Author: itsupport

The supply chain crisis

Posted on by itsupport

Aptus Utilities, a UK energy and lighting infrastructure and installer company, sits towards the end of its own supply chain. For Ian Winn, group financial director, it’s an uncomfortable place to be currently. “We’re seeing prices increase as lead times lengthen and demand increases, making it very difficult for manufacturers and suppliers to build up stock levels. This is leading to shortages and impacts across the board.” Winn continues, “We’re not direct importers but two of our most important materials are electric cable and meters, which come in from the continent. Because of Brexit some lead times have now doubled.”

Aptus uses a lot of polyurethane pipe. “But production capacity was taken out of the market last year,” Winn goes on. “That’s reduced capacity to the manufacturers and pushed up prices and introduced scarcities exacerbated by the take-off in construction activity at the back end of last year and this year.” Add in COVID-19 issues for this street light installer. “Effectively they’re [street lights] fabricated steel. But with COVID-19 people are less able to work closely together.” Aptus is getting around some of the issues by talking to suppliers more, holding more stock. But they also have 20 three tonne long wheel-base on order since March from Peugeot. They’re eking more life out of their existing vans, which is pushing up maintenance costs.

Inexplicable planning failure?
Michael Boguslavsky, head of artificial intelligence at Tradeteq, told World Finance that while the supply chain crisis continues, there’s no lack of supply and demand data to plan around it. “What’s clear is we can’t put this down to a lack of resource,” Boguslavsky said. “Global companies have some of the best operational and risk management systems around but, in the case of microchips, they failed to detect how a shortage would impact operations.”

Consumer spending remains high, and inventory levels across the globe remain very low

The technology to detect and anticipate shortages exists – communicating with customers in real-time deploying lightning-fast payment systems right down the supply chain – and is in use in other areas. Banks and the financial trading community use fintech tools that can be repurposed, given care and planning, to other sectors.

Are industries picking up? The evidence looks uneven. Richard Parkinson, port director at Southampton’s UK Solent Gateway, says that while there’s no end of data, understanding it in a holistic way is massively challenging. There are two data issues – context and access – that are needed for an effective pan-global supply chain analysis, he says. “It may be that each logistic service provider, airline or shipping line holds its own data but perhaps it needs to be collated centrally for a single analysis of end-to-end global supply chains. That may be where the weakness in data lies: each element of the global supply chain holding its own stove-piped data.”

Licence to drive
In the UK the food supply chain is being weakened by an acute driver shortage. According to the Road Haulage Association there’s a shortfall of 100,000 missing jobs. Part of the problem is drivers quitting the UK during the COVID-19 pandemic who can’t – or don’t want – to return via the post-Brexit immigration system, which doesn’t recognise the haulage role as highly skilled. Also, the age of the average UK lorry driver is 55 – just two percent of HGV drivers are under 25 in the UK – so the pool of available UK driver labour is getting smaller.

“The public,” says Hugh Mahoney, CEO of UK food wholesaler Brakes, “are starting to notice the resulting gaps on retailers’ shelves; in failed waste disposal collections; and through the items missing from the menus at their local pubs and restaurants.” The disconnect at government level is a failure to see driving, says Mahoney, “as a part of the critical infrastructure that supports feeding the nation, and that this will disproportionately impact smaller farmers, producers and suppliers who will be hardest hit by surging distribution costs.”

In the run-up to Christmas the Conservative government has introduced temporary visas for 5,000 fuel tanker and food lorry drivers to work in the UK. But there still remains a serious shortfall of driving labour. “The EU workers we speak to will not go to the UK for a short-term visa to help the UK out of the shit they created themselves,” Edwin Atema from Dutch-based lorry drivers union FNV said in an interview with BBC’s Radio 4. “In the short term, I think that will be a dead end.”

Demand overwhelms supply
The disruption across so many points is a vicious circle. Freight forwarding specialist Unsworth warned at the beginning of October 2021 that Black Friday, Cyber Monday and Christmas were approaching fast. “Consumer spending remains high, and inventory levels across the globe remain very low,” it said.

Exports out of Asia, it added, have been one of the biggest chokepoints as European demand for goods has overwhelmed the capacity of space and workforce. Worse, several Chinese tech suppliers – including those supplying consumer tech giant Apple – have cut operations in Jiangsu province, a major hub for China’s industrial tech industry due to electricity rationing as the Beijing administration attempts to hit carbon-cutting goals. HP, Microsoft and Dell are also affected.

 

Business and political risk – watch those chokepoints
While the Suez and Panama Canals are global chokepoints there’s increasing worry over less well-known, but critical, shipping highways. For NATO, the Greenland-Iceland-UK Gap is a concern. This is a 200-mile stretch of ocean between Greenland and Iceland and a 500-mile gap between Iceland and Scotland. It’s where Russian warships push through to reach the Atlantic Ocean.

Both the Chinese and the Russians, in different ways, are looking at creating new chokepoints that can accommodate military operations.In other words, some countries are pivoting seemingly neutral economic infrastructure for political and strategic advantage. The US has always made use of its geographical and military reach, weaponised by 9/11.

However, some businesses, hauling considerable supply chain risk behind them, may underestimate the geopolitical nuances.They may even, unwittingly, make themselves a target. “Network connections are so complex that policy makers often don’t understand how interventions could produce unexpected consequences,” wrote Henry Farrell and Abraham Newman in the Harvard Business Review. “When the US announced sanctions against the Russian metals giant Rusal, it did not anticipate that they might bring the European auto industry to a halt, and it had to modify them swiftly. The more businesses’ government-relations offices can do to educate policy makers, the better.”

 

Turbulent waters
Simultaneously the cost of sending containers from China to Europe and the US has been hit by severe inflation. For some global trade routes the price of standard 40-foot containers saw a 400 percent rise in 2021. In mid-September the Economist estimated that the spot price of sending such a box from Shanghai to New York cost $2,500 in 2019 but this price was now close to $15,000.

The Ever Given container ship that ran aground in the Suez Canal, March 2021
The Ever Given container ship that ran aground in the Suez Canal, March 2021

Admittedly a monumentally-sized container ship blocking a vital maritime passageway – the 120-mile Suez Canal – in March 2021 didn’t help. The 220,000-ton Ever Given, en route to Rotterdam, diagonally blocked the canal having been blown off course by high winds. Most vessels passing through the Suez are obliged to use Egyptian pilots to help them navigate this stretch. However, the Ever Given belongs to a new super-class of carriers that are simply too vast for some waterways – including the Panama Canal. Somewhat predictably, the incident was a billion-dollar disruption to global trade as well as garnering a huge amount of press.

 

Forever change?
John Manners-Bell, CEO of Transport Intelligence, a supplier of market solutions to the global logistics industry and Visiting Professor at the London Guildhall Faculty of Business and Law, says global supply chains, post-COVID-19, will irrevocably change. “Globalisation has really been about sourcing things from China,” he says. “Now, companies are very much thinking about diversifying their supplier base. A lot more are thinking about sourcing more from either their own countries or from countries that are much closer.”

“Transportation risk,” he goes on, “has been growing for many companies for some years but has come into focus because of COVID-19. Geo-political issues such as the trade war between the US and China but also security concerns as well. You can easily see in the future that the world will start to break into supply chain regions.” Some will be China focused while other routes will be close to Europe and the US. In other words, there will be increasing bifurcation, one being Sino-centric and the other more Western-based.

Cooling on China
This will bring huge changes as regional trade flows rather than global flows predominate, says Manners-Bell. “There will be some major global companies that will lose out but more regional and national players will benefit.” Manufacturing is likely to gain considerably from the switch, he says. He cites electric car marker Tesla, which has sourced a great deal of components from inside the US, snipping transportation risk. While Tesla has operated out of its California Fremont factory, originally built by GM in 1962, its new factory in Austin, Texas is attracting many more local suppliers. That is where it’s building its SUV Model Y and Cybertruck models.

Tesla Gigafactory in Austin, Texas, US
Tesla Gigafactory in Austin, Texas, US

The ‘keep local’ rationale is gaining traction in the UK. A recent EEF survey claimed that the average UK manufacturer has close to 200 suppliers in total with almost 100 percent of manufacturers relying on some materials being sourced from overseas. Many, many companies must be reconsidering their relationship with China, however difficult it is to untangle a supply chain. Multiple supply chains may be one answer. Rising concern over data and privacy is another issue.

In October 2021 the British international freight association (BIFA) said 12.5 percent of global capacity was unavailable in August due to delays. “This means that in August 2021, a full 3.1 million TEU [shipping container with internal dimensions measuring 20 feet long] of nominal vessel capacity was absorbed due to delays. To put this into perspective, the insolvency of Hanjin in 2016 [the world’s eighth largest carrier at that time] removed only 3.5 percent of the global capacity – until the vessels came fully back into circulation with new owners. The current situation is akin to a scenario of three and a half Hanjins all going bankrupt at the same time, with no immediate outlook for the vessels getting back at sea.”

Solutions please
Neil Ballinger, head of EMEA at automation parts supplier EU Automation, says the supply chain manufacturing model itself, for some, would benefit from switching from a linear model to a circular one, slashing production scrap and making better use of existing resources. “Taking care of industrial equipment and implementing a strategic preventive maintenance programme can,” he says, “help manufacturers keep track of their machines’ lifecycles so that they can manage component obsolescence.”

Many companies must be reconsidering their relationship with China, however difficult it is to untangle a supply chain

Over time this limits the amount of new equipment needed to buy, he says. The circular route is built upon the three R’s approach: resume, reduce and recycle. It’s attracting more attention as sustainability and climate pressures mount. This approach contrasts against the linear economy model where the focus is more about eco-efficiency per se, rather than overall eco-effectiveness of the system itself. “It’s also crucial to diversify supply chains,” Ballinger goes on. “Over-relying on one supplier or a cluster of suppliers based in the same area can be a great risk at times of socio-political instability.” While logical enough, many materials companies, according to Professor Thomas Johnsen from Audencia Business School, have little choice “but to source from distant and high-risk locations, for example, in case of rare and precious materials and metals.” He told World Finance that “cobalt and lithium are essential for a range of electronic devices, including electric cars – and are notoriously difficult to source.”

‘Normal’ labour mode?
Then there is the concern around supply chain ethics and working conditions. In a crisis, it’s harder for companies to keep labour standards and working conditions tight. Supply chain disruption means higher risk of unauthorised subcontracting as wholesalers, agents and others seek alternatives, upping corporate risk. “The risk of exploitation,” says Jessica McGoverne, director of policy and corporate affairs at ethical trade service provider Sedex, “such as forced labour increases at times of pressure through a combination of factors – supplier pressure, worker shortages and more pressure on workers to work longer hours.”

There’s not just reputational risk but legal and financial. Poor practices and mistreatment of workers – low wages and discrimination – can quickly turn into scandals and negative press coverage, even a drop in share price. McGoverne says the global garment manufacturing sector has been badly hit by the supply chain crisis with close to 90 percent of businesses exposed to slashed orders. It’s not all bad news: some 20 percent of businesses have diversified and deployed new innovations to respond to the pandemic, she adds.

Picking, packing and sorting isn’t cheap
To what extent can artificial intelligence (AI) better support the average supply chain? Nigel Lahiri from software provider Grey Orange says industries exposed to labour shortages should look at robotics and AI to slash labour costs as much a third, “while also reducing order fulfilment time by as much as 50 percent.” He says the supply chain crisis, at least in the UK, is in part due to Brexit and loss of a European workforce. “Which reflects,” he told World Finance, “the often tedious and dangerous nature of those jobs within logistics, retail, food service, and manufacturing, which are the industries most affected by the labour shortages.”

Supply chain fulfillment using robotics
Supply chain fulfillment using robotics

“With a lack of labour,” he adds, “businesses within those industries will experience slow order fulfilment and food shortages by Christmas.” As the holiday season gets under way with the promises of record sales, so too does the risk of record returns. This logistics area is one many retailers dread. But some think this is a good area to deploy AI and robotics towards.

