesses lie, and to determine whether they would be a good cultural fit within the company.

The tests are embedded in business culture, especially at top companies. In fact, the most popular personality inventory in the world, the Myers-Briggs Type Indicator (MBTI), has been used at approximately 80 percent of Fortune 500 companies and 89 percent of Fortune 100 companies.

Although estimates of how extensively personality tests are used in recruitment vary tremendously – from as low as 25 percent to as high as 75 percent – Nigel Guenole, a senior lecturer and director of research at Goldsmiths, University of London, said it is safe to say personality testing is widespread. However, as the scientific validity of certain personality tests is called into question, their use in business has become controversial.

What’s your type?

The MBTI, which was created by Katharine Cook Briggs and her daughter Isabel Briggs Myers, and is based on the theories of psychoanalyst Carl Jung, categorises participants as one of 16 personality types. Many well-known companies, from McKinsey & Company to the CIA, have used it in their hiring process. As of 2013, it reportedly generated around $20m

(€17.5m) per year in revenue. In 2012, CPP, which holds the publishing rights of the MBTI, told The Washington Post that about 200 federal agencies have paid for the MBTI as part of their training programmes, including the military.

Following the MBTI’s success, thousands of companies have sprung up to provide similar personality-testing solutions to companies, including Criteria, Wonderlic and HumanMetrics. The industry has an estimated worth of anywhere between $500m (€438m) and $4bn (€3.5bn).

Guenole told European CEO there is a good reason the use of personality tests is so prevalent in corporate human resources teams: “Personality scores predict what you’ll achieve at work and the type of work colleague you’ll be.” Recruiters say personality tests like the MBTI can be advantageous for businesses as they can help determine successful team dynamics, though they work best when used in conjunction with traditional interviews and screening. By highlighting individuals who possess the necessary skills and abilities for hiring, promotion, team building or training, personality tests can help reduce costs for businesses.

According to Guenole, companies are now working to make personality tests easier and more enjoyable for candidates. This can include giving scores for the way applicants play specially designed games, or building a personality profile based on their social media activity. However, he added that these methods are not as useful as more traditional tests: “It’s very important to say that there is little to no evidence suggesting that these new methods assess personality as well as standardised ques-

Companies using the Myers-Briggs Type Indicator

80%

Fortune 500

89%

Fortune 100

tionnaires can. Questionnaires remain the gold standard for serious personality measurement.

Nonetheless, the demand for a more enjoyable candidate experience is clear. Firms want you to recommend their firm to friends and keep buying their products, even if they choose not to employ you. An enjoyable assessment experience can help with that.”

Fake it till you make it Even the personality tests that are considered the most trusted are being called into question. In particular, the MBTI has been labelled scientifically dubious, and experts say the ‘either/or’ approach it uses is problematic. A paper on the relationship between MBTI types and managerial effectiveness published in the Journal of Management determined that “few consistent relationships between [personality] type and managerial effectiveness have been found”.

Annie Murphy Paul, a science journalist and author of The Cult of Personality Testing, has argued for years that personality tests are not reliable or valid and should not be used in

48 | EUROPEANCEO

C19MA_C01.indd 48

13/02/2019 16:18

MANAGEMENT

Human Resources

workplace hiring or promotions. “Personality testing is an industry the way astrology or dream analysis is an industry: slippery, often underground, hard to monitor or measure,” she wrote in a 2016 essay for NPR. Critics argue that companies can weaponise the results of personality tests, in terms of choosing who gets a promotion or who gets to work with a big client, which can lead to a toxic work environment. What’s more, applicants who are worried that choosing the wrong answers on a test will lose them a job or promotion could end up faking their answers in order to game the test.

A 2018 study into the issue of faking answers on personality tests called Faking Good and Personality Assessments of Job Applicants concluded that faking is a “real problem when it comes to the applied context of high-stakes employee selection”. Guenole said: “It’s natural to expect people to fake when there are career opportunities on the line. Most people manage the impression they make on others in daily life, and an inability to do that in a selection situation is a bad sign, so we should expect faking.”

However, Guenole was unwavering in his view that personality tests still show useful workplace relationships, even when it is expected that a candidate might have faked their responses. “[Psychometric] test developers have also developed effective methods of preventing extreme faking, such as using warnings, flagging people who present themselves as overly virtuous for further investigation, and statistically correcting for the effect of faking,” he said.

Companies can weaponise the results of personality tests, in terms of choosing who gets a promotion or who gets to work with a big client, which can lead to a toxic work environment

A balanced approach Unfortunately, according to Guenole, it is very easy to build a bad personality test that has the sheen of legitimacy. A test is not good just because it is popular or has been used in the industry for a long time.

One marker of a high-quality test is if articles about it have been published in scientific journals. This process is not easy and can take many years, proving that significant research and development has gone into the making of the test. “[Legitimacy] is important to the talent acquisition professionals I talk to,” Guenole said. “They want to be able to confidently stand behind the tests they use because they know that test scores can have a serious influence on people’s lives.”

But whether any personality test should be used in the hiring process remains to be seen.

Research conducted by Cornell University’s Centre for Advanced Human Resource Studies in 2010 concluded that organisations should be cautious, as failing candidates tended to change their personality scores “drastically” between tests. The research findings noted: “Companies should review their retesting policies carefully and gather data to understand the extent to which candidates repeat the process and to clarify whether those who eventually get hired are truly a good fit for the job.”

Personality tests are a useful tool in business environments because they give a quantifiable indication of how a candidate will behave in the job, and how likely they are to be effective in different roles, ranging from sales to leadership. “If you consider the personality of every person in your organisation carefully, on aggregate, you will have higher organisational capability and, in turn, better business unit performance,” Guenole said.

While this is possible, it will only be true if the personality tests used are well designed, the people interpreting the test scores are highly skilled, and the companies that use them do not base their decisions on test scores alone. ■ EUROPEANCEO

C19MA_C01.indd 49

| 49

13/02/2019 16:15

C19MA_050_C09_15923.pdf

MANAGEMENT

Human Resources

Safety first

The EU has proposed a new set of market surveillance rules to protect against an influx of non-compliant products. Such restrictions could prove prohibitive for smaller businesses, writes Barclay Ballard Although the free movement of goods is one of the four fundamental freedoms of the European Single Market, it is not without its caveats. In order to sell goods across the 28-member bloc, businesses based outside the EU must ensure their products fulfil a host of regulatory criteria. A small business looking to export electrical equipment from, say, India, would have to first produce the required technical documentation, ensure its products comply with various EU directives and then complete an EU declaration of conformity. Unsurprisingly, this process can be prohibitive in terms of both cost and time for smaller operators.

Such barriers are in place for good reason.

Some of the requirements aim to ensure that consumers are kept safe; others protect them from being ripped off. Collectively, they help to maintain the integrity of the single market.

It has been suggested recently, however, that the existing EU measures do not go far enough to ensure product compliance.

In December 2017, the European Commission published a proposal for new regulations regarding the surveillance of products entering the single market. The most eye-catching part of the new regulation was a requirement for manufacturers based outside the EU to appoint a designated person “responsible for compliance information established within the [union] to facilitate contacts with market surveillance authorities�.

The new legislation could help European regulators crack down on illegal products entering the single market, but businesses are understandably worried about the extra 50 | EUROPEANCEO

burden that will be placed upon them. If the proposal is approved, it could have major implications for businesses based in thirdcountry markets that conduct a lot of trade with the EU, such as Canada, Japan and, potentially, a post-Brexit UK.

The cost of compliance According to the European Commission, the quantity of non-compliant goods currently present within the single market is substantial. Up to 32 percent of toys, 47 percent of construction products and 58 percent of electronics do not meet the regulatory standards required for sale in the EU. This not only harms consumers, who may be receiving unsafe goods, it also damages the business landscape by putting compliant companies at a competitive disadvantage.

Given the sheer quantity of non-compliant goods in the market, it is understandable the EU is trying to improve its market surveillance.

The proposed legislation would cover around 80 percent of the consumer goods sold within the single market, including items such as medical equipment and wireless electronics.

In total, the regulation covers more than 70 product categories, with businesses required to have a designated agent for each type of product they import. The chosen individual will then have their contact details included on every product that is sold, so there is clear accountability if any problems arise.

Still, Maurits Bruggink, Secretary General at the European E-Commerce and OmniChannel Trade Association, told European CEO there are a number of issues surrounding the proposed EU regulations.

Proportion of non-compliant products by sector:

32% Toys

47%

Construction

58%

Electronics

MANAGEMENT

Human Resources

“An online retailer based outside the EU will have to find the right representative person, or perhaps more than one if it is selling a diverse range of products,” Bruggink said.

“How much is this going to cost? A representative will eat away at the retailer’s margins.”

The financial impact of the proposal is likely to have more of an effect on some retailers than others. Many SMEs already operate along extremely thin margins; if they have to recruit another member of staff or pay for legal advice to ensure they comply with the new legislation, many will be forced to stop exporting to the EU altogether.

“Large companies that benefit from economies of scale will manage, while small companies will find it too cumbersome and expensive to appoint a representative person,” Bruggink said. “There are already so many other hurdles, [such as] VAT, different consumer rules and cost of returns.”

Indeed, the majority of larger firms already have an appointed representative in place within their EU subsidiaries, making it easier to conform to new regulations. It’s the smaller firms that are more likely to struggle.

Ironically, the measure – which was partly intended to improve competition by preventing firms from cheating the system – may price international SMEs out of the EU market.

Faulty reasoning Although the proposed EU regulation still needs to clear a few hurdles before it comes into force, businesses are already concerned about its potential impact. The UK’s Federation of Small Businesses believes it could cost each company £1,500 (€1,729) per product category to hire an EU law firm to ensure compliance. If the regulations are approved, they will be enforceable from January 1, 2020, leaving little time for firms to prepare for such a substantial financial cost.

The other potential issue with the new EU rules is that they may not make much of a difference for illegal traders. Many of the companies currently importing non-compliant goods into the EU are not doing so out of ignorance of the rules, but rather in defiance of them. Bad actors are unlikely to bother employing a designated person – they will simply claim they have.

“Rogue traders may actually see the new proposals as an advantage,” Bruggink told European CEO. “They can simply tick another box and make it appear to the consumer and the authorities that all is fine.”

The rise of e-commerce sites like eBay and Alibaba means it is easier than ever for businesses located in markets with less stringent

Many of the companies currently importing non-compliant goods into the EU are not doing so out of ignorance of the rules, but rather in defiance of them

product standards to import their goods into the EU. Often, these goods are cheaper than those made in the EU, but they can also be dangerous or poorly made – or both.

Tit for tat With US President Donald Trump seemingly intent on starting a trade war with anyone who threatens his country’s economic supremacy, there has been a lot of talk regarding the effect tariffs can have on the movement of goods and services. And it is certainly true that tariffs can be a particularly effective way of restricting imports. What the EU’s proposed legislation for product compliance shows, however, is that non-tariff barriers can also have a significant impact on international trade.

Although it is not the EU’s intention for the new regulations to spark retaliatory protectionist measures, there is a possibility the legislation will create a domino effect. “Other countries will perceive this proposal as a nontariff barrier and will introduce similar measures,” Bruggink said. “This will hurt European online retailers trading to non-EU consumers.”

As a possible alternative, Bruggink cited the decision by some online marketplaces to sign a voluntary ‘product safety pledge’.

“The European Commission has issued a voluntary code for marketplaces with best practices to guarantee product safety,” Bruggink explained. “One of the elements is maximising cooperation between operators and enforcement authorities. That is the way forward. Otherwise, any measure should always be risk-based. We want surveillance to focus on high-risk products like toys and not impose burdens on, say, [a] shoe seller.”

The reaction to the EU’s attempts to crack down on non-compliant goods highlights the difficult balancing act facing the European Commission. Too much regulation can be prohibitive for smaller firms; not enough undermines the single market. Consumer safety should never be compromised, but if bureaucracy ends up going too far, it will put small companies out of business. ■ EUROPEANCEO

C19MA_C09.indd 51

| 51

13/02/2019 10:15

C19MA_052_B06_04859.pdf

while you work Whistleblowing comes with a number of risks, but remaining quiet can be just as costly. In fact, research indicates that companies with a higher number of reported problems boast better long-term health than those trying to keep them secret, writes Barclay Ballard Âť

C19MA_053_B06_08874.pdf

C19MA_054_B06_42368.pdf

L ip s e r v i c e

hat would you do if you found out the com- is a sign of good company health, the landscape for pany you worked for was engaging in unethi- employee disclosure remains risky.

“The protection afforded to whistleblowers varies cal practices, or was even breaking the law?

Many, no doubt, insist they would raise the country by country,” Welch said. “In some countries, alarm immediately, informing their manag- protections are starting to move in the other direction ers and, if necessary, law enforcement. But it is easy and they are starting to have more safeguards for the to claim such a virtuous approach in a hypothetical person being identified in a whistleblowing case rather situation. In reality, blowing the whistle comes with a than the person giving a report.”

Clearly, the safeguards in place to defend whistleblownumber of implications and risks.

On multiple occasions – and across a variety of ers against reprisals are not sufficient. Thomas Vink, industries – whistleblowers have found that good inten- Whistleblowing Programme Officer at Transparency tions come with little reward. Regardless of the legal International, told European CEO that, for the majority protections sometimes afforded to them, employees who of people around the world, speaking up about cases of disclose company wrongdoing have been ostracised, wrongdoing in the workplace is perilous, and legal protection is lacking: “Most citizens remain largely unprotected demoted or even dismissed.

While some corporations have formal structures if they speak up, facing the risk of retaliation, judicial in place to encourage the reporting of internal issues, proceedings and dismissal.

“Around the world, only 34 governments have enactmany do not. Without a clear path to disclosing company problems, members of staff have to choose between ed national whistleblower protection laws. Only 10 EU countries have comprehensive legislation going public and simply ignoring the issue. in place – France, Hungary, Ireland, Italy, Both options can prove disastrous for busiLithuania, Malta, the Netherlands, Sweden, nesses in the long term. Unfortunately, Slovakia and the UK – and even in those many companies still view whistleblowers In the majority of as a nuisance, instead of an asset. cases, whistleblowers countries, enforcement is often inadequate.

To date, there are no whistleblowing laws are not looking to Risky business get their colleagues that are fully aligned with the 30 TransparOn April 23, 2018, the EU drafted a new fired or discredit their ency International principles for effective whistleblower protection legislation.” law designed to strengthen the protections employers: they are Fortunately, the EU’s proposed whistlegiven to whistleblowers across the bloc. The simply looking to make blowing directive should help clarify the legal proposed regulation was long overdue: more things better situation surrounding employee disclosures. than 10 years previously, the European Court of Human Rights ruled that the Moldovan Govern- If further discussions with the European Commission are ment had violated Article 10 of the European Conven- successful, then the directive could be adopted before the tion on Human Rights by dismissing a civil servant who European parliamentary elections in May. Some of the revealed information that was in the public interest. It is improved measures it would introduce include allowing worrying the EU has only recently attempted to codify whistleblowers to report directly to law enforcement or regulators, as well as allowing for anonymous reporting. whistleblower protections in law.

In the vast majority of cases, whistleblowers do not The lack of legal certainty has left some whistleblowers in a state of limbo, and has deterred many other employees have malicious motives at heart. They are not looking from speaking out at all. Hervé Falciani, a whistleblower to get their colleagues fired or discredit their employers: who leaked documents alleging widespread tax evasion they are simply looking to make things better. However, at HSBC’s private banking arm, has faced extradition the legal situation in many parts of the world means requests from Swiss authorities. Howard Wilkinson, the speaking out remains a big risk. former Danske Bank manager who alleged the bank was caught up in a €200bn money laundering scheme, called A problem shared upon national governments to offer him greater protection As a result of inadequate safeguards, employees can be after his identity was disclosed late last year. placed in a difficult situation when they discover susKyle Welch, an assistant professor at the George pected wrongdoing. Ensuring whistleblowers feel conWashington University School of Business, has looked fident about coming forward not only reduces stress for extensively at how whistleblowing can affect an organi- the individual concerned – it boasts advantages for the sation. Although his research indicates whistleblowing companies they work at, too. »

“

54 | EuropeanCEO

C19MA_055_B06_68705.pdf

worth the

Mark Whitacre

In 1992, Mark Whitacre, the corporate vice president of commodities firm Archer Daniels Midland (ADM), informed the FBI that the company had been fixing the price of the food additive lysine to increase profits.

While ADM eventually settled with a number of the brands affected for $400m (€352.9m), it was later revealed Whitacre had stolen $9m (€7.9m) from ADM. Hollywood actor Matt Damon portrayed Whitacre in the 2009 film The Informant!

Christopher Wylie

Former Cambridge Analytica employee Christopher Wylie sparked international outrage when he revealed that the political-consulting firm had harvested the data of more than 50 million Facebook users to create psychological profiles of voters ahead of the 2016 US presidential election. While the firm obtained the information through legal – though not necessarily ethical – means, the incident highlighted Facebook’s lax privacy policy and data controls. Cambridge Analytica has since shut down operations.

Jeffrey Wigand

After hearing the CEOs of seven major tobacco companies swear under oath that nicotine was not addictive, Jeffrey Wigand, a research and development executive at Brown & Williamson, told 60 Minutes the company had knowingly doctored the nicotine content of its cigarettes to make them more addictive. Amid fears of breaching Wigand’s confidentiality agreement, however, the interview was pulled, and only broadcast after the story broke via The Wall Street Journal.

Sherron Watkins

In 2001, Enron Vice President for Corporate Development Sherron Watkins sent a seven-page email to CEO Kenneth Lay outlining what she labelled as an “elaborate accounting hoax”, which included inflating income and hiding the company’s massive losses. Despite Lay promising to launch an investigation into the allegations, Watkins claimed she was punished for speaking out. Enron, no longer able to sustain the fraud, filed for bankruptcy four months later.

L ip s e r v i c e

Last year, Welch – alongside Stephen Stubben, an 60 percent of whistleblowers received no response from associate professor at the University of Utah – examined their managers after making a claim.

Given some of the high-profile examples of whistlemore than 1.2 million anonymised internal reports supplied by NAVEX Global, a leading provider of incident blowers leaking information to journalists or members management systems. At first, their findings appeared of the public – and the subsequent reputational damage counterintuitive: the firms that had more problems being caused – it’s easy to see why businesses might prefer to sweep their problems under the carpet rather than face reported had better long-term health.

“There is a real problem within management theory them head-on. That is certainly the easier approach. today,” Welch said. “There is an idea that it is possible to But ignoring a problem means it will surely rear its have the perfect organisation, the perfect manager, the head again at some point. perfect leader and all problems will be solved. But our research shows all firms have problems, and the differ- Ins and outs ence is firms that encourage whistleblowing and internal When discussing whistleblowing, it is important to note feedback are the organisations that have fewer issues and the distinction between internal and external disclosure. concerns going forward.”

An internal report can allow an organisation to quietly In fact, the study found one standard deviation but purposefully address the issue, avoiding unnecessary increase in the use of an internal reporting scrutiny from the media system corresponded with a 6.9 percent or regulators. There decrease in pending lawsuits, and are occasions, howa 20.4 percent fall in aggregate ever, where internal settlement amounts. Welch channels may be inadlikened the relationship equate. In these situations, between a company external authorities or even a nd prospec t ive a public debate may be needed Proportion of whistleblowers to to bring about change. whistleblowers who have that of a parent and “At Transparency International, we reported being demoted or child: “Parents [who] recommend that several types of reporting given lower-level tasks as have a relationship where avenues be available and that the circuma result of speaking out their children feel comfortstances of each case determine which is the able sharing their problems are most appropriate channel to use – whether it’s able to deal with them. If those internally, externally to an authority, or to the media/ problems aren’t being shared, it doesn’t public,” Vink said. “Whistleblowers should also be able to mean they don’t exist.” report directly to the media… or civil society organisations Of course, this doesn’t mean all incidences of where it is in the public interest, where reporting interwhistleblowing will prove beneficial to a company – nally would put them at risk of reprisal, or where external especially not in the short term. Following its money authorities have not taken necessary action. Recent cases, laundering scandal, Danske Bank suffered a significant such as LuxLeaks and the Panama Papers, show that not decrease in customer satisfaction, losing 2,500 custom- all wrongdoing can be solved behind closed doors.” ers in Q3 2018. Marc Jones, a partner at IBB Solicitors, Employees must not only weigh up whether an intertold European CEO that whistleblowing can be both nal or external disclosure will be most effective at dealpositive and negative for an organisation – it depends ing with the issue at hand; they must also consider how on the nature of the allegation. each approach will affect their own position. Blowing the “The recent disclosure that aid workers working for whistle internally may not be effective and could cause Oxfam had sexually exploited victims of them to be ostracised by their colleagues; the Haiti earthquake in 2010 resulted in an external disclosure, meanwhile, can a reduction in income of £3.8m [€4.4m] have greater repercussions for both the for the charity,” Jones said. “This also and the individual.

Whistleblowing takes organisation changed the public perception of overseas “If employees make an internal disclocourage, but it can make sure and receive negative repercussions, that charity workers and damaged the chara huge difference to ity sector as a whole. On the other hand, indicates there is a huge problem at their place people’s lives whistleblowing can help an organisation of work,” Welch said. “However, if they choose be open, transparent and accountable to go external to a regulator immediately, then – to be able to learn from events and prevent future there’s a significant chance they will damage their reputation concerns damaging company health.” with their employer. It’s highly unlikely the firm will look at Problems at Enron, WorldCom and Lehman Brothers them in the same way. Going external has a fair amount of were all raised by whistleblowers – but all were ignored. It risk affiliated with it. It would be nice to see firms encourage is a frustratingly common occurrence: a survey undertaken internal whistleblowing and then, if they are unresponsive,

by Public Concern at Work in 2013 found approximately employees have little choice but to go external.”

62%

“

56 | EuropeanCEO

C19MA_B06.indd 56

12/02/2019 16:45

L ip s e r v i c e

The story of the Tuskegee syphilis experiment is a perception of whistleblowing and ensure managers react to good example of whistleblowing done correctly. In the reports in the correct way. Further, it’s important employ1930s, the US Public Health Service conducted a study on ees see action being taken as a result of their disclosures. the impact of untreated syphilis among African American When it becomes clear whistleblowing has positive results, males. Officials never told those involved about the true speaking out becomes a more natural process. nature of the study and continued to withhold treatment even after a cure for syphilis was discovered.

The aftermath In 1966, Peter Buxtun, a social worker who had only Once an incident has been reported, it would be wrong for been with the Public Health Service for less businesses to assume this represents the than a year, filed an official protest on ethiend of the matter. Even if the appropriate cal grounds. After it was rejected, he filed action is taken and the whistleblower is again in 1968. Left with little alternative, for making his or her report, Rather than being viewed vindicated Buxtun leaked details of the experiment to they may still face challenges. Workplace as an inconvenience, The Washington Star in 1972. The study was may have been damaged and reporting issues at work relationships subsequently terminated, proving that while internal investigations could have taken should be seen as the their toll on everyone concerned. whistleblowing takes courage, it can make first step on the road a huge difference to people’s lives.

“More should be done to offer postto solving them disclosure support to whistleblowers,” Vink said. “Cases like that of Ana Garrido Changing the tune In October 2018, Carmen Segarra released an account Ramos, the Spanish local government employee whose of how her life had been affected by whistleblowing. revelations led to the Gürtel scandal and the fall of Spain’s In Noncompliant: A Lone Whistleblower Exposes the government in 2018, show that many whistleblowers Giants of Wall Street, Segarra reveals how she faced psy- suffer greatly for choosing to speak out.

“As well as support and protection in the event of chological manipulation and eventual dismissal after looking into conflicts of interest at Goldman Sachs. retaliation and victimisation, it is also important whistleblowers are able to seek restitution and remedies. Another Her experience is far from unique.

According to a recent study, Post-disclosure Survival form of support is to update the whistleblower on how the Strategies: Transforming Whistleblower Experiences, 62 per- investigation is going and the next steps.”

Whistleblowers may find their motives questioned – cent of whistleblowers report having been demoted or given lower-level tasks as a result of speaking out. While many they are also likely to become the victims of retaliation and organisations talk of creating an open environment, the be resented for placing their head above the parapet. It is important organisations do not allow them to be typecast reality is often very different. as ‘snitches’. Mediation and dispute resolution “Firms have to be services should be offered to help rebuild dedicated to these trust in the workplace, if necessary. whistleblowing systems Offering the right kind of – there’s lip service and post-disclosure support is [then] there’s actual another way for compadedication,” Welch explained. nies to alter the per“If managers are really serious, ception of whistlethey will make that clear in comNumber of customers blowing. Rather than pany-wide emails, they’ll have posters up in Danske Bank lost in Q3 being viewed as an the workplace, and they will promote a culture 2018 as a result of its inconvenience, reportwhere whistleblowers feel comfortable they can alleged money ing issues at work should be come forward without being retaliated against. laundering scandal seen as the first step on the road The worst thing is when your employees recognise to solving them. “Human capital a big problem at your firm, but instead of trying is still the most important resource to fix it, they just decide to get a job somewhere else.” that firms have for identifying and fixing Even if businesses do not officially penalise whistleblowers, social stigma and informal blackmail may be problems,” Welch said. “That is why these incident manageused to discourage individuals from reporting issues. If ment systems are designed to pick up the kinds of things you organisations want to create an environment where staff cannot see by reading ones and zeros.”

In the past, whistleblowers have been disregarded feel comfortable raising issues, the first thing they should do is invest in anonymous internal feedback systems. Research and vilified, with businesses happy to maintain the status indicates such systems do not, as many fear, result in a quo so long as those ones and zeros continue to add up in larger number of external reports, but actually increase their favour. This approach has not only caused personal distress to the individuals involved, but has also proved the likelihood of potential problems being addressed.

In addition, businesses must create a culture of open- hugely regrettable for businesses in the long term. Ignoring ness and integrity. Staff training can help to improve the whistleblowers today can lead to huge problems tomorrow. n

“

2,500

EuropeanCEO

C19MA_B06.indd 57

| 57

12/02/2019 16:44

MANAGEMENT

Leadership

Leading by example

Mentoring can transform the careers of young employees, but the benefits work both ways. Elizabeth Matsangou explores what mentoring can do for leaders and their organisations It might surprise some to learn that the word ‘mentor’ finds its origins in The Odyssey, Homer’s epic poem that dates back to some point around the eighth century BC. Specifically, the term comes from the character Mentor, who Odysseus charges to care for his son Telemachus during his absence. In a bid to guide Telemachus during a time of need, Athena, the goddess of wisdom, disguises herself as Mentor. Taking on this role, the deity encourages Telemachus to stand up against his mother’s suitors and search for the truth behind his father’s disappearance.

