Author: itsupport

Unique appeal of Andorra: a microstate that is on the rise

Posted on by itsupport

Andorra is a European microstate located in the Pyrenees. For a good part of its history, it has been a country that, except for tourism, has lived discreetly, hidden from the spotlight and unnoticed by most. Today, things have changed and the principality looks more and more like a place full of opportunities and open to the world. How and why has Andorra gone from being a great unknown to a fashionable business and tax destination?

Change management has become a key factor in our time, for people, companies and countries. Society is going through an intense and constant transformation process, and for those not paying attention or unwilling to change, they risk being left behind.

In this context, a key word for maintaining competitiveness and success is adaptation. A concept that generates success stories such as that of Andorra, whose government was able to take agile steps to efficiently modify its positioning when they saw that the country and economic model needed to take a different route. Less than a decade ago, the Pyrenean country made the decision to leave opacity behind and integrate itself by adopting international standards of transparency and taxation. At that time, voices were heard predicting a collapse of the banking system and serious problems for the economic viability of the country.

Today, we can say that those predictions were very much mistaken, that the financial sector is in excellent health and Andorra is growing. All of this is thanks to a process that we know well at MoraBanc, since we follow a very similar one and have been a significant success story in our own right. Within a few months, we were able to rethink and carry out a transformation plan for the bank in record time. The result? Far from the times of opaque banking, we have generated other business lines and redesigned our range of products and services to achieve four years of growth in a row on a consolidated basis. Our subsidiaries in Switzerland, Miami and Barcelona (opened in 2020) are also contributing to this success. We maintain solvency levels well above the average for European banking. In short, as the country itself has done, we have repositioned ourselves by adapting to the needs of our society today, leveraging our competitive advantages.

 

Strategic positioning
Andorra has been able to adapt and has developed a fascinating appeal for individuals and companies to come and live here, all without losing its attraction as a tourist destination. Every year, eight million people visit this country of only 80,000 inhabitants.

If we want to list the attractions of Andorra for the investor, we must start with the country’s fiscal ecosystem. Andorra currently has a competitive tax framework that is standardised with the surrounding countries. It applies a balanced tax regime that on one hand is within the standards of international taxation, but on the other hand is sufficiently attractive.

The tax rates applicable to both natural and legal persons are a maximum of 10 percent. Andorra also has an indirect tax on consumption, through the taxation of the supply of goods and services by entrepreneurs or professionals, as well as the importation of goods, with a general rate of 4.5 percent. During 2010 and 2011, Andorra signed Tax Information Exchange Agreements (TIEAs), and no longer features on the list of tax havens in certain countries such as Spain. The ‘tax quarantine’ provision no longer applies when there is a change of tax residence to our territory. Andorra has a worldwide income tax system in which all income earned must be declared. This is very important for the purposes of signing double taxation treaties and being a fully comparable jurisdiction.

Andorra has a fiscal framework that is completely standardised with neighbouring and surrounding countries. This makes it attractive for new investors, with a network of agreements to avoid double taxation growing year by year. The principality is also a signatory to the common reporting standard, and has been exchanging information automatically with more than 70 countries each year, since 2017. In addition, it should be noted that the principality of Andorra is a member of the inclusive framework of the Base Erosion Profit Shifting (BEPS), having fully committed itself internationally to adapting its internal regulations to the provisions laid down in the action plans of the OECD project.

Virtually all investments or financial returns are exempt for non-residents. We have had a personal income tax since 2015 and it is a very competitive 10 percent. The first €24,000 is exempt on a general basis and the first €3,000 in savings is exempt, operating as reductions from the base. It is also a very powerful regime in relation to capital gains, which are generally exempt from taxation, as long as you do not hold more than 25 percent of the share capital.

 

Enhanced appeal
Andorra does not have inheritance and gift tax, nor does it have wealth tax – like many European countries that have eradicated this tax from their internal regulations. The absence of this type of tax further enhances the appeal to investors and large estates.

The Andorran Sicavs and investment funds continue to be taxed at a reduced rate of zero percent in corporation tax and are generally recognised via double taxation agreements. In short, Andorra is a very attractive country fiscally that has been adapting and successfully passing all international and peer reviews.

Andorra currently has a competitive tax framework that is standardised with the surrounding countries

According to data from Actua.ad, foreign investment in Andorra has grown by 500 percent in less than a decade. With these favourable conditions as its calling card since the beginning of the economic opening process, Bradley Hackford recently ranked the principality as the second most attractive country in the world to invest in.

Andorra’s popularity in this respect would not be possible solely on economic grounds since a change of residence, or setting up a business in a place is also a life project. In matters such as education, health or security, the country is also at the forefront.

Geographically, Andorra is well connected with Barcelona and Toulouse, and meets basic needs with an excellent level of quality. It has free education with three educational models and international schools, a public health service recognised for its efficiency and good service, and a level of public safety that is among the highest in the world. It is a modern and digital country with 94 percent of homes connected to the internet via fibre optics.

In the last decade, the number of expats living in Andorra has grown by 35 percent and many top international artists and athletes have established themselves in the country. This is a figure that grows every year, as the level of recommendation among them is very high. Andorra’s positioning goes beyond attracting new residents and companies. The country is making its voice increasingly heard in international forums. Just recently the country’s entry into the International Monetary Fund became effective, and this now opens up new paths and opportunities for the country’s economy. Andorra is also currently negotiating an association agreement with the European Union.

 

The bank of the new Andorra
Andorra is a success story. It is the story of how a country has reinvented itself to seek an attractive international positioning that generates opportunities. As a bank and as a company, we see ourselves reflected in the new image of the country, and we believe in promoting openness, transparency, innovation and outstanding personal client service. Digital banking has played a key role in the transformation process of the bank, when it made a significant investment of resources and talented professionals to lead the digital banking sector in Andorra. As a result, this year’s World Finance awards have recognised us as the best online bank and best app in the country, for the fourth consecutive year.

We are closely connected with new companies coming to Andorra and with new passive residents. We know that the service offered by the financial sector is very important to the country’s standing, and to add value we work with the objective of making permanent improvements.

Just as the country has closed agreements with institutions such as the IMF, as a bank we also add partners, and have alliances with Goldman Sachs Asset Management, the Cuatrecasas law firm and with Pyrénées, the largest retailer in Andorra.

The cost of continued lockdowns is adding up

Posted on by itsupport

When the world went into lockdown back in March, it was hoped that shutdowns, quarantines and wartime-like curfews would do the trick in eliminating the deadly coronavirus. But more than nine months on, an end to the pandemic is not only out of sight, infection rates across the globe are rising at a record pace. The worsening situation has placed world leaders in the unfortunate position of contemplating new nationwide shutdowns.

 

The new COVID reality
There can be no doubt that we are living in perilous times as social distancing and wearing masks become part of our daily lives.

Increasingly, job cuts and ever-spiralling death tolls are also turning into permanent fixtures of this new reality. Despite news of a vaccine for COVID-19 breaking at the time of going to press the global recovery remains not only on shaky ground, but with the risk of a double-dip recession growing by the day as restrictions are tightened and more and more countries are swept by a second wave.

The devastating consequences of shuttering large swathes of the economy has meant that governments have had to spend like they’ve never spent before and central banks have had to get even more creative with their unconventional tools to fight the most severe downturn the world has faced in a generation. The problem is that monetary policy is already reaching its limits and governments are reluctant to commit to additional relief packages out of fear of pushing national debts to unsustainable levels. The enormous stimulus that ensued after the first wave may not necessarily be repeated as major economies are partially shut down again in the winter months.

 

Slow and uneven recovery
There is already growing unease in financial markets about the prospect of a slow and uneven recovery amid fresh lockdown orders. The risk rally that was triggered by the tsunami of stimulus announced in March came to an abrupt end in September as the rebound in Europe and elsewhere started to show signs of strain and doubts emerged about whether the US Congress would approve another virus relief bill.

The virus situation in Europe has only become worse since late summer when new cases began to spike again, with most countries tightening their restrictions and unavoidably putting the brakes on their recovery. However, the odds of further fiscal stimulus in the United States have improved somewhat, propelling stocks back towards their early September highs. This only goes to underline how the mere prospect of more easy money fuels stock market euphoria even when the economic outlook has never been so uncertain.

But for how long can the combined forces of fiscal and monetary stimulus shore up investor confidence when a full recovery is looking increasingly precarious? The longer it takes for a vaccine to be implemented, the further a full recovery will be pushed into the distance, meaning governments and central banks will have to continue propping up their economies with unprecedented measures.

However, there is a limit to how much more policymakers can do. And even if they were to live up to their pledges of further spending and money printing if needed, there is a risk that additional stimulus will eventually be met with less enthusiasm by investors as it becomes evident that the economic backdrop isn’t about to get better without a fully approved global roll out of a vaccine.

 

Avoiding the dreaded lockdown
The immediate dilemma for authorities, though, is whether full and prolonged shutdowns are inevitable. Having succeeded in getting the infection rate down to manageable levels during the summer, it appears that curbs on public gatherings, mandatory masks and local lockdowns can only go so far in keeping the virus at bay. Worryingly, it also seems that mass testing and travel restrictions are not as effective as hoped, which is not surprising when contact tracing is patchy and compliance on self-isolating is not 100 percent.

Following the near-complete reopening of their economies as well as the return of students to schools and universities, daily virus cases in many European states have now surpassed their previous records from April when the first wave peaked.

The surge has unwittingly prompted several European governments to backtrack on earlier assurances that a second national lockdown could be avoided.

 

Are ‘circuit-breakers’ the way to go?
As healthcare systems once again reach breaking point and death rates soar, scientists are urging for so-called circuit breakers, where much tougher controls are imposed for two to three weeks to slow down the spread of the virus. Some countries like the Netherlands have heeded their advice, closing bars and restaurants, which are widely considered to be virus hotspots.

Others such as France have gone a step further and banned all non-essential travel for its population, though the general trend in the latest round of restrictions is to find a middle ground. Even so, as sensible as this approach may be under the circumstances, governments are worried about the economic cost of asking businesses to close their doors again. Layoffs are accelerating as wage subsidy schemes are phased out and demand in the hardest-hit industries has been permanently depressed by the pandemic. Even if job retention schemes as well as other initiatives were to be extended, they are extremely costly and unsustainable in the long run.

What is clear, though, is that the fiscal space hasn’t run out just yet for Western governments as large-scale asset purchases by their respective central banks have created a favourable environment to borrow and spend. In fact, the warning shots fired in their direction are almost all about the urgency to act now and do more as failing to do so could prove more disastrous in the future.

 

Political dithering
When it comes down to it, the overriding duty to save lives appears to be taking precedence over the economy, at least in Europe. However, there is the concern that the delay in bringing stricter measures from when the virus first started to re-escalate has already cost lives, as history has shown that the less done at the early stages of the outbreak the greater the danger that even tougher ones will be needed down the line.

Yet, the rifts on lockdown policy are only widening, with many politicians strongly opposed to more stringent rules while others are arguing that existing curbs don’t go far enough. Even on the monetary policy front, there are signs of a split at key central banks like the Federal Reserve and the European Central Bank on whether bond purchases should be scaled up or down.

These divisions certainly don’t help promote confidence among the public and are less than reassuring for jittery markets. The US dollar probably has the most to gain if the uncertain path of the recovery becomes even cloudier, and the most to lose from fresh injections of fiscal and monetary stimulus. At times of global crises, the dollar tends to attract the greatest attention from the safe-haven currencies due to it being very liquid. The Japanese yen is not far behind.

 

It’s still all about the dollar
After going on the retreat once the market turmoil at the height of the virus crisis in March began to subside, both the dollar and yen have enjoyed a bit of an uptick in the autumn. This reflects a heightened sense of caution among investors as to how the pandemic will pan out over the next few months, though rising US political risks have also been a factor.