AI doesn’t object to repetitive tasks or require a pension, but it drags its own supply chain risk behind it: AI administers highly sensitive business information and only one incident is needed to jeopardise a supply chain. Not everything in a supply chain can be automated. Sales predictions and HR are areas supply chains will always struggle with. These ‘soft’ skills may never be a fit for robotics – until computers and robots are able to think beyond their own programming. And we’re not there yet, most AI experts say. Social cues, ‘reading’ a human situation – delicate HR circumstances, for example – remain well beyond it.

Each company is looking for the right mix of automation and AI investment to tackle the sheer volume of data

AI though can be an enabler of supply chain verisimilitude, says Chris Huff, chief strategy officer at software business Kofax. This has real value as ESG supply chain pressure rises. AI can track data insights that “previously,” says Huff, “might have been ignored because the human labour cost of assembling, analysing and gleaning insights was simply too onerous and costly.”

Applied with care AI can expose poor business practices and work quality. And when AI is used to create digital workflows the quality and cost of work can be rapidly measured. “Just about every industry,” says Huff, “is struggling to digitally transform as they seek to remain relevant. Each company is looking for the right mix of automation and AI investment to tackle the sheer volume of data.”

Taxing issues
What is harder to plan and anticipate is political risk. In fact, it’s impossible. Christiaan Van Der Valk is a tax and regulatory expert at Sovos, a reporting software business. He acknowledges being crisis resistant is an impossibility – but tax digitisation and the reporting around it can streamline supply chain governance, at least. “All companies could benefit from tax digitisation efforts.

The big question is whether governments can converge on more harmonised approaches. There is a real opportunity with modern technology for all stakeholders to benefit from tax reporting and business process automation, provided the diversity of legislative requirements can be reduced over time.” This is ongoing. Van Der Valk says too many businesses see supply chain tax issues as a tiresome ball and chain. “I’d recommend them to instead approach tax as an opportunity. While it’s true tax administrations, in their quest for digital transformation, may place varying requirements on your systems and processes which in the short term make supply chain automation harder, smart organisations transcend it to see a bigger picture.”

And if the tax data is high quality, your tax and business objectives stand a better chance of converging. “This level of externally-consumable data intelligence will open up new opportunities to improve many critical processes such as cash management, supply chain transparency for environmental protection and labeling purposes, and customer service.” So, get serious about understanding what tax authorities want in digital format, he advises, then look hard at how consistent the reporting flows are.

Turning a corner
While there are plenty of excuses for understanding the current shortage problem the most pressing challenge is how to restore stability and ease the shortages, and quickly. When the immediate supply concerns retract, companies and governments will need to consider what kind of insurance or slack they should build into the production system over the longer term.

Just as banks needed to increase their equity buffers after 2008, we perhaps now need to step back from just-in-time production and redefine productivity in light of the supply-chain risks being witnessed.

Taboo economics

Posted on by itsupport

The word ‘taboo’ was introduced into the English language by Captain Cook from the Tongan word for prohibited or forbidden, in his 1784 book A Voyage to the Pacific Ocean. It is associated both with the holy, and the unclean. In his 1890 book The Golden Bough, the Scottish anthropologist James George Frazer argued that taboos were a throwback to the age of magic. Human belief progressed through three stages: primitive magic was followed by religion, which in turn was followed by science. Taboos belonged to the first stage, and could be viewed as a kind of negative magic: “The aim of positive magic or sorcery is to produce a desired event; the aim of negative magic or taboo is to avoid an undesirable one.”

So what would qualify as an economic taboo? Well, to start with something basic, how about money. Economists of course use money as a metric all the time – but they have long avoided talking about how the stuff is actually created. In fact, as economist Richard Werner remarked in 2016, the subject “has been a virtual taboo for the thousands of researchers of the world’s central banks during the past half century.” According to economist Norbert Häring, “Cursory observation suggests that credit creation or money creation are taboo words in the leading journals.”

The creation of money
Textbooks have traditionally dodged the subject by saying that the process is controlled by central banks, but the reality is that the vast majority of money (about 97 percent in the UK) is created directly by private banks. When banks issue loans such as mortgages, the money isn’t taken from somewhere else; it is just created on the spot, as if by magic. The taboo around money creation has started to lift in recent years, beginning with a Bank of England paper in 2014 that admitted that the standard textbook story was wrong. But it does seem odd that the misunderstanding could have persisted for so long. One reason perhaps is that, as banks have long known, the best way to make money is to literally make it. Money creation through loans is very good business, because the bank can charge interest on all that new money. As Häring notes, this “pecuniary benefit” is not discussed in the textbooks, which again “points to a taboo imposed by the interest of a very powerful group.”

Still, other kinds of business are profitable too – so what makes money special? The reason is related to another taboo topic – which is the subject of power. Classical economists and thinkers such as Thomas Hobbes and Adam Smith recognised the connection between money and power – as the latter wrote, “Wealth, as Mr Hobbes says, is power…the power of purchasing a certain command over all the labour, or over all the produce of labour which is then in the market.” But it has since fallen from favour. In fact the economist Blair Fix did a word-frequency analysis of economics textbooks, and found that “What defines econospeak is that power is conspicuously absent.”

This reluctance to address power is right there in the very definition of economics. The English economist Lionel Robbins wrote in 1932 that “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” and similar definitions still appear in modern textbooks. Gregory Mankiw’s widely used textbook Principles of Economics, for example, defines economics as “the study of how society manages its scarce resources.”

The crowbar of power
But if you look at how scarce resources are actually allocated in the real world, it would be more accurate to say that what counts is power. Money is certainly a tool used by the powerful – as Nietzsche said, “money is the crowbar of power” – but other things can work too, like an army.

And if anything, it would be more accurate to say that economics avoids the question of how we distribute resources – and indeed has long treated it as taboo. Robbins wrote that, because the subjective utility of one person cannot be measured versus that of another, the whole question of fair distribution is “entirely foreign to the assumptions of scientific economics.” Or as Nobel laureate Robert Lucas put it in 2004, “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.” As an example, today one of the most obvious economic signals is that, on average, white males earn more than other people.

Yet given the lack of interest in power relationships, it is perhaps unsurprising that the words ‘sexism’ and ‘racism’ are missing entirely from the economic corpus, according to Fix. As the New School’s Darrick Hamilton argued in a lecture, “What we need to do as economists is a better job at understanding the roles of power and capital in our political economy.” A first step is to relax some of those economic taboos, and restore money and power to their rightful place at the centre of economics.

A renewable energy transition is on the horizon

Posted on by itsupport

Around the world, momentum is growing behind the renewable energy movement. Nations are searching for solutions to power a cleaner, greener future, and bold plans are being set out to reduce carbon dioxide (CO2) emissions. The race is on to transition to a net zero energy system by 2050, and thus avert the crisis of global warming by limiting the world’s temperature rise to 1.5 degrees Celsius, as set out at the Paris Agreement.

Yet while countries around the globe look to put a stop to rampant CO2 emissions, energy demand is expected to tick ever higher as economies demand more power to facilitate their continued growth and development. The International Energy Agency (IEA) predicts energy demand will rise between 25 and 30 percent in the years to 2040.

Reaching the net zero milestone in a matter of decades while energy use continues to rise will require businesses to innovate and seek out sustainable solutions that are both accessible and efficient. One of them could be hydrogen.

A progressive fuel
Solutions for the renewable energy transition can often be found in plain sight in the natural world. Take solar, wind or hydropower. Hydrogen is the most abundant chemical element and as such is found throughout the earth. Its atoms make up water, plants, animals and humans, and in its rarer gas form it is an incredibly valuable fuel. Just take into account hydrogen is always in a compound form.

Today, green hydrogen is used as a cleaner alternative to high-polluting fuels, offering a critical tool in countries’ net zero journeys. While fossil fuels like oil, coal and natural gas cause damaging greenhouse gases when burnt, the only waste product created by hydrogen is water vapour. As a universal, light and highly reactive fuel, its place in the energy mix is key. For years, hydrogen has been heralded as a commodity with the power to revolutionise the energy industry.

A key step in decarbonising the planet will involve decarbonising the hydrogen industry

But obtaining hydrogen is not cheap, and high costs have restricted its growth. With hydrogen’s green credentials calling the attention of global investors, however, this is finally changing. The Hydrogen Council expects at least $300bn to be invested globally in green hydrogen over the next decade. Meanwhile, the global demand for hydrogen for use as feedstock (in the fabrication of ammonia or its inclusion in chemical processes in refineries or industry) has tripled since 1975 to reach 70 million tonnes a year in 2018, according to the IEA.

Its popularity is no wonder, but its environmental impact is not so clear cut. When fossil fuels are used to create hydrogen, carbon dioxide emissions find their way into the atmosphere despite hydrogen’s clean credentials. Currently, hydrogen is almost entirely supplied from fossil fuels, with six percent of global natural gas and two percent of global coal going directly into hydrogen production. This makes hydrogen responsible for more than two percent of total global CO2 emissions, which is equal to the carbon emissions produced by the UK and Indonesia combined.

That’s why renewable energy champions like Iberdrola believe a key step in decarbonising the planet will involve decarbonising the hydrogen industry. Creating green hydrogen, a version that stems from renewable energy, will slash carbon dioxide emissions and create a truly revolutionary material that will help decarbonise other high-polluting sectors, offer more security to renewable energy and avert a climate crisis.

Renewable technology
Hydrogen generated from natural gas, or methane, is also known as grey hydrogen, and it is the form of the fuel that is most commonly produced today. Blue hydrogen is created when the carbon generated by obtaining hydrogen is captured and stored underground through carbon capture and storage (CCS) before it can pollute the atmosphere, although carbon capture is an expensive and not yet commercially viable technology.

Green hydrogen is the cleanest version of hydrogen available, and it is produced when renewable electricity, created by solar or wind power, is used in a chemical process called electrolysis, which sees the hydrogen atoms that make up water (H2O) being split from the oxygen atoms. Green hydrogen is a small but growing segment of the energy market, currently making up just 0.1 percent of overall hydrogen production, according to the IEA.

The World Hydrogen Council predicts that production costs for green hydrogen will drop by 50 percent by 2030, opening the floodgates for green hydrogen to power the future. As the decarbonisation of the economy progresses around the world – a process that is well in motion – and companies continue to build the necessary infrastructure, renewable energy will become cheaper, thus lowering the cost of green hydrogen and making it more widely available. In the longer term, green hydrogen will be important in niche areas that cannot be electrified, such as shipping, aviation, long-distance freight and steelmaking.

Realising its potential
Barriers persist, however. Iberdrola itself has invested in renewables for nearly two decades, but further progress is needed. Replacing all the grey hydrogen in the world will require a whopping 3,000 terawatt hours per year (TWh/year) from new renewables, equal to the current demand of Europe.

The shift will be critical for creating a cleaner energy system, as producing green hydrogen that emits no carbon dioxide into the atmosphere would slash the 830 million tonnes of CO2 that is emitted annually by obtaining grey hydrogen through traditional fossil fuels.

For green hydrogen to replace dirtier, polluting fuels, it must be produced at scale. Until the cost of renewables falls, green hydrogen will remain expensive to generate. Electrolyser farms, fuel cells, and other equipment that is used to obtain and manage green hydrogen, will all see their costs fall from mass manufacturing.

Another aspect to bear in mind is the added safety requirements needed when using hydrogen. Hydrogen is a highly volatile and flammable element, so extensive safety measures must be put in place to prevent leakages and explosions. While these hurdles cannot be overlooked, the benefits of hydrogen extend well beyond its sustainable status.

Hydrogen is also transportable and versatile, as it can be transformed into electricity to power a wide variety of industries, as well as ships, and planes. What’s more, hydrogen could be stored, allowing it to solve some of the mismatches between supply and demand, an issue that is often at the heart of the renewables debate. While prices for new solar and wind power are falling, batteries or other storage solutions are needed for the days when the wind doesn’t blow, or the sun is hidden behind clouds. Hydrogen, which can be obtained through renewables and then stored and used after it is produced, as well as being mixed with other energy sources, offers a flexible solution. Hydrogen can also be transported from renewable-energy-rich countries to areas with less access to green forms of energy, or manufactured in situ if the renewable electricity is transported using the electrical networks up to the consumption areas.