The character Mentor appeared again, thousands of years later, in Les Aventures de Télémaque, an educational novel by the Archbishop of Cambrai, tutor to Louis, the Duke of Burgundy, who was then second in line to the throne. First published in 1699, it fills out gaps in Homer’s Odyssey, recounting the travels of Telemachus, who was accompanied

by Athena disguised as Mentor. According to Professor David Clutterbuck, co-founder of the European Mentoring Centre and author of several books about mentoring, the 17thcentury novel, which continued the dialogues between Athena and Telemachus, was “the first leadership book in western society”.

Gratifying work Today, the term ‘mentor’ refers to someone who provides guidance and support to someone, usually younger than themselves, but crucially with less experience. While the benefits for the mentee are obvious, mentors stand to gain from the relationship too. “The mentee typically gains greater clarity about where they can go with their career, and how,” Clutterbuck told European CEO. “Mentors also typically learn to see things from the perspective of a different generation, gender or culture.”

Having been in their industry for a number of years, if not decades, mentors can benefit immeasurably from a fresh viewpoint gleaned from a younger person. Understanding newer generations, how they think, how they react and what’s important to them are lessons that can be applied in any business. Keeping abreast of preferences from one generation to the next can help a company anticipate the next big thing; failure to do so could be their downfall.

Mentoring, therefore, can be pivotal for the long-term success of an organisation, and for the careers of those in its highest echelons.

Mentoring has a more personal benefit, too. There’s something deeply gratifying about helping those that remind us of ourselves when

we first started out. Providing guidance so young individuals can avoid the same career mistakes we have made somehow makes those mistakes more palatable. This feel-good factor plays a significant part in encouraging successful people to pass their wisdom on.

Sound advice But being a good mentor is no straightforward task. It takes patience, time, communication skills and, perhaps most importantly, empathy.

Clutterbuck explained: “Mentors encourage self-belief, help mentees expand their horizons [and] support them in building networks.” But in doing so, it is important that they do not project their own ambitions or make decisions for their mentee. To do so would compromise the guiding role a mentor should have, ridding the mentee of the opportunity to forge their own path.

“One of the common misconceptions about mentors is that they give lots of advice,” Clutterbuck told European CEO. “That’s simply not the case. They help the mentee with the quality of their thinking, sometimes providing context (information the mentee doesn’t have that will help them make better decisions), but never telling them what they should do, or expecting them to follow the mentor’s career path.”

58 | EUROPEANCEO

C19MA_D07.indd 58

13/02/2019 16:50

MANAGEMENT

Leadership

Given the difference in experience, position and (usually) age between mentor and mentee, it is easy for an unproductive power differential to arise. “It’s important to minimise this,” Clutterbuck advised. “A simple rule is to listen most of the time and to ask more questions than give answers.”

Further, rather than offering scraps of time and information, good mentors should feel invested in the success of their mentee and take a personal interest in their development. That said, it’s also key for mentors to remember that the relationship is different to that involved in sponsorship. “Sponsorship is a different role, incompatible with mentoring,” Clutterbuck said. “It’s hard to be fully open and honest with someone who you are trying to make into your champion.” The relationship is more about empowering individuals, instead of spouting career advice. As such, mentors are charged with the responsibility of sharing their experience and knowledge while maintaining a positive attitude.

To some, this may seem like a lot of work, but such skills are highly relevant to leadership roles and could therefore provide instrumental training and reminders to mentors in C-suite roles, as well as to those striving for such posi-

tions. “We should also note that mentoring is ture, enhances their systemic view of their an excellent way to leave a legacy,” said Dr Riza environment and also becomes a source of Kadilar, President of the European Mentoring motivation for both of them.” and Coaching Council.

Clutterbuck added: “It also reinforces the alignment of people at all levels with the business strategy, which in turn enables organisaTwo-way street Mentoring programmes can positively impact tional ability to respond to change.” Clutterbuck an entire organisation by creating a culture cited two growing areas of mentoring, the benof guidance and support. This is because the efits of which should not be underestimated.

The first is maternity mentoring, which supbenefits for mentees are manifold. Kadilar told European CEO: “As a storyteller, the mentor ports women returning to work after maternity will share inspiring stories. As a network- leave by pairing them with colleagues who have er, he or she opens new doors that [enable] already gone through the sometimes-difficult new connections… As a coach, mentors help transition. “It has a major impact on the propormentees to discover their true potential by tion [of women] who return to their old jobs, determining their goals, their barriers and and how long it takes them to get back up to their drivers.” In such a space, young tal- speed,” he noted. The second is ethical mentorent develops more quickly, adding greater ing, which began as a response to the scandals that underpinned the 2008 global financial crivalue to a company overall.

“Evidence shows that mentoring enhances sis. “Ethical mentors are trained to help people the engagement of employees... We know peo- who have an ethical dilemma to think it through ple tend to leave their bosses rather than their and make better decisions,” Clutterbuck said. companies,” Kadilar said. “The value-based, “The result is that there is much less chance non-judgemental dialogue that a mentee or of reputational and other damage to either the mentor enjoys during the mentoring process company or the individual.”

Those who think that mentoring would helps them better understand the larger picbe a drain of their time should think again.

Within an organisation, mentoring can be a powerful tool, fostering a culture of empowerment that spurs greater productivity, innoHaving been in their industry vation and teamwork. Crucially, it can also for a number of years, mentors align business strategy across hierarchical and can benefit immeasurably from generational divides. Meanwhile, the honing of a fresh viewpoint gleaned skills, understanding the younger generation, and gaining a fresh perspective can create new from a younger person opportunities that see the mentor progress in tandem with their mentee. ■ EUROPEANCEO

C19MA_D07.indd 59

| 59

13/02/2019 16:50

M a n a g eme n T

Company Culture

Making CSR fashionable Fast fashion has long been demonised for its unethical and ecologically harmful business processes. It is now undergoing an overdue makeover thanks to new corporate social responsibility policies, writes Sophie Perryer

The fast fashion industry has something of a bad reputation. Its endless churning to keep up with the demand for 80 billion new garments every year relies upon two controversial things: cheap labour and disposability. Unlike their ‘slow fashion’ predecessors, clothing produced by today’s high street brands is not envisaged to last for years, but solely until the next trend comes around. For that reason, many items are mass produced for as low a cost as possible, and thrown out like stale bread once they’re no longer en vogue.

In recent years, however, we’ve become increasingly aware of the impact that fast fashion is having on the world around us.

Consumers are beginning to expect more from their clothes and the brands that produce them. In turn, brands must step up their ethical credentials to keep hold of their valued customer base. With this in mind, many are implementing corporate social responsibility (CSR) policies to transform their business processes, and they are witnessing a bonus uplift in consumer loyalty as a result.

Race to the bottom The fast fashion industry relies heavily upon low manufacturing costs and volume of sales to stay afloat, which it achieves through hiring cheap labour to produce trend-led garments

made of inexpensive materials that are designed to last a season or two at most. This necessitates maintaining a large global manufacturing network of low-paid workers. More than three quarters of the world’s clothing exports come from developing countries and are produced by 26.5 million employees worldwide, over 70 percent of whom are women.

Employees are often forced to work long hours for meagre pay, while enduring deplorable conditions. This is a particular issue for brands that outsource their manufacturing to factories in the developing world, where they have no say in working conditions.

In June 2018, the workers’ rights campaign group Global Labour Justice revealed that instances of physical and sexual violence, as well as verbal abuse, had been reported at 540 factories across India, Bangladesh, Cambodia, Indonesia and Sri Lanka, many of which supply the clothing brand Gap. Other European brands including Primark and Zara have been at the centre of their own labour scandals over the past few years, with claims of employees doing unpaid work in squalid conditions running rife.

Keeping up with retail trends also requires a huge amount of natural resources, and creates substantial waste. The myriad materials used in creating designs each come with their own issues, whether that’s the use of toxic chemical

dyes to create brightly coloured swimwear, or the manufacture of polyester clothing, which, when washed, sheds tiny plastic microfibres that end up in our oceans.

Kirsten Brodde co-founded Greenpeace’s Detox My Fashion campaign in 2011 to tackle the use of hazardous chemicals in textile manufacturing. Traditional dyeing and finishing processes use 5.8 trillion litres of water annually, with between 10 and 20 percent of the dye remaining in the water after the process is complete, according to Brodde. This then creates a pollution hazard when wastewater is released into rivers and streams. Brodde told European CEO: “We did a lot of research before we started the campaign, and we found that fashion had a dirty secret. The colourful effluents hide a serious and sometimes invisible problem – hazardous chemicals. It was a black spot of the industry – no one had [treated] them before they polluted freshwater resources and eventually the oceans.”

But while the Detox campaign tackles ecological issues during the production process, there’s still much to be done to reduce the environmental damage caused by the disposal of unsold clothes. British brand Burberry sparked outrage in July 2018 when it was revealed to have burned over £28m (€32.2m) worth of clothes and perfumes, but this sort of material

60 | EuropeanCEO

C19MA_C06.indd 60

14/02/2019 10:26

M a n a g eme n T

Company Culture

Smaller startup brands have the upper hand, as they’re able to build sustainability into all of their business processes

destruction is common within the fast fashion industry. Not only is this a monumental waste of the time and resources taken to manufacture products, it’s also extremely detrimental to the environment, as burning products containing any kind of plastic fibres is likely to release toxic chemicals into the atmosphere.

Finding a solution Both labour violations and waste issues can be tackled, if not eliminated completely, through the introduction of a CSR programme, as demonstrated by a number of leading European brands. German retailer ARMEDANGELS, for instance, uses only organic Fairtrade cotton in its products, which consumes about 95 per-

cent less groundwater and 100 percent fewer pesticides than its traditionally cultivated counterpart. It also pays a fair wage to all of its farmers, and never employs anyone under the age of 18. Meanwhile, Swedish retailer H&M, which was one of the original proponents of CSR policy in the fashion industry, collected 17,771 tons of textiles through its garment reuse and recycling initiative in 2017 – the equivalent of 89 million T-shirts.

CSR is often seen as a greater consideration for larger brands, as most have already established a workable profit margin and, as such, are able to dedicate financial resources

to making manufacturing processes more ethical. However, for brands with multinational supply chains, retroactively introducing sustainability policies can prove highly complex.

Not only that, larger brands can be reticent to reveal data about their supply chains or profit margins lest they be accused of not dedicating adequate resources to CSR. H&M, for example, declined to tell European CEO the number of global employees working on its sustainability initiative, or its annual spend on CSR. In that sense, smaller start-up brands have the upper hand, as they’re able to build sustainability into all of their business processes and account for CSR spend in their profit margins from the onset. “Smaller brands

[also] have more oversight on their supply chains and are more likely to have long-term, trusting relationships with their suppliers,” Brodde said. Austrian swimwear brand Arkitaip is a pertinent case: founders Lea and Michi Weiser opted to make their initial collection entirely in linen, as flax (its base material) is grown in Europe on marginal land of little agricultural value. This allowed the duo to minimise Arkitaip’s carbon footprint in terms of material and product transportation, while also ensuring that they were able to supervise the entire manufacturing process.

Regardless of a brand’s size, however, it is highly likely to see a positive reaction from consumers when it implements a robust CSR policy. Samantha Dover, Senior Retail Analyst at Mintel, told European CEO: “Sustainability is at the forefront of many consumers’ mind.

Research for Mintel’s 2018 UK Ethical Lifestyles Market Report found that two thirds of [UK] adults say they are currently trying to live more ethically than they were a year ago.” By demonstrating their commitment to CSR, brands are able to capture the sustained interest of this new class of virtuously minded consumers.

Sea change However, the continual appetite for fast fashion counteracts this growing demand for sustainable clothing. Dover noted that while 64 percent of women in the UK think it is worth spending more on quality clothing that lasts, 66 percent also believe it is important for retailers to update their collections frequently. As such, while the ‘buy now, wear now’ mindset persists, brands are likely to hit a wall when it comes to increasing their sustainability credentials.

What’s needed, therefore, is a fundamental shift in attitude within the fast fashion industry, which begins with a rollback of the trend-driven mindset. “The big elephant in the room is the overconsumption of textiles and the unsustainable growth of clothes production in recent decades as a result of the increasingly fast turnaround of fashion trends,” Brodde told European CEO. “ We do need a ‘time out for fast fashion’ and an industry that is putting on the brakes.”

This shift would complement individual sustainability policies, while helping to tackle the sheer volume of waste that the fast fashion industry as a whole produces. It will take a concerted effort to pioneer a considered, ‘slow fashion’ mindset, but those that strive for higher standards will establish themselves as the go-to brands for ethical consumers – a badge to be worn with pride. n EuropeanCEO

C19MA_C06.indd 61

| 61

14/02/2019 10:10

M a n a g eme n t

Company Culture

All by myself

As the stigma surrounding loneliness begins to break down, the staggering cost of the so-called ‘hidden epidemic’ on the workplace is coming to light, writes Courtney Goldsmith According to a poll by management consulting firm Gallup, 87 percent of employees worldwide are not engaged with their work. Through its research, Gallup found one surprising driver of engagement: whether or not an individual has a best friend at their workplace.

Age UK defines loneliness as an individual’s personal, subjective sense of lacking social or familial contact. An international survey by non-profit group the Kaiser Family Foundation (KFF) found that the condition is widespread, with 23 percent of adults in the UK, 22 percent in the US and nine percent in Japan always or often feeling lonely or socially isolated.

What’s more, loneliness often goes hand in hand with negative health conditions. Vivek Murthy, former surgeon general of the US, compared the health impact of loneliness to that of obesity or smoking 15 cigarettes a day. Although it is not clear whether loneliness leads to poor health or vice versa, a 2015 meta-analysis led by Julianne Holt-Lunstad, a psychology professor at Brigham Young University, found that lonely people had a 26 percent higher risk of death. But loneliness is not just a public health problem: as more employees begin to disengage at work, it is increasingly an economic concern.

Ending the stigma In 2015, Eurostat found that six percent of adults in the EU had no one to ask for help if they needed it. The results were particularly bad in Italy and Luxembourg, which, at 13 percent, were more than double the EU average.

Another six percent of EU citizens said they had no one with whom they could discuss their personal matters.

In a study of late-life loneliness in Europe, Thomas Hansen and Britt Slagsvold of Oslo Metropolitan University found the rate of

‘quite severe’ loneliness was worst in Eastern European countries (30-55 percent). In Western and Northern Europe, better living conditions and welfare provisions meant 10 to 20 percent of respondents were experiencing the same degree of loneliness.

But while the elderly are disproportionately affected, loneliness generally does not discriminate based on age, gender or nationality, according to Karen Dolva, CEO and cofounder of No Isolation, a Norwegian start-up that aims to reduce loneliness through technology devices. “Loneliness is an increasingly pressing issue and not something we can keep brushing under the carpet,” Dolva said. Across Europe, more countries are broadening their understanding of loneliness through campaigns and research initiatives. The UK took charge in 2018 by appointing the world’s first loneliness minister, while countries including Denmark, Switzerland and Germany are bringing the issue of loneliness into the global conversation.

All together now While the conversation around loneliness and its relation to wellbeing is gaining momentum, it is still largely neglected in the workplace. A study compiled by the New Economics Foundation estimated that 1.2 million Britons suffer from chronic loneliness. This number costs employers £2.5bn (€2.88bn) a year due to the effect loneliness has on the health of employees and those they care for, as well as the ripple effect on productivity and staff turnover. The report concluded: “It is in [employers’] interests to take both reactive and preventative approaches to minimise the loneliness of their employees.”

A number of factors can contribute to workplace loneliness. The increasingly nomadic nature of work is one: remote working is

62 | EuropeanCEO

C19MA_B09.indd 62

14/02/2019 10:34

M a n a g eme n t

Company Culture

While the elderly are disproportionately affected, loneliness generally does not discriminate based on age, gender or nationality more popular than ever, and employees tend to converse over instant messaging or email rather than face to face. Plus, as the working day stretches longer, many employees choose to eat at their desks and dash home as soon as they clock out.

But the benefits of reducing workplace loneliness are numerous, including increasing workers’ efficiency and commitment to the job, as well as reducing staff turnover and absences due to sickness. To reduce loneliness at work, managers must first acknowledge the issue and discuss it with their employees. Dolva said: “Making sure your employees understand loneliness and [knowing] that you as a company are doing what you can to reduce it is a great starting point. The next step can be to map out and get to grips with the reasons... why some of your employees might, or do, feel lonely.”

According to Dolva, small changes – such as introducing a fixed time for lunch – can make a big difference. “At my company, lunchtime is sacred,” she told European CEO. “In good, old-fashioned Norwegian style, every employee takes half an hour off at the same time to eat lunch and chat with their colleagues. Every day you end up sitting next to someone new, and over time, you get to know your colleagues really well, which definitely helps all of us to feel more included and less lonely.”

Managers can also take actions Adults like mixing up their experiencing teams, starting a loneliness or mentoring scheme social isolation for new employees, or arranging social activities outside UK of work, such as football teams or monthly museum US visits. However, one often overlooked area of workplace loneliJapan ness is right at the top: Source: The Kaiser Family Foundation managers or CEOs

23%

22% 9%

who differ from their co-workers in terms of age and responsibilities. In an article for Harvard Business Review, Murthy wrote that half of all CEOs suffer from loneliness.

Double-edged sword There are no easy solutions to loneliness.

Puzzlingly, one of the potential treatments – technology – is often cited as one of its main causes. It is easy to point the finger at social media, which shows users a carefully curated, largely positive account of their friends’ lives, fuelling feelings of anxiety and ‘FOMO’, or fear of missing out. However, participants in the KFF study said social media was strengthening their ability to connect with others in a meaningful way. Those who reported experiencing loneliness were divided on whether they thought social media made their feelings of loneliness better or worse.

“It is a sad irony that we are living in an incredibly well-connected time – smartphones allow us instant communication, crossing time zones and oceans in a matter of seconds – yet we still haven’t solved the issue of loneliness,” Dolva said. She added that tech entrepreneurs should address concerns and improve social interactions with what she calls “warm technology”. She told European CEO: “Warm technology is an area of innovation that is rooted in social responsibility, and harnesses the capabilities of existing technology to solve the big societal issues that we are currently experiencing.”

No Isolation, for instance, makes devices to combat loneliness, such as KOMP, a screen that allows seniors to receive calls, images and messages from family members who have an accompanying app. Users are not required to have any digital skills to use KOMP. The company has also developed a telepresence robot that allows pupils who take extended time away from school due to an illness to maintain a presence in the classroom.

Loneliness is unlike many other illnesses in that it weaves its way into every aspect of a person’s life, leading to poor health and a withdrawal from the workplace. In an interview with Quartz, however, Murthy explained that loneliness is unique in another way: “[What] I find profoundly empowering about addressing loneliness is that the ultimate solution to loneliness lies in each of us. We can be the medicine that each other needs.”

Now that light is being shed on what the Red Cross has called the “hidden epidemic” of loneliness, employers must ensure they are providing the support their employees need. n EuropeanCEO

C19MA_B09.indd 63

| 63

14/02/2019 11:28

C19MA_064_D08_37194.pdf

CEOprofile Didier Rappaport CEO | happn

Let love happen

Serial entrepreneur Didier Rappaport found fame as the cofounder of Dailymotion. His latest venture, Happn, strives to help individuals find love by reprising chance meetings The world of dating has changed. There was a time when meeting the love of your life would invariably occur in the places you frequented most (work, university, etc.) or through introductions made by friends and family members playing the role of Cupid. Yes, such meetings do still happen, but they are becoming mere shadows in modern-day courtship.

Indeed, according to the Pew Research Centre, 59 percent of adults think matchmaking websites are a good way to meet people.

Today, online dating reigns.

Grabbing the most attention in this space is Tinder, a location-based search app that allows users to match if they both like one another when flicking through a vast database of local users. While some advocates point to the platform’s timesaving benefits, detractors argue its ‘swipe right’ approach to matchmaking epitomises the disconnected nature of modern social interaction. Regardless, it has become the staple of online dating, with many competi-

tors adopting a similar model or developing sophisticated algorithms to connect potential partners with corresponding interests.

One player, however, has taken the concept in an entirely new – yet familiar – direction.

Happn, a dating app based on the premise of reprising chance meetings, is the product of serial tech entrepreneur Didier Rappaport. And despite entering an already saturated market, the app’s approach has seen it explode onto the global stage since launching in 2014. “We now have 60 million users around the world and Happn is the numbertwo most downloaded dating app worldwide,” Rappaport told European CEO.

Love at first site What’s remarkable about Rappaport is the success he has found – and the industry firsts he has helped introduce – across a number of different sectors. After studying economics at the University of Bordeaux, Rappaport went

cV born: 1955, France

into the family textiles business, where he was charged with sourcing materials from Asia to be sold across Europe.

Rappaport was, however, unable to ignore an event that would forever change society: the arrival of the internet. “I guess I am a very curious man in general and, when I started in the digital business, it was something entirely new and unknown,” he said. “I felt there was really something to build and I knew it would become something big in the future.”

Inspired, Rappaport created the world’s first B2B marketplace for textiles, Textileeguide, in 1998. Not one to sit still, Rappaport would establish SourcesIT, a site specialising in online services for IT professionals, just four years later. Then came the pièce de résistance: in 2005, Rappaport co-founded Dailymotion, the second-most popular videosharing website in the world today.

“With more experience and many more ideas, I was eager to move on and build »

Happn |

education: Economics, University of Bordeaux

in numbers

1977

1998

2005

2014

After studying economics at the University of Bordeaux, Didier Rappaport went into the family textiles business, where he was responsible for sourcing materials from Asia

Inspired by the creation and growing popularity of the internet, Rappaport used his experience to create the world’s first B2B marketplace for textiles, Textileeguide

Rappaport co-founded Dailymotion, a video-sharing platform. Rappaport stayed on as COO until 2008, when he co-founded geolocationfocused social network Nomao

Having developed a greater launched understanding of geolocation technology at Nomao, Rappaport co-founded locationbased dating app Happn with users Fabien and Anthony Cohen

64 | EuropeanCEO

2014

40+

60m+

6.5m

Countries present in

Active monthly users

C19MA_065_D08_20801.pdf

C19MA_066_D08_22798.pdf

CEOprofile

Happn attempts to reconcile the digital world with the physical one, using modern tools to capture some oldschool magic something new… [Something] useful to everyone in the world, yet impossible at the time: getting closer to your relatives and friends [who live] miles away by sharing your videos online in two clicks,” Rappaport said. “This [is] how we came up with the idea of Dailymotion... We were French and the very first ones to launch such a platform (actually three weeks before the Americans and YouTube), which became hugely used on a daily basis and all over the world.” Rappaport stayed on as COO at Dailymotion until 2008, when he co-founded Nomao, a personalised social network based on geolocation technology.

When asked what draws him to the digital world, Rappaport said: “I strongly believe that the evolution of social behaviour and customs… have influenced and are influencing technology.

So I guess, maybe, what appeals so much to me in the digital world is that digital evolutions are supposed to provide answers to existing issues.”

Right place, right time This curiosity about social behaviour – and the effects of technology upon it – helps to explain Rappaport’s passion for this current undertaking. But while some believe the prevalence of smartphones and the internet presents social obstacles, Rappaport sees solutions in the very same technology.

“It has never been so difficult to connect with people in real life than today,” Rappaport told European CEO. “Most of the existing dating services are very virtual and often very 66 | EuropeanCEO

time-consuming – or basically work like a ‘human online shop’. This is not ethical, and even less respectful of the users who are, let’s never forget, human beings.”

Happn uses ‘hyper-location’ technology to proffer matches when users have crossed paths in real life. And this, in Rappaport’s opinion, is the app’s key differentiator: “We believe that the magic of love is when two people meet thanks to little coincidences, and when an unpredictable alchemy makes them connect and really fit together.”

In a bid to further prompt such little coincidences, the start-up introduced the Happn Map in June 2018. Once opened, users simply tap on a location they have visited in the past week and are presented with a list of other users who have been at the same place in the same time period.

The idea is that it provides individuals with a second chance to connect with people they may have missed, whether due to hesitation or circumstance – a point of frustration we have all experienced at one point or another.

Aside from assisting in the serendipitous nature of finding love, there’s logic to using location to match individuals. “If you live in the same location you will probably have similar life habits; working in a similar workplace will possibly mean your jobs are quite similar as well,” Rappaport said. “Time and space together are a double filter which very often proves you have something in common – a connection.”

Perhaps this ethos is what sets Happn apart from others in the online dating space. The app

attempts to reconcile the digital world with the physical one, using modern tools to capture some old-school magic. Whether you prefer to call it fate or chance, there is definitely something special about catching someone’s eye and falling into a tête-à-tête that feels oddly natural.

“Happn’s essence is romantically modern, and our whole purpose and technology are [designed] to bridge your digital and... real life,” Rappaport said. “There’s only one world – the real one – and our app is just a tool to help you connect with new people and go back to real life with them.”

Making connections Like many apps, Happn adopts a ‘freemium’ business model: while consumers can use the service for free, premium features are available for purchase, both through pay-per-use transactions and via a subscription.

Happn’s premium service allows users to send up to 10 notifications – known as ‘hellos’ – per day and shows them a list of people that have ‘liked’ them. It also provides an ‘invisible mode’, presenting users with the chance to schedule times of the day when they do not want their profile to be visible to others, and a ‘mystery feature’ that enables users to hide some of their personal information.

Advertisements are also disabled.

Given the premise of Happn and its business model, critical mass is essential. As such, it tends to work best in cities. To attract a greater number of users upon market entry,

C19MA_067_D08_55739.pdf

59%

of adults think online dating is a good way to meet new people Right Didier Rappaport co-founded video-sharing platform Dailymotion in 2005.

Image © Dailymotion

Rappaport focuses on precision marketing: “Our marketing moves are always localised to make sure the app and messages are the most relevant to each country and culture.

“Our [headquarters are] in Paris, but we work closely with local contacts and market representatives, who regularly share insights with our team here. And the team includes members of different nationalities, who very often travel to their country to feel what’s happening [in] the field. So when launching in a new city, our campaigns… are so native and local that they [go] viral quite quickly, since people identify themselves very easily.”