The reverse has been true for risk-sensitive currencies such as the Australian dollar, which has been closely mirroring equities since March. The euro has also behaved much more like a risk currency during the pandemic as the narrowing yield differential between the US and the Eurozone has increased the potential upside for the single currency, making it very responsive to positive headlines coming out of Europe.

 

At the crossroads
The direction that these currencies take in the coming months will very much depend on how the dollar responds to the impending headwinds. That in itself will be determined by what policymakers decide about how far to go with new restrictions and how much additional stimulus is required should the virus flare-up intensify further before mass vaccination programmes can be rolled out

Digital switch picks up speed in Spain’s banking sector

Posted on by itsupport

By embracing digitisation, the banking sector is facing new opportunities and challenges both for the institutions themselves and for consumers. With users increasingly demanding digital products and services, companies are experiencing a revolution in the way they interact with their customers. This is improving companies’ efficacy and productivity as well as users’ satisfaction. The new ways customers interact with services and finance as well as the current change in their consumption habits boost digital banking in the marketplace, which has finally achieved the value and space that users have been demanding for years. In this scenario, the COVID-19 pandemic has accelerated the digital shift in the banking sector over recent months. Banking and financial services sectors, not only in Spain but all over the world, are currently driving this change by challenging the traditional banking industry through new alliances with other entities as well as significant investments in technological innovation. Enrique Tellado, CEO of digital bank EVO Banco, spoke to World Finance about the opportunities for disruptive innovation in Spain’s evolving banking sector.

 

What makes EVO Banco different in the Spanish banking sector?
The banking sector is going through a great process of transformation towards digitisation, not only in Spain but all around the world. This is a process that had already begun before the pandemic. However, the COVID-19 crisis has accelerated all these transformations and digital banking is no longer a trend but a reality. In this sense, in EVO we believe we are prepared for these changes because we have been working in this direction since 2012, when we planned to lead the change in the Spanish financial industry with a 100 percent digital banking model. To achieve this goal, EVO has launched numerous technological projects based on our values of simplicity, transparency and innovation to offer a unique, agile and surprising experience to our customers. We are in a scenario where users are increasingly demanding digital products, services or even experiences. Satisfying these demands will continue to strengthen our offer as a 100 percent digital bank. But our strategy does not settle for only implementing disruptive technologies; we consider ourselves to be a disruptive technological firm in the banking sector. Digitisation and enhancement of customer experience is in our DNA.

As a 100 percent digital bank, we know that the digital transformation is giving many companies the opportunity to achieve greater efficiency and productivity

 

What are the benefits EVO Banco experienced during the digital transformation of all contracting and financial management processes?
As a 100 percent digital bank, we know that the digital transformation is giving many companies the opportunity to achieve greater efficiency and productivity. In the case of EVO, the digital transformation means becoming an active part of all the processes of change in our society, listening more and better to our clients, understanding their needs, and acting accordingly. For this reason, EVO has created a digital ecosystem of financial services focused on better serving clients. Customers can find everything they need in our mobile banking app, one of the most advanced in the sector not only in terms of services, but also in usability and user experience. In addition, we consider the new players in the sector as potential allies who help us build a powerful digital ecosystem that adds value to the customer and makes us different. We seek to innovate with solutions and disruptive products that allow us to move swiftly in the market and be in the customer’s moment of truth.

 

Could you tell us more about EVO Banco’s fintech alliances?
We are convinced that societies of the future need to collaborate with each other as a fundamental part of their activity. Financial alliances with other entities are part of our strategy in the pursuit of value. We cannot think that in the current context companies can survive without strengthening ties with each other.

An example of this is our financial alliance with Finizens, which made us the first bank to integrate robo-advisor technology with what we call the Intelligent Investment Plan, an opportunity to invest automatically into five different investment profiles. Or Travel Cash, which allows clients to request currency through their mobile app and have it sent to their home.

We also have agreements with the Spanish Post Office and Caja Rural cash dispensers, to offer solutions for cash deposits and withdrawals throughout Spain. And the most recent one, the agreement with Coinscrap, which allows us to have an Intelligent Money Box that helps the customer save money while spending, by rounding up purchases and receipts, and with clear short, medium and long term goals.

 

How is the new revolution in banking changing the interaction between banks and customers?
The way customers and organisations interact and relate to each other is continuously changing. We work to offer our clients disruptive and sustainable services and experiences. That is why EVO became the first bank in the world to create a comprehensive bank assistant in Spanish with voice interface and the usage of natural language. Through EVO Assistant, our new artificial intelligence engine, the bank is transforming the way in which we relate to our customers, who will be able to solve queries, perform transactions and receive value-added information from the bank to improve their financials.

Furthermore, we have integrated EVO Assistant into our call centre service and, last July, we extended EVO Assistant to telephone banking, in order to improve self-service and responsiveness in the main customer service channel. After that, in September 2020, along with NUANCE, a leading company in voice biometrics and artificial intelligence technology, we announced a partnership that will provide EVO’s customers with a voice biometric fingerprint. We believe that voice biometrics is currently the most secure system for verifying our users’ identity and preventing unauthorised access to services and operations. We strongly support the idea that voice, as the new revolution in banking, is changing how banks and customers interact, and voice technologies and their exponential growth, in the form of assistants, speakers or other IOT devices, will become the main channels of interaction with the customer.

 

What further strategies are you putting in place for next generation digital banking?
It is important to listen to what customers are telling us, and they want their bank to give them the same experience they have with big tech companies. One of the main pillars of the activity of EVO is its first-in-class user experience, which, from a technological perspective, we aim to enhance by boosting stability, scalability and security in our architecture. Agility is also essential for quickly providing new services to clients and that is why we use short development software cycles. We also consider ourselves to be a data-driven bank, incorporating machine learning technology and managing data in real time.

We are also pioneering in mobile first and voice banking, with the integration of natural language services in the different channels we have, and we will also keep working on offering more transparency and widening our open-banking ecosystem, so we will continue to expand our fintech alliances.

 

What are your expectations in terms of growth over the next five years?
Our main focus in the next five years is to consolidate ourselves as one of the most innovative and digital financial institutions in the Spanish market. To achieve this, the bank will consolidate the digital acceleration strategy that has allowed us to offer high-value financial and non-financial services to the client to date. Internally, our main goal will be to extract the value of data. Data is becoming the most valuable asset in our day-to-day relationship with clients. Based on that, we will completely adapt the offer and the way we interact with clients. In addition, voice will remain highly relevant, as the easiest interface to interact with clients. Since being the first bank to launch its own Voice Assistant in March 2018, now, EVO Assistant has integrated several new services. It is going to be one of the main pillars to enhance user experience. We will also advance in the use of biometric technology and our customers’ biometric data to validate and authenticate the decisions they make about what to do with their money. EVO Banco will bet on biometrics and voice to deliver a seamless, agile and secure experience to our customers in authenticating their operations.

 

What are EVO Banco’s key areas of focus for the next 12 months?
Our main goal is to become a reference in digital banking and voice in Europe through the use of data and AI. Digital banking has changed the paradigm of the relationship between customers and financial organisations. Technology, innovation, and customer experience will have a relevant space in the future. In fact, the current change in customers’ consumption habits and the new ways of interrelating with services and finance allow digital banking to acquire the value and space that customers have been demanding for years. The current economic crisis as well as the digitisation motivated by COVID-19 have allowed the natural evolution towards this new generation of financial entities with very talented teams, a new culture and leadership style of young people with different skills and wide expertise.

How can we restructure business to put people first?

Posted on by itsupport

Since its establishment in 1972, the Order of National Artists of the Philippines (Orden ng mga Pambansang Alagad ng Sining ng Pilipinas) has seen two sculptors inducted into its honour roll, Guillermo Tolentino (1890-1976) and Napoleon Abueva (1930-2018).

In 1930, Guillermo Tolentino designed and executed in bronze the country’s most important statue of Andres Bonifacio, the complicated initiator of the Philippine Revolution for independence from Spain. ‘Instead of basing his [project] on printed materials, he interviewed people who participated in the Revolution. Bonifacio’s figure was based on the bone structure of Espiridiona Bonifacio, the national hero’s surviving sister.’

Napoleon Abueva, the “Father of Modern Philippine Sculpture”, worked with ‘all kinds of materials such as wood, adobe, metal, stainless steel, cement, marble, bronze, iron, alabaster, coral and brass.’ Students of the University of the Philippines in Diliman, Quezon City, are familiar with his numerous installations found throughout the campus and have most likely been, consciously or subconsciously, influenced by the sculptor’s aesthetic and philosophy which, when the installations were unveiled in the 1960s, reflected a world of new possibilities.

For over 40,000 years, man has turned to art to capture and express the abstract – his ideas, preconceptions and feelings. In anxious times, people do not wonder too much about the motive behind Edvard Munch’s The Scream (1893-1910) but rather appreciate that it exists to give them an outlet for their own emotions. Munch’s pastels and paintings provide one with a much-needed channel and frequency to partially relieve disquietude and frustration.

Since the Internet’s commercialisation in the mid-1990s, abstraction has exploded. Salim Ismail, the author of Exponential Organizations, and Peter Diamandis and Ray Kurzweil, the founders of Singularity University, summarise this explosion in their 6D framework where Digitisation, Deceptiveness, Disruption, Democratisation, Demonetisation and Dematerialisation spur exponential growth, with special emphasis on Digitisation which is a proxy for abstraction.

That every company committed to commercial viability and sustainability must keep pace with the world’s technology and market leaders in the various elements of Industry 4.0 is a given. Here we are talking about: the pursuit of full digitisation and horizontal & vertical system integration, big data and A.I., the Internet of Things, cybersecurity, the cloud, additive manufacturing, augmented reality, autonomous robots and simulations, lean startup methodologies, and the United Nation’s 17 Sustainable Development Goals, among others.

That we have a plan for nurturing the long-term mental, emotional and physical well-being of people who participate in this race is not.

How much art or its analogues is mankind going to need to absorb in order to offset all this abstraction? As Chief Martin Brody in the 1975 film, Jaws, is so often quoted, ‘we’re going to need a bigger boat.’

 

Creating art through non-human matter
For a person, specific physical objects, while providing a certain level of utility, more importantly stirs memory and engenders feelings of comfort, relief, security and beauty. I enjoy drinking anything – water, milk, juice – out of some stemless wine glasses that my wife bought for me. Doing so makes me feel generally optimistic and enthusiastic about life. I also still have a bean bag doll that my mother gave me 47 years ago. It reminds me that it is possible, and that it is alright, to love and be loyal to ideas, things and people indefinitely.

In her 2014 book The Life-Changing Magic of Tidying Up, Marie Kondo shares that her approach to home organising is influenced by Japanese Shintoism and an ‘element of animism which believes that every object has a soul … this idea is incorporated in [my] method of expressing gratitude to your belongings for taking care of you’.

Kintsugi, another contribution of Japan to world culture, is the centuries-old method and art of repairing broken pottery pieces, using gold. It is part of the Zen ideals of Wabi-sabi, which centres on the embracing and acceptance of transience and imperfection.

In the Holy Father Pope Francis’ 2015 encyclical Laudato si’, the Vatican’s most comprehensive document to-date on environmentalism, ethics and the Christian faith, he identifies and describes a ‘destructive paradigm that tends to see all of reality as raw material awaiting human use, rather than a living reality, intrinsically valuable in its own right and therefore worthy of our respect … Human beings and material objects no longer extend a friendly hand to one another … the relationship has become confrontational.”

Perhaps one way our company has tried to follow this philosophy is by actively participating in the circular economy and establishing the country’s first and largest motorcar recycling and restoration centre. We repair damaged vehicles that are still structurally safe, but that cannot be economically repaired by the body shops of the domestic car dealers, and sell them to our associates and our clients on an installment basis. The ‘renewed’ units provide some of our enterprise’s stakeholders with much-appreciated mobility at an affordable price.