A long-standing relationship with industry has also proved beneficial to hydrogen. Having been used to fuel cars, airships and spaceships since the beginning of the 19th century, today, hydrogen fuel cells are increasingly common for vehicles. Scaling green hydrogen in industries such as the production of fertilisers, steel, shipping and aviation is crucial to hydrogen’s contribution to a clean energy future (see Fig 1).
The electrification of the economy using renewable energy is the world’s best bet at decarbonisation, but decarbonised materials like green hydrogen have an important role to play in sectors where electrification is not yet competitive or technically possible, like steelmaking, shipping or aviation.

A promising future
Iberdrola, a longtime pioneer in renewables, is a leading force in the development of green hydrogen today. Having already fronted projects to transform sectors like the ammonia industry with green hydrogen, the group has announced plans to launch a large-scale green hydrogen project based on photovoltaic energy starting its initial phase in Puertollano, Spain. By 2030, Iberdrola is set to produce 85,000 tonnes of green hydrogen.

Now is the time to act on the vast opportunities presented by green hydrogen. Iberdrola’s investments in green hydrogen technology are driving down costs and committing resources to a greener, cleaner future. For example, the business has spearheaded new developments as part of a broader €150bn investment plan that will fuel the growth of green hydrogen, as well as launching a new business unit solely focused on green hydrogen. By investing in the revolutionary technology of green hydrogen, Iberdrola is making a promise to the future that a cleaner energy industry is indeed on the horizon.

The ethical dilemma created by leaking confidential docs

Posted on by itsupport

Swiss Leaks, LuxLeaks, Paradise Papers, Panama Papers and now the Pandora Papers: 12 million confidential documents from the archives of firms specialising in the creation of offshore companies in so-called tax havens. The phenomenon of the papers and leaks is in full swing and causing strong reactions among the public and major upheavals among the political class; however, some aspects of this ‘practice’ raise substantial ethical and legal questions.

Tax evasion is illegal and therefore legally and socially unacceptable; it can neither be condoned nor advised. It is obvious that exposing patterns of fraud can be useful for the authorities, in order to know the scale of the problem and the methods used by fraudsters and their advisers, whose names are also exposed.

This allows authorities to undertake all necessary steps to counteract these illegal schemes, whether national, European or international, mainly at the OECD level, where the committee on fiscal affairs is ensuring the urgent implementation of the main base erosion and tax shifting (BEPS) actions in this area. These actions aim to neutralise the effects of hybrid mismatch arrangements, design effective controlled foreign company rules, limit base erosion through interest deductions and establish financial payments and mandatory disclosure rules. While the explanation of fraud schemes may be of educational interest, the publication of the names of the beneficiaries of offshore companies can only be of theoretical interest to the ordinary citizen.

Total (while uncontrolled) disclosure
As previously said, this way to proceed poses many problems on legal, ethical and social levels. It should be emphasised from the outset that the facts are presented to a largely non-specialised public, which has difficulty distinguishing between tax fraud (an illegal practice) and tax avoidance (a perfectly legal practice).

Political statements exacerbate this confusion, such as the recent statement by the Belgian minister of finance: “Avoiding tax through off-shore constructions is fraud.” This statement must of course be tempered.

Tax justice demanded by the public is interpreted in a peculiar way: people do not ask to pay less tax, but rather that others pay more

Firstly, it is obvious that an offshore company (like any other structure or company, wherever it is established) is nothing more than an instrument. And like any instrument, the offshore company is not legal or illegal in itself: it is its use that may or may not be. An offshore company is therefore not necessarily an instrument of tax fraud.

Subjected to a multitude of media and political statements, and lacking the technical skills to understand the situation properly, the average citizen thus loses sight of another important issue: the fact that they are being very heavily taxed. Thus, curiously, public opprobrium is directed against those who have tried to escape, even legally, from heavy taxation, rather than against governments that constantly increase the tax burden to cover their excessive public spending. In this way, the ‘tax justice’ demanded by the public is interpreted in a peculiar way: people do not ask to pay less tax, but rather that others pay more. This is a curious attitude, since the state’s argument that increasing the tax base (notably by combating tax avoidance) would allow the average citizen to pay less in taxes has never been verified in reality: tax revenues increase over time but taxes never decrease.

An attempt on human rights
On an ethical level, it is unacceptable to put fraudsters and people who use an offshore company in a perfectly legal manner on the same footing. The latter are subjected to an unprecedented attack on their privacy for absolutely no reason, especially since, at the time these documents are revealed to the general public, no one knows whether the beneficiaries of such structures have acted improperly or not. Moreover, while the revelation of such information is always widely publicised, the results of the ensuing investigations are rarely known, so much so that the proportion of fraudsters among those whose private lives have been exposed to the public is unknown.

Some of the practices denounced are common in everyday life. For example, a former political leader was accused of having acquired a company that owned a building, rather than the building itself. This very common transaction is stigmatised on the grounds that the company in question was established in a tax haven, but it has not been argued that if it had been a local company, he would not have made the same saving. After the right to privacy, it is therefore the principle of proportionality that falls victim to the lack of nuance in this way of communicating: starting from the incorrect assumption that the offshore company is an instrument of fraud, it is deduced that anyone who uses an offshore company is necessarily a fraudster and that, in general, the use of offshore companies is to be banned. However, it is also true that a large number of people defraud by means of structures established in their own country, but no one has ever suggested banning their use. To ban (the use of) a tool on the grounds that some people may misuse it makes no sense.

Finally, this phenomenon raises important legal issues. The problem of violation of privacy has already been mentioned above. Article 8 of the European Convention on Human Rights proclaims the right of everyone to respect for “their private and family life, their home and their correspondence.” Admittedly, restrictions exist when they are “prescribed by law” and are “necessary in a democratic society.” It is difficult to see, though, how dumping millions of non-anonymised documents on the internet, in bulk and without any prior filtering, could be considered as an attitude prescribed by any law, in a democratic society. Moreover, once published, these documents are subsequently examined by national authorities and serve as a starting point for tax audits, criminal investigations, and sometimes as a basis for tax adjustments and criminal prosecutions.

These documents and the information they contain are, legally, the result of a theft, often in violation of the professional secrecy obligations of their holder, and their disclosure constitutes a violation of the right to privacy and the secrecy of correspondence. It is difficult not to notice the singularity of this approach, which has been frequently validated by the courts, and which consists of fighting, in the name of legality, fraud by means of data illegally obtained by a third party.

The principle thus overrides an exception that is not as exceptional as it should be, and therefore the property and privacy rights of the beneficiary of an offshore company give way to the ‘necessities of a democratic society’ (be it freedom of expression or the duty of the state to prosecute violations of the law), making the publication and use of illegally obtained data legitimate, whether directly or indirectly.

A quest for proportionality and balance
Is this acceptable? Opinions differ on the subject, but it cannot be denied that the use of stolen information by the authorities to achieve their ends is shocking in principle and in most cases, making unfiltered and non-anonymised data public constitutes a disproportionate step with regard to the right to privacy and the presumption of innocence.

In the future, even if this practice should be deemed legally or morally acceptable, the release of such data should at least be regulated to protect the rights of the citizens concerned (many of whom are beyond reproach). In the middle ages, only the names of the convicts were called out and shamed by town criers. These days, the European Court of Human Rights, to the detriment of human rights, considers that states have an obligation to regulate the exercise of freedom of expression to ensure adequate protection of the privacy and reputation of citizens. As for the press, it must assess the repercussions of its publications, which are supposed to generate a ‘debate of general interest.’ While the issue of the use of offshore companies may well be the subject of a general interest debate, it is doubtful that the disclosure of the names of the beneficiaries (especially those whose actions are not of general or even public interest) can be of any interest in the context of such a debate.

This is in fact the whole problem with these leaks: it leads to confusion and very often results in a disproportionate infringement of the rights of beneficiaries. Tax avoidance is equated with tax fraud and the beneficiary of an offshore company with the fraudster, while at the same time, the use of stolen documents appears to be acceptable in order to achieve a ‘higher’ goal, even if nobody knows whether the proportion of fraudsters among the beneficiaries justifies such a breach of the legal rules.

Furthermore, the personal data and assets of thousands of people are subject to uncontrolled publicity, often with disastrous consequences on both personal and economic levels, even though they often have nothing to blame themselves for.

In this highly media-driven context, public and governments often disregard the fact that proportionality is also essential in a democratic society, especially when it comes to reconciling values of equal strength that are on a collision course.

Driving change with financial inclusion in the Philippines

Posted on by itsupport

2020 was quite a challenging year for all of us. Lives and businesses were severely disrupted due to the pandemic. As we crossed over to 2021, there was cautious optimism that this would be a year of recovery and rebuilding. We were right to be cautious as the second wave of the pandemic hit. The Delta variant of the COVID-19 virus caused havoc to local and global economies alike, enforcing another round of lockdowns and slowing economic activity in the process. Fortunately, the vaccine rollout in the Philippines has also progressed throughout the year and we saw more Filipinos get fully vaccinated, which consequently led to the gradual reopening of the economy.

The ‘We Find Ways’ mentality
Similar to 2020, BDO Trust and Investments Group (BDO Trust) has constantly been on hand to assure clients that it is in full control of their investments, transitioning from being defensive to counter market volatility to becoming opportunistic to gear investment portfolios in preparation for recovery and growth.

BDO Trust continues to service clients by embodying the ‘We Find Ways’ mentality, ensuring that clients get access to investment opportunities despite the challenges of community lockdowns. Digital technology, through email and mobile messaging systems, is highly utilised to share investment ideas that can help to manage investment funds, encourage investment opportunities or simply to reassure.

Video conferencing and collaboration tools are used to execute initiatives such as our investment teleconsultation service, Market Sense and the Practical Investor webinar series. The BDO Invest Hotline and BDO Invest Online provide safe alternatives for clients to carry on with their investment transactions even if most bank branches are already open. These measures not only allowed us to increase wallet share from our existing client base, but the same communication tools were also used to acquire new markets that successfully brought in fresh funds.

For our institutional clients, we now offer a holistic approach to retirement fund management services, which is truly unique in the industry. We believe that it is important not only to provide adequate returns for the company’s retirement funds but also address the needs of the ultimate beneficiaries – the employees.

Through the BDO Pension 360, companies can empower their employees in augmenting their funds for retirement through the BDO Easy Investment Plan and the Personal Equity and Retirement Account, and provide them with a facility to responsibly manage their regular retirement payout through BDO easy pension pay. As a testament to BDO Trust’s ability to remain nimble and adapt despite the disruptions of the pandemic, clients invested more in 2020 and continue to do so in 2021, increasing BDO Trust’s leadership in the trust and investments space in the country with a 24 percent market share with trust assets under management of PHP1.183trn ($23.66bn) as of August 31, 2021.

Preparing for the future
The ongoing pandemic has helped accelerate the use of technology among Filipinos. For the past year and a half, digital transactions have massively increased. Groceries, supplies, discretionary purchases, and banking have seen a surge in digital traffic. Investing is no different. BDO Trust’s invest online facility allowed clients to invest in the BDO UITFs from the safety of their own home.

Increased transparency through BDO Invest Online reassured clients that their money was still safe during the pandemic. Moreover, having the means to continue transacting has allowed clients to take advantage of opportunities during this period of economic recovery. BDO Invest Online’s end-to-end investment process, from account opening to transaction fulfillment, places it at a competitive advantage to its competitors, most of whom require a visit to the branch. This same straight-through digital process is also available for its programmed investments, the BDO Easy Investment Plan. Currently, only BDO Trust has the capability to show both the client’s segregated portfolio via an investment management or trust account and a UITF account in the same online portal, providing the client with a full 360-degree view of their investment portfolio.

BDO Trust is the only Personal Equity and Retirement Account (PERA) administrator and PERA product provider that allows investors to open an account and invest in PERA products fully online, digitising an otherwise 30-minute face-to-face process, revolutionising the onboarding experience and making it more accessible to the intended market who are the overseas Filipino workers. PERA is a voluntary retirement account that is meant to supplement a Filipino’s social (GSIS or SSS) and/or corporate pension benefits. It provides tax exemption benefits to contributions of a yearly maximum of PHP100,000 ($2,000) to encourage long-term retirement savings.