Marketing this way must be continuous – if the app is ineffective, people will simply stop using it. As such, Rappaport believes it is important to attract a continuous stream of new users: “The success of our app is maybe more about always convincing new people to join than ensuring critical mass. When our users find the people they were looking for on Happn, they stop using our services – and we are glad they do so, because it means we did our job – [but] this is why we always look for new users.

“But our main targets – single [people] – are always numerous, whatever their age and gender. For instance, lately we have seen more and more users over 35 join Happn, so it’s clearly becoming intergenerational.”

The app is also favoured among professionals. As opposed to the perceived ‘hook-up’ culture of some of its competitors, Happn has a more grown-up feel to it. Meeting others in

similar vocations or with similar ambitions can provide the footing for a fruitful relationship.

Offering people the chance to meet someone who lives in their neighbourhood, attends the same events or frequents their favourite restaurant may not necessarily be a formula for love, but such commonality can break the ice and act as a foundation for deeper connections.

The eye of the beholder Rappaport’s success can be attributed – in part, at least – to an uncanny ability to envisage his creations on a global scale from day one. This is evidenced by the fact Happn opened in its second market just three months after launching, and its third four months after that. Today, the app is used in more than 40 countries. “Scalability is all about making sure your product and business model are ready to be rolled out anywhere and in the shortest possible time... It obviously has to be a central matter when developing a company internationally,” Rappaport said.

While some believe the prevalence of smartphones and the internet presents social obstacles, Rappaport sees solutions in the very same technology

“A highly scalable business always appeals to international investors and business partners because it guarantees a sustainable growth.”

When asked what advice Rappaport offers to aspiring entrepreneurs, he said: “It takes confidence, strong motivation and vision. You have to be ready and eager to go all the way, and then it’s mainly about getting the help of the good people and always [being] two steps ahead. Of course, you should always pay attention to the culture and society in each country you want to go [to], just to make sure you adapt smoothly and do not force your own vision upon the local people. When you are a foreign player... it makes such a big difference when [you] know a country very well.

“Entrepreneurship is really a state of mind to me. It’s all about [being] willing to make things differently, [building] something from scratch, having a genuine taste for risks – although, experience helps you to measure them – and enough strength to carry on what you’re undertaking. Being an entrepreneur is also about handling freedom and independence.”

Given his success disrupting both new and saturated markets, Rappaport is a force to be reckoned with. He sees new opportunities, grabs them and turns them into multinational enterprises in a remarkably short time frame.

From textiles to video sharing, Rappaport has made his mark. Today, he’s using his talents to help people connect in an increasingly disconnected world – and hopefully find love along the way. ■ EUROPEANCEO

| 67

C19MA_068_A08_74911.pdf

FINANCE

Asset Management

Risk and reward

A successful risk management system requires more than just rules and regulations: it requires a culture that works across all levels of an organisation, writes Dr Oliver Bungartz, Head of Risk Advisory Services at RSM Germany In the aftermath of the Enron and WorldCom accounting fraud scandals, the US Congress took it upon itself to introduce tighter industry regulations by passing the Sarbanes-Oxley Act in 2002. While legislative action like this is necessary to maintain the hygiene of a given sector, it is often only provoked by events that were entirely preventable in the first place.

Seldom does 12 months go by without some industry-shaking revelation of scandal or fraud grabbing the world’s attention. The list of companies whose reputations have cratered – or whose businesses have collapsed – in the wake of widespread misconduct is always growing, and each is a case of a systematic internal failure of risk management.

Conventional wisdom will tell you that the fish tends to rot from the head: when an organisation is caught in a scandal, it’s the senior figures who are most culpable. This is true to an extent, but the reality is not so simple. It may be easier to assume it was simply a few bad apples who engaged in wrongdoing but, more often than not, the fault also lies in the organisational environment that did not sufficiently safeguard against risky behaviour.

These are things that, in theory, every company should already have in place. Indeed, a superficial reading of most companies’ annual reports will include language suggesting such a 68 | EUROPEANCEO

system is already in use. In practice, however, having policies in place – even if employees are widely aware of them – does not by itself ensure they are considered as a day-to-day necessity.

Change takes time A transformation in the way an organisation manages risk does not happen suddenly. Short of a complete managerial overhaul, there will never be an overnight reorientation of an organisational mindset. It is not enough for the C-suite, for instance, to decide to install a risk management mechanism. While this may work as a public relations measure, it is purely cosmetic if it is not accompanied by the kind of organisational mentality that would make it seem necessary in the eyes of employees.

A risk management system will only work effectively if there is a strong risk culture underpinning it. In the absence of a sufficiently strong risk culture, there is no guarantee that risk management mechanisms will be taken seriously – or regarded as necessary – by either those directly monitoring them or the employees going about their regular day-to-day duties.

The first step that must be taken – as with any endeavour in which there is a problem that needs to be fixed – is to determine the nature of the existing culture. Once the present situation has been identified, the second step is to analyse

C19MA_069_A08_66276.pdf

FINANCE

Asset Management

It has been shown time and again that culture is a far more effective safeguard than strategy or process

and evaluate the culture to determine what the organisation wants it to look like moving forward. The final piece of the process is the crafting of an action plan to implement the culture the business wants.

Identifying a culture Edgar Schein, the former MIT professor renowned for his contribution to the understanding of corporate culture, identified three elements that determine the cultural architecture of an organisation: artefacts and symbols, espoused values, and basic assumptions.

On the surface, the artefacts and symbols are the most outwardly visible aspects of a business’ approach to risk management. They describe the proactive measures put in place to mitigate risk, including the publication of guidelines, the establishment of reporting mechanisms and the release of a risk report in tandem with the annual report. This is followed by an organisation’s espoused values, which are more visible than basic assumptions.

They describe the goals, aspirations and moral orientation depicted within the group.

At the most fundamental level, the basic assumptions are the underlying, interwoven norms that we often take for granted. They are not just based on the organisation itself, but rather how people interact with one another.

Basic assumptions determine the behaviour, perception and feelings within an organisation.

Identifying what each of these levels looks like within a company’s risk culture can be done through a three-step model. The first step involves the questioning of all employees with regards to the risk culture, making employees more aware of both the topic and what is expected. Second, organisations should carry out more in-depth workshops with selective employees to identify basic assumptions.

Finally, the last step involves one-on-one interviews with senior management.

Evaluation and implementation Once there is a sufficient understanding of the existing risk culture within an organisation,

there must be an evaluation of what needs to be changed and, more importantly, what a desirable culture looks like for the company in question.

When determining which kind of risk culture would be most desirable to a particular organisation, it is important to keep in mind the factors that influence it. Generally speaking, an effective risk culture involves having company-wide coordination with regards to accepted guidelines, so as to encourage the safeguarding of employees’ activities. In aggregate, having a well-integrated risk culture fosters a stronger sense of belonging among employees, which ultimately results in a higher level of motivation at all levels.

The final step is the actual implementation of the action plan. It is crucial to keep in mind the interconnectivity of the elements in a risk culture. That is to say, changing a single element of a risk culture without having an effect on the wider system is something that is both futile in terms of bringing about meaningful change, and near impossible to do even if attempted.

Changes can be made on the surface level to initiate a cultural change. These include the introduction of a risk policy – as well as the mechanisms to implement it – the integration of measures for employees and the introduction of some form of risk suggestion system.

In order to maintain this change and ensure it permeates the whole organisation, however, there must also be ongoing monitoring and calibration. This includes keeping on top of any unforeseen and even negative consequences that may stem from the culture change. Monitoring is also necessary to ensure risk management systems are operating consistently throughout the organisation.

Risk and responsibility are not mutually exclusive, and it has been shown time and again that culture is a far more effective safeguard than strategy or process. Any business that wants to grow will have to take on a certain level of risk, without which – as they say – there is little reward. With a culture that identifies and adequately responds to risk, however, even great chances can be taken on without catastrophic consequences. ■ EUROPEANCEO

| 69

C19MA_070_A02_53258.pdf

FINANCE

Asset Management

A roadmap to success

Investors are always on the lookout for more profitable opportunities. Copy trading is a simple way to enjoy the forex market’s great earning potential with less risk, according to Joanna Archer, Product Owner at OctaFX In the spring of 2018, the copy trading market was met with a wave of interest. The method of trading, which allows investors to mimic the strategies of professional forex investors, opened the industry to new participants, building on the growth inspired by the development of mirror trading in the late 2000s.

Mirror trading – a method where investors copy trades executed by auto-trading and signal services, rather than successful investors – made investing a far more relaxed experience.

Unfortunately, it also failed to win investors’ trust. Copy trading presented itself as a natural evolution: as a tool, it was transparent, trusted and as easy to use as a savings deposit, but with much greater earning potential.

Although the idea has been around for close to a decade now, copy trading is still comparatively new to the market and there’s much room for growth. European CEO spoke to Joanna Archer, Product Owner at OctaFX, to learn more about the sector’s coming challenges and opportunities.

70 | EUROPEANCEO

How is the forex market in Europe changing at present?

Now that the European forex market has overcome its own hype, regulators are trying to position it properly within the retail investment sector. The introduction of the second Markets in Financial Instruments Directive, for example, emphasised the European Securities and Markets Authority’s (ESMA’s) desire to make forex more transparent and less risky.

Unfortunately, by trying to protect traders from all possible missteps, the initiative also reduced traders’ earning potential.

How has copy trading impacted the forex market in Europe?

I would say this trend has helped maintain the popularity of Europe’s forex market. The updated regulations introduced by ESMA at the end of last year left many traders fearing that the profitability of their trading accounts would fall. On the one hand, copy trading supports ESMA’s risk reduction and

transparency drive; on the other, it provides more opportunities to both experienced and novice traders. This is undoubtedly something that draws clients’ attention.

Our research shows copy trading has helped offset the downturn in interest that many expected the ESMA regulations would cause.

Why does copy trading exist? What are its biggest benefits?

Trading in the retail forex market is statistically proven to be a very risky endeavour – everyone knows that. Yet, forex is still associated with the application of knowledge and the understanding of price formation, rather than simply gambling on price trends.

Copy trading allows investors to enter the market and enjoy its potential instantly: you no longer have to study for six years at a university and work for a further five on Wall Street to understand how quotes move.

Now, you can simply subscribe to a trader with a successful trading history instead. If the

C19MA_071_A02_74136.pdf

FINANCE

Asset Management

investors to examine particular people and their strategies, as well as the service and its conditions. We recommend that clients spread their investment portfolios across different traders. With the OctaFX Copytrading app, this part of the process is made easier through the provision of trading statistics and strategy descriptions.

platform is transparent enough, you can even study the market by tracking your investment performance in real time and in full detail.

What are the biggest challenges presented by copy trading?

The first challenge is the marketing of the service. It is easy to use, transparent and it brings money to investors, but it is not entirely in the control of the broker: the moneymaking side of the business remains on the user’s side.

Another challenge stems from the human factor. It’s important to note that even professional traders can fail: no matter how strong a professional’s trading history is, we cannot guarantee their winning streak will last forever. It may end on the very day someone decides to invest with the trader; such misfortune would no doubt spoil anyone’s impression of the service.

To manage this risk, investors need to study the trader they wish to invest with carefully. This involves additional work and pushes

Can you tell us more about the app?

How is it making copy trading more accessible?

We offer an online service and an Android app that are dedicated to one thing: investing.

Through the OctaFX Copytrading app, we give users full control of their investments with a clear and friendly interface. The app is perfect for those who are interested in short-term investments and generating a passive income.

We wanted to ensure investors had full control of their investments at all times. As such, the app not only tracks the performance of investments, but also provides a range of settings that investors can tune before backing a particular trader, even while the investment is engaged in a market operation.

Put simply, once a user has decided how much they would like to invest, they can view detailed statistics and, with the help of handy filters, select the individuals they would like to invest with from a list of professional traders. Clients can then split their investment between traders, setting risk levels for each one individually.

The OctaFX Copytrading app is perfect for those who are interested in short-term investments and generating a passive income

What can clients gain from using the OctaFX app?

We have created a special wallet in our app that allows users to keep their investment portfolios in one place. Through this feature, investors can easily choose the traders they would like to copy, and split their investments between them accordingly. What’s more, clients can collect any profits in a single payment from the wallet, leaving their core investments to continue working.

Users can also preset their risk preferences for each trader before making an investment and adjust these values at a later date to react to changes in the market. The OctaFX Copytrading app, therefore, gives users the confidence to manage their portfolios.

On special occasions, we also run promotional campaigns with bonuses for our clients. For instance, we offer investors a free trial, allowing them to copy traders for a certain period of time without paying any commission. This is a mutually beneficial initiative, as professional traders are able to promote their services.

What developments do you see taking place in the forex market this year?

The demand for greater transparency in every aspect of how a broker operates will undoubtedly continue to grow. As a result, traders will leverage more effective and precise tools for risk management. Brokers, meanwhile, will have to publish more comprehensive accounts of a trader’s performance, quotes and spreads.

As for new developments, I think copy trading is yet to reach its final form. There’s still room for brokers to present a service that people will find even more advantageous. I expect this will be more dependable and have a broader set of features, while being just as easy to use as the current system. Above all, industry players will become more transparent in an effort to increase investors’ confidence in their products. ■ EUROPEANCEO

| 71

C19MA_072_A01_74043.pdf

FINANCE

Asset Management

Fighting back

Banks have had a stranglehold on the foreign exchange market for decades. Fortunately, smaller competitors are now able to offer clients a cheaper, more convenient service, writes David Wong, CEO of Midpoint The business and retail foreign exchange market is heavily weighted in the favour of banks.

A variety of methods are employed – including opaque fees and large bid-ask spreads – to make it difficult for customers to discern whether or not they are getting a good deal.

At Midpoint, we are well aware of the financial damage these tactics can cause. Recently, a well-known public relations client of ours received $10,000 (€8,726) from a US business and promptly paid it into their bank account in pound sterling; when the money was later exchanged for a trip to the US, the client only received $9,000 (€7,853).

Last year, The Wall Street Journal revealed that American Express’ foreign exchange unit had “recruited business clients with offers of low currency-conversion rates before quietly raising their prices”. According to The Wall Street Journal, the bank deliberately targeted smaller companies for more than a decade, only stopping when the publication printed an article alleging similar practices at Wells Fargo.

There is, of course, an argument to be made for the ease and convenience of ‘one-stop banking’, but when the costs are so high, it may not be worth sticking with one institution. Although the banking industry has a tight stranglehold on the foreign exchange market, there are ways for businesses to avoid exorbitant fees and escape ‘bait-and-switch’ sales practices.

72 | EUROPEANCEO

Finding a better deal A growing number of competitors now offer lower rates and a better service than the major banks. These institutions can easily undercut high fees and fat margins, saving their customers money while still making a profit themselves.

For the occasional holidaymaker looking to exchange relatively small amounts of money, foreign exchange rates don’t really make much of a difference. But for anyone buying a property abroad, savings can reach thousands of euros per transaction; for businesses involved in regular foreign exchange transactions, they can run into the millions.

Essentially, there are three main points to focus on when looking for a foreign exchange bargain: the bid-ask spread, transaction fees and transmission costs. Typical bid-ask spreads for retail accounts can be as much as 300 basis

Midpoint uses technology to cut out the middleman and provide clients with direct access to the wholesale interbank foreign exchange market

points (bps). For larger amounts or business accounts, this may be reduced to 100bps. Smaller, more agile competitors will often charge as little as 150bps, dropping to 100bps if clients are willing to haggle. There may, however, be a way to reduce this spread even further.

Saving the day Midpoint has an entirely new business model – one specifically designed to provide the very best value for money. We use technology to cut out the middleman and provide clients with direct access to the wholesale interbank foreign exchange market. This allows companies to deal at the midpoint of the bid-ask spread in exchange for a single transparent fee that never exceeds 30bps (0.3 percent).

Our research has shown that paying a modest one-off fee and dealing at the midpoint will, on average, save clients approximately £1,370 (€1,535) for every £100,000 (€112,030) traded into US dollars, and £1,360 (€1,520) for every £100,000 traded into euros. For larger sums – or for companies that make regular transactions – the savings can be significantly higher.

In addition to the financial benefits, we understand the importance of convenience to our clients. As such, our technology allows anyone to open an account online in minutes, and we have a helpful team on hand to offer support every step of the way.

The world of technology has come a long way in the past few years. Today, we have reached a stage where customers can open an account from anywhere in the world at the touch of a button, effortlessly sending or receiving foreign currency at the midpoint – the finest exchange rate there is. ■

C19MA_001_Z02_11335.pdf

- ŠGetty images - Shutterstock

thalesgroup.com

The people we all rely on to make the world go round, they rely on Thales Search: Thalesgroup

THALES KV Global 210x280 EN.indd 1

29/01/2019 09:34

C19MA_074_B07_66574.pdf

C19MA_075_B07_61245.pdf

CLEANING UP ITS ACT OVER THE PAST DECADE, THE EUROZONE HAS STRUGGLED TO WASH ITS HANDS OF DIRTY MONEY. AS A RESULT, MONEY LAUNDERING HAS BECOME A GLOBAL CONCERN THAT REQUIRES A MAJOR INTERNATIONAL SOLUTION, WRITES SOPHIE PERRYER »

C19MA_076_B07_41038.pdf

DIRTY MONEY

Shining a light There’s little mention of money laundering in Europe’s history books prior to the late 20th century, as the practice was predominantly confined to certain factions of the illegal drugs trade. However, this changed somewhat with the formation of the Financial Action Task Force (FATF) at the 15th G7 summit in 1989.

“Money laundering… in the context of drugs was on the agenda at that summit, which triggered discussion [of the practice as a whole],” Katie Jackson, a partner at Deloitte’s financial crime team, told European CEO. “There was a recognition of the need to do

something systemic across Europe, hence [the foundation of the] FATF.” At the time, the FATF published its 40 Recommendations, which set the international standard for anti-money laundering (AML) measures. They were subsequently incorporated into EU law in 1990, with the introduction of the Anti-Money Laundering Directive (AMLD), a piece of Europe-wide legislation that established a due diligence framework for financial institutions across the continent.

Money laundering was catapulted into the international spotlight in 2001 by the 9/11 attacks, which crystallised concerns that laundered funds could be used to finance terrorismrelated activities. A global crackdown on money laundering ensued, with the FATF’s recommendations revised and expanded to include new guidelines on terrorism funding. The AMLD was also updated to establish informationsharing guidelines for EU member states, while incorporating governments’ rights to “identify, based lender ING after identifying a pattern trace, freeze, seize and confiscate any property of suspicious transactions from clients dating and proceeds linked to criminal activities”. back to 2007. During the trial, which lasted almost two years, prosecutors said ING had violated AML laws “structurally… for Scandal upon scandal As far as the legislative authorities were con- years”, demonstrating a blatant disregard for cerned, the scene was set and the regulations repeated warnings received since 2008 about were in place. But over the past few years, the robustness of ING’s security measures. it has become increasingly clear that these Ralph Hamers, CEO of ING, said at the time: measures have not been as successful as once “Although our investments [in transaction hoped (see Fig 1 and Fig 2). Money laundering monitoring] have been increasing since 2013, is not only alive and kicking, it has also caused they have clearly not been to a sufficient level.”

In September 2018, ING was ordered to some of Europe’s most significant financial pay €675m in fines, plus an additional €100m scandals in continental history.

The trouble surfaced in 2016, when Dutch to compensate for any profit it had made as a prosecutors began to investigate Netherlands- result of the crimes. Although the settlement

EU MONEY LAUNDERING:

PERCENTAGE

urope has a dirty money problem.

For the past decade, the continent’s banking system has been awash with laundered funds – the product of illicit activities conducted by financial criminals. Legislative attempts to tackle the issue have proved fruitless, as there’s no overarching way of ensuring they are enshrined in law and correctly implemented.

What’s more, Europe’s financial institutions have turned their backs on investigative responsibilities due to the high price tag attached to such diligent processes. Any national attempts to address money laundering have not been wholly successful either, as the open, accessible nature of Europe’s financial framework means no door is ever really closed.

With greater instances of money laundering brought to the fore every year, the issue is taking its toll on countries across Europe. It’s clear a solution must be found – and fast.

¤197.2bn ANNUAL COST

FIG 1: THE REPORTED RATE OF ECONOMIC CRIME

45

43%

%

49% 43%

37

%

1.2%

30%

34%

37%

36%

2014

2016

PROPORTION OF ANNUAL GDP

2001

2003

2005

2007

2009

2011

Source: PwC Global Economic Crime and Fraud Survey 2018 Note: Respondents were asked, “Has your organisation experienced any fraud and/or economic crime within the last 24 months?”

76 | EUROPEANCEO

2018

DIRTY MONEY

The 9/11 attacks crystallised concerns that laundered funds could be used to finance terrorismrelated activities was one of the largest ever handed out in the Netherlands, it was of little consequence to an institution of ING’s size, which posted a net result of €776m in Q3 2018 even after the fine was paid. Rather than being the deterrent it was intended to be, the fine simply knocked a zero or two off the bank’s sizeable yearly profit and left little lasting fiscal damage.

ING’s case sparked investigations into the institutional inaction that had rumbled on unchecked for the past decade. In July 2018, Estonia’s prosecutor general opened a criminal investigation against Danish national lender Danske Bank following allegations of a mass-scale money laundering operation. Over €200bn in suspicious transactions had report-

Howard Wilkinson, the whistleblower who first brought the Danske Bank scandal to light

edly flowed through a tiny Estonian branch of the bank between 2007 and 2015, predominantly through the accounts of British and Russian entities. The scandal was brought to light by British whistleblower Howard Wilkinson, who headed up the bank’s Baltics trading unit during that eight-year period.

The case has since swelled to massive proportions, engulfing Deutsche Bank, which has been named as a secondary lender. According to sources quoted by the Financial Times, the German bank helped to process some €181bn of corrupt funds for Danske across around one million transactions. In December 2018, the Organised Crime and Corruption Reporting Project named Danske Bank as the 2019 Cor-

FIG 2: THE REPORTED INCREASE IN THE RATE OF ECONOMIC CRIME BY REGION 57% 33%

EASTERN EUROPE

NORTH AMERICA WESTERN EUROPE

25%

¤675m ¤100m

53% 35% 37

54

%

40%

62%

PAID IN FINES

47%

28%

LATIN AMERICA MIDDLE EAST

46%

30%

ASIA-PACIFIC

A costly affair The question on everyone’s lips during the entire sordid affair was this: how did money laundering on this scale go undetected?

Both Estonia and the Netherlands are part of Europe’s banking union, which is subject to no fewer than 19 different AML systems and regulations, including the AMLD. Yet, the ING and Danske Bank cases continued unpoliced for years. It’s not just a problem in »

ING MONEY LAUNDERING SCANDAL:

■ 2016 ■ 2018

AFRICA

rupt Actor of the Year, while Estonian authorities arrested at least 10 people in connection with the case. UK and US authorities have now launched their own investigations; the scandal is expected to persist for years to come.

45%

Source: PwC Global Economic Crime and Fraud Survey 2018 Note: Respondents were asked, “Has your organisation experienced any fraud and/or economic crime within the last 24 months?”

%

ADDITIONAL PENALTY TO COMPENSATE FOR ANY PROFIT RESULTING FROM THE CRIME

¤776m

NET RESULT IN Q3 2018 (INCLUDING PAYMENT OF THE FINE) EUROPEANCEO

C19MA_B07.indd 77

| 77

14/02/2019 15:25

C19MA_078_B07_00129.pdf

DIRTY MONEY

Danièle Nouy, former Chair of the Supervisory Board at the European Central Bank

these two countries, either: money laundering accounts for up to 1.2 percent of the EU’s annual GDP, or around $225.2bn (€197.2bn) in 2018, according to a 2017 report by Europol.

There are a number of reasons for this. First of all, it’s important to note the timing of Danske Bank and ING’s alleged transgressions: suspicious transactions were detected at both lenders as early as 2007, at the onset of the subprime mortgage crisis. While this doesn’t excuse the duo’s supposed lack of vigilance, it’s likely that both had greater concerns to contend with at that time, such as protecting themselves from collapse. Many financial institutions switched to ‘survival mode’ at that point, with operations trimmed down to the bare minimum.

Fraudsters saw an opportunity and took it.

Second, the AMLD has frequently been criticised for its inefficacy, largely due to its lack of uniform implementation. As it is a directive, not a law, EU member states have a considerable amount of freedom in the way the AMLD is amalgamated into their respective constitutions. “Some countries still haven’t embedded the full requirements of the FATF [and the AMLD], because they just don’t have that driving political agenda,” Jackson said.

Moreover, the AMLD – like other AML legislation – is extremely costly to implement.

The latest iteration of the AMLD – AMLD V, which is due to come into force in 2020 – is far more expensive than its predecessors, requiring banks to conduct Know Your Customer (KYC) checks on a more frequent basis. According to a 2017 whitepaper authored by Consult Hyperion, 78 | EUROPEANCEO

KYC processes currently cost the average bank $60m (€52.9m) annually, with some larger institutions spending up to $500m (€440.7m) every year on KYC and associated customer due diligence (CDD) compliance.

With these exponential costs set to skyrocket, it’s little wonder just 47 percent of banks in the UK told a 2017 Thomson Reuters survey that they had taken action to implement all new regulations. Over a third of the firms surveyed reported that scarce resources remained their greatest challenge when implementing KYC and CDD processes. “Ultimately, firms may have the best will in the world to prevent money laundering, but they are running a business at the same time and they have competing [financial] pressures,” Jackson said.

Many of the institutions surveyed by Thomson Reuters generated $10bn (€8.8bn) or more in revenue in 2017, meaning they should theoretically be financially robust enough to withstand increased AML costs. If institutions of this size are struggling, it doesn’t bode well for smaller banks in financially weaker EU countries.

For some financial institutions, there’s also a great deal of confusion surrounding AML

The greatest issue hindering anti-money laundering measures in the EUrozone is the lack of cross-border information sharing

regulations. Jackson said: “The risk-based approach is a core principle of AML directives and a number of firms, even today, still don’t really understand how to effectively apply that.

So they don’t consider the holistic application of that principle, but they apply it in a very siloed way, which can prove to be quite costly, resulting in duplication of effort.”

Traversing borders By far the greatest issue hindering AML measures in the EU, though, is the lack of crossborder information sharing and targeted action against money launderers. While each country within the bloc has its own financial intelligence unit (FIU) – whose main task is to identify suspicious transactions on behalf of prosecutors – these organisations do not share information with their international counterparts.

This is particularly problematic when attempting to tackle money laundering in the eurozone as a whole, as the countries with the flimsiest AML procedures tend to bear the brunt of the crime. This, in turn, has a knockon effect on other nations within the bloc. As Jackson told European CEO: “You’re only as strong as your weakest link.”