 

Creating art through time
In his 4,215-page novel, In Search of Lost Time, Marcel Proust spends 30 pages describing his tossing and turning and difficulty falling asleep.

In 1986, Carlo Petrini founded the international slow food movement. ‘Promoted as an alternative to fast food, it strives to preserve traditional and regional cuisine and encourages farming of plants, seeds and livestock characteristic of the local system. It promotes local small businesses and sustainable foods, and focuses on food quality rather than quantity.’

In 2015, researcher Aoife McLoughlin from James Cook University’s Singapore campus published a study that found that ‘technology is speeding up our brains’ perception of time.’

In 2018, Dr. Anthony Wagner, head of Stanford University’s Memory Laboratory, published a study on the detrimental effects of continuous task-switching, commonly misnamed ‘multi-tasking’, on working memory, attention, cognitive ability and productivity.

What is the impact of respecting professional time, in the form of unhurried and intentional conversations with other stakeholders within the enterprise, and being mindful in the performance of one’s work? What are the benefits of respecting personal time to allow one to be fully present with family and friends, as well as to provide one’s mind, body and spirit to rest and be refreshed? What are the adverse effects of treating time like a commodity?

 

Creating art through people
Quoting Genesis Chapter 4, verses 8 to 9, “Cain said to his brother Abel, ‘Let’s go the fields’. Once there, Cain turned on his brother Abel and killed him. God asked Cain, ‘Where is your brother, Abel?’ He answered, ‘I don’t know; am I my brother’s keeper?’

The 1942 Albert Camus novel The Stranger introduced the world to the character Meursault, a French Algerian shipping clerk whose indifference and alienation triggered incredulity.

The National Geographic’s June 1985 issue gained fame due to its cover, which featured a photograph of a young Afghan refugee, taken by the photographer Steve McCurry.

Walkable cities, such as Florence, New York, Marrakech, Paris, Vancouver, Buenos Aires, Dubrovnik, Melbourne, Boston and Vientiane brings one much closer to fellow human beings. Jeff Speck’s 2012 book Walkable City: How Downtown Can Save America, One Step at a Time outlines ways to make urban areas more humane environments for social creatures.

In 2009, on my first day on the job as an insurance professional, a fellow executive and I drove around the Philippine city of Marikina which was just drying itself out after Metro Manila had been hit by one of the worst floods on record. I saw muddied belongings on the sidewalks, and had initially dismissed them as debris, but upon closer inspection found them to include a wedding dress and family photo albums.

It is our aspiration and vocation to serve each customer and stakeholder authentically and with deep care. To do so, we try to combine industrialised processes with artisanal methods. It is only by getting the right mix of the organic and inorganic that we are able to fulfill our company’s purpose of contributing to ‘Peace of Mind for all Mankind.’ When it comes to taking care of each other – everything is personal to us at our company.

It has become so convenient and sanitary to abstract human lives through modern technology. Is not every human being entitled to aspire and work towards a more decent and dignified life? To be disconnected from the concerns of struggling families throughout the globe is the result of excess abstraction. How do we go about teaching current and future generations to see through each other’s eyes and to truly empathise with the human condition?

We look forward to living in and helping build this new world – where there is a unifying respect for things, time and people, and where there is harmony between the organic and inorganic, the digital and the analog, the perfect and the flawed, the symmetric and imbalanced. It would also be a pleasure to see and be with you on this journey.

A profile of the drilling firm working smarter and harder

Posted on by itsupport

The impact of the COVID-19 virus will be far-reaching and long-lasting for many industries. The crisis was a particular blow for the offshore oil sector, which had only just recovered from the 2014 oil price crash, when prices declined 70 percent in the period to the start of 2016.

In January 2019, oil prices were around $70 per barrel. At the time of writing, oil sits just below the $40 per barrel mark (a reduction of over 40 percent). Oil demand fell as much as 30 percent in April 2020 alone, as lockdowns and travel restrictions forced people to stay at home. Additionally, E&P companies cut their planned Capex spends for 2020 by around $100bn.

If this were not enough, markets have not looked favourably on the market capitalisation of listed offshore service companies. Listed offshore drilling companies have seen reductions of up to around 80 percent in their market capitalisation during the past six months, offering a clue as to immediate as well as longer-term impacts of the current moment.

Modelling by Moody’s has suggested that global oil demand might not return to 2019 levels until at least 2025. The ratings agency has further said that there is a possibility that demand won’t return to 2019 levels at all due to the combination of weaker economic growth, behavioural shifts and decarbonisation, especially within the transport industry. The result of the US election will surely have an impact here too, given President-elect Biden’s pledge to rejoin the Paris climate agreement and push forward with a ‘Green New Deal’ to tackle climate change domestically.

The drilling sector is being hit particularly hard at the moment, as Dr Ravi Kumar Mehrotra, founder of Foresight Offshore Drilling (FOD), well knows. Having started the drilling division in 1989 (the company started in 1984) as part of Foresight Group International, a family-owned, global enterprise whose areas of business also include shipping and the infrastructure of ports and gas, Dr Mehrotra is well placed to put the current challenges in their wider context and identify what’s required if the sector is to thrive. The marine engineer and executive chairman, who is a veteran in shipping and has spent more than 50 years in this industry, spoke to World Finance about navigating FOD through these treacherous waters.

 

What was the immediate impact of the coronavirus pandemic on offshore drilling?
In late 2019 we were beginning to see day rates improve as more E&P plans were firmed up in drilling. As of now, the drilling sector has experienced an environment where there are contract delays, suspensions, cancellations and terminations along with the somewhat inevitable squeeze on day rates.

 

How did FOD respond to those challenges in the first instance?
We have over 27 years of drilling experience and a fleet of six rigs, three of which are cyber rigs ordered from Cosco Dalian in 2013 to modernise the fleet. After successful marketing of the fleet ahead of the COVID-19 pandemic and ensuring contracts remain protected from adversities arising after the crisis, the fleet now has a utilisation of 100 percent with a backlog of 18 years. The fleet is delivering an operational up-time that exceeds 99.7 percent and is supporting clients such as ADNOC, ONGC, Oil India and Masirah Oil.

 

How can a relatively small drilling contractor such as FOD compete with the larger corporations, particularly at a time like this?
With drilling costs accounting for 40–70 percent of offshore oil and gas development costs, it is clear why the oil and gas operators choose their drilling contractors very carefully. Because of their size, larger corporations are often able to leverage their financial and human resources to outperform smaller businesses at every turn. However, as I often remind our team, reputation is all that matters; money, anyone can create. Small can be beautiful. The client sits at the heart of all we do and being smaller means that we are not driven by standard practices and processes. This doesn’t mean we do not have accredited management processes, just that we have the agility to adapt to requests. We offer a more customised service by ensuring all levels of management in our group are fully engaged with our clients. This means we can fully understand our clients’ needs and develop solutions that are ideal for both parties. Most importantly, though, it means that all internal functions are aligned with the solutions being proposed.

The client sits at the heart of all we do and being smaller means that we are not driven by standard practices and processes

 

Has the pandemic offered any lessons going forward?
It has highlighted the importance of robust partnerships with suppliers and service providers. By being able to demonstrate that business operations within our organisation remain strong despite market conditions, our partners have been willing to be flexible and support our efforts around debt management and cash flow optimisation. For small companies, the relationship with their partners and the support they can provide becomes an important survival mechanism. And again, it is about the organisation having the relationship – not just relationship managers.

Focusing on your customer is critical. During the pandemic we, like many, experienced significant issues with crew change logistics. It would have been easier to try and pass on our challenges to our clients, claiming that the problems were not of our making or within our control. Instead, our operations and HR teams came up with imaginative solutions to overcome logistical issues, including quarantining staff before and after crew rotations. In this way, operations remained smooth and showed our clients how we were supporting them, not adding to their burdens at this challenging time.

By highlighting and exploiting every innovative aspect of our efforts, whether process, service or technological, we emphasise the unique elements that set us apart from the larger corporations. In turn our clients see evidence of the compelling value propositions that we offer, propositions that enhance our reputation and generate further support.

 

How do you remain agile enough to respond effectively in these challenging times?
Large organisations can have a strong focus on consistency, whether it is internal with staff or external to clients. This is often achieved through layers of oversight that can increase the time to formalise decisions or approvals.

At Foresight, we have short reporting lines irrespective of geography or task. This permits an agile approach to problem solving and demonstrates to clients a flexible and responsive approach that helps to reinforce a willingness to collaborate.

 

What is the secret of your success?
Our workforce. To succeed, everyone within the organisation must share the collective desire to test themselves and be prepared to work the extra hours or go the extra mile. The valuable learnings picked up along the way are what will enable the organisation to more quickly and efficiently achieve its desired outcomes.

Collaboration is crucial, particularly for us as a smaller company. There’s a shared understanding, a common purpose and a real sense of pride in what we do. It is our teams and our people who regularly perform miracles to get critical milestones achieved for our clients.

There are plenty of examples of the power of this approach, from having a fleet with 100 percent utilisation to running at an amazing 99.7 percent uptime with excellent safety performance. An even more tangible example was the delivery of three brand new rigs from construction through rig readiness to operation in record time, not only getting our rigs operating quickly for our clients but delivering performance levels that exceed the norm. This could not be achieved without a workforce who are committed and engaged, ready to demonstrate that they can not only complete work quickly but thoroughly as well. It also highlights that the transition from construction to operations can be seamless.

 

How do you foster such a culture within your teams?
Much of the credit for these achievements can be attributed to long-term employees who have been trained within the company. We have learned that there can be no excellence without in-house training. I established the Amer Maritime Training Academy in 2001 to ensure that new entrants to the drilling or shipping world can learn both the basic skills and discipline to aid their development, while becoming clear on culture and expectations.

When times are tough, we endeavour to support our people and help them remain engaged with the business. This pays dividends when our valued clients are placed in their care.

 

Finally, what would you say is your company’s greatest strength?
Attributes such as agility, discipline, resilience, a clear focus on common goals and innovation are measures that help a small organisation compete with the largest of contractors. Building a strong reputation by focusing on these points gives us equal standing with the big players. But of course, for our organisation to be sustainable, we will need to continue evolving and adapting innovations.

Insurance firm Atradius is evolving with the times

Posted on by itsupport

Despite a rocky end to 2019, the tentative trade agreement between the US and China gave us optimism for global economic growth in 2020. However, all hope was dashed by the catastrophic arrival of COVID-19.

Spreading around the world in a matter of weeks, the virus has infected millions, and for many, the lockdown measures to contain it have effectively brought economic activity to a standstill. The crisis has plunged the global economy into its deepest recession since the Second World War, with the World Bank anticipating a GDP contraction of 5.2 percent for 2020. Despite the best efforts of governments to soften the economic blow with emergency fiscal measures, the outlook is decidedly gloomy.

Though some countries have fared better than others, the forecast is rather bleak across the board. In general, countries with longer and harsher lockdowns have experienced the most severe economic contractions – the likes of Italy, Spain and France among them. The virus has been particularly cruel to Europe, both in terms of the human and economic impact, with the EU expected to see a GDP decline of 8.3 percent in 2020, amid a renewed surge in COVID-19 cases and newly reinstated lockdown measures.

These are turbulent and testing times for us all. While there is a long road ahead of us in both the fight against the virus and the recovery from its economic effects, the crisis has also shown us where changes can be made in our working lives, and has stimulated plenty of ideas about how we can create a stronger and more innovative post-pandemic world.

If we take this time to implement some positive changes, we can emerge from the COVID-19 crisis in a better place, both as businesses and as individuals.