BDO Trust continues to invest for the future to better serve digitally savvy investors and to provide more value to customers. Enhancements to its digital channels are already ongoing for a seamless and consistent customer experience through multiple channels.

The pandemic has proven that financial inclusion can be accelerated through a robust digital infrastructure. The digital roadmap for BDO Trust takes this into account to further contribute to the achievement of financial stability and economic development. What this translates to, for our customers, is convenient asset accumulation. To our country, it increases economic participation. To our institution, it is a cost-effective means of achieving market growth and business sustainability.

Focus on sustainability
Another aspect of business sustainability is being able to provide relevant products to customers. BDO Trust has always been an advocate of socially responsible investing. Since 2015, it has made available the BDO ESG Equity Fund, which invests in companies that exhibit exemplary environmental, social and governance attributes. The BDO ESG Equity Fund subscribes to the specific guidelines set by the International Finance Corporation (IFC) for ESG investing. The fund does not invest in companies with the primary business of selling alcohol, tobacco or those purely engaged in gaming or mining.

While the fund is still relatively small, it has the potential to grow exponentially in size and importance as more investors start to see value in socially responsible investing. Clients are beginning to favour companies that manage their environmental and social risks and practise good governance, creating a positive contribution to society. Schools, foundations, religious organisations, associations, and other non-profit organisations, in particular, generally seek a long-term investment portfolio that is consistent with their values and purposes. For these clients, BDO Trust offers a values-driven investment strategy that upholds their own environmental, social and governance principles.

Advocating financial wellness
BDO Trust continues to support sustainable strategies through the advocacy of financially inclusive growth. The pandemic clearly demonstrated the importance of financial wellness as Filipinos were blindsided by the sudden economic downturn. This presented a golden opportunity for BDO Trust to direct the market’s attention to greater financial literacy by continuing its investor education programmes digitally, providing fresh content and modules that take into account where the target audience is in terms of their customer journey.

Supporting this strategy is a dedicated team that provides free financial education programmes to clients. The courses, which cover proper budgeting, wise investing habits and retirement planning, are open to different audiences – clients, bank branch personnel, employees, teachers, and blue-collar workers to name a few. Throughout 2020 and 2021, BDO Trust has conducted numerous webinars to sustain its training and educational activities despite limited mobility.

The pandemic has proven that financial inclusion can be accelerated through a robust digital infrastructure

At the heart of these financial wellness sessions is the BDO Easy Investment Plan or EIP, which is the clients’ tool to successfully and automatically execute their wealth creation plans. EIP allows clients to invest in the BDO UITFs for a minimum investment amount of PHP 1,000 ($20) for peso-denominated funds and $200 for US dollar-denominated funds. Through the EIP, more Filipinos are able to invest for their emergency fund, children’s education fund, retirement and other financial goals easily, affordably and regularly without the need to go to a branch for every transaction. EIP effectively democratises investing for the mass market – allowing easier conversion of savers to investors.

BDO Trust also offers the Personal Equity and Retirement Account (PERA) to help Filipinos augment their retirement pay and plan for a comfortable retirement. PERA lets clients invest a maximum of PHP 100,000 ($2,000) yearly – or PHP 200,000 ($4,000) yearly for overseas Filipino workers (OFWs) – and take advantage of tax-free investment income to encourage long-term savings.

Making Filipinos global investors
In support of its push for improving financial literacy of Filipinos, BDO Trust not only aims to make Filipinos transition from being savers to investors, but also to turn Filipinos into global investors as well. Understanding both the benefits as well as the risks inherent to investing is fundamental to becoming a savvy investor. In addition, learning how local and global economies develop and grow can also help Filipinos appreciate investing more, knowing that diversifying into other markets can help grow their investment portfolio.

Through the BDO global feeder funds, retail and institutional investors alike can conveniently access global assets for as low as $500. Available through BDO Invest Online and BDO branches, these funds allow clients to invest in stocks that are traded in the US, Europe, China, and other developed and emerging markets. BDO Trust partners with the biggest names in the global asset management industry, such as BlackRock, Nomura Asset Management, Wells Fargo Asset Management and Citigroup to leverage on their expertise and experience in global markets. This strategy allows our clients to grow and diversify their investment portfolio as well as take advantage of investment opportunities both locally and globally.

With our advocacy for both financial wellness and sustainable investing and our adherence to the ‘We Find Ways’ mentality, we believe that our clients can easily take advantage of opportunities in the domestic investment environment as well as confidently venture into possibilities outside the Philippines.

A digital transformation is taking place in Andorra

Posted on by itsupport

It was Philip Kotler, the father of modern marketing, who observed that the adoption of new technologies alone cannot transform an organisation. Add a lot of new tech to an old organisation and all you get is an old organisation that costs a lot more to run. If it’s real transformation you want, then new technologies are just one piece of the puzzle.

MoraBanc is an old organisation. Today one of the largest banking groups in the European principality of Andorra, it dates back to 1938, when its founder, Bonaventura Mora, opened the exchange bureau Comptoir Andorran de Change.

In 1952, it became a bank proper, part of a nascent banking sector that grew up in response to Andorra’s changing fortunes in the wake of the Second World War. There have been plenty of changes at MoraBanc in the nearly 70 years since it became a bank but those of the last six – heralding the organisation’s transition to digital – have been arguably the most significant.

Digital transformation – a process that began six years ago when MoraBanc successfully implemented a technological platform to revolutionise client relations in Andorra, and continues today – has never been about adopting new technologies alone. It is about leveraging these new technologies to transform business models, the client experience, operational processes, organisational culture and the way teams are led. Digital transformation is about much more than technology.

People are the key
You can incorporate new technologies, from big data to artificial intelligence to cloud computing – but unless they are used effectively by people with the talent to develop them, people ready to prioritise client experience, true transformation will remain elusive.

In the turbulent world of modern finance, banks cannot afford to ignore digital transformation in its broad sense, incorporating not just technology and processes but business models, new markets and client experience. People, of course, are central to every one of these. There is no room for complacency in the competitive world of Andorran banking – those who cannot adapt will be left behind. Banks must adapt to clients’ needs, demands and expectations in an environment that is volatile, uncertain, complex and ambiguous. It is a difficult journey, but one full of opportunities for those organisations able to use the full potential of digital environments, creating differentiated value propositions and seeking alliances with new players, from fintech to proptech.

Real differential value will be found in the people who understand what digital is and are able to anticipate clients’ new needs

Banks must shift from being mere providers of traditional financial services to taking on a much more relevant role in their clients’ daily lives. They must lead a strategy focused on client engagement and loyalty through digital ecosystems far beyond financial products, in a context of ongoing personalised interaction.

There are many challenges that financial institutions have to face in order to digitally transform themselves. Agility is key and this can be achieved by implementing a digital culture internally, one led by a management team that drives this change through the acquisition of new digital skills and agile ways of working.

New technologies must be incorporated as a key strategic element – this technology must go far beyond simple business support and enable new digital business models to be defined. It can’t be done without acquiring new digital talent, bringing entrepreneurs and those passionate about the digital world into the organisational fold. This is because the real differential value will be found in the people who understand what digital is and are able to anticipate clients’ new needs and consumption habits.

The challenge of change
Banks will have to explore the frontiers of their business and redefine themselves, seeking new digital business models that generate new sources of income and increase their profitability. This is everything from the monetisation of client knowledge to offering digital non-banking services to creating open technology platforms.

At the same time, banks must increase the productivity of their existing digital channels: this isn’t just about keeping costs down but rather taking advantage of the large number of digital interactions with their clients to sell more and gain better leverage on digital marketing and client intelligence tools. Alongside all this, banks can’t just leave their physical distribution network to stagnate while developing their digital infrastructure – efficiencies can and must be achieved throughout the business.

For a small country such as Andorra (population 77,543), digital transformation comes with both opportunities and challenges. According to a study on the digital maturity of the Andorran companies that MoraBanc works with, 83 percent are at a basic stage of digital transformation and their employees have a long way to go in improving their digital skills.

To boost the digital capacities of the country’s businesses and public administration agencies, in July 2021 the government of Andorra presented a wide-ranging digital transformation project that will run until 2024. Examples of adaptations to the current regulatory framework include the implementation of a law on digital assets, a law regulating e-sports and a new digital economy law intended to encourage innovation and the diversification of the country’s economy in order to attract talent and investment.

A profound transformation of the bank in the wake of regulatory and market changes has set the pace for the bank’s strategy. MoraBanc’s strategic plans have focused on digitalisation, efficiency and quality of customer service and have led to the growth of client benefits and assets under management, profitability, solvency and efficiency in the Andorran banking sector over the last four years. MoraBanc opted to place key people with digital talent at the forefront of its digital transformation project. Transformational leadership at management level, driven by a clear vision of the digital path the organisation must follow, was key. As was the ability of leaders to inspire their teams to put clients’ needs at the heart of the MoraBanc experience, whatever channel they engage with.

The reputation of banking is badly damaged. We need to win back clients’ trust, improving the client experience in every interaction. Each client’s experience with the brand is unique and this has always been the case, but the advent of digital banking ups the ante in terms of the options institutions are able to offer their customers. The effective use of technology has the potential to make banking significantly more convenient, as clients are able to access the products and services they need whenever and however they need them. The potential for personalised approaches is huge, providing banks are able to turn client data – their personal behaviour, preferences and circumstances – into value.

A long-term vision
Achieving this transformation wasn’t just a matter of a few new hires. The success of digital transformation lies primarily with people; it required a sea change in organisational culture, building a community where people are at the centre of the business and establish quality relationships based on a willingness to share a common, long-term vision. The result was MoraBanc Digital. This digital ecosystem, approved by the board of directors at the end of 2014, included the launch of a new website, iOS and Android apps and a state-of-the-art online broker. Clients were able to reach us via new routes, such as a chat function, appointment system and MoraBanc Direct, a fully virtual client branch office.

It was worth the hard work. Between 2017 and 2020, MoraBanc Digital’s usage figures increased by 112 percent in platform access growth, 80 percent in the number of monthly unique users and 154 percent in transaction volume. And it wasn’t just clients that were impressed – MoraBanc recently won World Finance magazine’s award for Best Digital Bank and Best Banking App in Andorra for the fifth consecutive year.

At MoraBanc we are committed to digital transformation, innovation and ongoing improvement in order to be the best bank for our clients, the best company for our employees and the go-to bank in the markets where we offer our services.

Addressing the climate crisis in the infrastructure sector

Posted on by itsupport

Choosing climate action as the theme of my ICE presidency was an obvious choice. I’m an engineer, having trained first as a geographer. My background is infrastructure, people, planet and places. So climate change – with a focus on net zero carbon and climate resilience – is a priority topic, both personally and professionally. Yet until very recently, the infrastructure sectors (energy and also transport, buildings, digital, water and waste) have been able to ignore climate impacts or treat them, at best, as an add-on. We have had far greater focus on economic growth and gain as a primary outcome, at the expense of social and environmental aspects. This mindset is now the cause of massive problems worldwide. But it’s the way public infrastructure and the environment is planned and built that must change – we must change. That means engineers, city and municipal planners, construction professionals – all of us have to adapt in order to make a major difference in the years ahead.

Commitment is overdue
To reach a net zero balance by 2050, we must cut the total carbon emissions connected with today’s infrastructure systems in half by 2030. This gives us a chance to slow the pace of climate change. Though even if we achieve this, we can expect decades of a worsening climate ahead of us, so in parallel we must build in better resilience to cope with more frequent extreme weather events across the world: storms, floods, fires, droughts and more.

The key now is turning climate worry and climate talk into climate action

This is urgent. Our existing infrastructure systems remain highly carbon intensive, as they are used and relied upon by billions of people every day. Today’s decisions about whether we build, what we build, where we build and how we build are key to build-stage carbon impact, but we must also take into account the carbon emissions linked to the existence, operation and use of infrastructure over many generations. We already have some of the right tools, ideas and know-how to start to address the climate crisis. The key now is turning climate worry and climate talk into climate action.

And I say none of these things from an activist mindset. It’s simply the most responsible thing to do, given the scale of our collective challenge. You only have to spend time with your own children, or their friends, for a sense of how they see the future. We have to listen to the next generation – and to 70 years of climate science that already lies behind us. So our job now, as engineers, is to influence and bring about the slashing of carbon, to deliver the art of the possible. And there is no time to waste.