Once a money launderer has broken into the European financial system via the weakest point of access, they’re able to run amok across the entire group. There’s certainly no shortage of crafty criminals, either. As former Europol chief Rob Wainwright told Politico in 2017: “Professional money launderers – and we have identified 400 at the top, top level in Europe –

C19MA_079_B07_57769.pdf

DIRTY MONEY

are running billions of illegal drug and other criminal profits through the banking system with a 99 percent success rate.”

According to a 2017 study by Europol, 65 percent of the suspicious transactions detected across Europe took place in the UK and the Netherlands. This came as a surprise for many, as both countries have advanced banking sectors and theoretically should have had highly robust AML procedures in place. Some, including the Dutch central bank, DNB, have placed the blame squarely with banks themselves.

In a letter addressed to the Dutch finance minister in September 2018, the DNB wrote: “Too often we see that the [banking] sector insufficiently acts as a gatekeeper.”

Others have criticised the UK’s ineffectual AML procedures, many of which are carried out manually, with data taking months to be processed. “A number of the bigger [financial institutions] operating across multiple jurisdictions with diverse business units have archaic and fragmented systems, and their data is all over the place,” Jackson said. “They need to go back to basics, and undertake a complete transformation of what they do and how they do it based on what the [AML] requirements are.”

In light of recent political events, the UK’s insufficient framework is of particular concern to both British intelligence agencies and the EU itself. After Brexit, the UK will no longer be subject to the EU’s AMLD and will likely lose access to shared data on repeat money launderers within the EU, leaving a massive informationsharing gap for criminals to exploit. However,

Jackson is confident the overarching appetite to tackle money laundering will surpass any political impediments: “Politically and practically As long as various regulators, speaking, there will be certain elements that financial institutions and need to be worked through… but that doesn’t governments play the blame game, mean there’s any reason not to do it. We just financial criminals will continue need the right environment to support that to benefit from the vulnerabilities kind of collaboration. As a European group of of the European banking framework countries, we are in a much better position than ever before, but there is still much more to be states – there’s no reason why that couldn’t done to drive that agenda forward.” happen,” Jackson said.

A cohesive judgement as to whom is A better way In order to tackle money laundering at the responsible for establishing this body and, by source, Europe needs a multilateral body with extension, tackling money laundering would the power to not only share information, but also have to be reached. There’s no current also to prosecute perpetrators. It’s a popular consensus on this – some have postulated the solution to the issue, one that Jackson is very burden should lay squarely with the banks, with much in favour of: “[Financial] criminals are fines increased to ruinous levels in a bid to force not bound by jurisdiction or borders, so we them to take AML responsibilities seriously.

However, this risks weakening the EU shouldn’t be either.” Powerful European players, including former European Central Bank financial system overall and could drive signifi(ECB) Supervisory Board Chair Danièle Nouy, cant market players out of business, or to move are also advocates, and have even begun pre- abroad. Others have said FIUs and regulators paratory work. Nouy, for example, confirmed should do more to prevent money laundering at the ECB was working on creating an AML office a national level but, as history has shown, this within its banking supervision jurisdiction to is not an effective solution. “Many of the actors “act as a single point of entry with respect to the that we’re trying to monitor... don’t work on a direct exchange of AML information between national basis, so we need a body that mirrors that and can work as seamlessly as they do,” the ECB and AML authorities”.

The establishment of a body like this could Jackson told European CEO. As long as various regulators, financial instihelp individual member states to cut costs with regards to AML procedures. “At the moment, the tutions and governments play the blame game, national bodies are spending a huge amount of financial criminals will continue to benefit from money on processing suspicious activity reports, the vulnerabilities of the European banking and the volume of information that they have to framework. A lax attitude in implementing AML policies – driven by confusion and high costs – deal with is huge,” Jackson explained.

“If we could pool those activities into a has created an environment in which money central function that operated on behalf of launderers are able to clean funds rapidly and Europe, everybody would only incur a slice undetectably within the eurozone. We must of their current cost, rather than the burden- now act to bring light into the darkest corners some cost that they have today. Let’s say the of the system, working to increase transparency UK spends £100m [€115.2m] on the National and ensure that all funds passing through have Crime Agency – you could probably take £25m legitimate sources. This will require cooperation [€28.8m] from them, £25m from France, £25m on a governmental, logistical and financial level.

“I do think the political will is there,” from Germany [etc.] and you’d have a bigger pot overall, but you’d be operating on a much Jackson said. “After all, [money laundering] is bigger scale and would be much more effective. not just about drugs, but about loss of life and the impact on normal people, the economy and It’s a win-win for everybody.”

Such a body’s creation, however, relies wider society day to day – human trafficking, on several key factors. First, in order for a prostitution, weapons [and] tax evasion.”

Financial crime has grown vastly in scope multilateral agency with prosecutory powers to be set up, every EU member state would and scale, and any solution must certainly have to confer the AMLD regulations into law match – if not surpass – the role it has come in a wholly unified way to ensure that crimi- to play in the European financial landscape. It’s nals could be charged regardless of which time for money laundering to be put at the very country they were caught in. “We do have top of the political, corporate and regulatory Europe-wide institutions and organisations agenda – only then will the continent finally that work very effectively across member succeed in washing its hands of dirty money. ■ EUROPEANCEO

| 79

C19MA_080_A04_15976.pdf

FINANCE

Citizenship by Investment

Charmaine Donovan CEO, Citizenship by Investment Unit

A piece of paradise Antigua and Barbuda offers individuals the chance to call one of the most beautiful places on Earth home with a fair and affordable citizenship by investment programme Nestled among the Leeward Islands, where the Caribbean Sea meets the Atlantic Ocean, Antigua and Barbuda comes close to many people’s idea of paradise. Known as the ‘land of 365 beaches’ – one for every day of the year – the twin-island state has a population of more than 90,000 people and is considered one of the most beautiful places on Earth.

Bolstered by generous government incentives, foreign direct investment has contributed to the rapid development of the local economy, giving Antigua and Barbuda one of the highest GDPs per capita in the Caribbean. As a result, it has become an ideal jurisdiction for those seeking second citizenship.

Growth in the citizenship by investment industry has exploded of late. For those whose freedoms have been restricted by the politics of their home country, acquiring second citizenship presents the chance to become a global citizen. As well as offering greater mobility, citizenship and residency investment programmes provide families with greater security, better access to education, a higher quality of life, stability, and wealth protection.

Ideally positioned to respond to these emerging demands, Antigua and Barbuda established its Citizenship by Investment Programme (CIP) in 2013, offering citizenship through four affordable initiatives.

Spoilt for choice The first option presented by the CIP offers second citizenship in exchange for a contribution to the National Development Fund, which has parliamentary oversight that 80 | EUROPEANCEO

ensures contributions are used on legitimate infrastructure and socioeconomic projects that benefit all citizens.

This path to citizenship is suitable for both single applicants and families of up to four, necessitating a $100,000 (€87,800) contribution, with processing fees of $25,000 (€22,000).

For families with five or more members, this contribution rises to $125,000 (€109,750), excluding the relevant processing fees. These figures represent a 50 percent reduction on the standard investment and will only apply until October 31, 2019.

Individuals can also earn second citizenship by making a minimum real estate investment of $400,000 (€351,200). This sum must be invested in an approved project, with ownership being retained for five years. Until October 31, two related-party applicants can make a joint investment to this effect, with each Number of CIP investing a miniapplications mum of $200,000 processed as of (€175,600) to qualify.

December 2018 The CIP’s third citizenship initiative seeks to encourage business investments and requires individuals to contribute $1.5m (€1.32m) to a local venture. Parties of two or more must provide a joint investment totalling $5m (€4.4bn), with each individual supplying a minimum of $400,000 (€351,200).

The fourth and final option tenders citizenship in exchange for a contribution to the University of the West Indies Fund.

1,900

Applicants selecting this option will be required to make an investment of $150,000 (€131,700) for a family of four or more persons – this option is not available to single applicants. Participation in this initiative will entitle one member of the family to a one-year, tuition-only scholarship at the University of the West Indies’ Antigua campus.

Second to none The CIP is a well-regulated programme, duly cognisant of its collective responsibility in the community of nations and the need to protect all borders, while at the same time fostering improved human relations. We believe that citizenship should be granted to those most deserving. As such, all applicants are subject to stringent background checks.

The programme also has a ‘restricted countries’ list, which prohibits applications from Afghanistan, Iran, Iraq, North Korea, Somalia, Yemen and Sudan. There are exceptions to this ruling, however: if an applicant resides outside of these given countries, if their source of income is generated elsewhere, or if they are lawfully a permanent resident of either Canada, the UK, the US, Australia, New Zealand, Saudi Arabia or the UAE, they may still be granted second citizenship.

As of December 2018, more than 1,900 applications have been processed. With its efficient management, rigorous due diligence, wide choice of investment options and sheer physical attraction, Antigua and Barbuda is fast becoming the jurisdiction of choice for second citizenship. ■

C18ND_001_Z03_99505.pdf

C19MA_082_E01_43506.pdf

F i n a n ce

Government Spending

Learning the hard way Education in Italy has been neglected for years.

Now that new populist premiers want to cut spending even further, students have reached the end of their tether, writes Sophie Perryer “We need to regain our future.” This rallying cry reverberated around Rome on October 12, 2018, as more than 3,000 students took to the streets to protest further cuts to Italy’s woefully underfunded education sector.

Students have recently elected deputy prime ministers Matteo Salvini and Luigi Di Maio to thank for the redistribution of desperately needed funds away from the schooling system. In an effort to deliver on ambitious campaign promises of increased welfare spending, the populist duo – who represent Lega Nord and the Five Star Movement respectively – have opted to increase the country’s budget deficit dramatically, which in turn has directed funds away from other areas, such as education.

Italy’s education sector has been on a financial roller coaster ride for the past few years. “In terms of expenditure, Italy experienced major cuts of almost €1bn per annum between 2010 and 2013,” explained Andrea Gavosto, a director at the education research foundation Fondazione Agnelli. “Then, when the Renzi government came in [2014], it 82 | EuropeanCEO

pledged €3bn extra every year.” Now, this additional investment is set to be redirected to service a larger budget deficit, leaving the education sector gasping for air.

This is a particularly harsh blow for a country that already spends far less of its GDP on education than many other EU nations.

Yet, with reports emerging of school buildings crumbling and establishments in Rome unable to provide pupils with toilet paper, it is clear additional funds are sorely needed.

Cutting class Italy has bucked the international trend with regards to education funding in recent years.

Across the globe, spending rose from 3.9 percent of GDP in 2000 to 4.9 percent in 2015, the latest year for which the World Bank had data available. By contrast, Italy spent 4.3 percent of GDP on education in 2000, compared with 4.1 percent in 2015. It fares worse still when compared with other major European countries: in 2015, Germany spent 4.8 percent of its GDP on primary, secondary and higher

education; France contributed 5.5 percent; and the UK 5.6 percent.

Gavosto told European CEO that most of the lag stems from university spending: “[Italy] spends about one percent of GDP on [universities], which is much lower than countries such as France, Germany and the UK – not to mention the Scandinavian countries, all of which spend between two and three percent.”

Education in Italy is compulsory between the ages of six and 17, after which pupils can choose whether or not to attend university (tertiary education). According to Eurostat, just 57 percent of Italians aged 25 and over had obtained a diploma at upper secondary or tertiary level in 2015, compared with 76.3 percent in the rest of the EU. Gavosto said this is due to the fact the drop-out rate in secondary and tertiary education is extremely high in Italy, particularly in the southern regions, where it can reach 20 percent – more than double the EU average.

“The government has made a major effort to bring… down [the drop-out rate] in recent

C19MA_083_E01_14698.pdf

F i n a n ce

Government Spending

Education spending

(as a proportion of GDP):

5.6% UK

5.5% France

4.8% Germany

4.1% Italy

26.2%

Proportion of Italians aged between 30 and 34 to have completed a university degree years, and the national average is now 14 percent,” Gavosto said. “But it remains dangerously high on the two major islands and within the Calabria and Naples regions.” Those areas in particular have high numbers of pupils opting for vocational courses, rather than more traditional academic routes, which Gavosto described as being “extremely weak”.

Other EU countries, such as Switzerland and Germany, have very strong vocational offerings, as they recognise academia is not an appropriate path for every pupil, especially those seeking practically focused careers in industry. By contrast, the attitude in Italy is much more akin to ‘academia or the highway’, which results in many pupils simply giving up and leaving without a diploma.

This high drop-out rate has a significant impact on the composition of the workforce and unemployment levels among young people. “Italy has two million young people who are neither in education, training or jobs,” Gavosto explained. This equates to around three percent of the population who are of

prime working age but aren’t contributing anything to the national economy.

What’s more, according to the European Commission, more than 90 percent of Italian SMEs are made up of fewer than 10 employees.

This means companies often do not have the time nor the finances to invest in incoming employees – they simply expect them to be equipped with the appropriate skills. That’s hugely problematic given the fact that many young people are dropping out of school before the end of their studies. Those who do make it across the finishing line, meanwhile, are finding the skills they have aren’t adequate in the workplace.

“We clearly have a skills mismatch,” Gavosto said. “Technical vocational schools aren’t providing young people with the right skills for the right jobs, but firms are too small to spend time and resources on training them. The two sides of the market don’t match up at all.”

A crumbling facade Protesting students argued that increased investment in the education system would help to combat the issue of dropouts. In a statement published on its website, Rete degli Studenti Medi, a student campaign network that played a significant role in orchestrating the October protests, said: “We are tired of paying hundreds of euros for our most important right: to study.

Too many kids leave school because they can not afford it – it’s time to say enough.”

Education has never been at the top of Italy’s priority list, on a political or social level

Unlike in other countries, state schools in Italy are not entirely free – there is a registration charge of approximately €20 to be paid per annum, while students are responsible for paying for textbooks and stationery, which can cost up to €400 each year for a child at upper secondary school.

Rete degli Studenti Medi also called for additional funding for school buildings: “We want safe and functional schools, not jails or ghettos.” Italian educational infrastructure has quite literally been left to crumble since many of the buildings were first built: the majority of school buildings were either erected during the early 1900s or in the 1960s to cope with the influx of new pupils born during the baby boom. Few have been structurally maintained, reinforced or repaired since construction, while many are woefully ill-equipped to cope with the demands of modern pupils.

“Most of the infrastructure is totally inadequate from a didactic point of view,” Gavosto said.

The age of buildings can also pose a serious safety risk: according to the Italian National Institute of Statistics, more than 156 school ceilings have collapsed in the past five years, with one student, 17-year-old Vito Scafidi, being killed in 2008.

Although infrastructure would certainly benefit from a funding boost, throwing money at the entire sector isn’t the answer. Rather, what’s needed is a comprehensive redistribution of existing funds, which are currently being funnelled to all the wrong places. According to Gavosto, more than 80 percent of the education budget is spent on teachers’ salaries, leaving little money for anything else. Italy has one of the highest teacher-pupil ratios in the EU, with an average of around 10 pupils per teacher across the country – and that’s just in state schools. Unfortunately, they’re not always hired for the right reasons, either. » EuropeanCEO

| 83

C19MA_084_E01_80925.pdf

F i n a n ce

Government Spending

Italy's recently elected deputy prime ministers, Luigi Di Maio (L) and Matteo Salvini

despite these well-documented and enduring problems earned them a vitriolic response from the European Commission. The duo originally wanted to increase the deficit to 2.4 percent of GDP, flouting EU regulations, but Brussels refused to accept such terms, with the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, suggesting such a large deficit would mean “one euro less [spent] on roads, one euro less on education and one euro less on social justice”.

A 2.04 percent deficit was eventually agreed in December 2018 – a substantial increase on the 1.8 percent limit set by the previous government and one that is likely to prove just as troubling for the education sector.

Yet, while both protesting students and the European Commission have lambasted Salvini and Di Maio for the increased cuts, to attribute the blame solely to these two individuals is to disregard a significant element of the debate. Education has never been at the top of Italy’s priority list, on a political or social level – Italians simply do not valorise it in the same way other European citizens do. “[Education] is never a major topic during general elections or in party manifestos,” Gavosto said. “It’s always a side topic in the policy debate too, which is a pity.”

According to Gavosto, the rate of return in terms of wage growth on each additional year of education after high school is eight percent per annum: “Eight percent is a fantasLife lessons Salvini and Di Maio’s decision to direct funds tic investment, much better than you can get away from education in the 2019 budget from real estate or equity markets nowadays,”

“Schools are perceived by policymakers as a way to fight unemployment, and that has historically led to teachers being hired without having the right qualifications or the right motivations to do the job,” Gavosto said. It goes without saying that incorrectly trained educational staff cannot provide pupils with the best possible teaching; as a result, pupils often become disengaged, leave school and are later hired as teachers to bring down youth unemployment rates. It’s a vicious cycle.

The inefficient distribution of funds also leaves no budgetary room for investment in extracurricular activities. The majority of Italian schools – particularly those at primary level – are scraping by, providing basic education with little cultural enrichment.

Although sport, music and art are technically part of the mandatory curriculum, a lack of funding means they are only taught for a few hours per week. There’s certainly no scope for trips to local museums or galleries, meaning pupils are missing out on key learning opportunities.

Further, schools don’t provide the option to participate in sports teams. As such, children are forced to join private, fee-paying associations to practise sports. This effectively reserves extracurricular activities for an elite class of pupils whose parents have the time, money and inclination to fund them.

84 | EuropeanCEO

If education is not being prioritised by politicians, it follows that society will cease to value it in the same way too Gavosto said. However compelling the data, it seems societal attitudes do not match up.

According to 2017 statistics released by Eurostat, just 26.2 percent of Italians aged between 30 and 34 had completed a university degree, the second-lowest percentage of all EU countries. If education is not being prioritised by politicians, it follows that society will cease to value it in the same way too.

The devalorisation of education has trickle-down effects on other sectors as well.

“When people are [better] educated, they are [healthier], they eat better, they look after themselves more, so it will help in terms of health spending if people are educated,” Gavosto said. “The [better] educated you are, the better citizen you are.”

It’s clear that inadequate education spending furnishes a country with a wealth of short and long-term issues, from safety concerns related to crumbling school buildings to rising youth unemployment. And yet, the knock-on effects of not investing in Italy’s youth doesn’t seem to have figured in the government’s consciousness when devising the new budget.

Salvini and Di Maio have failed to realise that the increased welfare spending they are proposing wouldn’t be necessary if they put the onus on education now. With their current strategy, they are likely to find that today’s undereducated, underemployed youth will need even more welfare support when they reach retirement age. And when today’s students come knocking in five, 10 or even 20 years’ time, they will find the pot is empty. n

C18ON_001_Z08_66946.pdf

C19MA_086_D06_66363.pdf

CEOprofile Carlos Brito C E O | A nhe u se r - B u sch I nB e v

Raise a glass

Transforming from a regional Latin American brewer to a European giant with a global footprint, Anheuser-Busch InBev’s growing influence has revolutionised the international beer market. Today, even as the company lumbers under its own debts, the dreams of CEO Carlos Brito remain undimmed Anheuser-Busch InBev (AB InBev) was formed as the result of one major merger after another: in 1999, mid-sized Brazilian brewer Brahma acquired local rival Antarctica to form Companhia de Bebidas das Américas (AmBev). Then, in 2004, the company rebranded as InBev after it merged with the Belgian brewing giant Interbrew. Just four years later, InBev combined with US brewer and Budweiser-maker Anheuser-Busch in a $52bn (€45.3bn) deal – AB InBev, the world’s largest brewer, was born.

This did not signal the end of AB InBev’s mergers and acquisitions (M&As), though: in 2016, the Belgium-based powerhouse decided to gobble up SABMiller, the world’s second-largest brewer, in a €92bn deal that became known as ‘Megabrew’ by industry commentators.

Today, AB InBev owns seven of the 10 most valuable beer brands in the world. One man has been at the centre of this flurry of market activity: CEO Carlos Brito, who started

his career as an ambitious sales manager at he developed a knack for quickly trimming Brahma in the late 1980s. costs and boosting margins. Eddy Hargreaves, a consumer equities analyst at South-Africabased asset manager Investec, said Brito’s On the hop Brito found his way into the drinks industry success in taking a regional, Latin American through Jorge Paulo Lemann, a partner at brewer and expanding it across the globe was Brazilian investment bank Banco Garantia achieved with the help of “disciplined operaand the future founder of 3G Capital. At first, tional methods, such as the early adoption of Lemann’s scholarship programme simply zero-based budgeting to control costs tightly”.

At AB InBev, Brito has fuelled a culture helped Brito through his education at Stanford University. But after graduating with an MBA, of transparency, with executives sitting in Brito reunited with his benefactor at Brahma, central, open desks instead of in private offices. a brewer Lemann had just bought with two Some have likened the dynamic to that of a start-up. While Brito embodies this open partners for $50m (€43.6m).

At Brahma, Brito displayed his strong busi- management style with his choice of clothing ness acumen, boasting a keen eye for deals and a – his typical office attire comprises jeans and laser-like focus. Following the 1999 merger that a Budweiser-branded shirt – and his handscreated AmBev, Brito quickly ascended to the on approach, it would be wrong to suggest he top; soon after AmBev’s tie-up with Interbrew, doesn’t run a tight ship.

AB InBev employees are not valued on he was named as CEO of InBev at 45 years of age.

One of Brito’s most distinctive skills is seniority, but rather on the potential they offer cost cutting. Following a flurry of big deals, the company and their inherent traits, such as »

cV born: 1960, brazil

AB InBev |

education: MBA, Stanford University

in numbers

1989

2005

2008

2016

After graduating from Stanford University, Carlos Brito joined Rio-de-Janeiro-based brewer Brahma, kick-starting a career in the drinks industry that has spanned decades

Following AmBev’s merger with Interbrew, Brito was named CEO of the combined group, InBev. He was recognised for his ruthless cost-cutting and negotiation skills

Brito’s powers of persuasion came to the fore when InBev acquired brewing giant Anheuser-Busch – a deal that saw the group take control of a number of major US brands

Under Brito’s leadership, AB InBev bought the world’s second- founded largest brewer, SABMiller, for €92bn, creating a global powerhouse with operations in Revenue (2017) most major beer markets

86 | EuropeanCEO

2008

500

¤48.9bn

¤90.7bn

brands

Net financial debt (2017)

C19MA_087_D06_03571.pdf

C19MA_088_D06_86877.pdf

CEOprofile

curiosity and the ability to move out of one’s comfort zone. The high-pressure working environment sees young, ambitious staffers evaluated constantly; Brito makes it clear that anyone who does not meet his expectations will not remain in the company for long. In fact, according to a report by the Financial Times, outsiders have said AB InBev trainees are “brainwashed” by the company.

Devotion to the brand is non-negotiable.

Brito wants everyone in the company to be as dedicated as he is – he has admitted to having no hobbies outside of the business and his family, barring a daily 30-minute run on the treadmill. In a company press release around the time of the Megabrew deal, Brito said: “People thrive in a culture based on ownership, meritocracy and informality. It’s not just a job – it has to be a passion. That is a crucial mindset. It’s also one of our selection criteria. You could compare our employees with top athletes: the dream is big, talent is scarce, selection is strict [and] sacrifices are plentiful. But all of that ultimately makes the difference.”

An unquenchable thirst Despite his no-nonsense management style, Brito is not without charm. His warm personality has likely been an asset in his impressive track record for making deals. “Brito’s strong negotiation skills are often overlooked,” Hargreaves told European CEO. “But his ability over 88 | EuropeanCEO

the years to persuade diverse owners to sell to him has been truly extraordinary.”

Through these deals, Brito has transformed the beer industry from a fragmented and disjointed market into one of consolidation, dominated by a handful of owners.

According to Hargreaves, the scale of major M&A deals Brito has executed over the past 20 years is “unparalleled across the entire consumer staples industry”.

Even after the tie-up with Anheuser-Busch, Brito’s thirst for expansion went unquenched.

In 2011, the firm bought Chicago-based craft brewer Goose Island; a year later, the company took a majority stake in the Dominican Republic’s Cerveceria Nacional Dominicana for $1.2bn (€1.05bn). In 2013, AB InBev purchased Mexico’s Grupo Modelo for $20bn (€17.5bn).

Speaking to the Financial Times, an unnamed AB InBev advisor likened Brito and his team to sharks: “They can’t stop moving.

It’s just not in their nature. M&A is in their

AB InBev employees are not valued on seniority, but rather on the potential they offer the company and their inherent traits

blood.” But Megabrew was a turning point: since the announcement of the deal in 2015, AB InBev’s shares have halved from a peak of around €122.50. M&A has taken a backseat as executives focus on stabilising the business, with the $100bn-plus (€87.4bn) debt that AB InBev racked up in order to buy SABMiller starting to weigh heavily on investors’ minds.

While the deal gave AB InBev a truly global footprint with operations in nearly every important beer market, the anticipated increase in volume that was to result from SAB’s presence in the high-growth Africa region took longer to materialise than expected. At the same time, macroeconomic weaknesses in emerging markets, where 72 percent of AB InBev’s volume is sold, has heaped pressure on the company.

Trouble brewing Last year alone, AB InBev’s share price slid almost 40 percent as it worked to put out fires on numerous fronts. The company has seen increased competition in a variety of markets, including China and South Africa. But in Hargreaves’ view, competition with likeminded rivals is “healthy” and is nothing new for Brito: “AB InBev has grown for many years in several countries where the beer market is extremely competitive.”

What is more worrying is the rising popularity of craft beer, wine and spirits: in the US market, which accounts for approximately 30 percent of AB InBev’s profits, consumer tastes

C19MA_089_D06_61390.pdf

Brito has transformed the beer industry from a fragmented and disjointed market into one of consolidation, dominated by a handful of owners

€3.6bn+ Estimated value of the North American marijuana edibles market by 2022

have been moving from beer to wine and spirits since around 2000. In the first nine months of 2018, the company’s North American beer volume fell by three percent. Further, younger, health-conscious generations are slowly turning away from alcohol altogether.

In December 2018, the Beer Purchasers’ Index – an informal metric that gives distributors an indication of purchasing activity – dropped to a measure of 47 from 55 in the previous year. At a time when more consumers are interested in craft beers, AB InBev’s portfolio skews to the weakest sub-segment in the US market: mainstream, light lager.