 

Surviving and thriving
The alarming speed with which the pandemic spread across the globe meant that businesses were forced to react rapidly, making significant adjustments to how they operate in order to comply with the new COVID-19-related rules and restrictions. Almost overnight, the world began a previously unprecedented experiment in home working, with offices left empty as workers began to log on from their kitchen tables. For many businesses, this turned out to be a surprising success, with employees adapting to this new way of working with ease. Many were all too happy to say goodbye to the daily commute, and enjoyed the extra time they got to spend with their families in the evenings, too. Productivity doesn’t appear to have suffered either, with a report by Equiem showing that 82 percent of British workers claim to be more or equally as productive at home as in the office.

Home working was just one of the ways that we adapted to the pandemic at Atradius. Our priority has always been the health and safety of our staff and customers, and we have successfully enabled remote working while also maintaining 24/7 support for our clients at this difficult and uncertain time. We have been proactive in our communication with our customers throughout the pandemic, helping to provide them with the cover that they need and keeping them abreast of how the situation is evolving and what it might mean for their business.

We understand that every business and every customer is unique, and each will have been impacted in different ways by the unfolding events of 2020. Early on in the crisis, we changed some claims notification procedures to allow our customers more time to collect outstanding invoices before having to file claims. This was essential as many businesses were trying to find their way under lockdowns and were not trying to avoid paying invoices.

While we have given our customers more time to collect invoices, we continued to pay claims at the same rapid speed we did prior to the crisis. At the same time, we also worked collaboratively with governments in many countries to implement plans that would allow more businesses to stay afloat during the pandemic. Now, with 2020 behind us, we are working to extend these plans in order to provide continued support as the financial crisis drags on.

While we are there to offer protection and support to our customers, there are other ways in which businesses can help themselves at this time. This year has shown us that innovation is indeed the mother of success, and in order to survive and thrive in challenging circumstances, businesses need to embrace change – with a healthy dose of wariness. At Atradius, we firmly believe that the key to success now lies in caution, innovation and evolution. It might sound like something of a contradiction to pair caution with innovation, but both concepts are vital to two distinct aspects of business. It is important to be cautious when it comes to your approach to credit management, because this is likely to be where an otherwise healthy business can find itself in bankruptcy.

Make sure that your buyers can pay you, limit credit given to riskier buyers, follow up on outstanding invoices early and regularly, and outsource credit management through credit insurance or collections companies. On the other hand, innovation and evolution will help you to find new ways to grow your business. The world is continuously evolving, and businesses need to evolve with it. Whether that means boosting your online services or reviewing your business model or product offerings, now is the time to consider how you can adapt your business to the ever-changing set of circumstances we find ourselves in.

 

An uncertain outlook
If 2020 has taught us anything, it’s that it is impossible to anticipate just what might be around the corner. Life can throw us for a loop, meaning that we all need to be ready to adapt to whatever the next challenge may be. And there are certainly challenges abound as we look to 2021 and beyond. In the early autumn, there was cautious optimism about the possibility of global recovery in 2021, as lockdown measures were gradually unwound across Europe. However, a pre-winter surge in COVID-19 cases and a tightening of restrictive regulations means that the long-awaited return to relative ‘normality’ now seems a long way off.

With a number of major European economies placed back into stringent lockdowns, businesses are understandably concerned – the stop-start nature of repeat lockdowns can pose a challenge to even the most adaptable and innovative of companies. What’s more, as people become less risk averse with their health and perhaps show less compliance with COVID-19 containment measures, businesses may well have to brace themselves for a longer run of partial lockdowns.

That being said, while repeated lockdowns are far from ideal, most countries now appear to be better prepared to deal with these measures than when they were first introduced earlier in the year. Improved healthcare infrastructure is now in place, and remote working and home offices have already been set up.

Businesses have made adjustments to survive under these conditions, and many governments have already announced extensions of emergency fiscal measures well into 2021. These developments may soften the blow of repeated lockdowns, but it is undeniable that a tightening of COVID-19-related regulations will prove incredibly taxing to businesses in the months to come. Unfortunately, the cost of this crisis in terms of bankruptcies and unemployment are largely still ahead of us, especially as fiscal packages are inevitably scaled down.

 

Protection in turbulent times
As it stands, global economic recovery in 2021 largely depends on the development and deployment of an effective vaccine, or a relaxation of the social distancing measures that have thus far hampered economic activities. As neither scenario is assured, the outlook for the next year is an uncertain one.

Amid such an unpredictable and ever-changing set of circumstances, businesses are in need of a sense of reassurance and stability. At Atradius, this is precisely what we aim to offer our clients, even in the most testing economic conditions. The commercial and political risks that are inherent in domestic and global trade have been amplified by the COVID-19 crisis, making it vital that we are there to provide protection to our customers when they need it most.

Now more than ever, businesses need reassurance that they will be paid for the goods and services they supply, and we are proud to be able to help our customers to enjoy more stable cash flow during this uncertain time. We have continued to improve our online systems over the course of the past year, to boost the efficiency with which we can deliver our services to our customers. After all, our success depends on our customers’ success, so we have continued to focus on helping our customers succeed.

As well as offering protection for the present, we are also committed to helping our customers prepare for the future. This means inspiring them to innovate and evolve, and keeping them up to date with all of the most recent developments that might affect their business – whether that be disruptions to supply chains, Brexit-related requirements or changes to COVID-19 regulations both domestically and overseas. The coming months will be challenging for us all, but at Atradius, we are confident that through innovation and adaptability, the most forward-thinking businesses will successfully emerge on the other side of the crisis, ready to weather any other storms that might come their way.

Brands of the Decade 2011-2020

Posted on by itsupport

The advent of online commerce has unleashed powerful new forces that influence nearly all brands from cars to cosmetics, according to the latest studies on brand-building. And, the studies say, the pandemic has accelerated pre-COVID-19 trends. Firstly, emotion is important, and today’s consumers expect to have an online conversation with their brands.

“They want to have a totally transparent relationship with you,” explains Boston Consulting. “They want to know who you really are. They seek the truth. They search out not only all your brand’s technical and functional features, but also its emotional elements.”

And sustainability sits at the top of consumers’ curiosity, running all the way from how well a brand treats its employees and suppliers to the energy efficiency of the factory. Having seen which way the wind is blowing, energy giant BP has made a long-term pledge to turn away from fossil fuels – its core business – in favour of renewable forms of energy. And secondly, the digital age produces a flood of useful data that brand builders can deploy to help engage buyers. That is why Toyota treats complaints as valuable sources of information rather than a nuisance.

‘A complaint is a gift,’ the automotive giant tells staff. Every single complaint is tracked through the system until customers get redress, but it is also pushed through to the appropriate department – for instance, engineering – so that the problem is fully addressed.

 

Tesla


Easily the most influential automotive group of the decade, Tesla has made electric vehicles desirable. And in mid-2020, Tesla became the most valuable car company in the world. While being revered for its zero-pollution vehicles, the brand also ranks highest on the cars’ appeal. Tesla owners see the brand as on a mission and majority owner Elon Musk as an engaging maverick who thumbs his nose at convention. Amazingly, the brand does not put a cent into advertising, compared with General Motor’s annual advertising budget of over $3bn.

 

Quality counts
But it is not always just the numbers that matter, says McKinsey in a series of interviews conducted in the middle of the pandemic. Companies should look for emotion as well as raw facts. “We tend to measure the quantity rather than the quality of something,” David Yin, vice-president of brand strategy and consumer experience at genealogy company Ancestry, told the management consultancy. “There are plenty of quality signals that come through digital that are vastly underutilised.”

That means the custodians of brands must be careful not to offend consumers who are vitally interested in a product’s social impact. “More and more customers expect their brands to do no harm,” adds Yin. “If you are actively doing harm in some way, you are pretty heavily punished by consumers nowadays. More companies need to be aware of that.”

Brazil’s Natura Cosmeticos is a shining example. Starting more than 50 years ago with a small shop and laboratory, it has leveraged the Amazon rain forest into a highly successful sustainable beauty business.

 

Natura


One of the world’s most profitable cosmetic companies, this Brazilian firm sees itself as a warrior for sustainability as much as a beauty business. Although founded back in 1969, Natura Cosmeticos embraced sustainable policies early on and is now seen as a standard bearer for the preservation of the Amazon, from which it extracts bio-ingredients and shares the profits with local communities. Along the way Natura snapped up several like-minded brands: Australia’s Aesop, The Body Shop and, most recently, Avon. In 2019, the group posted revenues of $6.04bn.

 

Bespoke features
In this increasingly digital age, brands are founded on technology. One of the new wave of online retail platforms is fashion group Zalando, the Berlin-based e-commerce platform that sells 500,000 products covering 2,500 brands. Its bespoke software features a ‘My Zalando’ engine that mines sales data to provide customers with the latest style advice. Launched only in 2008, Zalando boasted 2019 revenues of nearly €7bn. Like other online retailers, it has prospered during the pandemic – 2020 third-quarter revenues rose by nearly 22 percent.

However, Zalando has a long way to go before it catches Amazon, the most valuable company in the world, with a capitalisation of $137bn and annual sales of $90bn and rising. Amazon’s stupendous success is built on an algorithm-rich platform that is the envy of bricks-and-mortar retailers. It is a comment on the rise of online retail that Amazon is worth more than the combined value of all North America’s main department stores.

Most of the big brands have built up their own technology rather than relying on off-the-shelf software. As well as being the world’s biggest coffee house chain with over 31,000 stores in 80 countries, Starbucks developed its software in-house. Known as an ‘apostle brand’ because of its impact and recognition, the Seattle-based chain now sells the bespoke technology to other companies, boosting revenues in the process. Interestingly, out of some 10,000 consumer companies worldwide with revenues of many millions of dollars, only 100 are considered apostle brands.

Fashion group PVH, which owns Calvin Klein among other high-recognition brands, went down the same route in 2019 by building its own digital technologies. As Boston Consulting Group reports, “the group launched the award-winning PVH Digital Assistant mobile app to help retail associates answer customers questions, look up inventory, and provide product information.”

 

Huawei


The Shenzhen-based company has, in a few short years, turned itself into a brand rivalling Samsung and Apple in electronic devices. Primarily a manufacturer of backroom equipment of routers, switches and other high-tech telecommunications equipment, the employee-owned Huawei has come out of nowhere in the last decade. As a consumer brand, it is now the world’s third-largest manufacturer of smart phones by market share, with 10 percent of the global market. Like most great brands, Huawei is driven by a vision. Namely, ‘to enrich life through communication.’

 

Proactive predictions
Nike also took a big step into digital brand-building when, also in 2019, it bought Celect, another algorithm-rich platform developed by two professors from the Massachusetts Institute of Technology. Celect is so clever it can even sense the level of demand. “Its data scientists and engineers, who are now an integral part of the brand’s operations, are using the platform to predict when and where consumers are likely to buy certain styles.”

These insights come in handy in other ways. Nike plunders them to manage its inventory across many retail channels, something no human can possibly do. In a similar way, Spanish fashion retailer Zara uses advanced digital tools to manage its supply chain, distribution and inventory allocation across thousands of stores around the world. But Zara, a company established by a husband and wife in 1975, does not stop there. In addition to its own core technology, the chain works with a team of outside software providers whose job it is to boost sales through augmented reality. For instance, if customers like the latest clothing range on a mannequin, they only have to point the phone at it to make the purchase.

In an analysis of the digital practices of top retailers, Boston Consulting concludes: “Select the technologies that will enable the company’s core digital capabilities. Then develop them quickly and independently, continuing to purchase the rest.”

 

Strong brands
But some things do not change – strong brands are everything. “Retailers tell us that strong brands sell without promotion,” notes Boston Consulting. And strong brands arouse emotion, says Rebecca Messina, who has been a brand manager at Coca-Cola and Uber. “At their core I think brands are a feeling,” she told McKinsey. “They emote something that causes a kind of behaviour that’s irrational to some degree or we wouldn’t be wearing Rolexes and driving Porsches because we could buy cheaper versions of those products.”