New carbon ‘lens’ needed
We have to rethink how we approach infrastructure design to be more ‘carbon conscious’ in everything. For some clients this is a fairly new lens to look through, alongside other crucial drivers that remain, such as quality, cost, safety, productivity and social inclusivity. Fundamentally, the earlier in a project lifecycle carbon awareness starts, the greater the chance to build value through longer-term carbon savings, often without additional cost or risk. We need to ask the difficult questions about whether ‘new-builds’ are required or whether existing assets can have an extended life. We need to design with carbon firmly in mind, so that quantities of materials such as traditional concrete and steel can be reduced for the benefit of both cost and carbon dioxide. In time, we must aim to eliminate carbon emissions altogether, but in practice we will need to get into the habit of quantifying and then minimising whole life carbon emissions, before mitigating or offsetting any residual impact.

This last piece is evolving fast – it’s also widely misunderstood – but it’s crucial. Just as we mitigate other impacts in everyday technical design practice, we have to embrace and design in offsets directly and accurately. The good news is there’s a range of nature-based solutions that work with carbon capture tech that will become more commonplace, boosting credibility around net zero client work.

Generational pressure is a good thing
The generation coming into the workplace has grown up with climate change so there’s no uncertainty phase that held earlier generations back. There are pent-up frustrations from this group that we – as today’s responsible adults – still haven’t addressed climate change with real urgency, underpinned by fairness and social justice. Young and emerging professionals, whatever their role, must use their influence, knowledge and power to keep pushing the carbon infrastructure agenda to the top, for all our sakes. I am, personally, hopeful that it will succeed. But there’s no more time to waste. We must start now and not allow ourselves to slip back.

Leveraging a unique network to help you find your next role

Posted on by itsupport

The pandemic has seen massive fluctuations in the jobs market, affecting a wide range of industries, disciplines and territories. At the senior end of the market, however, there has been surprisingly continuous demand across both industry and geography, for top talent.

It’s not quite business as usual. In this post-pandemic world, corporates want and need to expand their top talent to turn around, recover and continue the growth of their organisations. Companies like InterExec, a London-based consultancy working with C-suite senior executives across all major business sectors, are ideally placed to help.

The transition from one organisation to another brings with it significant prospects of both short and long-term benefit, but demands focus and commitment to achieve the best result. InterExec facilitates that process, working with clients to make crucial decisions about their goals, when and how to move role, and how best to present themselves to the marketplace. Typically, a senior executive seeking a new role will have limited access to sufficient senior contacts in the recruitment market. It might seem straightforward to find roles at the bottom end of the executive market through selective channels such as advertisements, job boards and websites, as well as via their own personal networking. It’s much trickier at the top end – for roles with salaries in excess of £200,000 – where the market is unadvertised and where personal introductions and contacts are essential. In this ‘hidden’ market, it is almost impossible for executives to get a comprehensive view of relevant opportunities and an unbiased view of their prospects.

We specialise in assisting busily employed senior executives who want to make a move but do not have the time or market access to conduct an effective search. Future Choice, a system we developed over the last 30 years, enables the individual to identify their needs and skills. This way, drawing on our extensive knowledge of the market, we can work together to identify the positions that meet these prerequisites, whether they are financial in nature, or relate more broadly to job satisfaction.

With a global network of leading search consultants and over four decades’ experience, we are well placed to ensure that clients are presented with a strong range of options, whatever their field. InterExec staff – a combination of former company directors and executive search consultants – have daily access to thousands of the most influential people in the senior executive market, providing up-to-the-minute intelligence that allows them to plug into up to 90,000 unadvertised vacancies a year. We are regularly adding to this network, broadening the reach of our searches to encompass roles in nations around the globe, across multiple disciplines and sectors.

Market knowledge
The entire consultation process can be completed in little more than four hours, with search consultants working at a time to suit the client wherever they are in the world. By keeping the process as streamlined as possible and minimising interruption to normal workflows, we enable executives to stay focused on their current role while setting the stage for the next phase of their career. We then use our market knowledge to identify the people to whom confidential approaches can be made, to source relevant unadvertised opportunities. For executives seeking their next new challenge, confidentiality is crucial. The aim is always to minimise unnecessary market exposure while maximising a client’s range of options when it comes to changing roles. The world is small at the highest levels of business and executives must tread carefully. Our processes guarantee absolute discretion.

Whether the client is seeking full-time executive employment, interim management, non-executive, consultancy/portfolio roles or employment in a PE/VC environment, the channels to market are very similar. In our talks to the marketplace on behalf of the client, we work hard to fully brief those working on behalf of prospective employers so as to minimise the amount of time the client might need to spend at interview.

Some people have a very clear idea of their objectives in a job transition and some are more open-minded as to where they should best go for the future. Either way it is crucial that the client’s target roles be achievable, based upon their expertise and prior experience, and that the way we present the client to employers enhances their prospects. Standard procedure includes verifying clients’ qualifications, references, identity, skills, achievements and entitlements – because all this information is set out in advance of our conversations with those looking to fill particular roles, time is saved for all involved and the best result can be achieved. The unique InterExec process and network has proven to be a powerful asset to senior executives seeking their next challenge.

Olymp Trade reviews market trends of the new normal

Posted on by itsupport

When the virus came, the lockdowns, travel bans, and restrictions in response to it, decimated the global economy. To reduce the damage, state authorities put anti-virus and economic recovery measures in motion. Now, the global economy is slowly trying to recover, but the damage is reflected in the markets where the effects of supportive economic activities continue to alter the landscape.

For many traders, it can be hard to orient oneself in such a changing environment. This article was created to help them. It observes and structures the main economic trends. Also, it provides some specific trading strategy recommendations and helps traders better understand the changing global economic environment. As a result, their trades may be better planned and aligned with the current market trends, and their overall ‘survival’ ratio may possibly increase.

Response to the pandemic
The pandemic and resulting lockdowns severely impacted the global economy. Activity in the manufacturing sector, a core element of economic growth, sharply declined at the peak of the pandemic response. According to IHS Markit, in May 2020, the US PMI fell to a record low of 36.1. In the EU, the same indicator was at 33.4. Against this backdrop, stock markets began to slide. The Dow Jones fell more than 35 percent, and the Euro Stoxx 50 dropped more than 40 percent. To fix the situation, developed states put in place extensive supportive campaigns to restart their economies. Primarily, their central banks significantly reduced interest rates. Also, they launched emergency stimulus programmes, effectively printing more money.

As a result, the money supply in the EU and the US jumped to record highs. In the US, the M1 money supply almost tripled. The American economy has never seen such a growth rate in all its history. The supportive campaigns worked. Together with the loose monetary policy, the stimulus made the dollar fall. The central banks jump-started the stock market and their economies.

Inflation as a side effect
Central banks across the world printed nearly $9trn in 2020 to support economies. They managed to revive the economies, but their measures have led to inflation growth. In the US, it is now 200 basis points above the target value. Other developed states are suffering a similar side effect. In the meantime, the demand for international trade and domestic consumption is at historic lows. US retail sales haven’t grown by one percent yet. August saw a weak growth rate of 0.7 percent, and the second quarter of 2021 had –1.8 percent. China has a similar problem. Moreover, the world may fall into another recession from weakening demand for Chinese products. This problem plagued Europe in 2019 before the pandemic. If it happens again, Europe and Japan will suffer because their economies are export-oriented and have tight trade bonds with China. Also, unlike other G7 countries, their central banks are unlikely to stop the economic stimulus as their GDP growth has only recently surpassed zero. Therefore, while central banks’ actions aided the economies, they are now struggling to find a solution for the side effects for these measures, and inflation is just one of them.

The energy sector crisis
Energy prices are rising, and this issue moves parallel to the inflation problem. In Europe, gas reserves have been significantly depleted partly due to the unusual summer heat and low winter temperatures of 2020. On the other hand, the ECB’s push towards green energy doesn’t help the EU reduce its total energy demand. As a consequence, the EU’s current energy shortage has not been seen since the previous decade. Therefore, it is under pressure to get back to traditional energy such as coal, with Russia as its first supplier to consider.

Russia is now directing most of its coal to Asia under contractual agreements. It simply doesn’t have enough spare to provide to Europe. Furthermore, even if Russia was able to do it, the railway system’s physical limitations wouldn’t allow it to effectively distribute the supplies. As a result, Europe is stuck between the green movement and the effects of 2020, and its energy demand is left unfulfilled. In China, new resistant virus strains have disrupted the normal functioning of the country’s energy systems. The government has imposed restrictions on energy consumption, and businesses lack access to energy inside the country to meet production needs. This is pushing the Chinese state authorities to look for more energy on the global market.

These facts suggest that the global energy demand is increasing. In the oil sector, however, OPEC+ isn’t planning to meet it immediately. On the contrary, its member countries have recently agreed to incrementally increase oil output in the near future. The cartel wants to support energy prices to extract the most profit from them. Recently, natural gas prices exceeded $1,500 per 1,000 cubic meters. Brent crude has crossed $80 against the $60–70 range it had in the summer and is likely to keep going up. October 2018 was the last time Brent was as high. Even after the drone strike on Saudi Arabia’s ARAMCO refineries in 2019, oil prices didn’t leap that much. In the near future, observers expect the oil price to exceed $100.

Partly due to the strong energy demand and progressing economic recovery, the mining and exploration companies are now doing fairly well. The Dow Jones Oil & Gas index reached 470 points, and EuroStoxx Oil & Gas is testing 290 points. Based on these dynamics, we believe most energy stocks may grow through the end of the year. In the meantime, while developed states are trying to move towards green energy, the high carbon energy sector is attracting less global investment and losing appeal to retail traders. That’s why many brokerage companies now educate traders about the cost of missed opportunities while expanding their financial literacy.

How to trade when the stimulus ends
Positive dynamics may not be as likely for the other market sectors. The US Federal Reserve, European Central Bank, Bank of England, and other state financial authorities are about to move from supportive to restrictive monetary policies. Recently, the US Fed Chairman, Jerome Powell, hinted that quantitative easing (QE) will soon be phased out as the US economy is recovering well. When the cutting back of QE is announced, the US dollar will likely go up. In fact, it is already growing on the expectation of the end of stimulus. In the meantime, stocks have an inverse correlation with the US dollar.

Historically, every time the Fed cuts back the QE programme, stock prices mostly drop. In August 2021, the Fed indicated that a shift to the ‘normalisation’ of monetary policy was coming. In response to that, the stock market began to reverse. The impending end of the US Fed’s support is the main reason for the firming US dollar and the decline of blue-chip stocks. Yet, stocks may receive the full hit when the US Fed stops supporting the economy. The asset volume on the balance sheet of the Fed is around $8.36trn. They are currently buying $120bn in treasury bonds and mortgage-backed securities a month. This process fuels interest and prices in various asset groups. But when it stops, a huge void may form. To avoid its impact on asset prices, traders need to select their trade instruments well.

To benefit from the changing market environment, traders and investors need to be aware of its trends and the opportunities it offers

A possible way to do that is to wait until the market correction ends. While waiting, cash may be a safe place to keep funds, but eventually, traders may be able to form new portfolios by buying financial instruments at lower prices. Another way is to buy the so-called ‘defense’ stocks. This refers to those with low or negative beta. It may be American Tower from the financial sector or Bristol Myers from the medical technology sector. Colgate-Palmolive, Procter & Gamble, or PepsiCo from the non-durable consumer goods sector may also do.

These stocks have a fairly low beta. Comparative analysis shows that their capitalisation is undervalued against the industry average. At the same time, these companies have high average profitability and promising revenue and net profit growth dynamics. Alternatively, traders can open short positions on stocks that are in the risk zone upon moving to restrictive monetary policy.

A tactical solution from Olymp Trade
To benefit from the changing market environment, traders and investors need to be aware of its trends and the opportunities it offers. Focusing on the right asset at the right time is key. That, in turn, may be easier with a broker that offers a solid educational base and keeps traders well informed on what’s happening in the market. This is Olymp Trade’s commitment.