According to Hargreaves, niche competitors like craft brewers present an “ongoing challenge” for AB InBev. Competition could also emerge from a new area: marijuana. Some market commentators have suggested falling beer sales could be attributed to the US’ growing cannabis market. Although the number of states to have legalised recreational cannabis remains low, the industry is expected to boom in the coming years, with a 2017 report by Arcview Market Research suggesting the North American market could grow at a compound annual rate of nearly 25 percent between 2017 and 2025.

Speaking to CNBC earlier this year, Brito said his company did not have any data to suggest the growing cannabis market would hurt beer sales. In December 2018, however, AB InBev proved it was looking to get into the

market itself, forging a $100m (€87.4m) joint venture with cannabis firm Tilray to study cannabis-based beverages. The study will assess the viability of using both THC, the psychoactive chemical compound of marijuana, and CBD, the non-active chemical, in non-alcoholic drinks. According to Arcview, the North American edibles market – including drinks infused with cannabis – is expected to surpass $4.1bn (€3.6bn) by 2022.

The next round These competitive pressures have only been exacerbated by AB InBev’s staggering debt pile.

After its credit rating was cut by Moody’s in late 2018, the company began to take measures to rebalance its remaining debt – first by slashing its dividend in half, and then by refinancing $16.5bn (€14.4bn) of its debt in January 2019.

Not everyone is worried about the global brewer, however. Following these moves, RBC Capital Markets upgraded AB InBev’s stock.

Speaking of the change, RBC analyst James Edwardes Jones said: “The dangers of AB InBev’s indebtedness have been overstated.”

Jones also revealed he had hiked his 2019 and 2020 earnings-per-share estimates for the company, claiming AB InBev’s level of debt is “comfortably under control”.

To reduce its debt pile further, AB InBev is reportedly considering listing its Asian operations. Hargreaves said this option was likely just one of many initiatives the man-

agement team was considering, which is “consistent with its track record of creative thinking around the structure of its business”.

Were such a move to materialise, Hargreaves believes it would be significant, placing a clear value on the company’s Asian operations and demonstrating the current undervaluation of the remaining business.

The Asian beer market is one of the most exciting for brewers at the moment, with volumes growing rapidly in countries such as China, India and Vietnam. Crucially, listing its Asian unit would afford AB InBev more financial flexibility, allowing it to line up new M&A deals – both in Asia and elsewhere.

In an interview with the Financial Times, Brito himself admitted that AB InBev had fallen on hard times: “There has been a change in mood among investors on emerging markets and companies that have high debt.” But he remained optimistic about the company’s future: “We continue to be very confident in our footprint, brands and our people.”

Whatever happens moving forward, Hargreaves believes Brito remains the CEO for whom he has developed the “strongest respect and greatest admiration” among all of the consumer companies he has studied over the past 25 years. “Not only are his achievements immense, but he has retained the common touch, able and willing to speak to everyone from [the] shop floor [upwards],” Hargreaves said.

Much of AB InBev’s success can be attributed to Brito and the path he has forged for the brewing giant – one that applauds curiosity and risk-taking. In place of a mission statement or a set of values, Brito often speaks about the “dream” championed by AB InBev: bringing people together for a better world. Brito’s own vision has seen AB InBev grow into the world’s biggest brewer, selling one in every four beers globally. While there are almost certainly going to be tough times ahead for the company, Brito is unlikely to see his dream falter, or his glass become half empty. n EuropeanCEO

| 89

W o r l d V i ew

Property

Grand designs

The Turks and Caicos Islands offers a glimpse into paradise on Earth. With a stunning collection of unique villas to boot, vacationers find themselves returning year after year, according to Ronald A Shaw, Founder and CEO of RA Shaw Architecture With the advent of ‘do-it-yourself’ rental agencies, it has become incredibly easy to target online shoppers with informative property advertisements. Not too long ago, vacations were organised through local travel agents and related resort brochures, with little or no communication between the client and the end provider. In other words, sourcing a private villa without specialist knowledge of the destination was near impossible.

Fortunately, communications are now direct, seamless and effective. Internet rental agencies can put clients in touch with owners and agents in real time, removing the need for middlemen. Further, all details about a villa – including rates and availability – are now right at shoppers’ fingertips, allowing travellers to make informed renting decisions.

European CEO spoke to Ronald A Shaw, the founder and CEO of RA Shaw Architecture, to discover how this shift has impacted the rental market in the Turks and Caicos Islands.

More generally, the archipelago offers a broad and interesting variety of activities. For example, we have some of the greatest diving spots on Earth, as well as extremely popular deep-sea fishing charters. The islands also have a whole range of great restaurants available, with phenomenal tropical decor. All this, together with perfect weather, means once you’ve visited the Turks and Caicos Islands, you’ll be sure to return.

How has this popularity affected the local property market?

Due to the islands’ reputation, property management firms have been cropping up to fill the growing demand for property maintenance.

Fortunately, agencies have proven to be proficient in rental enquiries, bookings, airport pick-ups, concierge services, housekeeping and the general maintenance of villa properties.

This means investors can be as involved as they want to be – even if that means not being involved at all. What’s more, there are no property taxes in the Turks and Caicos What sets the Turks and Caicos Islands apart from other destinations? Islands, so holding costs and annual expenses The Turks and Caicos Islands is very popu- can be kept to a minimum. lar with travellers seeking a warm climate, white sandy beaches, turquoise waters, modern What role does architecture play conveniences and fantastic restaurants. The in the rental market? archipelago is particularly attractive to the US Those surfing the net for vacation rentals will market, as it is an English-speaking British discover myriad properties across many differOverseas Territory that uses the US dollar ent markets. As such, it’s important to have a and boasts one of the lowest crime rates in unique and interesting architectural offering the Caribbean. What’s more, Miami is just a that grabs the attention and interest of procouple of hours away by aeroplane. spective renters. In spite of a saturated market,

we find customers return to our website time and again for our beautifully designed villas.

Beyond aesthetics, the architectural form and function of a villa can have a significant impact on the vacation experience.

One of our most popular short-term rental projects, Crossing Palms Villa, has attracted the continued interest of nine different families, who continue to return to the property. Repeat renters are the key to success in this business; unforgettable architecture helps to bring them back.

Can you tell us more about your firm’s designs?

At RA Shaw Architecture, we pride ourselves on a team-focused approach to design that gives due consideration to topography, sunlight, wind direction, privacy and security. As previously mentioned, the Turks and Caicos Islands has a near-perfect climate, with a consistent easterly breeze from the Atlantic moderating the weather. This allows us to design our properties with an emphasis on

90 | EuropeanCEO

C19MA_C07.indd 90

12/02/2019 12:39

C19MA_091_C07_20981.pdf

W o r l d V i ew

Property

pool, with water cascading down multiple levels of the house. It’s an incredible assembly of modern design mixed with Caribbean heritage architecture. That’s what RA Shaw Architecture is all about.

exterior living space – something few other destinations can offer throughout the year.

Ultimately, however, our approach to architecture is to design what the client wants: after all, it’s their home, not ours. As a result, you will see a wide variety of styles in our portfolio.

Having said that, the ‘modern’ look, with a focus on geometry and clean edges, seems to be one of the most popular styles at present.

What services does RA Shaw Architecture offer?

We manage projects from concept through to occupancy, taking pride in our outside-the-box approach to architecture and interior design.

But our greatest accomplishments are achieved when clients employ our full suite of services, from architectural design to the selection of furniture, art, linens, small appliances, dishes and cutlery. This ensures continuity of vision; the result is a very consistent and cohesive design.

The Mandalay Villa on Long Bay Beach is a good example. This award-winning design is integrated with the surrounding

Repeat renters are the key to success in this business; unforgettable architecture helps to bring them back

Can you tell us about your client base?

The majority of our clients are high-net-worth individuals from North America and Europe.

With the popularity of villa vacations on the rise, many are interested in building a dream vacation home that pays for itself through short-term rentals.

Investing in a villa in a popular destination can result in significant income and capital gains, regardless of the scale of the investment. We have designed and built villas with valuations from $500,000 (€437,260) to $32m (€28m). The majority, however, fall between $2m (€1.8m) and $3m (€2.6m) in terms of construction costs.

Generally, our clients are individuals who want a property for themselves, not corporations seeking to enhance their revenues. Our properties are popular among retirees, but most clients have families with children of various ages. The Turks and Caicos Islands is an intriguing and fun place for both the young and the young at heart.

What does the future look like for RA Shaw Architecture?

We are very well known in the Caribbean for our creative designs, but we also want to expand into new markets. As such, we have recently started operating in Southern Ontario, Canada. We are confident of expanding into further markets in the future, too.

This is a very exciting juncture for RA Shaw Architecture and we look forward to the new challenges presented by the contrasting design elements required in northern climates. We will continue to push the envelope to deliver equally creative designs to those we have crafted in the Caribbean. n EuropeanCEO

| 91

C19MA_092_A05_11357.pdf

W o r l d V i ew

Property

Homes away from home

The hospitality sector is due a shake-up.

While genuine passion for the business may seem like a subtle distinction among industry players, it can make a world of difference to discerning guests, according to Lauren Berger, Founder and CEO of the Lauren Berger Collection Hospitality means different things to different people. For some individuals in the industry, it’s a simple box-ticking exercise: if you offer warm greetings, a clean space and good food, customers will walk away happy. While that is true to some extent, it’s not the whole story.

To understand the intentions of those who offer more, it’s useful to revert back to xenia, the ancient Greek concept of hospitality. The term, which translates as ‘guest-friendship’, refers to the courtesy and generosity given to those who are far away from home. It’s this idea of treating a guest as a friend of the family that shifts the concept of hospitality from a provider-consumer transaction to something more encompassing and genuine.

The latter approach can be said of Lauren Berger, the founder and CEO of the Lauren Berger Collection, a company that organises luxury accommodation, as well as yachts, exotic cars and once-in-a-lifetime experiences, for discerning guests.

Founded in 1991, the group now offers some 450 properties around the globe, from 92 | EuropeanCEO

charming chalets in France to sprawling villas in the Maldives. Its impressive yacht collection, meanwhile, comprises 10 models, including the luxurious Leander and the 73.6m-long Pegaso, which boasts spacious living quarters that are the envy of many a penthouse suite.

With such a desirable array of properties and yachts to choose from, it would be easy for Berger to rest on her laurels and let the settings she offers do the talking, but that’s simply not the case. With the concept of xenia at the heart of her business, Berger offers an entirely new class of hospitality. European CEO spoke to Berger to find out more about her unique approach to the industry.

What inspired you to create the Lauren Berger Collection?

Love, is the answer. It started when I met my husband, Dr Sidney Berger, who is one of the top dental implant surgeons in the world.

He truly loves his patients and takes care of them with every fibre in his body. Many of them are privileged, high-profile individu-

als who travel to New York from around the world to see him.

My childhood played an important role, too. I come from a big, loving family with 11 brothers and sisters. I grew up in New York watching my Greek mother passionately take care of her family and friends, forever making sure everything was perfect – she never settled for less. It was a true privilege watching my mother cater to everyone’s needs, so it became natural for me to enjoy taking care of my husband’s patients with the same passion.

How did the company start out?

After we got married, my husband thought it would be a good idea to buy a home for his patients to stay in while they recuperated from surgery. But it turned into so much more: when Sidney’s patients returned to New York for their continued dental care, they would call on me for their private luxury accommodation. They came to us as patients, but left as family. And so, the concept of the Lauren Berger Collection was born.

C19MA_093_A05_65353.pdf

W o r l d V i ew

Property

The Lauren Berger Collection:

1991 Founded

450+ Properties

10

Yacht models

An underwater property managed by the Lauren Berger Collection. Image © Justin Nicholas

Hospitality means never expecting anything in return and always being there for your guests, whether you get paid or not

The company grew quickly through word of mouth, as Sidney’s patients referred their family, friends and business associates.

The homes soon grew into a portfolio of 450 hand-selected properties.

What makes the Lauren Berger Collection different from other hospitality groups?

I have learned everything from my loving parents – my father never took a day off work, while my mother would never stop, even for a breath. Love comes naturally when you grow up with loving parents and then marry a man born to love the world.

I share that love with my guests, many of whom have told me they return because it feels like they are coming home when they stay with us. It means the world to me to hear my guests say that.

Dr Sidney and Lauren Berger

always being there for your guests, whether you get paid or not.

Luxury can be purchased, but genuine hospitality can only be given. Relationships with my guests are at the heart of everything I do, and their continued trust and loyalty has made my life complete.

What does creating once-in-a-lifetime experiences for your guests involve?

Extraordinary experiences come from the people you meet, not just the places you’ve been to.

It’s these connections that can transform your life – nothing could be worth more. But it also means you have to pay close attention to every detail and leave nothing to chance. No request is too great or too daunting, from planning a formal dinner with Minton china, Baccarat crystal and show-stopping views, to exclusive box tickets for some of the greatest operas at the Metropolitan Opera House. If it’s legal, it’s done.

Luxury is often defined by the smaller details, which I embrace as a perfectionist. I truly enjoy creating exclusive experiences that are as unique and extraordinary as my guests.

What does the future hold for the Lauren Berger Collection? Do you have any plans to expand your current offering?

My ultimate dream would be to have a home big enough for all my guests to stay in at once.

Until then, I plan to never give up and to continue searching for properties and experiences that will make my guests feel treasured. I do all I can to make sure the valuable time they spend with family and friends is nothing short of a lifetime memory.

My guests have high standards and expect only the best, so I am very careful to ensure that no matter where I send them, the property owner provides the extreme level of hospitality they have become accustomed to with the Lauren Berger Collection.

What advice do you have for entrepreneurs seeking to enter the hospitality industry?

Hospitality, as with any business, should always focus on love – there’s no greater or more valuable motivating force. Of course, experience always matters, too. It’s the foundation for providing the most well-informed and discerning service. Every person appreciates being taken care of like family. When you truly love people, you can’t go wrong in hospitality. If I had only one day to live, I would be doing the same – taking care. n

What does hospitality mean to you?

True hospitality is when you give your guests the best you’ve got. This means F or F ur t he r Inf or m at ion never expecting anything in return and www.laurenbergercollection.com

EuropeanCEO

| 93

C19MA_094_B05_99181.pdf

W o r l d V i ew

Property

Letting nature in

From its beautiful, nature-inspired properties to its worldclass athletics facilities, Quinta do Lago is a luxury resort in Portugal that promotes wellness and transforms lives, writes the company’s CEO, Sean Moriarty As a resort community with a 45-year history to uphold, Quinta do Lago remains engaged with the latest market trends, while also staying streets ahead of the competition. Recognising what the next generation of buyers is looking for is fundamental to our continued development and, as such, we are always trying to find out what works best for our customers.

From initial contact right through to design and purchase, Quinta do Lago strives to ensure all experiences are seamless and speak to the calibre of its offering.

From a sales perspective, this means bringing together state-of-the-art technologies, such as virtual reality, while maintaining a human touch. Our real estate team works with passion and drive, leveraging Quinta do Lago’s experience within the industry to provide the highest level of customer service. Put simply, we believe you have to live it to love it.

A natural choice Quinta do Lago is surrounded by the Ria Formosa Natural Park, impeccably maintained golf courses and stretches of sandy Atlantic beaches. With such a majestic landscape, we design our properties with nature in mind. By using floor-to-ceiling windows, making pool areas central features and using materials that enable sunlight to become a natural function of the home, we immerse our properties in the area’s natural beauty.

One of our most sought-after real estate opportunities is Reserva, a collection of 26 94 | EuropeanCEO

three and four-bedroom homes that overlook the lake and ocean. Spanning some 230sq m each, the properties feature tropical landscaping and plunge pools, and provide membership to the residents-only Reserva club, which boasts a pool, gym, members’ lounge, children’s play area and private tennis courts. Priced from €2m and due for completion in July 2019, 19 of the 26 apartments have already been sold.

Aside from the complex’s unique location, Reserva’s 24-hour concierge service and lockand-leave option make it a compelling offering to those who value their time.

What’s more, if a buyer loves the location but would prefer to build a home from the ground up, we offer a plot just minutes from the beach with both golf and lake views – a stunning location in which to craft the dream home.

Another opportunity available is San Lorenzo North, a neighbourhood of 26 sites, located in a peaceful enclave surrounded by a lake and pine groves. With prices starting from €2.8m, owners have free rein over the design of their properties. For those with less time on their hands, our expert design and project management teams are on hand to provide assistance.

Top performer Wellness has long been prevalent in the hospitality sector. The fitness industry in the UK alone is valued at close to £5bn (€5.7bn), while according to Deloitte, the European fitness market is worth a staggering €26.6bn. Fortunately, we know how to speak the language of our health-conscious guests, most of whom are part of young families. We also recognise the need to offer something above and beyond that which is found in other luxury resort communities.

As such, we have recently completed the construction of a 45,000sq ft performancetraining facility, the Campus, in which bn people of all ages and abilities can practise Value of the the sport of their European choice. The Campus fitness market offers something for everyone – be it tennis, cycling tours of the coast, swimming, yoga, pilates or year-round boot camps.

Children, meanwhile, can enjoy our holiday camps, which offer the chance to train with inspirational sporting personalities such as Judy Murray and Rio Ferdinand.

Quinta do Lago offers guests a seamless transition from their daily lifestyles to a beautiful setting surrounded by nature. We hope the teams and athletes we have attracted to the Campus, together with the undeterred appetite for our property and services, is testament to our desire to keep improving. n

€26.6

C18JA_001_Z06_88639.pdf

MACROECONOMIC SOUNDNESS IN LAST 20 YEARS INVESTMENT OPPORTUNITIES IN ENERGY, TRANSPORT AND SANITATION FAIR AND PREDICTABLE LEGAL FRAMEWORK

SEIZE THE OPPORTUNITY NOW INVEST IN A RELIABLE COUNTRY,

INVEST IN

PERU

www.proinversion.gob.pe

C19MA_096_D02_30312.pdf

Taking back

control The fortunes of tech companies were built on the abundance of free personal data provided by their users.

Today, as allegations of misuse stack up, consumers are beginning to ask whether they can reclaim ownership of their data, writes Courtney Goldsmith Âť

xx | EuropeanCEO

C19MA_097_D02_25970.pdf

special report

Xxx

EuropeanCEO

| xx

C19MA_098_D02_06474.pdf

Data ownership

ately, it can feel as if you’re being followed on the internet. The products we search for on e-commerce websites shadow us on social media platforms in the form of advertisements, while the news websites we frequent seem to always appear at the top of our searches.

These ‘benefits’ are what consumers have received in exchange for the volumes of personal data they have gifted big tech firms over the years. In other words, while we have received personalised suggestions that make it easier to find products we enjoy, companies like Facebook and Google have multiplied their income many times over.

Until last year, many of us gave little thought as to whom had access to our personal data and what they were doing with it. Several high-profile data breaches and allegations of data misuse later, however, and the issue has been cast well and truly into the international spotlight.

The concept of data ownership – previously unheard of among the masses – is now gaining steam. In fact, even musician Will.i.am has penned an article on the subject, arguing in The Economist that data should be regarded as a human right – one that people are compensated for.

Privacy paradox Experts (and rap stars) have argued that data should be treated like property – something people can rent out or sell for fair compensation. As one example goes, you should own your data like you own a vehicle: if someone took your car and rented it out for others’ benefit, you would care. In reality, however, when our personal data is gathered, stolen or sold, we appear far less worried than we would about any physical object.

The idea that consumers don’t own or control their personal data has long been embedded in internet culture; consumers have grown accustomed to the idea their data is not their own. This changed in 2018, however, when it was revealed that the personal data of more than 50 million Facebook users had been improperly acquired by politicalconsulting firm Cambridge Analytica ahead 98 | EuropeanCEO

of the 2016 US presidential election. The New York Times later reported that Facebook also held data-sharing deals with firms such as Netflix and Spotify, giving said companies access to users’ private messages.

Although Facebook users expressed outrage at the lack of care demonstrated by the social media giant, many remained complacent about the protection of their data. Daryl Crocket, CEO of data consulting firm ValidDatum, told European CEO that consumers are careless due to a lack of understanding, which is fuelled by the complexity of the subject and the absence of clear, concrete solutions: “Most media coverage fails to help the public connect the dots to what a breach really means to them personally. After a while, people become

The idea that consumers don’t own or control their personal data has long been embedded in internet culture

desensitised to the messages and accept the condition of ‘data insecurity’.”

This plays into a phenomenon called the ‘privacy paradox’ – the idea that while consumers claim to be concerned about their online privacy, in reality they do little to protect their personal data. According to Vince Mitchell, a professor of marketing at the University of Sydney Business School, this suggests consumers lack the skills and knowledge – rather than the motivation – to better protect their data.

“With so many ways privacy can be protected… [across] each different app or website, it’s not possible for [a] consumer to know how to navigate even frequently used websites like Facebook, let alone the millions of apps available,” Mitchell said.

Data is intangible and hard to visualise; it is also widely dispersed and largely inaccessible. These qualities make it difficult for consumers to attribute any value to the personal information they release into cyberspace.

According to a survey of nearly 300 Londonbased business students included in Mitchell’s research, 96 percent of participants failed to understand the scope of the information

C19MA_099_D02_19636.pdf

Data ownership

Proportion of annual revenue spent on labour:

5-15% Big tech firms

80% Walmart

Facebook has faced much public criticism since the Cambridge Analytica data scandal surfaced in 2018

While consumers claim to be concerned about their online privacy, in reality they do little to protect their personal data

alise. “Raising awareness is only helpful if you can then do something about the thing you’ve been made aware of,” Mitchell told European CEO. “This is too complex for consumers to do themselves… [so] regulators need to take more responsibility on consumers’ behalf.”

they were giving away when registering to use apps or websites. Another study of MIT students, published by the National Bureau of Economic Research, found that 98 percent would give away their friends’ email addresses in exchange for free pizza.

In an article published by the Conversation, Mitchell, along with two co-authors, argued that the reality of what consumers were giving away when they agreed to share their data could be made clearer with added specificity: “Imagine if an app asked you for your contacts, including your grandmother’s phone number and your daughter’s photos. Would you be more likely to say no?” This thought experiment helps ground vague data requests in reality.

But while recent data breaches have lifted the lid on the exploitation of personal data, a solution to the problem has failed to materi-

The value of data In the book Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Eric Posner and E Glen Weyl argued that titans of the digital economy – or ‘siren servers’, as they referred to them – have exploited the lack of public understanding regarding artificial intelligence (AI) and machine learning to freely collect the data consumers scatter around the internet.

Personal data is a vital component of the success tech and social media giants have experienced in recent years – as such, it’s extremely valuable. This is because it allows companies to squeeze more money out of consumers through targeted advertisements and customisations that keep users engaged with their platform. AI algorithms, which can be programmed to identify and predict

exactly what consumers want, are boosting the value of data even further.

According to Mitchell, the personal data industry generates around $200bn (€175.2bn) in revenue each year. But despite the fact companies are constantly buying, selling and trading data among themselves in a bid to increase profits, the consumers who generate it are not compensated. “This is the source of the record profits that make [siren servers] the most valuable companies in the world,” Posner and Weyl wrote.

The pair went on to argue that data creation is a form of labour, one that has been systematically undervalued in the same way ‘women’s work’ has been unfairly compensated throughout history: “Most people do not realise the extent to which their labour – as data producers – powers the digital economy.”

To demonstrate this point, Posner and Weyl compared the pay structures of some of the world’s largest technology companies with retailer Walmart. While the big tech firms spend between five and 15 percent of their annual revenue on labour, Walmart spends as much as 80 percent. This disparity is due to the fact the former receive so much free data from consumers and do not, therefore, require large workforces to generate income. “People’s role as data producers is not fairly used or properly compensated,” Posner and Weyl wrote.

“This means that the digital economy is far behind where it should be.”

However, there are some encouraging signs of change, and Europe is at the forefront.

The EU’s General Data Protection Regulation (GDPR), which launched in May 2018, ensures businesses are more transparent about the personal data they hold on customers, as well as what they do with it. Additionally, the EU’s proposed ePrivacy Regulation, which would complement GDPR, aims to address the confidentiality of electronic communications and the tracking of internet users.

According to Crocket, the new rules will also benefit businesses: GDPR and the ePrivacy Regulation will improve visibility, providing companies with the necessary education and guidance on the fundamentals of data » EuropeanCEO

| 99

C19MA_100_D02_79790.pdf

DATA OWNERSHIP

With a transparent data ownership framework, consumers could choose what they sell and to whom ownership and privacy. This is helpful, as businesses need motivation to change. “Without standards and regulations, businesses typically pursue only internally beneficial goals and rarely self-govern without profit [as a] motive or external pressure,” Crocket said.

But while these are steps in the right direction, some experts argue consumers will remain passive, happily ticking consent boxes to access their favourite websites. Instead, it has been suggested that the only way to get the public to pay attention is to give consumers ownership of their personal data and transform an idle form of entertainment into an economic asset.

The exact amount of compensation consumers would receive for their data is not yet known and would likely vary depending on its quality. In the first few years, estimates range between a couple of hundred euros per year and a few thousand. And as Posner and Weyl point out, the importance of data labour as a source of income will be determined by the significance and scope of AI in the future.

Creating a framework How such a system of data ownership and compensation would work is a question that has not yet been definitively answered. According to Mitchell, the fact that companies are paying each other for personal data means frameworks for consumer compensation should already exist. New methods could also be developed through blockchain technology.

Theoretically, such structures would empower customers to determine which types of data they wanted to give up, protecting against blanket data collection in the process. In other words, while a consumer may be happy to sell their browsing history to a company wanting to target individuals in the same demographic, they may be less willing to provide access to their private messages in exchange for personalised music recommendations. With a transparent framework, consumers could choose what they sell and to whom.

As the big tech/Walmart pay comparison shows, however, treating data as labour could 100 | EUROPEANCEO

Proposed ePrivacy Regulation New players Under the regulation, the privacy rules proffered by the GDPR will be applied to new players, such as WhatsApp, Facebook Messenger and Skype.

This will ensure these popular services guarantee the same level of confidentiality as traditional telecoms operators.

Communications content and metadata The new regulation will guarantee the privacy of communications content and metadata, including call times and locations. Metadata will also be anonymised or deleted if users did not give their consent, unless said data is needed for billing.

New business opportunities Once consent is given, traditional telecoms operators will have more opportunities to provide additional services. They could, for example, produce heat maps of customers, helping public authorities and transport companies in the development of infrastructure projects.

Simpler rules on cookies The cookie provision, which has resulted in an overload of consent requests for internet users, will be streamlined. The new rule will be more user-friendly as browser settings will provide an easy way to accept or refuse tracking cookies and other identifiers.