The best brands are “sticky and memorable,” adds Yin. But they must also deliver. “Brands are fundamentally an expectation of the quality of an experience and it’s really important to start paying attention, as digital companies evolve, to that expectation of quality.”

And what people say about a brand could be the best technology of all. “Word of mouth is one of the most powerful places where brands are built,” explains Yin, citing how Fitbit caught on with consumers because they told others about it rather than through a PR campaign. A prime example is eBay, a company that fulfilled a largely untapped need – online auctioneering – but then grew rapidly because a global community adopted it. What we are continuing to see is that some of the most successful brands of the last decade, and beyond, are those where a lot of value is created outside the company, as well as within.

 

Brands Of The Decade 2011-2020

Technology
Apple

Commercial Services
American Express

Automotive
Ferrari

Logistics
UPS

Banking
Guaranty Trust Bank

Investment Banking
BTG Pactual

Retail Banking
Garanti BBVA

Islamic Banking
Jordan Islamic Bank

Watches
Rolex

Retail
The Chalhoub Group

Entertainment
Netflix

Soft Drinks
Red Bull

Technology
Google

Forex
XM

Sustainable Investment
Nordea Asset Management

Apparel
Superdry

Investment Management
AFP Confia

Global Insurance Awards 2020

Posted on by itsupport

If there is one industry in the world that could be described as being uniquely equipped to cope with a disaster, it is the insurance sector. The core purpose of insurers is to prepare for the worst and be ready to take charge of a recovery. This is why the development of the COVID-19 pandemic, at least broadly for insurers, has not been the catastrophic blow that other industries have experienced.

But this does not mean that the sector should be complacent. In fact, the pandemic is increasing scrutiny of insurers to even greater levels. As more people are faced with unexpected lifestyle changes, businesses required to cancel events and governments driven to make incredibly tough decisions, insurers face a looming crisis of reputation. How insurance companies respond to the growing volume and complexity of claims has the potential to alter how the world sees the industry. Will insurance companies be the sturdy foundation behind the world’s return to COVID-normal, or the penny-pinching misers hindering our reconstruction?

This may sound like an exaggeration, but this is the lens that individuals, companies and governments are likely to view the sector through. Facing this reality, ambitious innovation and high professional standards are the most important values an insurer can hold onto.

This year the World Finance Insurance Awards showcases the businesses that are best equipped to handle the environment and expectations that are accompanying our new COVID-normal world. This means much more than just financial discipline. All businesses need to be leaders, but insurance companies need to be moral touchstones given the critical role they will play in the months and years ahead.

 

Prolonged pressure of interest rates
The COVID-19 pandemic has provided a number of challenges that are applicable to any business. Increased frequency of working from home, economic malaise and the prolonged pressure of minimal interest rates means companies have had to rapidly change how they work.

This has been true for insurers as much as any business, though COVID-19 has presented several more specific quandaries for the insurance industry. The first is the surge in claims, most commonly within the health, travel and business sectors. Additionally, falling sales of these products due to travel restrictions has contributed an additional layer of pressure. Less interest in holding conferences means less business in event insurance, for example. This is likely to be a temporary problem. As the world reopens, insurance will be the first thought on any event organiser’s mind.

Despite this, there are more persistent issues. The broad economic strain from COVID-19 has all but guaranteed stubbornly low interest rates for the foreseeable future. For insurers’ broad investment portfolios, this means limited returns to fund their operations as well as a greater risk of their customers defaulting or going bankrupt. A sudden shock to the economy, such as another global financial crisis, could send a significant portion of the economy beyond the brink, driving a swell of claims and bad debts. Combined, the potential of these forces is expected to have an impact on government regulations, particularly in terms of solvency. Solvency tests could increase, placing an extreme burden of compliance for many insurers. Ultimately, only the best run insurers will be able to guarantee a future for themselves and their clients.

Insurers are in the customer service business just as much as the financial business. When a person or organisation suffers some kind of catastrophe and requires help, financial or otherwise, the personal service they receive will be the only thing they remember from their insurance policy, no matter how many years they paid for it. Insurers have been looking for ways to improve their customer service for years, particularly in the digital space, but COVID-19 has made it an imperative.

A recent report from KPMG, COVID-19: customer and digitisation in insurance, predicts that the pandemic will change both the products and services on offer throughout the insurance sector. On the product side, people enduring greater financial stress are taking this moment to reassess their ongoing expenses and reflect on what is really valuable to them. In many cases people are discovering unexpected benefits in their products, as well as unnecessary expenses. A COVID-normal lifestyle is also likely to result in a number of new products in the market, as people change how they live, work and travel.

People are also changing the way they shop for insurance, with digital channels now an absolute necessity. Online services have always been important, although they are now the only way many people feel comfortable interacting with companies. In the corporate space, new business proposals that would usually occur in an office have been moved online, if they are occurring at all. Old habits may be tough to return to, so success in the future will depend on how effective insurers’ new channels are.

 

Successful services for consumers
Alongside new channels, COVID-19 is contributing to a change in product preference among insurance customers. According to Deloitte’s A demanding future: The four trends that define insurance in 2020 report, developed from a survey of over 200 C-suite executives located throughout Europe, the Middle East and Africa, insurers now believe that 62 percent of consumers now regard non-insurance products as the most important factor when choosing an insurer.

These kind of non-insurance services have been most successful in the health sector, particularly in terms of internet-connected devices. Smartwatches and wristbands are a common gift with new policies, providing potential health benefits to the customer. Other insurance sectors are catching up as well. Car insurers can now install driver-monitoring software to help people correct poor driving habits that left unchecked would increase their chances of having an accident. Cyber insurers provide dedicated training and guidance to companies to help them avoid a cyberattack, as well as providing support if an attack actually happens.

These kinds of products hit right at the core of why people buy insurance: to be safe and protected in times of crisis. It’s often said that prevention is better than a cure, and in this sense, there is no better example than the role that the insurance sector can play in preventing disasters before they happen.

Alongside this comes an added layer of responsibility. Insurers are now doing far more than just financially supporting someone in the event of a disaster or emergency. Having access to the data that these kinds of add-on services provide, and the power that accompanies it, puts insurers under a tremendous amount of scrutiny. As 2020 has led to the world living most of its life online, the types of data people are willing to part with have increased, making many of these new policies more palatable to the public. However, it would only take a few negative incidents to turn public opinion around. Based on this, ongoing success in the insurance field is based just as much in ethics as it is in good business sense.

The COVID-19 pandemic has illustrated to companies and individuals the immense, unpredictable risks that our modern world faces. Insurance has a role to play in alleviating their fears and helping the world recover. The winners of this year’s World Finance Insurance Awards are the organisations most able to adapt to the new environment and help forge the future of the industry.

World Finance Global Insurance Awards 2020

Argentina
General – MetLife
Life – MetLife

Australia
General – QBE
Life – Tal Life

Austria
General – UNIQA Group
Life – Vienna Insurance Group

Bahrain
General – Gulf Union Insurance
Life – Bahrain National Life Assurance

Bangladesh
General – Nitol Insurance
Life – Popular Life Insurance Company

Belgium
General – Belfius Insurance
Life – Belfius Insurance

Brazil
General – Bradesco Saude
Life – Sulamerica Cia Saude

Bulgaria
General – Armeec Insurance
Life – UNIQA Life Insurance

Canada
General – RBC Insurance
Life – Sun Life Financial

Caribbean
General – Guardian Group
Life – ScotiaLife Financial

Chile
General – ACE Seguros de Vida
Life – SURA

China
General – Ping An P&C
Life – New China Life

Colombia
General – Liberty Seguros
Life – Seguros Bolívar

Costa Rica
General – ASSA Compañía de Seguros
Life – ADISA

Cyprus
General – CNP Asfalistiki
Life – Eurolife

Czech Republic
General – Komercˇní banka
Life – Allianz pojišt’ovna

Denmark
General – Topdanmark
Life – Topdanmark

Egypt
General – Allianz Egypt
Life – Allianz Egypt

Finland
General – Fennia Mutual Insurance
Life – Fennia Life

France
General – Covéa Insurance
Life – CNP Assurances

Georgia
General – Aldagi
Life – Aldagi

Greece
General – EuroLife FFH
Life – NN Hellas

Honduras
General – Ficohsa Seguros
Life – Pan-American Life

Hong Kong
General – China Taiping Insurance
Life – AIA

Hungary
General – Allianz Hungária
Life – Magyar Posta Életbiztosítás

India
General – ICICI Lombard
Life – Max Life Insurance

Indonesia
General – Sinarmas
Life – Great Eastern Life

Israel
General – Phoenix
Life – Clal Insurance

Italy
General – UnipolSai
Life – Poste Vita

Japan
General – Mitsui Sumitomo Insurance
Life – Nippon Life Insurance Company

Jordan
General – Middle East Insurance Company
Life – Arab Orient Insurance Company

Kazakhstan
General – Nomad Insurance
Life – Kazkommerts-Life

Kenya
General – CIC Insurance Group
Life – Britam

Kuwait
General – Warba Insurance
Life – Al Ahleia Insurance

Lebanon
General – AXA Middle East
Life – Bancassurance

Luxembourg
General – AXA Luxembourg
Life – Swiss Life

Malaysia
General – Etiqa
Life – Hong Leong Assurance Berhad

Malta
General – GasanMamo Insurance
Life – HSBC Life Assurance Malta

Mexico
General – GNP
Life – Seguros Monterrey New York Life

Netherlands
General – ABN AMRO
Life – ING Netherlands

New Zealand
General – Tower Insurance
Life – Asteron Life

Nigeria
General – Zenith Insurance
Life – FBNInsurance

Norway
General – Fremtind Forsikring
Life – Nordea Liv

Oman
General – Oman United Insurance
Life – Dhofar Insurance

Pakistan
General – Adamjee Insurance
Life – EFU Life

Panama
General – ASSA Compañía de Seguros
Life – Pan-American Life Insurance Group

Peru
General – RIMAC Seguros
Life – MAPFRE

Philippines
General – Standard Insurance
Life – BPI-Philam Life Assurance

Poland
General – Warta
Life – Warta

Portugal
General – Allianz Seguros
Life – Grupo Ageas Portugal

Qatar
General – Qatar General Insurance
Life – Q Life and Medical Insurance

Romania
General – ERGO Group
Life – Allianz-Tiriac

Russia
General – AlfaStrakhovanie
Life – Renaissance Zhizn Insurance

Saudi Arabia
General – Al Rajhi Takaful
Life – MEDGULF

Serbia
General – Generali Osiguranje
Life – Generali Osiguranje

Singapore
General – AIA Singapore
Life – AIA Singapore

South Korea
General – Hanwha General Insurance
Life – BNP Paribas Cardif

Spain
General – Grupo Mutua Madrilena
Life – Zurich

Sri Lanka
General – Sri Lanka Insurance Company
Life – Ceylinco Life Insurance

Sweden
General – If.Skadeforsakring
Life – Folksam

Switzerland
General – Helvetia
Life – Swiss Life

Taiwan
General – ShinKong Insurance Company
Life – Fubon Life Insurance

Thailand
General – Bangkok Insurance
Life – Thai Life Insurance

Turkey
General – Zurich Sigorta
Life – Anadolu Hayat Emeklilik

UAE
General – ADNIC
Life – ADNIC

UK
General – AXA UK
Life – Legal & General

US
General – Progressive
Life – Lincoln Financial Group

Uzbekistan
General – Uzagrosugurta
Life – New Life Insurance

Vietnam
General – Bao Viet
Life – Boa Viet

Digital Banking Awards 2020

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The banking industry grappled with unheard-of disruption in 2020: from responding to COVID-19 to the stampede for ESG investment, there was a voracious appetite for new answers to financial risk. But the journey – particularly for some – has been especially tough. As is, in some cases, the pressure bearing down from regulators and government: get the service offer right first time or risk punishing fines and media humiliation. Equally, the opportunities and reward for a relevant product that captures the consumer’s confidence are still there. Innovate or die is a tired axiom but behind the fatigue of the words lie huge prizes.