Olymp Trade is a trading platform that provides a practical knowledge base through its help centre, made available right from inside the app. It contains various kinds of educational materials from video guides to textual explanations of how Forex trading works.

Traders may apply their knowledge to various types of assets, from Brent to crypto. Moreover, they can do that in various trading modes such as Forex or stock price trades. Equipped with various trading tools ranging from price alerts to market news, they get a trading environment that is as flexible as it is comfortable. Both qualities help traders to effectively orient themselves in the rapidly changing Forex world and reach their financial goals.

Sights set firmly on the future with digitalisation processes

Posted on by itsupport

The Bulgarian institution, Postbank, this year celebrated three decades since it was founded. Despite the challenging year with the effects of the pandemic still being felt, Postbank has managed to navigate itself through 2021 thanks to its flexibility, commitment to personalised service and willingness to learn. Drawing on its 30 years in the international banking space, the institution is now looking to the next 30. World Finance spoke to Petia Dimitrova, CEO and chairperson of the bank’s management board, about embracing digitalisation and supporting Bulgarian entrepreneurship going forwards.

How has Postbank responded to the COVID-19 pandemic and the need for digitalisation?
Everything that happened over the past year and a half posed many challenges for all of us. It was a test of our capability to adequately respond to a change the scale of which could not easily be foreseen or controlled. These recent times have allowed us to get to know the situation we are living in and to efficiently organise internal processes. Bulgarian banks responded to this situation very well and once again showed that they are resilient and stable institutions. Results show that the banking system has been through minimal stress during this critical period. And although the pandemic has had an effect on the way we work with multiple restrictions, the Bulgarian banking sector remains stable and profitable, with high levels of capital adequacy and liquidity. The future of banking is undoubtedly digital, with more advantages and benefits for our customers, providing what is most important – a speedy, time-saving service.

We started digitalisation processes at Postbank a few years ago, when we created a special unit dedicated entirely to that mission. This team developed the overall strategy and its implementation, set priority fields for investment in creating new products with one main aim – digitalisation. This is why in 2020 we were ready, reacted quickly and responded to our customers’ expectations. That we are on the right track was proven by the data, which show that for yet another year in a row Postbank scored a significant increase in customers who now choose to use the digital channels of the bank. Now more than 70 percent of transactions are being carried out online.

What are the benefits of digitalisation?
The pandemic was not only a catalyst for digitalising banks but was also a stimulus for financial literacy among customers after successfully transforming attitudes that we would have otherwise waited for years to change under normal circumstances. The months spent in isolation helped many Bulgarians discover the benefits of digital banking channels and the speed and security with which they can manage their funds online. Naturally, this is a process, so we expect it to continue, and we will be by our customers’ side, responding to all their specific expectations for faster and more convenient banking. As a modern bank working towards protecting the environment, we were among the first to introduce an innovative way to confirm payment documents with a digital signature. Thanks to this, we decreased the use of paper by 43 percent.

What are the leading trends you expect to see in the banking sector in Bulgaria for the next year?
We are currently focused on instant payments, which allow for funds to be transferred to a counterparty in seconds. Postbank, together with BORICA, a company providing technology infrastructure to the Bulgarian payment industry, has been working hard to implement this product and we expect it to be available to our customers by the end of the year. Banks are starting to pay much more attention to online customer experience and are introducing entirely digital processes. I believe these are processes that eventually will benefit customers, since with healthy competition in our industry we manage to further contribute by adding new products and services to e-channels.

Along with this, our mission is to adequately participate in the development of Bulgarian society and as a leading financial institution, to assist with projects in the major spheres of social life, such as education, culture, sports and environmental protection. Our mission is motivated by the deep and genuine concern for the most valuable asset of our bank, people.

This year, Postbank celebrated its 30th anniversary as one of the leading banks in Bulgaria. Can you tell us about the products you have launched to mark the occasion?
We offered our customers our unique new generation mobile wallet, ONE Wallet, with which customers can perform even more banking services through their phones. They can have practically instant contactless access to main banking services as they transfer their physical wallet onto their mobile phone. They can add all their cards into this new wallet and freely and efficiently manage them thanks to the rich range of functionalities set in the app. There is support for contactless POS payments through the phone, managing cards in the mobile wallet by setting limits for different channels (POS, ATM, online payments), opportunities for adding loyalty cards from various merchants, discount vouchers for partners and much more. Our customers have active and flexible control over their funds 24/7, which is certainly a convenience nowadays. This is why I am sure that ONE Wallet will become an irreplaceable application in everyday payments for each of us.

Our mission is motivated by the deep and genuine concern for the most valuable asset of our bank, people

Another major innovation we carried out at Postbank was the introduction of our express banking digital zones that were immediately recognised as a preferred alternative to banking at a counter. Thanks to the intuitive devices in these zones, customers can easily and quickly carry out a major part of main banking transactions after identifying themselves with their debit or credit card, with no need to be registered for the bank’s online banking. Digital zones are already functioning in 75 branches in 32 towns across the country and we will be unveiling more locations and upgrading the service.

Our customers’ needs are of greatest importance to us, and we will therefore continue offering new solutions for managing their finances. One of our main goals in this process is to create high-quality products providing them with the necessary security of the investment. A few months ago, we became the first bank in Bulgaria to start offering a new-generation metal credit card.

Once again, we demonstrated our position as an innovator in the sector and succeeded in offering our customers something different, modern and valuable in order to meet their highest demands and expectations. We are happy that our customers appreciated this modern product that gave them even more flexibility and confidence, completely in line with their style.

We are pleased to be the first bank in Bulgaria to offer an easy and convenient solution for contactless payments for any merchant. The innovative service, which contributes to mobility, holds the key to the effective development of many industries, and is attractive to both small and niche businesses, as well as large corporate clients. Smart POS by Postbank aims to upgrade the established POS business model and make contactless payments much more accessible and convenient for merchants. This, in turn, will expand access to contactless payments for end customers, which is not only convenient but also especially important during a pandemic.

What further goals are you working towards with Postbank?
Other than our innovative digital products and services, here at Postbank, we continue focusing our efforts and funds in support of projects with real added value for society and we believe that one of the great effects will be building self-awareness that will change our lives for the better. For the third year in a row, we are participating in the ‘dare to scale’ project – a four-month growth programme, aimed at entrepreneurs and businesses that are already past the initial phase of development and want to scale up their activity. The programme is organised by the Bulgarian office of the global entrepreneurship network, Endeavor, with Postbank as the main partner.

It is extremely important to us to be part of this process, to support the ambitions of companies seeking to upscale their businesses and thus change the entire ecosystem. I am positive that this is the right path and the right attitude to lead us forward. The times we live in provide numerous challenges, but they will be overcome with resilience and our capacity to learn and grow. We at Postbank will share with entrepreneurs our experience and expertise in order to support them in the most important stages of their businesses’ development and become part of their growth. We will seek the potential of successful partnership allowing us to innovate and create opportunities in the ecosystem. To us, this is an investment in the future and a chance to be part of the change moving us ahead.

Unique opportunities offered for investors in Malta

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The world is currently struggling with its identity. Overnight, from a place of globalisation where cross-border movement was at its height, humankind found itself in a state of travel limitations, border restrictions and introspection, and all because of a microscopic but highly contagious virus. Media coverage of curfews, quarantines and doctors decked from head to toe in full protective body gowns at hospital beds looked like cuts from post-apocalyptic movies. Citizens of the world put their physical and mental brakes on, to take stock of their personal, professional and social situations, while political contexts baulked under pressure.

Never before had we felt our freedoms so restrained, checked and limited. Never before has liberty of movement been so valuable. And never before has second residency been a more attractive proposition. Traditionally, families look at residency-by-investment as a means to have an alternative home in a safe and secure place, in case things go wrong in their country of domicile – a plan ‘B’ that puts their mind at rest. From geopolitical unrest to lack of educational opportunities for their children or a dearth of investment possibilities, a second residency gives individuals and families a kind of insurance, a guarantee of a sound fall-back position, and a plan for a better future and lifestyle for their families.

Our industry has not been spared the impact of COVID-19. However, ironically, there has also been increased interest in residency-by-investment propositions. It is easy to see why. People want to live in jurisdictions where their health and safety are guaranteed. Families want fast and easy access to good healthcare that can be life-saving. Entrepreneurs want to operate in markets that are sound and that have growth potential even in the face of adverse economic conditions.

An attractive proposition
There is an excess of motives as to why Malta is an alluring destination for investment migration. Malta combines island life with European standards and a multi-cultural ambience. An archipelago in the middle of the Mediterranean just south of Sicily, the country boasts a mild climate and over 300 days of sunshine, pristine beaches, a rich history and heritage and an outdoors lifestyle. This, however, is contrasted with a strong economy, highly regulated industries, and membership of the European Union, the Commonwealth, the Schengen Area and the Eurozone.

Malta combines island life with European standards and a multi-cultural ambience

Malta’s strategic location and its geographical proximity to Europe, North Africa and the Middle East means it is well connected to the main regions and markets of interest with numerous air and sea links. Malta has world-class healthcare services, easily accessible via reasonably priced health insurance. The country registered impressive Covid vaccination stats that dominated the EU tables – the result of a strategy that coupled opting for full allocation when purchasing vaccines, with a general awareness of the importance and benefits of getting vaccinated. At the height of contagion, health authorities gave daily public briefings to keep citizens well informed while introducing general restrictions that helped mitigate the spread.

The country offers excellent educational opportunities with a range of state, church and independent schools, as well as a 400-year-old university and a college of arts and sciences. With English being an official language and the language for doing business, expats will have no issues communicating with locals and settling in will be easy. Indeed, Malta is one of the safest countries in the world, with a negligible crime rate. This should attract families who would like to spend their time in an environment where children are safe and women go out for early-morning jogs, secure in the knowledge that no harm will come to them.

Doing business
Investors and entrepreneurs look for jurisdictions with robust and growing economies, high regulation, government support and industry demand. Malta has all these elements while constantly garnering positive ratings from credit agencies and topping the EU charts for economic growth, even in Covid’s aftermath. The government has in place a number of interesting business support agencies that are geared to help entrepreneurs startup or expand their operations.

And with Malta’s size and composition, it doubles up as a fully-fledged test market for new products and services. Booming industries include hospitality, aviation, pharma, maritime, financial services, gaming, film and the knowledge industry. These industries are supported by a strong broadband infrastructure and e-government services.

Stay, settle and reside
The Malta Permanent Residence Programme (MPRP) is a property-based residency-by-investment programme that gives beneficiaries the right to stay, settle and reside permanently in Malta with visa-free access to the Schengen area for 90 out of 180 days. Investors have the option to purchase or lease property, while making a direct contribution to the Maltese government. They should also make a donation to a local registered non-governmental organisation in the areas of philanthropy, culture, sport, science and animal welfare. The aim of this initiative is to build links between residents and the local community.

Up to four generations may apply, enabling family relocation. Applicants and their dependants must go through a four-tier due diligence exercise that ensures that only fit-and-proper individuals and families are given Maltese residence status. To ensure rigour in the application process, applications are submitted via regulated and licensed agents, who will act on behalf of applicants. The programme is straightforward and competitive and we promise a processing time of four to six months from the submission of a complete and correct application. With such a brand promise, applicants can put their mind at rest that it will not be a long-drawn-out procedure.

Embracing the nomadic lifestyle
The pandemic also gave the final blow to the concept of the traditional workplace. When remote working kicked in for the masses in order to control the spread of the virus, it was a first test of a more flexible working arrangement for many. The future augurs well for sustainable hybrid arrangements that give flexibility and improve work-life balance, but also reap benefits for employers.

So, with teleworking no longer the prerogative of the few, many will be seeing how to best exploit this newfound way of working remotely. For those in the knowledge-based industries, working from one country while giving services to employers and clients based in other parts of the world is now even more doable. Malta was quick to react to this trend with the launch of a new Nomad Residence Permit intended to give non-EU nationals the opportunity to work remotely from Malta for a temporary period. Malta already hosts a significant digital nomad community made up mostly of EU nationals who do not require any permits due to freedom of movement. The new permit is intended to reach new niches beyond Europe, as travel restrictions ease once again enabling global mobility.