Protection against spam Unsolicited electronic communications via emails, SMS and automated calling machines will be banned. Depending on national laws, people will either be protected by default or be able to place themselves on a ‘do not call’ list to determine which marketing phone calls they accept.

Source: European Commission

€175.2bn Annual revenue of the personal data industry

C19MA_101_D02_64351.pdf

Data ownership

Telefónica CEO José María Álvarez-Pallete López unveils Aura, a digital assistant that provides customers with a personal data space

prove a major setback to some of the largest and most influential companies on the planet. What’s more, data ownership relies on transparency, and some experts believe there is little chance of businesses like Facebook or Google ever agreeing to an arrangement wherein they have to pay consumers to share user data with advertisers.

Eric Tjong Tjin Tai, a professor at Tilburg Law School and an expert in IT law, told technology-focused blog Engadget that it was already too late to take back dominion of our data: “Once you provide [companies] access, you’ve lost control.” Put simply, as consumers do not have a full log of everything companies already know about them, there can be no conversation about ownership. The only option would be to fully outlaw the way Facebook collects data, which is something Tjong Tjin Tai doesn’t believe will ever happen: “In the end, the only thing [that] would work is regulation.

For physical stuff, you can do without regulation, because you can just chase [someone] off your property and protect your things by putting [them] in [a] vault and so on. Data is intangible in that respect.”

Posner and Weyl agreed that pressure from regulators would be needed to catalyse change, as it is “plausible that the structure of the industry makes it unlikely that any private entity will voluntarily… shift to a more productive model”. Other issues with a framework of data ownership include the

potential for individuals to take advantage of the arrangement. Microsoft, for example, once experimented with paying its users for data, but bots – offering no usable information – began to exploit the system.

Data brokers Even with a solid framework, it will be challenging to get consumers – who typically do not even read the terms of service for online agreements – to comprehend the nuances and legal complexities of data ownership.

This is where digital advisors could come in. “In any complex consumer purchase, the way around [misunderstandings] is usually to provide an intermediary who helps consumers navigate [the problem] and acts on their behalf,” Mitchell explained.

Companies such as CitizenMe, people. io and Datacoup allow consumers to store and control all of their personal data in one app. These start-ups remain small and largely unknown to consumers, but they present a significant step towards data ownership as a viable possibility.

Any tech firm that relies on free access to data as a cornerstone of its business model will inevitably take a financial hit if it is forced to pay consumers for the privilege

“[By] connecting consumers to the potential buyers of their data, these types of applications are solving a large part of the problem,” Crocket said. “Consumers input their data (or allow their data to be collected) on dozens of sites per week, so being able to manage those ‘data for sale’ relationships in one application is a timesaver.”

Posner and Weyl believe an intelligent digital advisor could also offer the added benefit of suggesting more lucrative data opportunities. Since the concept is still so new, only time will tell whether these apps will be successful in the long term. Mitchell warned that these companies, while an excellent addition to helping solve the privacy problem, must work within a regulatory framework such as GDPR to avoid becoming part of the problem.

Elsewhere, some companies are working to solve the issues presented by data ownership directly for their customers. José María Álvarez-Pallete López, CEO of Spanish telecoms giant Telefónica, one of the largest mobile network providers in the world, believes consumers should have control of their own data, including knowing how it is used and whether it can be moved with them if they change service providers.

Telefónica has already handed over some data control to its customers through a platform called Aura, which was launched in 2018.

While Aura is a digital assistant, it provides customers with a ‘personal data space’ that keeps a log of all interactions with the company. Eventually, Aura will give customers an overview of all of the data they generate – such as location and payment history – and control over how the data is used.

Companies will certainly face a number of risks if the ownership of data is passed on to consumers. Any tech firm that relies on free access to data as a cornerstone of its business model, for example, will inevitably take a financial hit if it is forced to pay consumers for the privilege. What’s more, Posner and Weyl believe if consumers become aware of how much data businesses have already collected, the “creepiness” factor could deter them from engaging in online interactions altogether.

It is difficult to predict just how much the online business landscape would be impacted if consumers took back control of their data.

It is becoming increasingly clear, though, that the true value of personal data should lie with the consumers who created it. n EuropeanCEO

| 101

C19MA_102_A03_82577.pdf

W o r l d V i ew

Experiential Events

The rewards of travel Employee incentives have traditionally centred on salary increases and company cars. Today, however, businesses are increasingly turning to personalised, experiential rewards to boost productivity and employee engagement, writes Holly Mills, Head of Incentives at Penguins Rewarding and recognising employees for their efforts has long been a strategy utilised by successful leaders. Traditionally, these rewards programmes – often called ‘employee incentives’ – have been aimed at sales teams or departments with clear, quantifiable targets. Such incentives are put in place to motivate teams to reach, and hopefully exceed, their objectives.

Mechanisms that measure success serve to highlight the top performers within particular teams and provide a shining example for other employees. This simple yet age-old process is still adopted by many organisations due to its effectiveness in delivering tangible results, such as increased sales.

In recent years, however, there has been a noticeable shift in how organisations deploy 102 | EuropeanCEO

their rewards programmes. Having recognised that similar benefits can be replicated across the workforce, more leaders than ever are offering employee incentives to those outside the sales department. At Penguins, we help businesses deliver rewards programmes of genuine value.

Inside and out Increased profits resulting from improved sales figures is not the only hard return for businesses employing rewards programmes.

A further benefit companies would do well to remember is the impact incentives can have on employee retention, which helps reduce recruitment and training costs. There are also softer returns, including improvements to talent attraction, employee engagement,

team morale, corporate culture and employee loyalty. The recognition of these returns has caused a shift in the types of rewards offered.

In HR terms, there are two clear types of reward: intrinsic and extrinsic. Intrinsic rewards are the internal motivators – they are not usually tangible and can come in the form of job satisfaction, role autonomy or praise from managers and colleagues. Extrinsic rewards, meanwhile, are external motivators that usually come in the form of a physical benefit, such as a pay rise or bonus, or as an additional company comfort, such as a car, laptop or health insurance policy.

Historically, rewards have predominantly focused on extrinsic offerings, steered by employee demand. In various organisations,

C19MA_103_A03_41136.pdf

W o r l d V i ew

Experiential Events

for example, eye-watering bonuses and flashy company cars have driven sales teams to reach higher targets. However, as the perception of rewards within organisations has changed and business leaders have opened the schemes up to all, there has been a distinct transition to a more holistic offering, one that encompasses both intrinsic and extrinsic rewards.

Employee engagement Businesses have come to understand the importance of social rewards and are taking measures to improve the wellbeing of their people and create healthy, more desirable working environments. One of the ways of achieving this is through effective rewards strategies: according to Deloitte’s 2018 Global Human Capital Trends report, 77.4 percent of respondents ranked ‘new rewards’ as being important or very important to their wellbeing.

Nevertheless, sometimes companies require help delivering the right set of rewards.

Many are struggling to move their incentives programmes from a standardised offering to a more personalised one. As a result, just three percent of employees described their company’s current schemes as being very effective at motivating talent.

As one of the leading events agencies and incentive travel firms, Penguins has noticed an increased emphasis on rewards and recognition. Perhaps more importantly, though, we have also witnessed a change in focus, with businesses assigning greater importance to the overall goal of employee engagement.

Having helped businesses effectively communicate key messages to live audiences for the past 30 years, we have recognised a growing demand from corporate clients to build more positive relationships with their people, as well as a greater appetite from employees to be a part of something bigger, rather than simply being another cog in the wheel. Correspondingly, Penguins has seen a significant increase in demand for its incentive travel services – almost 50 percent year on year, in fact.

More leaders than ever are offering employee incentives to those outside the sales department

Incentives programmes

77.4%

of employees ranked new rewards as being important or very important to their wellbeing

3%

of employees described their company’s current A journey of discovery Incentive travel is a method of reward that schemes as being encompasses both intrinsic and extrinsic very effective at values. Like any other method of reward, it motivating talent can be used to motivate employees to achieve Source: Global Human their targeted goals. In particular, Penguins Capital Trends 2018 champions the power of group travel. In this

format, the successful employees who earn a place on the trip (or all employees, if it is an organisation-wide incentive) embark on an experience together. It is this unity that drives the greatest return for the business.

Peers get the opportunity to bond and share experiences, while also feeling valued.

Barriers are removed between traditional workplace hierarchies, as members of staff are able to enjoy being away together and share unforgettable moments. This helps the entire team to appreciate one another in a way that may not be possible in a normal working environment.

The key benefit of the shared experience is that it offers greater longevity: the impact of the trip lasts well beyond the experience itself, creating memories that stay with employees for the rest of their lives. In turn, this inspires others within the business to exceed targets and create their own similar experiences.

There is also an opportunity for businesses to widen the impact of the incentive beyond the employee-employer relationship.

Allowing employees to bring a guest on this journey rewards not only the individual, but also the people who support them in their personal lives – those who help them achieve above and beyond their potential at work. With the buy-in from partners and guests, there comes an added emotional connection that shouldn’t be underestimated. This connection encourages employees to ensure they return for future trips, whether it is as a result of meeting and exceeding targets, or becoming more closely aligned with the company’s values.

The benefit of using agencies lies in their ability to create bespoke, once-in-a-lifetime experiences that are planned and delivered by travel experts who take the time to understand the businesses they are working with. It is this knowledge and expertise that adds to the experience, whether it is ensuring that piping hot baths greet guests on their return from a glacier, umbrellas suddenly appear when a tropical storm brews, or simply through building in a contingency for currency fluctuations so unwanted surprises are avoided.

Using an agency also provides peace of mind. Their ground knowledge, awareness of security threats and appreciation of health and safety issues mean that business leaders can sit back, enjoy the trip and focus on building constructive relationships with their team. n EuropeanCEO

| 103

C19MA_104_A09_10540.pdf

W o r l d V i ew

Travel

Reaching for the sky It’s not just about the destination – it’s how you get there. With this in mind, Eccelsa Aviation ensures travelling in style is an integral part of any luxury stay in Costa Smeralda, writes the company’s general manager, Francesco Cossu Looking back through black and white photographs, it’s easy to see that the architects of the Costa Smeralda area were blessed with a superior vision, as well as a unique ability to make it come true. For about 50 years, the Costa Smeralda – located on the north-east coast of Sardinia – has been recognised as one of the world’s most famous tourist destinations. Now, with Eccelsa Aviation’s cutting-edge fixed-base operator (FBO) air terminal at its very heart, travellers seeking privacy and luxury need look no further.

Located just six kilometres from the terminal is the brand new Marina di Olbia, which provides dock services for yachts of all dimensions. Unique to the Mediterranean, a private transfer service between the terminal and the marina allows vacationers to start their holiday 104 | EuropeanCEO

within minutes of touching down – an amenity very much appreciated by private aircraft clients, who often lead busy lives and need to make the most out of their precious downtime.

Above and beyond Opened in the summer of 2009, the Eccelsa terminal – the only FBO in Olbia Costa Smeralda Airport – is an architectural masterpiece in its own right. From above, it resembles a massive aircraft door, while from ground level its clean, sleek lines seem to swoop skyward like giant wings. As passengers relax in the cocoon-like comfort of the terminal, its elegant lines and ambient lighting create a sense of privacy and peace. This is an astonishing feat for an airport that caters to more than 35,000 passengers,

all of whom are bound for the world’s most beautiful stretch of sea.

Eccelsa Aviation, which is controlled by airport management company Geasar, has fully embraced its role in making Costa Smeralda an exclusive tourist destination, combining utter professionalism with a special charm that comes from dealing with a constant flow of discerning, often famous clients. This culture of service is highlighted by the capacity of our 45-person-strong team to tackle all requests – no matter how demanding – with sheer passion on a daily basis. All staff are devoted to ensuring both passengers and crew have the best possible experience when using Eccelsa facilities.

Our passenger numbers and plane movements have doubled since the company launched in 2003, bringing with them a variety of new requests to satisfy. After all, service is everything to a hospitality company. Within the boundaries of legality, goodwill and common sense, we will always try to please our customers and make sure they leave our premises happy and satisfied, whether they are arriving to the island or returning home. We are all very much aware that tourists are the real assets –

C19MA_105_A09_57369.pdf

W o r l d V i ew

Travel

The Eccelsa Aviation terminal:

2009 Opened

4,000sq m Area covered

6km

Distance to Marina di Olbia

not only for Eccelsa and the airport, but also for the entire territory.

In full flight Today, the number of tourists visiting the Costa Smeralda is skyrocketing. This highly selective clientele travel from many different corners of the planet to relax on superyachts, in coastal villas or in the area’s most exclusive hotels. This influx of discreet guests was the inspiration behind Eccelsa’s FBO terminal, which now covers 4,000sq m and is home to a plethora of luxury brands. Visitors can browse Swiss jewellery at de Grisogono, luxury furniture at Provasi and high-end clothing at a range of outlets, as well as sample a range of select food products and fine wines from Sardinia, one of Europe’s best culinary destinations. Travellers also have access to a highquality restaurant, a conference centre, the San Marino Aircraft Registry office and an architectural studio that offers its services to high-net-worth individuals transiting in the FBO terminal during the summertime.

The terminal itself is a glittering combination of glass, steel and beautiful local granite. What

makes it truly unique to Europe, however, is its outer wing, which allows guests to enter and exit the terminal directly from their aircraft. On occasion, passengers are even transported via a sleek Audi while a well-trained team handles their luggage with care and professionalism. The giant wing is capable of sheltering large, executive carriers, including the Boeing 737 and the Airbus A319. With hundreds of square metres of cabin space – which houses three bedrooms, four or five bathrooms, a lounge, office and enough fuel to fly across the Atlantic Ocean – these jets are the closest things to an airborne villa. Tellingly, these carriers now make up around five percent of aircraft movements at the Eccelsa terminal.

Privacy, security and comfort are among the qualities private aircraft passengers most appreciate about Eccelsa Aviation, and our work with the Marina di Olbia is very much a part of that service. Thanks to a discreet limousine fleet that carries incoming passengers directly to their yachts, we can ensure guests enjoy privacy until the very last minute of their holiday.

What’s more, we can arrange for helicopters to take travellers to any superyacht with a helipad or to any of the local hotels and villas.

A taste for luxury The undisputed skill and efficiency of Eccelsa’s highly motivated team ensure every process runs smoothly. The terminal’s concierge service will happily organise anything visitors require to make their stay perfect, whether it’s horse-trekking expeditions or private helicopter trips. The concierge can also organise Ferrari, Bentley or Aston Martin rentals, as well as yacht charters – with or without a crew.

Through its sister company, Cortesa, Eccelsa provides first-class in-flight catering.

We are all very aware that tourists are the real assets – not only for Eccelsa Aviation and the airport, but also for Costa Smeralda as a whole

A team of chefs prepare a menu from a selection of 100 dishes, ranging from simple sandwiches to mouth-watering lobster dishes and local specialities. Italy’s finest wines complement all food options. While waiting for a flight, guests can also make use of the terminal’s coffee shop and bar, which serves food all day and allows those flying with Eccelsa to enjoy a local dish and a glass of good wine.

What’s more, Eccelsa has an agreement in place with Meridiana Maintenance to offer first-class ground assistance, integrated services for flight crews and the chance to shelter aircraft for the entire length of one’s stay in Olbia. Air taxi companies and their crews are also well catered for, as they account for as much as 60 percent of the traffic coming into Olbia Costa Smeralda.

Eccelsa Aviation’s commitment to providing a truly special holiday experience is one of the key reasons people return to Sardinia time and again. It really is an island where hospitality, quality and first-class service are intrinsic to the inhabitants. Consequently, discerning travellers regularly come together in Costa Smeralda for the summer months, turning to Eccelsa Aviation for all their private travel needs. n EuropeanCEO

| 105

C19MA_106_B03_94796.pdf

W o r l d V i ew

Travel

In the driving seat

While many people revere ride-hailing apps, what they offer is often unsuitable for discerning corporate clients. Brunel takes a different approach, building a global transportation network that is expansive, efficient and accountable, writes David Goldring, the company’s director of supply chain management Like many of the world’s well-established industries, the transportation sector is under assault from new technologies. Ride-hailing companies Uber, Lyft and Didi Chuxing have swiftly amassed large user bases, increasing the level of service customers expect in the process. Alongside their rise, many uncertainties and questions have emerged. Though corporate clients use these services for their staff, they are often unsatisfied with the level of indemnification and adherence to corporate social responsibility initiatives these large peer-to-peer apps provide.

The development of autonomous vehicles is adding to this uncertainty. Millennials aren’t expected to buy as many cars as previous generations, instead favouring ‘mobility as a service’. But in a world where the potential cost of car ownership could skyrocket with the introduction of new technologies, the difference between an autonomous vehicle that is rented and an autonomous cab for hire is an important distinction.

While the vehicle may be able to drive itself, who – or what – will be responsible for maintenance and cleaning? Cab operators may not be driving the cars per se, but they may be the 106 | EuropeanCEO

ones keeping them on the road or acting as fleet depots. Car manufacturers Daimler, Renault, Nissan and Ford are all heavily investing in future mobility services, but with so many questions left unanswered, it seems as if everyone is simply hedging their bets.

Track record At Brunel, we believe we are well positioned to play an important role in the future of the mobility sector. We are a ground-transportation provider that boasts an extensive fleet of vehicles in and around London.

What’s more, we are a global player in what has become known as the ‘vehicle-withdriver service industry’.

From an economy minicab on the Isle of Skye to chauffeur services available in 480 cities across 75 countries, Brunel provides a remarkable network of vehicles to the world’s most exacting clients. The company utilises a vast network of fully vetted and approved vendors, ranging from very small operators in rural locations to huge app partners in metropolises. With more than 600,000 vehicles available to clients within this growing network, Brunel has carved out an important niche in the transportation

market and has plans to further cement its place in the coming years.

To truly understand Brunel, you have to look back to 1982. Bill and Jackie Edwards established the company with just a single car in London at a time when minicabs and chauffeur services were still unregulated.

For large corporate clients, there were very few car operators that could satisfy their stringent duty-of-care requirements, with the exception of licensed taxis. Alongside the likes of Licensed Private Hire Car Association Chairman Steve Wright, Addison Lee founder John Griffin and proprietor of Carlton Cars Eddie Townson, Bill was instrumental in the regulation of the industry.

With an understanding of what businesses needed from a transport provider, Brunel grew and grew. The company embraced technology and was one of the first operators to use a GPS dispatch system to control its fleet. While that doesn’t sound like much today, at the time it was cutting-edge. Further, Brunel provided its clients with online booking facilities many years before it became the industry standard.

Upon Bill’s passing, his son, Anthony Edwards, stepped up and began the difficult

C19MA_107_B03_17021.pdf

W o r l d V i ew

Travel

Drivers have started to realise that owning a brand new vehicle and suffering through its depreciation is a flawed model

We feel other players in the sector are not taking the right approach when it comes to building the global mobility network of the future. Attempts to wipe away all incumbent operators in the sector and replace them are folly. It is easy enough to build a fleet in a large city, but the global app behemoths are finding it is also a very slow and expensive process. They will never be able to provide their services everywhere.

task of filling his father’s shoes. Anthony knew he needed to take Brunel to the next level while ensuring the company received sufficient investment. In 2016, Brunel became a wholly owned subsidiary of Europcar Mobility Group, with Anthony at the helm as managing director. The ethos Brunel maintained as a family business is what made the company successful and, to this day, remains of paramount importance to its operations.

Brunel’s Global network:

75

Countries served

480

Cities served

600,000+

Finding the right approach Vehicles available At Brunel, we believe attention to detail and to clients quality service are of the utmost importance. Our commitment to these principles has allowed Brunel to continue to grow in a world where customers expect perfection. Naturally, Brunel also feels well positioned to leverage Europcar’s strengths and infrastructure.

At last count, our network included more than 650 cabs in London. Drivers have started to realise that owning a brand new vehicle and suffering through its depreciation is a flawed model. Instead, they are turning to the rental market, which allows them to have a new car each year.

A new model The real challenge is providing a customer with the same experience whether they are in Beijing or Bolton. The only way to achieve this is to put commercial relationships in place in rural locations and then enable these services with a technology-based solution. This is what Brunel has done.

When dealing with a supply chain made up of operators varying from rural companies with five cars to urban fleets with thousands of drivers, organisation is a key consideration. As such, Brunel is utilising a variety of methods to address this logistical problem. For those with no technology in place, a driver app is provided, allowing bookings to be serviced in areas that are low priorities for global app-based companies. You will have a very long wait for an Uber in most rural areas.

Meanwhile, for operators using commercially available GPS dispatch systems to control their fleets, Brunel has written software integrations that allow the bookings to be sent via an application programming interface with numerous system providers. All of this enables clients to book with Brunel through their preferred method, be it via an app, the telephone, a website or their organisation’s travel management system. This allows Brunel to accept these orders and fulfil them in a scalable and seamless way.

Brunel will continue to grow this offering, and we have a long list of integrations under development that will further enhance our coverage and service. Innovation comes in many forms – at Brunel, this statement is the core truth of our future plans. n EuropeanCEO

| 107

C19MA_108_B01_48850.pdf

W o r l d V i ew

Travel

The good life

A fully customisable yacht is often seen as a highly luxurious purchase.

Thanks to Oceanco’s new LIFE Design, it’s now an ecologically conscious one too, writes the company’s CEO, Marcel Onkenhout It’s never easy to combine elegance with performance, luxury with environmental consideration, or invention with customisation. Characterised by its lengthened waterline, innovative layout, fuel-efficient hull design and integration of ecologically conscious technology, however, Oceanco’s LIFE Design succeeds in bringing these often-disparate benefits together.

Developed in collaboration with Lateral Naval Architects, the LIFE Design not only adds a slender elegance to the vessel, but also leads to a reduction in the overall demand for propulsion power. As a result, the engine room is condensed to a single tier – a rarity in large yachts.

This concentration of technical equipment affords additional room for lifestyle areas – particularly on the lower deck, where space is usually restricted. Additional suites or entertainment areas can also be incorporated into the space typically occupied by the engine room on other, less efficient designs.

Ahead of the curve To make the most of the minimised engine space, Oceanco and Lateral’s gifted team of engineers has developed an optimised hybrid propulsion system that utilises the latest energy-saving technology. This system benefits from best-in-class hydrodynamic efficiency, new heat and energy-recovery systems, and 108 | EuropeanCEO

integrated battery systems to allow for optimal operation at all times.

Not only is this pioneering system extremely powerful, it is also environmentally friendly, boasting a reduction in fuel usage of up to 27 percent. It meets all existing ECO notation requirements and is able to operate in all emission control areas thanks to its diminished air emissions. LIFE Design yachts also enjoy an enhanced maximum speed of 19 knots, which is derived from the lengthened shape of the hull and the innovative hybrid propulsion system.

Thanks to the sleek, energy-efficient layout, Oceanco has been able to reduce both noise and vibrations at higher speeds in all LIFE Design yachts, providing a more comfortable experience for guests. An exclusive ‘whisper mode’ has also been built in to ensure surrounding vessels are not disturbed when yachts are entering and exiting ports.

A class of its own Like all other Oceanco yachts, LIFE Design vessels are fully customisable to each buyer.

They are not pre-engineered hulls of fixed dimensions and characteristics, but rather collaborative technical solutions upon which a design can be developed.

Oceanco considers a yacht to be an investment that lasts a lifetime. For this

reason, it is imperative to fine-tune every minute detail to ensure the customer is entirely satisfied and will continue to be delighted with their purchase in the years to come.

T he compa ny believes every yacht Oceanco’s beg i n s w it h t he LIFE Design: owner’s vision, both aesthetic and sensory.

Once those desires Reduction have been established, in fuel usage the forward-thinking design team will work to make them a realEngine room tier ity. From state-of-theart technological solutions to handcrafted Enhanced finishing touches, maximum speed each element of the vessel is created to the owner’s exact specifications using the finest materials from trusted suppliers.

Oceanco’s new LIFE Design utilises the company’s technical expertise to improve the performance and ecological credentials of its yachts, while also delivering an abundance of lifestyle space for owners and their guests. It’s this consistent innovation and commitment to fulfilling customers’ dreams that underpins Oceanco’s world-class reputation. n

27% 1

19kt

C16ND_001_Z05_77934.pdf

Boudin ad #3_EuropeanCEO_HighQualityPrint.indd 1

10/20/16 10:37 AM

C19MA_110_D03_48563.pdf

CEOprofile Vasiliki Petrou E x ec u t i ve V i ce P r es ide n t a n d G r o u p C E O | U n il eve r P r es t ige

Taking care

From helping women advance in the workplace to tackling social inequality and climate change, CEO of Unilever Prestige Vasiliki Petrou is a positive force to be reckoned with Within the first few seconds of her interview with European CEO, Vasiliki Petrou stated: “We have to help women advance.” It’s an ideology that encapsulates her driving force in business.

The indomitable Petrou has spent her 25-yearstrong career ascending through the ranks of the world’s most prestigious corporate beauty companies. Now, in her lofty position as executive vice president and group CEO of Unilever Prestige, she is dedicated to ensuring that other women are able to follow in her footsteps.

Born in Greece, Petrou took her first steps into the corporate world in 1991, when she embarked upon an MBA at Columbia Business School in New York City. During her time at the prestigious institution, she was awarded a Fulbright scholarship.

After graduating, she joined Procter & Gamble (P&G) as a brand manager, first in Switzerland and then in Greece, before moving to the UK in 1999. Over the following five years, she climbed the ladder to the top, initially overseeing

marketing for all of P&G’s haircare businesses in the UK, before taking responsibility for Max Factor’s billion-dollar global business.

She left P&G in 2012 to join Unilever as vice president of its personal care department, before assuming her current role as executive vice president and group CEO of the Prestige division in 2014. This, she said, is the proudest moment of her career to date: “I have to say, as a woman, and I want to say this to encourage other women, we always second guess ourselves. We’re always thinking: ‘Oh, am I the right person? Why was I selected for the role?’ I think this move gave me the confidence and the faith in myself and my abilities to put myself forward, take risks, go into [uncharted] territory and create new history.”

thetics and a true love for what I call ‘creative genius’,” she told European CEO. “Beauty always inspired me, mostly because it makes a big impact on how people feel about themselves.

On top of this, Prestige gives me the ability to lead with a lot of new-to-the-world experiences that I believe bring new expertise to areas that were very much traditionally image-driven, so I’m excited about this new change.”