 

Fintech scrutiny is rising
Where does the present adversity leave us as we look back upon what has been, for some, an anxious year? Millions are on furlough and the survival of many businesses hangs in the balance. Despite out-of-this-world technology, the pitfalls of the banking market still expose the inexperienced to bleak realities. New entrants want growth and customer trust. They also need to put capital to good use. This double pressure is new ground for some banking fintechs. Out-of-this-world tech may not be enough for all. Then there is the issue of the economy, wherever your banking clients are in the world. A report from McKinsey & Company recently documented the changing face of opportunity and how switched on organisations are in managing it. “Citizens everywhere are demanding more of companies and reminding them, with due respect to Milton Friedman, that the business of business is now more than just business.”

 

Importance of Gen Z
In terms of banking, this will put more consumers in control of their financial journey and financial wellbeing. But which banking businesses, specifically, stand to gain? For example, both digital and non-digital banking players are desperate to build long-term relationships with Generation Z. How many of these banks know how to talk to Gen Z, let alone employ and keep them?

Gen Z grew up in an era of soaring asset prices where families struggled to keep up. A savings culture is deeply instilled for many Gen Z’ers. A lack of work and all-round options due to the pandemic is hitting this generation hard. But it’s also a generation that’s digitally native, adept at creating value out of little. Barring the essentials, an internet connection is all many need to flourish. Stock options and fancy add-ons are not so interesting, but old-style stability is.

In the background lies the remainder of a dark winter and a global health crisis still gathering pace. Many banks and financial players have come through multiple lockdowns and massive financial uncertainty with better earnings than expected. But the true economic fall-out of COVID-19 is still incalculable. One thing is certain: there are more global jolts to come.

The World Finance Digital Banking Awards 2020 arrive at an alarming time, for just about everyone. But bringing what is ‘good’ – things such as sustainability – to the fore will help. In fact, PricewaterhouseCoopers (PwC) predicts it may be the opportunity of the century, declaring that more than 50 percent of European fund assets will be ESG-denominated by 2025.

Environmental, social and governance funds (ESG) have moved well away from their narrow ‘do-good’ straitjacket. But financial players who underestimate the meaning of ‘good’ or ‘bad’ investment do so at their peril because these values now travel well beyond, for example, decarbonisation or arms sales.

‘Good’ might address racism, both covert and overt. The massive take-up of Black Lives Matter proves this. Or transgender and LGBT issues. Even what you eat – meat or vegan burgers, for example. And be aware, this list is lengthening. Just how these issues are measured is fraught with risk and complexity. Ratings systems are in their infancy (and set to spawn their own sub-industry). But the central tenet is fairness.

 

Old order upended
In other words, the deployment of capital, digital or otherwise, is being shaped by agendas that stretch well beyond the narrow confines of price-to-earnings values, cash flow and liquidity-solvency metrics. Even traditional asset allocation models. While those values still matter, credibility, empathy and transparency are now also part of the mix – and a growing one. The new social-financial contract is also being driven by regulation. PwC says the emergence of a new sustainable finance policy in Europe will see “a significant impact not only on products but on financial agents – MiFID firms, insurance brokers – and fiduciary investors – insurance companies, pension funds – at the same time.”

So a massive wall of ESG money is on the march – and digital banking players will want to attract as much of it as they can. The opportunities are staggering, as is the potential for out performance. While the new landscape enlarges and consolidates, unsustainable industries may rapidly wither as non-compliant sectors of the economy are rammed by legislation, fines and taxation. Institutional investors, you can be sure, will not want to risk being caught in the wrong place at the wrong time.

 

Digitally redefined
The digital banking concerns of 2019 were increasingly focused on biometric and AI-based issues, not to mention big data – trends that World Finance has trenchantly covered for some time. But all of these issues have now been supercharged by COVID-19.

For financial digital players, this has meant an opportunity to use AI to evaluate a business’ ability to withstand a pandemic – or even supply relief to other businesses. Some of this new thinking has been powered by social distancing. But much of the creativity has simply been down to the need for capital redistribution and compliance in an easy-to-access digital format. In Africa this has been going on for years in the form of micro and mobile payments; M-Pesa is a good example.

Where things have become more advanced is in the possibility of fintech in healthcare or in lending for larger sums, like mortgages. “Examples of these innovative partnerships already exist, like the ones Walmart has with PayPal and Green Dot [world’s largest pre-paid debit card company],” said a recent Deloitte report, Beyond COVID-19, New Opportunities for Fintech Companies. “There are myriad opportunities,” the report added, “for fintech to collaborate with partners in other areas – for example with the big technology firms – especially on a global scale.”

 

Stability 2.0
But no amount of financial innovation thrives without a stable domestic environment. If economic governance is robust then business, even in the grip of a worldwide pandemic, has more opportunity to succeed and grow.

Smartphone technology, meanwhile, is helping many people take charge of their lives, widening opportunity with access to capital at reasonable cost, throwing off tiresome legacy limits that once held so many back. Wherever we live, innovation and competition is repurposing almost every banking service there is. The World Finance Digital Banking Awards 2020 celebrates this progress in all its diversity, those at the epicentre of this digital banking turmoil. Their response to unprecedented challenges is impressive and innovative and deserves to be celebrated.

 

World Finance Digital Banking Awards 2020

Best Mobile Banking Apps

Andorra
MoraBanc App – MoraBanc

Armenia
Ameria Mobile Banking – Ameriabank

Botswana
SC Mobile – Standard Chartered

Brazil
CAIXA Tem app – CAIXA Tem

Brunei
Baiduri b.Digital Personal – Baiduri Bank

Bulgaria
m-Postbank – Postbank

Chile
BBVA Chile – BBVA Chile

China
Ping An Pocket Bank app – Ping An Bank

Costa Rica
Banca Movil BAC Credomatic – BAC Credomatic

Dominican Republic
Banreservas – Banreservas

El Salvador
Banca Movil BAC Credomatic – BAC Credomatic

Germany
DKB-Banking – Deutsche Kreditbank

Ghana
SC Mobile – Standard Chartered

Greece
NBG Mobile Banking – National Bank of Greece

Guatemala
Banca Movil BAC Credomatic – BAC Credomatic

Honduras
Banca Movil BAC Credomatic – BAC Credomatic

Hong Kong
DBS digibank app – DBS Bank

Indonesia
OCTO Mobile – PT Bank CIMB Niaga

Ivory Coast
SC Mobile – Standard Chartered

Kenya
PesaPap – Family Bank

Mexico
BBVA Mexico – BBVA Mexico

Myanmar
KBZPay – KBZ

Nicaragua
Banca Movil BAC Credomatic – BAC Credomatic

Nigeria
OneBank – Sterling Bank

Pakistan
HBL Mobile – HBL

Panama
Banca Movil BAC Credomatic – BAC Credomatic

Portugal
ActivoBank – ActivoBank

Qatar
QIB Mobile – Qatar Islamic Bank

Spain
EVO Banco Movil – EVO Banco

Sri Lanka
People’s Wave – People’s Bank

Switzerland
UBS Welcome – UBS

Tanzania
SC Mobile – Standard Chartered

Turkey
Garanti BBVA Mobile – Garanti BBVA

UAE
Mashreq Neo – Mashreq Bank

Uganda
SC Mobile – Standard Chartered

UK
Lloyds Bank: by your side – Lloyds Banking Group

USA
Bank of America Mobile Banking – Bank of America

Zambia
Atlas Mara Zambia Mobile Banking – Atlas Mara

Zimbabwe
SC Mobile – Standard Chartered

 

Best Consumer Digital Banks

Andorra
MoraBanc

Armenia
Ameriabank

Botswana
Standard Chartered

Brazil
Caixa Tem

Bulgaria
Postbank

Chile
BBVA Chile

China
Ping An Bank

Costa Rica
BAC Credomatic

Dominican Republic
Banreservas

El Salvador
BAC Credomatic

Germany
Deutsche Kreditbank

Ghana
Standard Chartered

Greece
National Bank of Greece

Guatemala
BAC Credomatic

Honduras
BAC Credomatic

Hong Kong
DBS Bank

Indonesia
PT Bank CIMB Niaga

Ivory Coast
Standard Chartered

Kenya
Family Bank

Mexico
BBVA Mexico

Myanmar
KBZ

Nicaragua
BAC Credomatic

Nigeria
Sterling Bank

Pakistan
HBL

Panama
BAC Credomatic

Portugal
ActivoBank

Qatar
Qatar Islamic Bank

Spain
EVO Banco

Sri Lanka
People’s Bank

Switzerland
UBS

Tanzania
Standard Chartered

Turkey
Garanti BBVA

UAE
Mashreq Bank

Uganda
Standard Chartered

UK
Lloyds Banking Group

USA
Bank of America

Zambia
Atlas Mara

Zimbabwe
Standard Chartered

 

Best Use of Social Media

Pakistan
HBL

Investment Management Awards 2020

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In many ways the last 12 months have been an inspirational experience. The world has collectively banded together to fight an invisible, destructive force. Vaccine development has exceeded even the best predictions, and while collective lockdowns have not been popular, they have been immensely effective at slowing the virus. The world has experienced a mobilisation of resources towards a common enemy in an effort that has only ever been seen during wartime. Frankly, the scale of work can only be matched by the scope of the tragedy COVID-19 has inflicted on so many families.

It is not controversial to say that the year 2020 is one that will never be forgotten. We have reshaped how we live our lives, in some ways permanently, and been provided a moment of reflection. What is truly important? What world do I want for my children? What can I do to create a better future? These are the questions that investors are asking both themselves and the people in charge of their portfolios. Technological development and innovation are inevitable, and have only accelerated due to COVID-19, but what will be more impactful are the changes to the fundamental motivations of investors.

This year the World Finance Investment Management Awards are spotlighting the firms that are answering these questions and exceeding clients’ new expectations. These firms are not only keeping their customers informed and safe by using digital channels of communication, but they are taking into consideration that the core reason many of their customers come to them is changing. These businesses know that their clients care about their future, both financially and existentially, and are rising to meet the challenge.

 

Bounce back
Back in 2014, the future of the wealth management sector looked very promising. According to PricewaterhouseCooper’s Asset Management 2020: A Brave New World report, the sector was set for a record-breaking year. Global investable assets were expected to increase to reach more than $100trn by 2020, with a compound annual interest rate of six percent. Sophisticated new tools and analytics were expected to revolutionise how the industry operates, and companies in the asset management space would transform into a proactive force for good.

It’s surprising how much of the prediction holds true. In August 2020, Boston-based research firm Cerulli Associates placed the total value of assets under management as $102.7trn in 2020, admittedly almost $1.7trn down from the previous year. PwC’s 2014 report also accurately predicted the value of technology in the modern asset management environment. Thanks to the use of technologies such as data mining and customer engagement systems, service delivery has become almost an entirely online process.

For firms that heeded this warning, the COVID-19 pandemic may not have been the catastrophic blow many expected. As the world locked down, people with assets under management were suddenly not only unsure of what investments made sense, but they were also prevented from going into a branch or office to receive some personal guidance. Digital systems obviously avoid this problem, but the firms who were not already fully digitally attuned were suddenly caught out.