Applicants who wish to work remotely from Malta, for a temporary period of up to one year, must prove they can work remotely, independent of location. They should either work for an employer registered outside of Malta, conduct business activity for a company registered outside of Malta, and of which they are partners or shareholders; or offer freelance or consulting services to clients whose permanent establishments are in a foreign country. The process is straight-forward and Residency Malta promises an efficient service that discerning nomads expect. To conclude with a famous quote – “the only constant in life is change”. We must all react with agility to what happens around us and find solutions to personal, social and professional challenges that offer us better futures. We believe these solutions can be found on the Island of Malta.

More information about the MPRP and about Malta’s Nomad Residence Permit may be found online at residencymalta.gov.mt.

Strategic investment clears a path through the crisis

Posted on by itsupport

It is a well-known fact that the pandemic has had far-reaching consequences on the global market beyond the outbreak of the disease itself. Nevertheless, amid a year of economic distress, one cannot overlook the resilience that major financial institutions in the Gulf market, such as National Investments Company (NIC), have shown during times of turmoil.

Established in 1987, National Investments Company is a leading Kuwaiti asset management and investment bank. The company takes pride in its dynamic and agile approach in a fast-changing environment. As a result, the company has been able to report a total comprehensive income of $73m in the first half of 2021, after registering a total comprehensive loss of $19.2m in the comparative period of 2020 (see Fig 1). In addition to these achievements, the company received three prominent awards in 2021. Firstly, the ‘Best Wealth Management Award, Kuwait 2021’ by Global Business Outlook for its successful record in serving high-net-worth individuals. Secondly, the ‘Best Investment Management Company in Kuwait for 2021,’ by International Business Magazine, a leading publication in the world of business and financial investment, headquartered in Dubai. And finally the ‘Best Asset Management Company of the Year, GCC 2021’ from financial platform Global Banking & Finance.

Manoeuvring through crises
The positive return in NIC’s H1 2021 occurred as the company was quick to capitalise on opportunities by shifting the tactical allocation of its funds and client portfolios towards sectors poised for recovery. The CEO of NIC, Fahad Al Mukhaizim, explained that Boursa Kuwait witnessed unprecedented circumstances due to the pandemic. By thoroughly analysing the market and understanding the reasons behind the changes, the company’s investment banking team took decisions that resulted in exceptional returns for its clients.

One of the examples was the acquisition of a significant stake of Boursa Kuwait, a strategically important asset with strong, recurring and sustainable cash flows due to its market leadership position and improving prospects. Since acquisition, Boursa Kuwait has undergone an IPO and listing process resulting in a gain of several multiples of NIC’s acquisition cost. The second case study was the acquisition of Kuwait Foundry, a mispriced asset with intrinsic value significantly greater than the prevailing market value. The investment offered an identifiable path to realisation of true value. Towards this, NIC acquired a 21 percent stake in January 2019 and have been taking measures to realise value. So far, the company has recaptured most of its equity in the transaction already and the total return multiple based on market value is 1.41 times.

Market leadership
Al Mukhaizim elaborated that the company has built specialist teams in key potential areas such as equity capital markets, mergers and acquisitions, and venture capital as part of its long-term strategy that provides NIC with an excellent platform to execute flagship transactions.
In 2021, NIC completed the financing mandate for a leading fitness and lifestyle business and has listed Al Safat Investment Company, a fully-fledged investment-licensed company with a capital of $85.2m. In addition, the team started a strong pipeline of other mandates, including a buy-side transaction for a leading logistics company, one of Kuwait’s largest multi-sector businesses. And, it is currently working on two flagship pre-IPO mandates, expected to complete in 2022 and 2023, as well as contracts to provide general advisory services.

Diversification and innovation
Technological innovation and the adoption of digital services have expedited since the emergence of COVID-19 and there are no signs of stopping. The technology sector has been one of the most attractive and high-performing sectors due to its record growth in the past few years. Consumer and business spending in this sector has boosted tech stock price targets and increased share prices, reaching new highs.

Harkening to the developments in this sector, NIC followed a technology investment strategy and invested in several global and regional venture capital funds as well as direct investment opportunities. The investment banking advisory team focused on supporting companies and founders, as well as venture capitalists that are likely to disrupt several industries, including financial services, data security, software, mobility, healthcare, and food. The strategy is to invest in projects and companies that have clear potential to make a huge impact on their respective industries and eventually the regional landscape.

Exemplary transactions include NIC’s recent investment in Pipe Technologies as part of its expanding investment strategy targeting the technology sector. Pipe Technologies is a fast-growing US-based financial technology company recognised as the world’s first trading platform for recurring revenues, with a recent valuation of $2bn. Its valuation increased in just under a year since its launch in 2020, making it one of the fastest financial technology companies to reach this rating in history. In addition to the Pipe investment, NIC has recently invested in several global and regional venture capital funds as well as direct investment opportunities. The direct opportunities include NotCo and Darktrace. NotCo is one of the most exciting food technology firms focusing on plant-based alternatives, utilising patented AI technology.

Darktrace is one of the global cyber-security champions, also using AI technology, in this case to help clients thwart cyber-attacks. Meanwhile, the investment banking team is in the advanced phase of due diligence to invest in a leading regional VC platform specialising in delivery.

Unrivalled partnerships
“At NIC, not only did we assess the market behaviour and investment projects during the heart of the pandemic, we also acknowledged the impact of the pandemic on our clients – as human beings. We care about our clients and this had to be translated into action during times of crises,” stated Al Mukhaizim. Accordingly, NIC’s objective was to provide a seamless customer experience that would recognise their psychological status and physical restraints during the uncertain times of the pandemic. Acknowledging what the clients are going through on the other side of the coin has prompted NIC’s evolvement plans to launch an electronic portal, the ‘Market Maker’ service, and support their clients in times of stress by understanding their individual needs and addressing these by offering highly personalised services.

The NIC electronic portal was launched to grant customers direct access to their account so they can view all their investments and the performance of their portfolios through one window integrated with their personal devices. Adhering to social distancing measures, and recognising the series of lockdowns that have occurred in Kuwait and the region, the electronic portal connects clients with their account managers at any time through one application. The service also enables customers to manage their accounts, follow up on investments, carry out withdrawals and deposits, obtain reports on portfolio performance and allows them to update their profiles.

Though the market was significantly impacted by the pandemic, NIC has demonstrated a successful example of strategically capitalising on challenging situations and turning them into opportunities for growth and evolvement. Applying best practices in investor relations and corporate communication has definitely played an important role in cultivating NIC’s relationship with its clients amid an economic crisis.

Investae is emerging as a true leader in fintech

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Investae is a fintech with offices in London and Moscow, which prides itself on serving clients in over 30 countries. The company provides a licensed solution for investment firms, bond issuers, wealth managers, private bankers, and alternative investment fund managers, and is designed to make the capital-raising process easier.

Why is your solution new and competitive?
Our aim is to simplify the distribution of financial instruments, whether bonds, equity, real estate, funds, or any other type of investment product. We have gained a complete understanding of the main hurdles faced by investment distributors. We innovate by striving to simplify each step of the capital raising process as much as possible, so that investment managers can focus on what they do best: managing money. We offer a unique solution in the market, providing our clients with guidance, sales and marketing tools, ongoing support, and a continual improvement of results.

Nowadays, investors require a soft-skilled and educative approach, instead of simply being solicited

What’s more, Investae utilises artificial intelligence in the continual process of improving the solutions that we are providing.
For example, there is no longer a need to prepare materials describing each investment proposal in order to persuade your prospects. There is no need to even compose marketing emails. All you need to do is click ‘send’ while using our system. Our team members not only train our clients how to deliver their sales pitches, but they also prepare these investor presentations in advance. Our clients can benefit from the experience of each member of their sales team by gathering all objections and tricky questions into a single dedicated forum, what we call the ‘objection centre.’ It is designed to inform sales team members about the objections they could face, so that they are better prepared to overcome them.

How is the market evolving?
The financial world is changing fast and undergoing a digital revolution. Undoubtedly, it is becoming increasingly hard for anyone looking to raise capital to stand out in an overcrowded marketplace. Nowadays, investors require a soft-skilled and educative approach, instead of simply being solicited.

Similarly, financial professionals need an effortless, smooth-running, and time-saving sales process. We strongly believe that raising capital from investors requires a more sophisticated marketing approach, which utilises all the benefits that our varied digital tools bring into the picture. This is something the market currently lacks, and it is something we excel at. The sell-side of the investment industry has been left behind by asset managers who would often use approaches that are very similar to each other, yet lack efficiency.

What challenges are usually faced when raising capital among investors?
Potential clients are constantly bombarded with investment proposals. That is why it is hard to grab investors’ attention. However, the most common mistake many advisors make is they do not take their prospects’ wants and fears into account. They contact anyone that they think might be interested, following a blanket approach, which means that they do not know how to appeal to potential investors. That is the very problem we solve. Investae runs comprehensive training sessions for our clients, presenting the best techniques on how to secure meetings with prospects, grow their network, deal with indecisive and less financially educated prospects, and get them to respond.

How can your capital-raising tool be used?
Investae offers a platform that uses white-label licensing. As a result, the capital raising process is considerably simplified, which enables our clients to raise money faster: all marketing efforts are already in place, leading to a huge time saving. Companies are then able to hire new agents and distributors, add them to their existing teams, train them, and instantly manage their work. Thus, this tailor-made licensed platform will assist our clients’ own sales teams in selling their own products.

What are your objectives for the next five years?
Our team’s day-to-day efforts are directed to continually increase the value we provide. The primary goal of Investae is to widen the range of services we currently offer to various industries and sectors and gradually become the leading fintech company in the field of capital raising. We aim to change the entire appreciation of this process and bring it to the next level.

Leading the digital service rollout in the Philippines

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The year 2020 blindsided the world with the Black Swan occurrence of the deadly Coronavirus disease that spread so swiftly across the globe and that had devastating consequences. Global activity ground to a halt, hampering economic growth as we paused to deal with this crisis. The healthcare industry was temporarily crippled, and the virus caused people to lose their jobs across all industries.

On the local front, the Philippines was faced not only with this devastating pandemic, but started and ended the year with natural disasters – from the unexpected eruption of the Taal volcano to the influx of typhoons during the latter part of the year. Reeling from all these, but most especially from the pandemic, the Philippine’s GDP suffered its biggest annual contraction on record at negative 9.6 percent, year-on-year, according to the Philippine Statistics Authority. Nonetheless, we must salute our selfless overseas Filipino workers who, in spite of global lockdowns and mass layoffs, found ways to send more money back home to help support their struggling families, with total remittances decreasing by 0.8 percent in 2020, dismissing a rather more grim forecast of a sharper fall due to the pandemic.

Highest growth in 33 years
Despite the challenges during these past two years, the Philippines has seen a gradual improvement quarterly, year-on-year, 2020 to 2021. From its worst dip in the second quarter last year, GDP posted a record high of 11.8 percent growth in the second quarter of 2021, year-on-year, the highest since the fourth quarter of 1988. This robust performance may be a result of the ‘base effect’ as some analysts claim. Some optimists nonetheless reason that this is a result of the gradual improvements in business confidence as the economy learns to live with the virus and the hope of a safer future with the vaccine roll-out in March. Following the performance of the economy, the Philippine non-life insurance industry faced its toughest and most challenging year as COVID-19 redefined the ‘face-to-face’ norm of insurance business transactions, with most insurance companies pivoting their business operating models and systems. Considered a non-essential sector, and thus not operational for several months during restrictive quarantine status, this propelled insurance companies to embark on more aggressive initiatives towards the digitalisation of operations. The non-life insurance sector’s business portfolio contracted by 9.3 percent at PhP83.8bn ($1.7bn) with total net premiums written posting a 16.2 percent negative growth at PhP49.3bn ($984m).

In terms of profitability, however, net income leaped by 65.8 percent to PhP5.7bn ($113.8m) as losses spiralled down 20.9 percent to PhP21.5bn ($429.2m). With lower claims incidences during the lockdown period and operational efficiencies partly brought about by work-from-home arrangements for the whole year, these somehow balanced off the decreasing premiums, hence maintaining the non-life insurance sector’s profitability. The loss ratio in 2020 was therefore at 41.7 percent versus 49.1 percent in 2019. On the whole, despite the challenges of the pandemic, the non-life insurance industry remains strong and stable with aggregate assets and net worth ending a challenging year with increasing growth rates at 7.96 percent and 7.66 percent at PhP280.2bn ($5.6bn) and PhP105.6bn ($2.1bn), respectively.