She also credits being a “very visual person” with giving her a strategic advantage in her role at Prestige. “The way my mind works, it sees patterns in seemingly disconnected fields,” she said. “So I see connections in areas that normally wouldn’t relate to each other, but I see where they converge.” Petrou cites “connected beauty” – the idea that beauty does not exist in isolation but within the context of a wider health and wellness industry – as In her mind’s eye Petrou’s interest in beauty far predates her one trend she predicted. She said: “At Unilecareer in the sector. “I’ve always had a love ver, the way we innovate is very much about for innovation, an appreciation of great aes- anticipating consumers’ needs. Strategically, »

cV Born: 1967, Greece

Unilever Prestige |

education: MBA, Columbia Business School

in numbers

1993

1995

2014

2015

Vasiliki Petrou graduated from Columbia Business School with an MBA in finance and management. During her studies, she was awarded a highly competitive Fulbright scholarship

Petrou began her career at Procter & Gamble, working her way up to become global managing director in 2012, where she oversaw Max Factor’s global business

After joining Unilever in 2012, Petrou was offered the top job in the company’s Prestige division, which involved overseeing six luxury beauty brands

Petrou became the chair of Cosmetic Executive Women, an official beauty industry guiding body with more than 10,000 members around the world

110 | EuropeanCEO

2014

6

¤425m

2015

founded

turnover in 2017

subsidiaries

First acquisition made

C19MA_111_D03_14084.pdf

CEOprofile

we are constantly asking ourselves, ‘Where is the world going? What is going to happen in the next five years? What solutions will people be looking for?’ I’m a big believer that we shouldn’t always be asking the consumer what they want because sometimes they don’t know; they can’t anticipate their needs. If we’re great at our jobs, we should be great in anticipating people’s needs and innovating for that.”

Strategic thinking is a key element of Petrou’s role at Prestige. The division is home to six differentiated brands, each operating independently within the context of a larger corporate framework. “Prestige is an expansion area for Unilever – it’s a huge growth opportunity,” Petrou told European CEO. “We’re really trying to pave a new model in how we manage companies, respecting their authentic DNA, respecting the founders that we partner with, and creating very new-to-the-world business models that delight the consumer.”

Workplace wellness Petrou extends her dynamic, forward-thinking approach to the workplace culture at Prestige.

She’s an advocate of self-care and believes in the oxygen mask analogy: in the event of a

plane crash, passengers are always advised to ensure their own masks are fitted before helping others. “It’s a very intelligent analogy because it just shows that unless you look after yourself, you can’t mentor or look after others,” Petrou explained.

She’s always on the lookout for ways to incorporate movement and meditation into the workplace. Her biggest innovation so far in 2019, she said, has been ordering treadmills for her offices, so staff can now incorporate exercise into meetings rather than sitting down for yet another hour a day. Petrou’s also introduced walking meetings into her own schedule, telling her fellow leaders at Unilever: “Let’s take a walk around the block and discuss what we need to, because that will give us fresh air and one or two new ideas, and we’ll come back much more enriched.” She believes that staid corporate culture is in need of an update for the 21st century, which begins by prioritising the mental and physical health of employees. “Self-care and wellbeing is the oxygen we need to take ourselves to the next level,” she told European CEO. Petrou has also recently introduced sleep pods to the Prestige offices, and actively

encourages her team to take a 20-minute power nap during their lunch break. “[Taking a short nap] restores the flow of creative juices and boosts productivity – it’s like the beginning of a new day,” she explained. Aside from the boost to alertness, a trip to the sleep pods also takes staff away from their desks and with that, into a new, more creative headspace. “I believe… the quality of the work is always statistically commensurate to the creativity and the inspiration you are tapping into, and inspiration does not come from looking at the computer,” Petrou added.

This care-driven mindset extends well beyond the confines of the Prestige office; it is present in the DNA of all of the company’s subsidiaries. Petrou cites Dermalogica, the number one professional skincare company in the world and a leader in the spa industry, as an example of how a positive workplace culture can bring success to a brand. Dermalogica is built on the principle of dedicating time to self-care, pampering the body and mind, and escaping from the stress of modern life. “We train about 100,000 skincare therapists globally every year, creating a ‘Dermalogica tribe’, as we call them,” Petrou said. This tribe not

112 | EuropeanCEO

C19MA_D03.indd 112

13/02/2019 12:45

Petrou extends her dynamic, forwardthinking approach to the workplace culture at Prestige

Right Unilever Prestige acquired Dermalogica in 2015

only delivers beauty treatments, but also runs meditation workshops and offers health and wellness tips to consumers. “Beauty is connected in all ways, so self-care is part of our business model,” Petrou said.

Magnanimous mission Petrou’s pride in Prestige’s subsidiaries is palpable when she speaks of their work: “All our brands are setting out to collectively decouple our growth from our environmental footprint, while also leaving a positive social impact.” REN, a luxury British skincare brand incorporated by Prestige in 2015, is a key example. As part of its Clean to Planet initiative, it has recently partnered with the Surfrider Foundation to collect ocean and beach plastic and repurpose it to produce packaging for its products.

Petrou explained: “When we first produced a bottle made with 20 percent recycled ocean plastic, it was grey in colour. Any other company may have said, ‘It doesn’t look luxury enough, we’re not going to do it.’ But we took the risk because we believed consumers would understand and they would respect our commitment to the mission. That’s exactly what happened

– people loved the product and the tale helped create new ambassadors for REN. I love to tell this story because it just shows that [while] what we think with our own biases may not mimic the traditional criteria of what luxury should look like, actually, [traditional ideas of luxury are] obsolete.” True to its mission, REN is now exploring the production of packaging using 100 percent recycled ocean plastic, and earlier this year became the first brand in the world to make a fully recyclable pump mechanism.

Activism is another essential part of Unilever’s identity. “For us, purpose is authentic; it came from our founders hundreds of years ago,” Petrou told European CEO. “We don’t do it for marketing purposes, we don’t pay lip service to purpose because purpose is trendy.” She believes that, given the role corporations play in modern society, they have a responsibility to improve society, tackle climate change and work to have a positive impact on the planet.

This mission might present itself through work to improve education, support entrepreneurs, improve business processes or simply help a customer to feel better about themselves. She added: “If we can change people’s lives for the better, if we can change the confidence of one person out there, then it is worth coming to work – otherwise what are we here for?”

Guiding light Alongside her extensive work for Prestige, Petrou is also the chair of Cosmetic Executive Women (CEW), a 60-year-old organisation that supports, mentors and connects women

working in the global beauty industry. It has more than 10,000 members, with key outposts in London, Paris and New York. “CEW is a networking body that wants to help women to do more and succeed in beauty,” Petrou said.

“The [global] beauty industry is worth [over] $400bn [€354.7bn] annually – it brings jobs, it creates an empowered workforce and it’s a great platform for women.”

Petrou has used her position at CEW to mentor a select cohort of young female entrepreneurs, offering advice and guidance to those at the very beginning of their careers in beauty. “I truly believe that if you can [mentor someone] in the early stages of their career… it means a lot because you can change their life destiny forever,” she told European CEO. “And if we all help each other, then it raises the [collective] consciousness.”

Being an advocate of female empowerment at all levels of the corporate ecosystem, Petrou is heartened by the impact of the #MeToo movement, which she said has inspired women “to stand up for themselves more” and “take power into their own hands”. While there are still plenty of obstacles to overcome, these can be tackled, she added, by demonstrating capability, passion for a cause and courage of conviction: “I believe business is smart; if it sees that you too are smart, then the promotions and the recognition will come. Women need to have more faith in themselves [in that regard].”

Petrou’s parting advice to all women is simple yet powerful: “Never lose faith, never be overcome by fear, and fight for what is fair.” n EuropeanCEO

C19MA_D03.indd 113

| 113

13/02/2019 12:38

C18ND_001_W01_76813.pdf

C19MA_115_E04_63418.pdf

EuropEanCEO

spring2019

lifestyle

116 Fashion 118 Leisure 120 Culture 122 Food & Drink

“You can’t state difference and also state equality. We have to state sameness to understand equality” Zadie Smith

EuropeanCEO

| 115

C19MA_116_B08_00543.pdf

A solid business

foundation

Driven by social media and changing attitudes towards masculinity, the male make-up market is booming. Keen to take advantage of the reported psychological benefits of wearing cosmetics, corporate executives are starting to get in on the act, writes Barclay Ballard “Beauty is not a matter of gender, it is a matter of style.” That’s according to Chanel’s new make-up line, Boy de Chanel. Launched in South Korea last year before being rolled out around the world, the range is part of a wider movement in the cosmetics sector: make-up for men.

While it has long been considered acceptable for women to don lipstick, foundation and a whole range of other cosmetic products, a stigma has persisted around male grooming – to some, a man who cares about his appearance is somehow less of a man. This stigma, however, appears to be gradually eroding: the likes of Tom 116 | EuropeanCEO

Ford, Estée Lauder and L’Oréal have all joined Chanel in launching their own male make-up products.

Although the market for men’s cosmetic products has expanded rapidly in recent years, these brands are still taking a sizable risk. While make-up for men has achieved a significant degree of popularity in many Asian countries, the phenomenon remains limited – albeit fast-growing – in the West. Social media, and indeed social change, may be making it more acceptable for men to buy and wear cosmetics, but winning over the mainstream may prove more challenging.

Style over substance Even as the female cosmetics market continues to dominate the beauty industry, products aimed at men are becoming more popular.

In fact, according to Euromonitor International, the male beauty segment has been outpacing its female counterpart in terms of annual growth since 2010. Allied Market Research, meanwhile, predicts the personal care market for men will reach $166bn (€145.6bn) by 2022, representing a compound annual growth rate of 5.4 percent.

Clearly, businesses would be wrong to ignore any sector boasting such impressive figures.

Alongside some of the cosmetic industry’s biggest names, a number of smaller firms are carving out a niche for themselves in the male grooming market.

War Paint, a UK-based makeup firm, has achieved success by launching make-up lines that are exclusively aimed at men.

“There is a lot of talk that make-up should be for everyone, and by creating War Paint, a malefocused brand, we can help do just that,” War Paint CEO and founder Daniel Gray told European CEO. “I don’t think many men would feel comfortable going into a shop and buying a female product – one that is designed and advertised for a woman. Hopefully that’s where we fit in. The issue with some of the industry leaders is that often they are taking a female brand and just aiming it at men. We’ve had a lot of success because we are an out-and-out male brand.”

There are also practical reasons why men might want to purchase from a brand that has a decidedly male focus. As a result of their higher levels of testosterone, men’s skin is both thicker and oilier than women’s. Facial hair, whether

C19MA_117_B08_36361.pdf

lifest yle

Fashion

“If make-up can help with selfconfidence, then it could fast become a boardroom staple”

Left Images © War Paint

a man is generally clean-shaven or not, can also affect which skincare products will be most effective.

But the growth of male grooming products, while undoubtedly impressive, should be placed within the context of the wider industry. It is easy to get caught up in the hype when male makeup artists have millions of social media followers and household fashion brands are starting to launch their own ranges for men.

In spite of this recent popularity surge, male cosmetics still represent less than one percent of the global beauty market.

Confidence breeds success It is important to remember that wearing make-up is not purely about improving one’s appearance: it is also about feeling more confident. A study by Procter & Gamble found individuals wearing make-up were perceived as more competent than those who went without. Research from Harvard Medical School also found evidence of the ‘lipstick effect’, whereby the wearing of make-up can give individuals a confidence boost. While both these studies

focused on women, there is plenty of anecdotal evidence to suggest similar phenomena in men.

“I was bullied at school due to my appearance... That led to insecurities about my looks, and now I have a form of body dysmorphia as a result,” Gray told European CEO. “As I got to my teenage years, I started using make-up to cover some blemishes – that grew to me using all different forms of makeup. Now I use it pretty much on a daily basis – really just to give me a bit of extra confidence. The way that men suffer from confidence issues doesn’t get enough exposure and if make-up can help with that, then it could potentially improve a lot of people’s lives.”

A wide variety of men have already started to feel the benefits of make-up use. One of the target demographics for new brands is image-conscious executives, who may well be drawn to the career benefits that can be derived from feeling good about the way they look. A psychological study carried out by Ohio State University in 2014 found a clear connection between an individual’s career path and their levels of self-

confidence. If make-up can help with the latter, then it could fast become a boardroom staple.

“We are definitely seeing a trend of high-power businesspeople purchasing our products,” Gray said. “Quite a lot of the time when you are in those sort of positions, you have to present yourself in a certain way and I think makeup can help with that. Personally, I’ve had to carry out a number of business presentations all over the world and, without make-up, my performance would have been completely different. It’s definitely helped with my career.”

The connection between confidence and corporate success has long been known. As the male make-up market grows, the likelihood of high-flying executives using cosmetics is likely to increase alongside it. In a business world where fine margins can be the difference between success and failure, the confidence boost derived from blemish-free skin could be significant.

A different complexion In order for business professionals – or any other men, for that

matter – to benefit from the selfesteem boost that can come from wearing make-up, they’ll first have to overcome any remaining stigma surrounding its use.

While progress is undoubtedly being made, there remains some way to go. Men’s Make-Up UK, for example, claims that between 20 and 30 percent of its customers want their names removed from parcels and to have their products put in plain packaging.

Other markets, particularly those in Asia, are showing the West how to break down the gender barriers associated with the cosmetic industry. In South Korea, for example, the average per-person expenditure on male skincare is more than 10 times that recorded in the US or France, according to Euromonitor.

Brands also have one eye on China, where the beauty market is expected to more than double by 2030.

Part of the unease that many men – in the West, at least – feel towards make-up likely stems from inexperience. A large proportion simply do not know how to apply it correctly, whether they want subtlety or a full-on look. “At War Paint, we want to be the place where everyone can come and find out about men’s make-up,” Gray said.

“We have a number of tutorials on the website to advise on the best way to use all [of] our products. Social media has also provided men with a lot of support. I think the more content that gets put out there, the more accepted male make-up becomes.”

Men’s make-up isn’t really new: Jean Paul Gaultier launched a range of mascaras and eyeliners for men in 2003. Looking back further, make-up has played an important role in male grooming throughout various periods of history. It has, however, long been out of fashion in mainstream circles in the western world. That may finally be changing: both inside the boardroom and out, men are starting to feel more comfortable wearing make-up, whether in a bid to boost their self-confidence or to simply express themselves. n EuropeanCEO

| 117

lifest yle

Leisure

nap time

daytime dozing. Though still small in number at present, they are finding homes in bustling cities throughout Europe, including Paris, London, Brussels, Madrid and Luxembourg City. “Cities with a high concentration of people and a fast-paced environment tend to have a sleep-deprived society, as well as a lack of privacy and quiet spaces in some chaotic areas,” said Mauricio Villamizar, CEO of London-based nap bar Pop and Rest. Nap bars, however, offer relief distinct periods to our days: one to this pressing urban problem. for wakefulness, the other for sleep. Most mammals, however, Basic needs are polyphasic sleepers, dipping “Many people suffer from a lack into slumber for short bouts of sleep for many reasons... They throughout the day. Interestingly, do not sleep enough and also the there is a strong argument to say quality of sleep has decreased that our current mode is not opti- because of work, stress, pollumum: infants and the elderly are tion, noise, [etc.],” said Chrisa fine example of this. Indeed, for tophe Chanhsavang, co-founder the former, napping is absolutely of France’s first nap bar, ZZZen crucial for early development. So, Bar, which opened eight years ago. perhaps polyphasic sleeping is Chanhsavang and his wife actually within our primal nature, were inspired by their travels and as such, we could be missing around the world, from which an important trick. they learned that in many counEnter nap bars. Not for drink- tries, napping is the norm. “In ing, eating or socialising, these Asia, people are taking naps eveestablishments are devoted to rywhere – in the streets, in shop-

Napping is a cultural norm in many parts of the world, but it remains a taboo across much of Europe. Now, the continent is finally tapping into the trend, with nap bars emerging in response, writes Elizabeth Matsangou We need sleep to survive – it’s a simple, irrefutable fact that applies to every single person on the planet. And yet, despite its importance to our physiology and psychological wellbeing, the practice is often neglected. Busy work schedules, responsibilities at home, social engagements and time-draining hobbies are affording us less time for precious sleep.

While cutting back on such commitments is simply not an option for the majority, there are other solutions. Rethinking sleeping habits could be one such remedy.

Unlike other mammals, humans are monophasic sleepers, meaning that there are two

ping malls... It was really unusual for me,” he observed. This cultural difference was highlighted further when, while working as a trader in China, Chanhsavang’s boss told him to sleep during his lunch break. Rather than seen as lazy and unnecessary, napping was encouraged as a quick way to recharge for the rest of the day.

This attitude isn’t exclusive to Asia. Throughout the Mediterranean, siestas hark back centuries. In warm climates they simply make sense: rather than suffering unproductively through the hottest part of the day, siestas offer people respite and a chance to feel refreshed when they continue working afterwards.

Armed with this knowledge, Chanhsavang set up ZZZen Bar in an area in Paris that’s proximal to various large companies and global headquarters. It’s also close to numerous restaurants, cafes and bars, which sees many chefs and waiters visit the nap bar during the long break between their morning and evening shifts. “For some of them, going back home is too far,” Chanhsavang said. This links to a trend that can be seen

118 | EuropeanCEO

C19MA_D01.indd 118

14/02/2019 11:27

lifest yle

Leisure

“Perhaps polyphasic sleeping is actually within our primal nature: we could be missing an important trick” Above and right Images © ZZZen Bar

around the world – namely, that many people have little choice but to move out to the suburbs due to the high cost of buying and renting property in city centres.

Ironically, this back and forth has further added to the need for a place to rest in urban areas. “Daily long commutes to work can be stressful,” Villamizar explained.

“In the last few years, people are more and more keen to find a better work-life balance and look to improve their mental health.

Nap bars in the city centre [give] them another option to disconnect from work and recharge.” These tranquil spaces have also found fans in those travelling through the city on business.

Reaping the benefits For many countries, especially in the West, napping during the day is still somewhat taboo. It’s a practice with connotations of laziness, particularly in the workplace. But this mindset is beginning to shift, albeit slowly, thanks to the pioneering approach of the likes of Google and HuffPost. For these groundbreaking companies, napping at work is not only encouraged – it’s

facilitated with carefully designed nap rooms and pods.

There’s good reason behind the move, aside from just being a nice job perk. According to sleep experts, siestas can boost both creativity and productivity. “Naps can restore alertness, enhance performance, and reduce mistakes and accidents,” Villamizar told European CEO. “A study at NASA on sleepy military pilots and astronauts found that a 40-minute nap improved performance by 34 percent and alertness [by] 100 percent.”

These short, super-charging breaks can also reduce stress, as well as the risk of heart problems.

In fact, a recent study conducted by the Harvard School of Public Health and the University of Athens Medical School found that those who napped at least three times a week for more than 30 minutes were 37 percent less likely to die from cardiovascular disease.

With so many health and mood benefits, employee wellbeing can be drastically improved thanks to this small, yet highly effective, work policy. Job satisfaction grows in turn, which further improves talent acquisition and

employee retention rates. Given such benefits, it’s little surprise that more companies are jumping on the bandwagon. L’Oréal Paris, for instance, has enlisted the help of ZZZen Bar. But with proximity being key for lunchtime nappers, instead of sending employees to the bar itself, Chanhsavang is bringing the concept to their doorstep with the ZZZen Truck. “We move everywhere, we go where the companies are,” he told European CEO. The truck provides two services – the first, a 15-minute session in a zero-gravity massage chair, which is said to be equivalent to a one-hour massage. “It’s very intense to [help people] recover from stress or maybe depression, or just tiredness,” Chanhsavang said. The second service involves a virtual reality device, which allows clients to use mental visualisation in a form of meditation known as sophrology. Through the use of technology, it’s possible to reach more individuals and provide greater relief in a shorter amount of time, thereby making lunchtime nap sessions a practical solution for busy professionals.

Desperate times Modern living moves at 100 miles per minute. With technology helping – and distracting – us in every aspect of our lives, sleep continues to face the brunt of our increasingly connected existence. Add in the levels of pressure and competitiveness found in city centres, and we are facing a melting pot of stress and burnout. As such, understanding what prompts and worsens stress levels in everyday life has become absolutely vital. In the workplace, leaving this unchecked can be of great detriment to an organisation. As Arianna Huffington wrote in a blog post on Thrive Global: “There is growing evidence that the longterm health of a company’s bottom line and the health of its employees are, in fact, very much aligned, and that when we treat them as separate, we pay a heavy price, both personally and collectively.”

To some, nap bars may seem like a self-indulgent gimmick, but the truth is, this seemingly trivial service is actually responding to a pressing and unanswered need in western life today. Many of us lead busy, stressful lives. In a bid to have it all, we really do try to do it all, leading to burnout that is prevalent across industries and national lines throughout Europe.

And yet, something as simple and cost-effective as introducing nap times, and fostering a culture where the practice is encouraged rather than shunned, can make a marked difference to individuals and the companies they work for. With more and more people waking up to this realisation, napping could well be the key to happy urban dwelling that we’ve been searching for. n EuropeanCEO

C19MA_D01.indd 119

| 119

14/02/2019 11:27

A Cultural education Harvard, Stanford and Yale now offer free online courses to budding students across the globe. Our free time has never been so productive, writes Elizabeth Matsangou Today, it’s possible to study an array of fascinating subjects taught by world-leading experts from absolutely anywhere on the planet – for free. Online platforms have unleashed fountains of knowledge to anyone keen to learn. Of particular note are Coursera and edX, which have partnered up with the US’ eight Ivy League universities – Brown, Columbia, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton and Yale – to offer around 400 online courses. The subjects range from social sciences and humanities to art and personal development.

These partnerships offer an incredible opportunity for individuals around the world to study and perhaps further their careers. But what’s also interesting about such offerings is the lifestyle aspect: those enrolling on such courses are not all doing so to aid career progression. For many, these courses

offer a chance for personal development, to gain a cultural education and to fuel their passions.

Art for art’s sake Thanks to the internet, we have access to reams of data, archives that would rival the Great Library of Alexandria, and expert knowledge from the world’s brightest minds, making it easier than ever to learn.

Consequently, individuals are not only afforded the opportunity to extend their knowledge in the field they work in, but also to explore new subjects and expand their cultural understanding. For example, one can study storytelling in Othello with a Harvard University professor or receive an introduction to Italian opera from Dartmouth academics, all from the comfort of their own home and without rigidity or restrictions.

Professor Andrew Cooper, Dean of Cultural Studies and

Humanities at Leeds Beckett University, said: “Cultural subjects of this kind have always had an intrinsic value – famously encapsulated by ‘art for art’s sake’ – but today’s context is very different. This is not simply because of the ease of access as a result of advances in technology. More importantly, whereas in an earlier stage of their life successful professionals may have been directed towards more vocational subjects for study, there is now a growing acceptance that indulging one’s passion for art, music, literature and creative subjects in general is of immense benefit.”

A strong desire for personal development is seeing a growing number of busy professionals taking classes in their free time.

Although studying the paradoxes of war with Princeton professors or undertaking Brown’s Ethics of

“A strong desire for personal development is seeing a growing number of busy professionals studying in their free time”

Memory course may not directly help with one’s occupation, the act of adding more strings to one’s bow inevitably makes someone more versatile and dynamic.

Christopher Pappas, founder of eLearning Industry, one of the biggest online communities of professionals in e-learning, said: “If you study different things, it gives you a different point of view, and that applies also to your social, personal and professional life. So maybe it sounds unrelated, but at the same time it gives you a competitive advantage.” For employers, such individuals are enthusiastic, proactive and keen to develop.

According to Cooper, this last point is key. Partaking in cultural education is important for the “development of intellectual capacity and enrichment of prior learning experiences”. It can also “release new wells of creativity within an individual”, which enhances thinking and productivity.

Cooper told European CEO: “For the more discerning and pragmatic, educational engagement with cultural subjects can add or augment skills and attributes that are highly valued in our personal

120 | EuropeanCEO

C19MA_E02.indd 120

14/02/2019 12:08

lifest yle

Culture Left Roman Architecture is taught by Yale professor Diana Kleiner Right Mahler Chamber Orchestra performs an all-Beethoven programme at Carnegie Hall Below Buddhism Through its Scriptures is taught by Harvard professors Charles Hallisey and Alexis Bader Brown

Of the hundreds on offer, European CEO examines three free courses for those wishing to make the most of their leisure time: Buddhism Through its Scriptures

Taught by professors Charles Hallisey and Alexis Bader Brown of Harvard Divinity School via the learning platform edX, this course is suitable for both novices and those who have practised Buddhism for years. The self-paced, four-week programme provides the opportunity to explore carefully selected texts while being guided in new ways of thinking about one’s self and the world. lives, but also play an increasing part in our professional lives as we experience the fourth stage of the digital revolution – attributes and skills such as emotional intelligence, cultural empathy, critical and creative thinking, and complex problem-solving from alternative intellectual perspectives.”

First Nights: Beethoven’s Ninth Symphony and the 19th-Century Orchestra

Taught by Harvard’s Thomas Forrest Kelly, this edX course guides students through all four movements of one of Beethoven’s most famous symphonies. Over a three-week period, Kelly covers the basics of musical form and analysis, while recounting Beethoven’s composition process and rehearsals, leading up to his premiere performance.

individuals are taking the time to enhance their cultural awareness. “Study of these areas at this point in their lives is often driven by successful professionals having the ‘permission’ to engage with some of their first intellectual impulses and also having the acumen to know that in doing so, they will augment skills that are not only vital to their perAccess for all As the appreciation of such sonal lives but also to their lines benefits grows, more ambitious of work,” Cooper said.

Roman Architecture

Requiring between four and eight hours of study per week over nine weeks, Roman Architecture is taught by Yale professor Diana Kleiner. Covering an impressive range of structures, from domestic architecture in Pompeii to the tombs of Roman aristocrats, this Coursera programme is aimed at those keen to discover the power of architecture and its ability to shape society and culture.

Accessibility has inevitably played an instrumental role. Busy professionals can take online courses at any time, almost anywhere. In fact, even a Wi-Fi connection isn’t always necessary. Online courses also provide an invaluable chance to exchange ideas with people from all over the planet, which can only broaden one’s understanding. “You can get a global perspective, see the point of view of different people, from different

backgrounds, different cultures,” Pappas told European CEO. And of course, there is the crucial cost factor. Pappas explained: “You do not need to spend a fortune to study; it is extremely important that you do not need to travel across the globe to find a course or a guru.