 

Asia first
The COVID-19 pandemic is unprecedented, making historic comparisons difficult, but Asia paints a clear picture for the rest of the world when it comes to navigating into a COVID-normal environment. As the first continent in and first continent out, what happens in the region will be of significant interest to managers in the US and Europe. A recent McKinsey & Company report titled: Asia wealth management post-COVID-19: Adapting and thriving in an uncertain world, reveals how quickly markets can recover from the devastating COVID blow. According to McKinsey & Company, investor wealth in Asian equity markets declined by approximately 10 to 15 percent between February and April 2020. China was, unsurprisingly, the biggest contributor to this fall both in terms of investors’ portfolios and economic activity. However, by June 2020, investments began to return to an upwards direction, indicating a positive sign for the sector at large.

The report flags several areas of concern. The first is retaining investors’ trust in financial institutions. Many will have memories of the 2008 global financial crisis and the doubts that were cast on the solvency of so many organisations. With COVID-19 acting as a catalyst for immense disruption, even greater than what was seen in 2008, wealth managers will need to do a lot to reassure their clients and keep them from panicking. In a medium-term scenario, identifying new growth opportunities will be the next priority as investors look to make sense of a new reality. Finally, after the industry has found its feet, competition will resume. The lingering question is what a COVID-normal world will look like. From a business sense, the shift to a digital-first model seems to be permanent. The industry was already heading towards digital communication and analytics as the primary form of interaction, but the current environment has all but guaranteed this will be the main form of engagement from now on. Additionally, the COVID-19 pandemic has changed the way we look at risks. It’s clear that the world faces a number of existential threats to our safety, both physical and financial, that have the potential to shut down business overnight. This changed environment will alter the risks that people, investors and the broader market are willing to tolerate. It’s easy to see investors shifting to a more conservative portfolio, or one driven by their values.

 

Trusted partners
Looking forward to 2021, asset managers are now identifying what new initiatives they can undertake to reassure their clients. A study undertaken by the Australian Securities Exchange shows that Australian investors have reacted to the disaster with some degree of sophistication. People around the retirement age have adjusted their expectations, while younger investors have accepted a willingness for short-term risk in exchange for potential long-term gains. In the first three months of the pandemic, more than half of investors made changes to their portfolio, and almost one out of 10 changed their entire portfolio.

Importantly, the value of an investment manager is still considered very high. The Australian Securities Exchange reports that the vast majority of investors were contacted by their adviser in the first three months of the pandemic, and the vast majority also found their adviser either ‘somewhat helpful,’ ‘very helpful’ or ‘extremely helpful.’ These results show that investors still place a high priority on the expertise of a trusted and reliable advisor. This will be important for advisors to keep in mind as they gradually continue towards a COVID-normal portfolio for their clients.

The skills that asset managers need to succeed in the future has dramatically changed. Not only do they need to be digitally literate while still providing personalised service, they need to look to the bigger picture and understand the shifting trends of the modern investor. The winners of the World Finance Investment Management Awards for 2020 are the companies most able to shift their thinking and embrace the new reality we find ourselves in.

 

World Finance Investment Management Awards 2020

Antigua & Barbuda
Global Bank of Commerce

Argentina
Puente

Bahrain
GFH Financial Group

Belgium
Ing

Brazil
Itau Asset Management

Bulgaria
Compass-Invest

Chile
BCI Asset Management

Colombia
SURA Investment Management

Croatia
ZB invest

Denmark
Danske Capital

Egypt
EFG Hermes

El Salvador
AFP Confia

Finland
LocalTapiola

Greece
Eurobank Asset Management

Ireland
Setanta investment Management

Japan
Nomura Asset Management

Kuwait
NBK Asset Management

Malaysia
AmInvest

Mexico
SURA

Netherlands
APG Asset Management

Nigeria
Investment One

Philippines
BDO Unibank

Saudi Arabia
Alistithmar Capital

Singapore
UOB Asset Management

Sweden
AXA Investment Management

Thailand
UOB Asset Management

Turkey
Ak Asset Management

UAE
AIX Investment Group

Uruguay
Puente

Vietnam
MB Securities

Wealth Management Awards 2020

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For around the last 200 years, the wealth management industry has operated under the same basic process. Develop a personal relationship with a client, and then create a bespoke financial strategy for them using the best products and services available. It’s a tried and true model, but since the year 2000, the industry has been changing. As the clientele becomes younger, more digital-first solutions are being prioritised as investment tools. As the old money managers gradually retire, younger employees are reshaping the big firms.

While these changes have been brewing for two decades now, the issue suddenly came to a head in 2020. The COVID-19 pandemic has put immense pressure on global wealth markets, requiring them to meet new standards in digital service while offering the same exceptional customisation clients have come to expect. Very suddenly, any firms that were lagging behind were caught unprepared for our new COVID-normal reality.

After almost a year of absolute disruption, a path forward is beginning to emerge. The future of wealth management will retain the personalised service high-net worth individuals have come to expect, with the modern communication and analytics afforded by the latest technology. Customers’ needs are becoming more specific, and only the most reactive, in-touch firms will be able to find success. The 2020 World Finance Wealth Management Awards recognises the firms that are pursuing these new ways of doing business and defining the future of the industry.

 

Crisis averted
The clearest predictions for the future can often come from the past. Boston Consulting Group’s Global Wealth 2020: The Future of Wealth Management—A CEO Agenda took its 20th anniversary to look over the last two decades to help predict where the industry is going.

Notably, the industry is very well adept at managing a crisis, having endured several since the new millennium. Between the dotcom crash and September 11 attacks causing dramatic uncertainty and a slump in global equity, the sector recovered all lost ground by 2003 and was hitting new records in 2005. Once again, the sector experienced a shock in 2008 as the global financial crisis wiped away over $10trn from private wealth in under a year. Following government bailouts and new central bank policies, private wealth had fully recovered by 2010. The last decade has been filled with strife from the lingering European debt crisis and the tumultuous trade relationship between China and the US, but taking a long-term perspective paints a relatively rosy picture. The arrival of the COVID-19 pandemic is expected to put markets through their greatest test yet. Like other troubled periods in the last decade, global wealth is almost certain to contract in the short term, especially given the dramatic increase in newly unemployed people. Depending on the speed of a global recovery, and how effective various health measures are, Boston Consulting Group estimates global wealth levels will recover sometime between 2021 and 2024. In all scenarios the group projected wealth managers can anticipate a hit in the short term, but whether the sector will experience long-term damage is in the hands of health officials.

But no matter how the world progresses after COVID-19, the wealth management sector will undergo a complete personal, as well as financial, transformation. Boston Consulting Group expects wealth management to bring together client needs, interactions and services in new, innovative ways better suited for digital systems. This represents a more tailored and detailed approach in terms of information, alongside the personal service that wealth managers have been traditionally good at.

 

Shifting priorities
How the sector manages the recovery will potentially affect their success for decades to come. Capgemini’s recently released World Wealth Report 2020 paints a clear illustration of the world’s changing wealth as compared to the previous year. In 2019, high net worth individuals’ wealth and population grew by almost 9 percent globally. Geographically, North America and Europe surpassed the Asia-Pacific region for the first time since 2012. However, all of these results predate the COVID-19 pandemic. With trillions of dollars erased from global books, investment priorities have shifted.

Anirban Bose, Capgemini’s Financial Services CEO and Group Executive Board Member, said wealth managers are currently in uncharted waters. “This unpredictable period may also present opportunities for firms to reassess and reinvent their business and operating models to be more agile and resilient. Analytics and automation, as well as emerging technologies like artificial intelligence, can enable firms to enhance revenues through better client experiences while reducing costs by streamlining processes.”

Success will depend on how wealth managers change their products and services in a post-pandemic world. COVID-19 has given people a chance to reflect on what is most important in their lives, and high net worth individuals are no exception. Responding to this, Capgemini reports that high net worth investors expect to allocate 41 percent of their portfolio to sustainable investment products. The interest is not just ethical, with 39 percent of investors expecting to receive high returns from sustainable investment products and 33 percent viewing the category as less speculative. These value-driven decisions are only expected to become more common. Firms are responding to this, with 80 percent now offering sustainable investment options, but their financial results will be highly scrutinised.

 

Technology transformation
Alongside changing preferences, changing expectations subsequently follow. Given that part of the benefit of morally driven investments is seeing a positive change in the world, reporting and statistics are becoming a greater priority. Capgemini illustrates this very clearly in its recent report. Before COVID, more than 60 percent of high net worth individuals surveyed reported a lack of satisfaction when trying to access information about new wealth management offerings or market information. This was particularly true for clients aged between 50 and 59.

Another point of contention is in regards to the role of big tech. Only 26 percent of wealth managers rate big tech as a potential disruptor to their industry, while 74 percent of clients reported a willingness to at least consider a big tech alternative to their current arrangements. This is a startling gap between expectation and reality, illustrating that traditional wealth managers could soon be under threat from a sector they don’t have any insight into.

The challenge will be marrying the new expectations of digital interaction with the personalised services that go hand in hand with wealth management. The advantage of personal wealth management is the human touch that accompanies it. The do-it-yourself nature of digital systems comes close to undermining this distinct quality. The firms that will be successful in the future are the ones that can creatively bring these two concepts together in an innovative and desirable way.

In this increasingly competitive environment, an appetite for bold moves and disruptive practices is required to make headway on new products and services. As people begin to reassess their lives and portfolios for a new COVID-normal world, wealth management should expect a shake-up. The winners of the World Finance Wealth Management Awards 2020 are the businesses that are embracing the future and developing new products that exceed the expectations of both their old and new clients.

 

World Finance Wealth Management Awards 2020

Best Wealth Management Companies

Argentina
Wells Fargo Advisors

Armenia
Unibank Privé

Australia
Escala Partners

Austria
Schoellerbank

Bahamas
Scotia Wealth Management

Belgium
BNP Paribas Fortis

Bermuda
Butterfield Bank

Brazil
BTG Pactual

Canada
Northwood Family Office

Chile
BTG Pactual

China
China Merchants Bank

Denmark
Nordea

Finland
Taaleri Wealth Management

France
BNP Paribas Banque Privée

Germany
UBS

Ghana
The Royal Bank

Greece
Hellenic Asset Management

Hong Kong
BNP Paribas Wealth Management

Hungary
Hold Asset management

India
IIFL Private Wealth Management

Indonesia
Bank of Singapore

Italy
BNL BNP Paribas

Kuwait
NBK Capital

Lithuania
INVL

Luxembourg
BGL BNP Paribas

Malaysia
RHB

Mauritius
Bank One

Netherlands
ABN AMRO MeesPierson

Nigeria
FBN Quest Merchant Bank

Norway
Nordea

Oman
Bank Muscat

Philippines
Bank of the Philippine Islands

Poland
CITI Handlowy

Portugal
Santander Totta

Qatar
Qatar National Bank

Saudi Arabia
SABB

Singapore
Bank of Singapore

South Africa
Old Mutual

Spain
Santander

Sweden
Carnegie

Switzerland
BNP Paribas Wealth Management

Taiwan
Cathay United Bank

Thailand
Kiatnakin Phatra Securities

UAE
First Abu Dhabi Bank

US
Merrill Lynch Wealth Management

Vietnam
Prestige Wealth Management

 

Best Multi-Client Family Office, Liechtenstein
Kaiser Partner

Best Real Estate Investment Company
SFO Group

Most Innovative Wealth Manager, Europe
XSpot Wealth

Oil & Gas Awards 2020

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In 2020 the world underwent countless changes, many of which we still don’t fully understand. Industries are still trying to figure out exactly what this means for the world, but perhaps none more so than the oil and gas sector. Between the collapse of global travel, the overnight shutdown of many manufacturing industries and drastic changes to how energy is consumed in the home, energy demand has fallen to a level that should have taken decades to reach.

While the industry has a track record of recovering from crises, this time is different. A 2020 McKinsey & Company report titled ‘Oil and gas after COVID-19: The day of reckoning or a new age of opportunity?’ warns that financial and structural problems have broadly left the industry in particularly poor health. Between the development of shale extraction, excesses of supply and all-too-eager financial markets, the sector was ill-equipped for a sudden shock. Combined with mounting social pressure and the gradual development of renewable alternatives, the oil and gas sector now has a challenging path ahead of it.