The route ahead
Moving forward, the non-life insurance industry is optimistic that it can recover lost ground and exceed expectations as the administration is fast-tracking its vaccine programme, imposing more localised and granular lockdowns, thereby reducing the drag on the economy. In addition to this, it is expected that the sale of new motorcars will lead to an annualised growth of 18.2 percent based on motorcar sales as of July 2021, so insurance premiums on these will naturally move up substantially relative to last year.

Nonetheless, to remain relevant, insurance companies need to advance technology as innovation will be an important component of the future. Equally important, artificial intelligence (AI) will be integral to better underwriting capabilities. There is no path back to pre-COVID, only a path forward to the post-COVID market, accelerating digital infrastructure and product offerings to meet the evolving demands of the market with minimal human intervention.

As we leave the most challenging year so far, we send our overwhelming gratitude to our colleagues and associates, our clients, our business partners and to everyone who went the extra mile during the global health crisis. The year leaves with us a reverberating memory of a sense of awe at how people can naturally adapt to a Black Swan situation and be resilient, tolerant, and empathetic in dealing with a diversity of challenges during this global COVID-19 pandemic; but at the same time, move on with a sense of caution, hopeful and optimistic that this too shall pass. We shall continue to face all difficulties with gratitude, strength, perseverance and we, together, shall work hard for a sustainable, dignified and fulfilling future. We should look beyond the short-term ‘new normal’ and towards the long-term ‘new normal,’ towards sustainability.

Continuously upgraded
Through all these difficult times, we turned challenges into a wealth of opportunities as Standard Insurance has been well prepared for catastrophic events. Our systems are all digital, integrated and upgraded continuously. Everything is online, whether for internal or external customers. All of our systems are also in the cloud, having migrated all of our systems onto the public cloud years ago, making us possibly the first domestic insurer to be an Amazon Web Services partner. The company’s ISSIoffice plus is an ‘insurance office in an app’ and is accessible via smartphone or any telecomputing device and is another platform that allows one to do the whole insurance cycle. These allowed us to fluidly adjust to the work-from-home arrangement.

Yes, we took a quick pause immediately after the declaration of the community lockdown in March, to check on our people nationwide, ensuring that all our associates were cared for and kept safe so that they too would care for our customers. When it comes to caring for each other, everything is personal to us at our company. After all, that is the very essence of our massively transformative purpose (MTP), ‘peace of mind for all mankind,’ starting with our associates. It is an MTP that we try to ingrain into our DNA so that we are guided by this in all aspects of our operations.

With everyone settled and secure of their future, we immediately plunged into the business of the day, maximising our digital capabilities while easing into the new ways of doing business and conducting meetings using the different platforms of digital communications. We looked at the ‘new normal’ just as a way of looking at and doing things from a different perspective. As long as we persevered and continued to focus on proper underwriting, intelligent pricing across all lines, fast and accurate claims turn-around, and sustainability in the long run, we knew we would be okay. As our Swiss independent director always likes to say, “If it doesn’t make cents, it doesn’t make sense.” Correct business decisions and sales, profits, cash flows, and balance sheets that we understand and can count on, are critical to the welfare of all of the enterprise’s stakeholders, especially during these times.

Furthermore, we strongly believe in both the power of an individual to make a difference, and in the greater power of individuals moving together as one enterprise. More importantly, we are in a unique position of working with a diversity of generations in our workforce, made up of millennials, generation Xers, late baby boomers, and even early baby boomers, with the latter two categories still very much able to work and learn. Getting the best out of the mix of all four generations is a highly challenging but necessary and worthwhile endeavour. We believe that combining the different but existing concepts and people in novel ways creates the products, companies and industries of the future that will surpass and overcome any adversity.

Utilising technological advances
Another unique position is having the capability to be data scientists, having the fundamental product of an insurance algorithm. As such, we have the capability to optimise a large database and engage in mutually beneficial customer-to-company interactions, and drill down on revenues, recurring losses, expenses and investments. We utilise technology to do this and consider it an imperative, recognising that these tasks require the often severely and chronically under-tapped computing power of today. This predictive and advanced analysis goes a long way in enhancing and updating our underwriting and pricing strategies, among others. These last two years brought out both simple and complex innovations of doing business, of delivering despite the challenges of lockdowns and quarantines, of consistently providing quality service to our customers and business partners. We successfully rose to the evolving demands of the market, in terms of innovative products and services.

To remain relevant, insurance companies need to advance technology as innovation will be an important component of the future

We further enhanced our market footprint across digital platforms as well as in physical sales offices in untapped and business areas with high potential. Moving forward, we continue to strive to be better and make an impact, making meaningful connections through well-established distribution channels, harnessing technology to improve our accessibility. We continue to bridge the gap with our strong presence in key cities, with the aim of bringing our products to where you are. We are building a collaborative network as we diversify boldly and expand globally. We are forging strong connections with leading institutions and broadening the spectrum of our local and international clients. Standard Insurance continuously strives for excellence in both national and international arenas, serving the needs of the insuring public according to global standards.

World Finance awarded us the ‘Best Non-Life Insurance Company, Philippines for 2021,’ for the eighth time, even at the height of the pandemic. Equally important, Global Credit Rating upgraded our financial strength ratings to A+(PH) (single A plus) and an international scale rating of BB (double B). We also maintained our ISO 9001:2015 certification by SGS International.

A sustainable future
Finally, the world is insisting that we do things sustainably. Let us all do things that create sustainable lives for everyone: work towards cleaner water for others; more nutritious food for others; cleaner energy for others; let us work towards a future in which we are able to live, work and study in clean and safe neighbourhoods without having to commute expensively for hours; let us be part of a society that provides more equality in terms of opportunities (even if there will always be some who will strive more than others).

We will always respond rapidly no matter what crisis falls in our way. With our massive team of claims experts, highly advanced digital platforms and total insurance infrastructure, we are attuning ourselves to all important challenges and needs, and with our strengths, we are making a difference, the way only we can

Championing participation insurance in Turkey

Posted on by itsupport

Bereket Sigorta was established in 1995 and provides services within the framework of a multi-sales channel business model with the motto ‘just in case.’ By 2017, it was serving in more than 500 locations, in places where other insurance companies do not have any distribution channels, and continues to meet the demands of customers all around Turkey with a wide range of products for all. It has a widespread and efficient supply network of over 3,300; consisting of 10 regional directorates, agencies of Agricultural Credit Cooperatives of Turkey, participation banks, saving financing companies, agencies and brokers.

Agricultural Credit Cooperatives of Turkey, the main shareholder of the company, was founded in 1863 and is the largest farmer organisation in Turkey, with total assets of €4bn and more than 850,000 members. With the all-encompassing support of Agricultural Credit Cooperatives of Turkey, Bereket Sigorta has set out to create a model for participation insurance based on taking the lead in the market to restructure insurance products so that they are in compliance with Takaful principles. Bereket Sigorta has developed an exemplary model for the sector called ‘the performance supported incentive proxy model.’ The model was created with the vision of being the benchmark for participation insurance. The idea is to offer positive balance sharing incentives over the profitability of the entire pool without separating income from investments.

What is participation insurance?
Participation Insurance is a type of insurance based on the idea of solidarity. It is built on a system that is far from the traditional economic and financial practices, with interest and activities that are considered forbidden, or ‘haram’ in Islam. It can also be defined as a type of insurance created to meet the insurance needs of individuals who stay away from traditional insurance for religious reasons. In this type of insurance, insurance activities based on risk sharing and cooperation among the participants is carried out.

Participation insurance refers to the insurance practice in which financial assets are managed within a special framework and under the supervision of an advisory committee consisting of experts in the field of Islamic sciences and insurance. In accordance with the principles of participation, companies can’t guarantee religiously illegitimate issues and risks, or manage financial assets within the framework. They must establish an advisory committee and a compliance unit and prepare a participation internal audit report.

The basic principles of participation insurance are to evaluate premium/donation collected from capital owners and participants within the framework, check which are in line with Islamic principles and submit for the approval of the advisory board, which is specialised in Islamic law, for insurance business and transactions. Participation insurance began in Turkey in 2009 and it has shown serious development due to the growth of the interest-free finance sector as well as the regulations introduced in the last decade or so.

As part of the medium term programme (2022–24) published by the T.R. Presidency, Presidency of Strategy and Budget, actions to ensure compliance with international standards in the field of participation finance and to expand participation insurance are included. In this context, participation insurance, as long as it is presented correctly to the segment it addresses, will continue to be an important potential source of funding.

Navigating a crisis
The company operates across all branches including motor, traffic, fire, housing, engineering, agriculture, health, personal accident, transportation, legal protection, TCIP and liability insurance, and continues to progress rapidly in the sector with its technological infrastructure and digital solutions. With its dynamic and innovative brand vision, Bereket Sigorta continues to swiftly progress at the point of customer experience with more than 100 robotic applications in operational business processes and 24/7 service through digital platforms of individual internet and mobile branches.

Participation insurance, as long as it is presented correctly to the segment it addresses, will continue to be an important potential source of funding

With the effect of quarantine and restrictions during the pandemic that affected the whole world, the company highlighted its online sales channel, took quick action and increased the efficiency of its digital channels. As a part of the digital transformation process started in 2019, Bereket Sigorta became the first company to offer online insurance products through the instant messaging service BIP, which is like the Turkish version of WhatsApp. Through our application, customers can buy insurance products and access information from agencies and authorised services. Bereket Sigorta, which implements the first and unique participation model in Turkey, continues to stand out in the sector with all kinds of corporate social responsibility projects and collaborations that will contribute to the sustainable growth of the participation finance ecosystem as well as the faster and healthier development of participation insurance.

It contributes heavily to the spread of participation insurance through public institutions, non-governmental organisations, universities, associations and sports clubs, with a special focus on corporate social responsibility projects. Within this scope, Bereket Sigorta worked with the Turkish foundation for waste reduction (TI˙SVA) and provided $101m coverage to more than 55,000 women entrepreneurs as they take important steps into economic life.

In order to encourage low-income women entrepreneurs within the agricultural sector, the ‘women farmer loan’ project, which includes basic agriculture and basic financial literacy training, was implemented in cooperation with Tekfen Foundation and TI˙SVA. This programme, implemented as a social management project, allowed the provision of support for low-income women farmers in the Aegean region of Turkey.

To deepen the participation finance ecosystem and spread the participation insurance to the base, a protocol was signed between the independent industrialists and businessmen association (MUSIAD) and Bereket Sigorta, with the idea of becoming a ‘unifying force in the economy.’ With this cooperation, discounted insurance products for MUSIAD women, young members and employees are offered, as well as membership of Bereket loyalty club, which provides advantages in many areas of daily life from shopping to personal development.

Continued excellence and growth
Participation insurance constitutes approximately five percent of the insurance sector premium production in terms of volume and this will likely increase to 10 percent in the coming periods. According to data compiled from the union insurance and reinsurance companies of Turkey (TSB), the total premium production in participation insurance in 2020 increased by 24.2 percent compared to the same period in the previous year and reached 4.3 billion TL ($460m). There are 10 companies operating in the field of participation insurance and they represent a significant proportion of production, having the largest share in premium production.

Bereket Sigorta received two awards at once in the categories of the ‘Most Reliable Participating (Takaful) Insurance Company in Turkey’ and ‘CSR Excellence and Dedication to Community in Turkey’ within the scope of the 2021 Islamic Finance awards presented by World Finance.

This accolade is in recognition of Bereket’s leadership and for demonstrating remarkable vision in identifying tremendous opportunity in the greatly underserved Turkish market, while simultaneously answering community needs for participation insurance. Bereket Sigorta’s successful nomination is not only due to its long-standing records of expertise in risk management, but also for its compelling business plan, mobilising highly qualified professionals with procedural know-how, allocating resources and being able to make outstanding progress in a short period of time.