You can talk via email, Facebook or LinkedIn; you can exchange ideas, exchange best practices, and that has changed the game.”

The game has indeed changed.

Even with busy careers, studying in our free time has never been easier.

With hundreds of fascinating topics to choose from, leisure time is heading in a whole new direction, with the pursuit of knowledge taking precedence. And this is significant, for learning should be incessant – we should never stop trying to develop and better ourselves. Only through continued progression in this way can we gain a more rounded understanding of the world around us, and of ourselves. Through the study of history, culture and a plethora of other topics, civilisation is presented with a unique opportunity.

What we do with this information is down to each one of us. n EuropeanCEO

C19MA_E02.indd 121

| 121

14/02/2019 12:09

C19MA_122_D09_77998.pdf

A place at the table Veganism is having something of a moment.

Now, as more European consumers ditch animal-based food products, high-end restaurants are seeking to capitalise on the latest culinary trend, writes Sophie Perryer There’s a revolution afoot in Europe’s restaurant scene. The old traditions of wine pairings and starched white napkins are disappearing, replaced by sharing plates, avant-garde cocktail menus and so-called ‘bowl food’.

Perhaps most astonishingly of all, meat, fish, eggs and dairy have disappeared from some menus altogether, replaced by innovative reimaginings of the most humble ingredients of all: vegetables.

While plant-based eating has been rising in popularity across Europe for some time, it had previously been confined to the launch of new supermarket products or the opening of low-key cafes. In recent years, however, the continent’s fine dining scene has started to experiment with vegan menus, elevating what was once a niche diet choice to a veritable culinary trend.

122 | EuropeanCEO

Sowing the seeds The past decade has seen an unprecedented shift towards plant-based diets, with consumers across Europe electing to reduce or eliminate animal products completely from their diets.

The sudden increase has been attributed to a perfect trifecta of factors: increased awareness of animal welfare, environmental concerns, and the personal health benefits associated with eating a plant-based diet.

Documentaries such as Cowspiracy: The Sustainability Secret and What The Health have raised veganism’s profile among consumers, while the rise of meat, fish and dairy-alternative products – now widely available in supermarkets across Europe – has facilitated the transition to vegan living. In fact, according to research from Mintel,

one in 10 food products launched in Europe last year featured a vegan or ‘no animal ingredients’ claim – double the number present in 2015.

Germany has emerged as a leading light in the shift to plant-based eating, boasting an estimated 1.3 million vegans and nine million vegetarians in 2017.

According to the World Preservation Foundation, a further 42 million German citizens identify as ‘flexitarians’ – those who eat a predominantly vegetarian diet and actively try to cut down on their meat consumption.

In Portugal, meanwhile, the number of vegetarians was found to have increased four-fold since 2007, surpassing 120,000 people in 2017. According to UK price-

“Europe’s fine dining scene has started to experiment with vegan menus, elevating what was once a niche diet choice to a veritable culinary trend”

comparison website comparethemarket.com, the number of vegans in the UK has also skyrocketed over the past 24 months, increasing from 540,000 people in 2016 to a whopping 3.5 million in 2018.

In bloom Veganism has also become a transformative force in the fine dining sector, spearheaded by a cohort of young chefs on a mission to bring freshness into even the fustiest corners of the industry. One such chef is Joey O’Hare, whose training at the Ballymaloe Cookery School – an organic, biodynamic farm in Cork, Ireland – awakened an affinity for plant-based cooking that has defined her 15-year culinary career.

After appearing on the BBC show MasterChef: The Professionals in 2015, O’Hare founded a vegetable-centric supper club called Hare on the Hill, which delivers predominantly plant-based dishes to vegetarian, pescetarian, omnivorous and vegan diners. “[Hare on the Hill] pioneered a way of eating that fared… and nourished everybody equally well,” O’Hare told European CEO.

C19MA_123_D09_22661.pdf

lifest yle

Food & Drink

O’Hare said the supper club’s guests were often surprised that, having eaten a six-course tasting menu, they didn’t feel stuffed or bloated, as they often had after eating the meat-based equivalent. “It’s very low-hanging fruit to make something taste insanely delicious for the 10 minutes that you’re sitting in front of a plate, any chef worth [their] salt should be able to do that,” O’Hare said. “But what’s hard is making something that delivers the same sort of levels of satiation – of pleasure – and yet still nourishes your customer.”

This, O’Hare explained, is the benefit of plant-based fine dining, as it’s possible to create a delicious, aesthetically pleasing dish that also has the added benefit of being healthy: “I call it ‘flavourfirst health food’ – the priority is that it tastes amazing and looks beautiful, and then the subtext is that the dish is made with primarily plant-based ingredients, so it won’t leave you feeling like you’ve eaten too much.”

Some established chefs have raised concerns in the past regarding the difficulty of incorporating

complex flavours into plant-based dishes, and O’Hare acknowledged these concerns: “Anyone could put a chicken in the oven and, with the crispy skin and succulent flesh, it will create a very multi-layered flavour experience, which is much harder to replicate with just plants.”

However, it’s certainly not impossible to create multifaceted flavour profiles in vegan meals, so long as chefs think about the whole dish in unison. This, according to O’Hare, means “layering up textures with crispy toppings, or incorporating some seasoning and spices into your garnish”. She added: “You’ve also got to think [about] treating vegetables like meat, so giving them rubs and marinades, maybe basting them during cooking, perhaps roasting them rather than just blanching or steaming.”

A new leaf O’Hare has even found that many of her culinary counterparts, who previously would have turned their noses up at vegetable-centric dining, are now embracing it. Twostar Michelin chef Alexis Gauthier,

for example, announced in June 2018 that his restaurant, which previously served 20kg of foie gras per week, would become 100 percent vegan by 2020. “The pure creativity has to lie with veganism,” Gauthier said at the Restaurant Congress event in London.

This meteoric rise in the popularity of plant-based eating – and the new crop of restaurants emerging to cater for ethically aware diners – has also benefitted those who have practised a vegan diet for some time. Where previously they may have been shut out from the best fine-dining institutions, the

introduction of new plant-based menus has allowed vegans to enjoy the cooking of some of the world’s greatest chefs without compromising on their diet choices.

Veganism has introduced a new level of inclusivity to an industry that has occasionally been criticised for its elitism, while also challenging chefs to exercise their creativity in new ways. More importantly, though, it has empowered an increasingly ethical and environmentally conscious population, giving individuals little reason not to embrace the latest culinary trend. n EuropeanCEO

| 123

Botched Scotch The rare whisky market is worth millions, with samples from before 1900 proving particularly valuable. However, new research suggests that many vintage bottles are not the real deal, writes Barclay Ballard The most expensive bottle of whisky ever sold – a 1926 bottle of Scotch that had been hand-painted

by Irish artist Michael Dillon – was purchased for £1.2m (€1.38m) last year. While that may be the worldrecord figure, it is not unusual for rare, antique spirits to fetch thousands from collectors and investors – and unsurprisingly, with such high figures involved, this market has also attracted its fair share of fraudsters. A report late last year revealed just how widespread this problem is.

Tests commissioned by Rare Whisky 101, a whisky valuation and consultancy service, and carried out by the Scottish Universities Environmental Research Centre (SUERC) found that more than a third of vintage Scotch whiskies may be fake. Out of 55 tested bot-

tles, 21 were found to either be completely inauthentic or, at the very least, not distilled in the year they claimed to be.

The findings could have huge ramifications for the rare whisky market, which has been experiencing rapid growth of late: the value of rare Scotch whisky sold at auction rose 46 percent across the first six months of 2018. If the proliferation of fakes dampens market enthusiasm, it could prove damaging for whisky fans and investors alike.

The genie is out of the bottle Technological developments have given whisky brokers another weapon in the fight against fakes.

In SUERC’s tests, radiocarbon dating was used to identify the age of the whisky samples, a process that

can give a distillation date – accurate within two or three years – for any bottle distilled after the 1950s.

Older varieties are harder to measure accurately. Major distillers lent their support, providing the centre with samples of verified age.

Still, identifying fakes needn’t always rely on a radiocarbon laboratory. Other forms of scientific analysis can be carried out to identify a whisky’s provenance, including measuring its malt-to-grain ratio and its phenol count. Individuals with extensive knowledge of the market may also be able to employ a less technical approach: a visual inspection can show irregularities with the labelling, glass and liquid itself. A nose and taste test, if possible, might also prove enlightening, depending on the method employed by the fraudsters.

“We broadly categorise fakes into three distinct areas: refills, replicas and relics,” Andy Simpson, co-founder of Rare Whisky 101, told European CEO. “Among the most difficult to spot are the refills, which tend to be where a genuine, or as near as can be faked, capsule or closure is slipped off a genu-

ine bottle, the contents are then refilled and the bottle reclosed. If the closure is good, then the only way to spot these is when they are opened. Replicas are where wellknown, usually high-value, bottles are replicated. To the trained eye, these can be the easiest fakes to spot, as the print quality of the labels can be quite poor. The third type is the relics: these are bottles, usually of single malt Scotch, which purport to be from pre1900. While there are a number of genuine bottles from this era, they are typically blends, rather than malts. The overwhelming majority of bottles of single malt from this era are fake.”

Given the variety of methods employed and the sheer prevalence of fake whisky on the market, buyers are advised to be extremely vigilant. In particular, any bottle of Scotch from before 1900 should be presumed fake until it can be proven genuine. Even for newer bottles, purchasing expensive whisky on the secondary market must be done with caution – regardless of whether it is coming from a reputable seller.

124 | EuropeanCEO

C19MA_C05.indd 124

13/02/2019 18:52

lifest yle

Food & Drink

“If the proliferation of fakes dampens market enthusiasm, it could prove damaging for whisky fans and investors alike”

Right A bottle of Macallan Valerio Adami 1926 whisky sold for €974,000 in October 2018

Slow reaction times In the vast majority of cases, sellers are not aware that the whisky they are offering is fake. Nevertheless, the widespread nature of the problem makes it a difficult one to solve. In the tests deployed

by Rare Whisky 101, fakes were purchased from private owners, auction houses and retailers. Evidently, there is no single route that fraudsters are using to get their goods on the market.

“We’re seeing a broad proliferation of fakes,” Simpson said.

“From relatively low-value bottles in the Philippines to exceptionally high-value bottles in the UK. The most faked brands are the likes of Macallan, Ardbeg and Bowmore.

These brands have bottles that can sell for exceptional prices, so they are the natural targets. In the main, it’s single malt Scotch whisky which is faked as it carries the highest value, although we’ve seen old ‘relic’ bottles of blended Scotch whisky being faked too.”

The industry is working hard to make newer releases more difficult to fake with the use of anti-tamper security and high-

quality closures, but antique bottles still represent an easy target. Many of these bottles are now appearing on the secondary market and are relatively easy to refill or copy completely. It is a challenging issue to resolve, but technological development could come to the rescue.

In 2017, Scottish start-up Distilled Solutions won £90,000 (€104,000) in funding for its handheld scanner that can accurately detect the age, blend and cask type of a particular spirit. Unfortunately, this approach will only work for relatively modern bottles.

The threat of legal action may be the only way to thwart the rising tide of fake whiskies.

Lawyers working on behalf of the Scotch Whisky Association, for example, typically have around 70 ongoing court cases at any one time. Often, these efforts focus on low-cost, generic fakes being sold in foreign markets, but the likelihood of going after high-value fakes will grow as awareness of the problem increases.

For purchasers and sellers of rare whiskies, obtaining a his-

tory of previous owners can help to after drinking methanol that was determine when fraudulent bottles sold as branded whisky. entered the market and identify “In some cases, what appears the individuals responsible. to be a cheap volume-produced blend has been used in the bottle; in others, a very much younger A sobering thought Due diligence is the best way to release of the same brand has been avoid being scammed – whether used – some old vintage Macallan bottles are being purchased to bottles contain what we think is drink, to collect or as an invest- Macallan 10-year-old,” Simpson ment. Rare Whisky 101’s Apex said. “So, for these bottles, while 1000 Index, which tracks the best- they certainly pose a threat at a performing bottles of rare whisky, brand and industry level, they don’t offered better returns than both pose a threat to health.

“However, certain bottles we’ve oil and gold indexes last year. It is clearly a lucrative market and tested, we’ve nosed but not tasted. a quick online search could be all They tested at a low level of alcoit takes for investors to spot the hol (between 30 and 35 percent) difference between a fake bottle and nosed as something very odd, certainly not what we would underand a genuine one.

While the preponderance of stand the contents to be. We would fake whiskies is certainly of great never imbibe these, as we genuinely concern to investors and distill- have no idea what’s in them.”

It is estimated that around ers, it could have more serious implications. When bottles have £41m (€47m) worth of rare whisky been refilled, the contents vary currently in circulation is fake. hugely. Often a cheaper variety of Fans of Scotch, along with the whisky is poured into the bottle, industry’s major players, must but sometimes more dangerous remain vigilant if these counterfeit substances are used instead. In bottles are to be identified – their 2016, for example, 30 people died wallets and their health may be in the Russian city of Krasnoyarsk at risk if they do not. n EuropeanCEO

C19MA_C05.indd 125

| 125

14/02/2019 12:39

sour grapes Europe’s wine industry is facing an uncertain future as global warming threatens the viability of today’s vineyards.

Winegrowing is a profession rooted in tradition, but the modern industry must embrace change, writes Courtney Goldsmith Over the past three decades, the fine wine market has trampled traditional commodities such as gold and oil in terms of annual growth.

According to the longest-running index, fine wine has notched a yearly compound growth rate of 11 percent, more than double gold and oil’s four to five percent.

Home to premium growing regions in France, Spain and Italy, the EU is the world’s leading producer of wine. The EU accounts for 45 percent of winegrowing areas in the world – with more than three million hectares of land covered in vineyards – and 65 percent of global production. Between 2009

and 2014, 167 million hectolitres were produced annually.

Now, the future prosperity of Europe’s wine industry is at risk.

The warming climate is expected to lead to a “huge shake-up in the geographic distribution of wine production” in the coming decades, according to a study published in the scientific journal Proceedings of the National Academy of Sciences of the United States of America in 2013.

With Europe being one of the most at-risk regions, the grapes that have made certain regions synonymous with rolling green vineyards could produce unrecognisable wines in mere decades.

Heating up The European wine market is undeniably on the brink of great change. But for winegrowers, the question is not what will happen in a couple of decades’ time but what is happening right now.

“I think it’s important to note we’re already seeing impacts of climate change on winegrowing in Europe,” Elizabeth Wolkovich, an ecologist and associate professor of forest and conservation sciences at the University of British Columbia, told European CEO. The industry has been rocked by the warming climate, with the most notable change being that

current harvests come at least two to three weeks earlier than they did in the 1980s. “Many regions that were harvesting in mid-October regularly before warming are now harvesting in mid-to-lateSeptember often,” Wolkovich said. “And the trend appears to be continuing: in 2017, in France, the harvest was six weeks earlier than average in some areas.”

For finicky grapes, even subtle changes in the weather can have a make-or-break effect on their chemistry and the quality of wine they produce. In colder temperatures, grapes do not completely ripen, resulting in high acidity, low sugar and bitter, unripe flavours.

Conversely, hotter temperatures produce overripe grapes with low acidity, high alcohol content and cooked flavours.

These changes are only expected to intensify over the com-

126 | EuropeanCEO

C19MA_C04.indd 126

12/02/2019 18:32

C19MA_127_C04_21361.pdf

lifest yle

Food & Drink

Below Grapes attacked by mildew in Léognan, near Bordeaux

ing years. Wolkovich explained: “Europe is expected to warm more than many other places on Earth, so it faces some of the greatest warming of major winegrowing regions, which is a major challenge to the industry.” Over the next 50 years, Europe’s temperature is expected to warm by three to five degrees Celsius. This will prompt “radical” advances in harvest dates, Wolkovich said, not to mention the fact that warming temperatures and increased humidity could cause a rise in the presence of pests and insect-borne diseases.

What’s more, as explained by Giles Cooper, Head of Marketing for BI, one of the largest fine wine merchants and traders in the world, climate change is about more than just changing temperatures. While small variations in climate can have significant effects on the profile of a region’s

wines, extreme weather incidents connected to climate change are what will really make life difficult for winegrowers. “These events might include unseasonal frosts or isolated heavy precipitation – particularly the dreaded grêle, or hail – both of which can cause untold damage to the vine and its chances of delivering a full and healthy crop,” Cooper said.

What’s in a grape?

The harshest estimates peg the losses in grape suitability at as much as 70 percent in premium winegrowing areas, and – according to a paper by Michelle Renée Mozell and Liz Thach in the journal Wine Economics and Policy – “vast portions” of Europe on the Mediterranean coast, especially Italy, Greece and France, might become completely inhospitable to grape production by 2050.

Soon, a glass of Burgundy may more closely resemble a Bordeaux, and winemaker Pascal Chatonnet has warned that Bordeaux wines could become fruitier and have a lower alcohol content by the middle of the century.

European winegrowers face additional pressures from substantial restrictions on what varieties of grapes they can plant. One answer to climate change could be for vintners to begin planting some of the hundreds of varieties of grapes that are better adapted to warmer climates and droughts, but strict labelling laws limit the degree of diversity growers can pursue. For instance, there are only three varieties of grapes that can legally be labelled Champagne, and only six red grapes can contribute to Bordeaux. Wine markets in many countries are dominated by just a handful of varieties of

grapes. In Wolkovich’s opinion, this limits how winegrowers can adapt to climate change and, unless Europe’s labelling laws are adjusted, will make the region less resilient than other areas.

However, these laws carry a deep tradition and play into the idea of terroir, a term that encompasses the entire natural environment in which a wine is produced, including the soil and climate. The terroir is said to be the vital link between where a wine is grown and its flavour. Climate and soil type can account for as much as 75 percent of a wine’s quality, but terroir also embodies the traditions and history cherished by winegrowers. For vintners, it is not just the climate that is changing, but also the identity they have established over centuries and the flavour that is characteristic to their region. » EuropeanCEO

| 127

lifest yle

Food & Drink

Investing in the future Over the past few years, Italian winegrowers have discovered just how destructive even a fractionally warmer climate can be to their harvest. Vintners in the top-producing region where Prosecco and Pinot Grigio are grown told The Washington Post that their grapes were ripening more quickly, burning in the hot summer sun and falling victim to more diseases.

The degree to which a winegrowing region will be impacted by global warming depends on its specific location in Europe and how much that region is projected to warm, as the hotter areas will have fewer options to help them cope with the warming climate. This will not spell disaster for everyone, though: cooler areas currently located on the fringes of wine producing regions could soon muscle their way into the premium segment. The warming climate means places such as the south of England – and, beyond Europe, Northern China and Upstate New York – will soon be able to grow a greater variety of grapes.

England, for one, is beginning to mimic a perfect climate for producing Champagne, according to Mozell and Thach. A rise of

one to two degrees Celsius would allow English grapes to develop more sugar and phenolic ripeness, which softens the acidity and influences the colour, flavour and aroma of wine. This would create a big growth opportunity for the country’s burgeoning wine market.

However, England would have a long way to go to catch up with a wine-producing giant like France. According to Eurostat’s 2017 figures, the UK had just over 1,500 hectares of vines in production compared with France’s more than 760,000 hectares. In 2014, the International Organisation of Vine and Wine found that France produced 47 million hectolitres of wine, compared with the UK’s meagre 47,000 hectolitres.

The impact of the changing climate will also be determined by how individual growers respond.

Although controversial, the best way to reduce the impact of global warming on a certain region is to swap the varieties of grapes used.

Hybrid grape varieties such as Petit Verdot, which fares well in warmer climates, could replace the more delicate Pinot Noir, for instance.

Aside from that, winegrowers can reduce the effects of global warming by working to manage

the microclimates around their vines, using strategic trellising practices, changing irrigation practices or introducing waterefficient micro-misters and wind machines. Shade cloths can also help balance the amount of sun grapes receive, and altering rootstocks, or replacing the root system of a vine, can improve water and mineral absorption.

Some Californian winegrowers have taken to training owls and falcons to control the increasing number of pests without using pesticides, according to a report in The New York Times. The report also detailed how winegrowers can use drones to detect moisture by monitoring the colour of the vegetation. What’s more, a growing number of winegrowers are taking it upon themselves to make their vineyards more energy efficient. “[For] growers who do nothing, we expect [they] will see large negative impacts,” Wolkovich said. “Growers who respond actively and proactively will cope much better.”

“For finicky grapes, even subtle changes in the weather can have a makeor-break effect on their chemistry and the quality of wine they produce”

Uncertain times Despite the disruption climate change has caused to winegrowers in recent years, 2018 marked a year of strong performance in the fine

128 | EuropeanCEO

C19MA_C04.indd 128

13/02/2019 17:48

C19MA_129_C04_16917.pdf

wine market. Burgundy, Bordeaux and Champagne all performed well for investors last year, and on the back of widespread global demand – with positive growth in Asia as well as the traditional markets of Europe and the US – the outlook for 2019 is encouraging, Cooper said.

But Cooper also warned that some of the world’s best wines for investors would likely be vulnerable to the changing climate: “The ‘safest’ winegrowing areas know what their weather is likely to be year in, year out – and yet those that make the finest wines are often located in more ‘marginal’ areas.

Great wine is all about balance, and that is often achieved by living on the knife edge of underripe and

overripe.” These marginal areas could become even more inconsistent, which would likely reduce the availability of the best wines.

For those already invested in these fine wines, there is a chance their asset could grow in value more rapidly than before due to the lower supply and increased global demand. But for investors who are new to the wine market, gaining access will become even harder.

However, the fine wine market will be fundamentally influenced by how vintners adapt to the disruptions caused by climate change.

Flexibility will be vital, and that means regulatory institutions must get to grips with this threat for the survival of the industry. Increased

flexibility for winegrowers in terms of grape varieties will offer the adaptability the industry needs, up to a point, Wolkovich said. But the process of changing grape varieties is long, with new vines taking up to five years to produce their first fruit, so action is needed now.

In the grand scheme of things, if society is plunged into an apocalyptic climate scenario in the latter half of the century, which sees us struggling to feed ourselves and find clean water, most of us will not mourn the loss of a late-night glass of red wine. But as Mozell and Thach put it: “Though wine is not essential to human survival, wine is an important product of human ingenuity.”

Wine is not merely fermented grape juice. It has transformed into a cornerstone of numerous cultures around the globe and is intrinsically tied to the economies and histories of many countries.

But at the same time, it is just another crop that is reliant on a supportive climate for its survival.

There is no doubt that global temperatures will rise in the coming decades, but the big question for vintners going forward is by just how much. The difference between two and four degrees Celsius could be vast and, as Wolkovich said: “Humans have tremendous control over that answer, and it’s critical to what the future of wine looks like.” n EuropeanCEO

| 129

C19MA_130_E05_82547.PDF

EUROPEANCEO

THELASTPAGE TOP TRUMP

70km Denmark has announced plans to erect a 70km fence along its border with Germany. Unlike US President Donald Trump’s infamous ‘wall’, however, the fence is designed to keep out wild boars, which authorities believe could bring disease to its pig farms. The country is home to more than 12 million pigs – twice the size of its human population – across 3,000 farms. Farmers are particularly concerned about African swine fever.

RAT RACE

YOUNG AT HEART

In January, hundreds of rats descended upon the small Italian village of Gattolino – which ironically translates as ‘little cat’. A special taskforce involving firefighters, the police and sanitary inspectors has since been brought together to deal with the problem. The rats appear to have emerged from an old pigeon-breeding enclosure that closed last year, leaving them in search of shelter and food supplies.

20 YEARS A Dutch court has rejected a 69-year-old man’s request to be 20 years younger. Emile Ratelband argued that his date of birth meant he struggled to find both work and love, and that his request was consistent with other forms of personal transformation accepted around the world, such as the right to change one’s name or gender.

The court rejected Ratelband’s request, saying it would have “a variety of undesirable legal and societal implications”.

OUT IN THE COLD Unilever, the owner of popular ice cream brands Magnum and Ben & Jerry’s, has been stockpiling its frozen desserts ahead of the UK’s departure from the EU. The move was motivated by concerns of a no-deal Brexit and rising tariffs. Unilever CEO Alan Jope maintained that Unilever was still on target to meet its 2020 goals, but said he anticipated underlying sales growth to be “in the lower half [of Unilever’s] multi-year three-to-five percent range”.

WORTH ITS SALT

3-5%

CLOSING TIME

DOUBLE TROUBLE

3.5 hours 1%

¤500M Italian police have discovered more than two tonnes of cocaine in the largest drugs seizure in the country for 25 years. As part of a sting operation involving British, Colombian and Spanish authorities, Italian law enforcement switched the cocaine for 1,800 packets of salt and followed the shipment to its final destination: Barcelona. The total value of the original cargo is thought to be in the region of €500m.

130 | EUROPEANCEO

A group of armed robbers were able to carry out a brazen robbery near Paris’ Champs-Élysées after placing a ‘closed’ placard on the front door of a local bank.

The perpetrators tied up staff and customers, leaving them for 3.5 hours as they sifted through around 30 deposit boxes. Once they had left, staff were able to free themselves and alert the police. In recent times, Paris has been subjected to a spate of audacious robberies.

New DNA evidence has finally debunked the Second World War conspiracy theory that Nazi Deputy Führer Rudolf Hess escaped justice after being replaced by a doppelgänger. Hess was arrested in 1941 and imprisoned until his death in 1987, but some have suggested the man serving his sentence did not have the correct scars. A recent blood analysis, however, has concluded there is just a one percent chance the authorities captured the wrong person.

C18ON_001_Z07_14207.pdf

NOW AVAILABLE

LIVE LIKE A ROCK STAR

VIP ACCESS AND EXCLUSIVE BENEFITS

1 & 2 BEDROOM APARTMENTS WITH HARD ROCK SERVICE

SWISS STYLE, QUALITY, EFFICIENCY

ARCHITECTURE AND INTERIORS BY WOODS BAGOT

RETUNE YOUR SOUL

EXCLUSIVE EVENTS ROCK SPA ®, BODY ROCK® GYM, ROCK OM® YOGA + MUSIC RESTAURANTS, PRIVATE DINING AND ROOF TERRACE WITH 360° VIEWS

FOR MORE INFORMATION WWW.RESIDENCESATHRHDAVOS.COM | +44 20 7971 7942

HRD_EuropeanCEO_280x210_Nov18.indd 1

25/10/2018 14:20

C16MJ_001_Z02_08375.pdf

Urban Jurgensen 2340 WG The European Advert 280x210.indd 2

11/03/2016 18:55