Despite the glum outlook, current difficulties have only accelerated a transformation that most had already accepted as inevitable. Oil and gas will undoubtedly continue to be a multi-trillion-dollar market for decades, although current factors will lead to more intense competition and a technological arms race among relatively flat demand.

COVID-19 may have made a transformation more urgent, but it presents a wealth of opportunities for companies that can accept the new normal and embrace the future. This year’s World Finance Oil and Gas Awards highlights the companies and organisations that are best equipped to thrive in this new business landscape while meeting the highest international standards.

 

Negative gains
It is no big secret that the oil and gas sector has been extremely competitive for some time now. In terms of shareholder returns, the overall industry has underperformed against the S&P 500 over the previous 15 years, according to McKinsey & Company’s 2020 report. It is a challenge for industries like these to weather a shock at the best of times, let alone an event on the scale of COVID-19. The pandemic impacted every element of the economy, although not many fared worse than oil and gas. Throughout 2020, both commodities have endured their own tribulations. In January 2020, West Texas Intermediate crude oil was hovering around $60 per barrel before experiencing an unprecedented fall in price.

As the global transport industry shut down practically overnight, prices fell to around $20 per barrel in March. However, at the end of the month, failure between Russia and Saudi Arabia, alongside OPEC, to negotiate a deal to limit production and stabilise the market destroyed any hope of an organised recovery. Instead, in April, WTI crude staged a spectacular fall to negative $37 per barrel as storage costs weighed on investors. While temporary, with prices currently back to a more reasonable $40 per barrel, investors appear to be remaining cautious.

It’s the latest chapter in a wild ride for the oil industry, with 2020 representing the third price collapse for the commodity in 12 years. As a sector closely tied to the health of the wider economy, how the world emerges into a post-COVID-19 environment will have a dramatic effect on the future of oil.

 

Turning up the heat
Gas has not fared much better. In its Gas 2020 report, the International Energy Agency described the year as a ‘meltdown’ for the gas industry. A mild winter in Europe saw a three percent year-over-year fall in demand across the continent. While a fall in prices prompted a shift from thermal energy generation to gas-fired generation, an increase in wind generation offset any gains that were made. In March, when global lockdowns truly began to set in, industrial generation substantially fell.

The news was not all grim. Switching from coal to gas in many US states led to an increase in gas-fired generation, a welcome sign for those in the industry. Between an increase in both gas-fired generation and personal electricity usage due to lockdown restrictions, the losses experienced in the US were somewhat mitigated.

Asia paints an unclear picture. While the region’s consumption appeared somewhat resilient during lockdown restrictions, much of the success was attributed to growing imports and countries increasing their stored reserves. Japan, the world’s largest liquified natural gas importer, experienced a five percent decrease in imports over levels seen during the first five months of 2019. Gas imports increased in most of Asia’s emerging markets, despite decreased demand throughout the region, suggesting the true cost of COVID-19 will be fully felt in 2021. Subsequently, most producers cut their production targets.

The International Energy Agency suggests that overall demand could fall four percent year-over-year for 2020, referring to the fall as the largest recorded annual decrease since the natural gas market developed at scale, and it could be twice as large as the fall seen during the last global financial crisis. While the industrial sector is responsible for the lion’s share of falls, every consumption category has experienced a drop.

 

Peak predictions
With 2021 looming, two questions remain: What needs to change in the oil and gas sector to make it sustainable, and how quickly do these changes need to happen? The answer to the first question is, unequivocally, do more with less. It’s a strategy the industry was already planning to undertake. In May, Mr John Browne, former BP chief executive, told the Financial Times that the COVID-19 pandemic has made the upwards trajectory of demand for oil that the industry has coasted on for over a century unlikely to continue. Instead, new behaviours created by the pandemic will permanently alter how energy is consumed. The second is a little less clear. While a peak of oil consumption has been expected for some time, many now expect it to occur sometime in the early 2030s. Between the increasing adoption of electric cars and governments taking a harsher view on emissions, change is guaranteed, although it is now approaching faster than many expected. Any hope of a ‘COVID recovery’ to pre-pandemic levels, at least in terms of oil consumption, seems increasingly unlikely.

Despite facing many of the same challenges, gas is expected to continue to grow. According to the International Energy Agency, gas is still expected to experience a compound annual growth rate of 1.5 percent per year between 2019 and 2025, revised down from a pre-COVID-19 prediction of 1.8 percent per year. With demand expected to rebound, the fast-growing Asian market is expected to be responsible for much of the ongoing demand.

As more countries move towards net-zero emission targets, oil and gas producers are beginning to move towards securing their futures. The year-over-year increases in consumption that have been the norm for the last century are destined to end. This year the World Finance Oil and Gas Awards look to celebrate the companies that are well aware of the challenges that exist and are prepared for what is coming. If the hyper-competitive environment that is predicted comes to pass, the following businesses are the ones that are guaranteeing their success into the future.

 

World Finance Oil & Gas Awards 2020

Best Fully Integrated Company
Africa: Sonangol
Asia: PETRONAS
Middle East: Aramco
Eastern Europe: Gazprom
Western Europe: Eni
Latin America: Petrobras
North America: Chevron

Best Independent Company
Africa: Seplat
Asia: Pharos Energy
Middle East: Genel Energy
Eastern Europe: Irkutsk Oil Company
Western Europe: Premier Oil
Latin America: Vista Oil & Gas
North America: PDC Energy

Best Exploration & Production Company
Africa: Oando Energy Resources
Asia: PTTEP
Middle East: ADNOC
Eastern Europe: OMV Petrom
Western Europe: Wintershall Dea
Latin America: PetroRio
North America: Occidental Petroleum

Best Downstream Company
Africa: Waltersmith Petroman Oil
Asia: Rongsheng Petro Chemical
Middle East: ADNOC
Eastern Europe: LUKOIL
Western Europe: OMV
Latin America: Grupo Dislub Equador
North America: Marathon Petroleum

Best Upstream Service & Solutions Company
Africa: Century Group
Asia: Bumi Armada Berhad
Middle East: Al Mansoori
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Davos: setting the world to rights

Posted on by itsupport

In January 2020, World Finance explored what might be on the World Economic Forum (WEF) Annual Meeting agenda in January 2021. But back then, few investors and policymakers envisaged a global COVID-19 pandemic and the dramatic turn of events that would result: a severe economic slump as major economies imposed lockdowns and travel restrictions. This would require an epic and unprecedented monetary and fiscal stimulus.

The WEF announced in December that the Annual Meeting 2021 would now take place from May 13 to 16 in Singapore and return to Davos in 2022, “as long as all conditions are in place to guarantee the health and safety of participants and the host community.”

Whatever issues the WEF plans to cover later this year, the current economic situation seems to be changing on an almost daily basis. “In all the major economies there was a massive slump in activity following the outbreak of COVID-19, though massive monetary and fiscal easing created a V-shaped recovery going into the third quarter of 2020,” says Neil MacKinnon, Global Macro Strategist, VTB Capital. “Equity markets also had a V-shaped recovery, making it one of the fastest bear and bull markets in financial history. ‘Phase 2’ of the COVID-19 pandemic also threatened a double-dip recession, but news that there might be a 90 percent effective vaccine from Pfizer in early November, hot on the heels of Joe Biden winning the US Presidential Election, took global equity markets to new highs.” Perhaps to stay on top of events, the WEF decided that the Annual Meeting will be preceded by what it terms “Davos Dialogues” during the week of January 25, a series of high-level digital events during which key global leaders will share their views on the state of the world in 2021. The week will be dedicated to helping leaders choose innovative and bold solutions to stem the pandemic and drive a robust recovery over the next year. However, the agenda will not shy away from the ‘Great Reset Initiative’ promised by the WEF last year and the January Dialogues will each focus on one of its five domains. Before digging down into the mechanics and potential impact of the Great Reset, let’s look at a few of the other issues we mentioned in January 2020 that are still relevant.

 

Trading tensions
The trade war between China and the US is still simmering. Tariffs remain in place on billions of dollars’ worth of goods, forcing businesses in both countries to explore new markets, make cutbacks or simply shut up shop. In spite of these tensions, at the start of 2020, the US economy had posted a record economic expansion and the S&P500 index was in an upward trend, making new highs as ‘phase one’ of the US-China trade deal had been agreed. The deal requires China to increase purchases of US products and services by at least $200bn over 2020 and 2021. In December 2020, the then US President-elect Joe Biden told The New York Times that he will not immediately end the phase one agreement or roll back punitive tariffs on Chinese goods imposed by President Donald Trump, adding that the United States needed to regain leverage to use in negotiations with China. After a summer of souring relations between the two states during the pandemic, the good news is that China’s purchases have increased in recent months as its economy recovers.

The pandemic has acted as an accelerator of new technologies that will restructure our economies

The leaders of the African Union have continued to discuss ways to ensure that the continent’s less developed economies are not negatively affected by a more liberal approach to trade. Although delayed by the pandemic, implementation of the African Continental Free Trade Area (AfCFTA) is set to begin in January 2021, with an initial focus on easing trade restrictions for SMEs, which account for 90 percent of jobs created on the continent. However, there are more challenges than ever, particularly thanks to the pandemic – “an unprecedented health and economic crisis,” noted the International Monetary Fund (IMF), “that threatens to throw the region off its stride, reversing the development progress of recent years and slow the region’s growth prospects in the years to come.”

 

The fourth industrial revolution
The WEF’s fourth January Dialogue, ‘Harnessing the technologies of the Fourth Industrial Revolution’, will explore “what organisations need to do in order to accelerate the uptake of technology and how can they avoid the issues that arise from a lack of governance.” There will no doubt be some reference to what the Harvard Business Review calls the “benign regulatory environment” that is partly to blame for Silicon Valley’s historic concentration of wealth and power – an era the publication believes is drawing to a close. In July, research by Accountable Tech found that 85 percent of respondents felt Big Tech has too much power. Meanwhile, people on both sides of the Atlantic want tech companies to pay their taxes fairly and in full.

 

The ‘Great Reset’
All of this and much more besides will potentially be overshadowed at the Annual Meeting by what the WEF concluded after its risk analysis at the 2020 event (see Fig 1). It found that the five biggest risks to humanity and the planet in terms of likelihood and severity are climate related. Climate discussions are set to continue at the 2021 event, particularly as many have been calling for a green economic recovery from the pandemic. The Great Reset campaign is calling for governments to end fossil fuel subsidies and funnel the money into low-carbon sectors instead. More broadly, the campaign is making recommendations to ensure that the recovery spurs the progress of sustainable development.

“In January the IMF thought global GDP would expand 3.3 percent in 2020,” MacKinnon told World Finance, “but this was mainly led by projected growth of 6.0 percent in China and 4.4 percent GDP growth for emerging market economies generally. GDP was expected to remain anaemic at 1.3 percent for the Eurozone and in Japan at just 0.7 percent.” The outbreak of the COVID-19 pandemic, which was becoming evident by the end of January, ripped up the IMF’s projections.

A greener future
Ironically, the step change created by the pandemic has perhaps provided a unique chance to reframe the future by building a fairer, more prosperous society founded on greener, more resilient, and productive economies. “This chapter presents an opportunity for governments and businesses to accelerate many of the shifts underway before the pandemic, while building a sustainable recovery,” says Steve Varley, Global Vice Chair – Sustainability, EY. “A recent study by EY and the European Climate Foundation found 1,000 ‘shovel-ready’ green projects that, with investment, could create almost three million jobs across the European Union alone.”

Others see tax policy at the epicentre of much of the change caused by COVID-19. With climate being high on government agendas, including the EU’s Green Deal and US President-elect Joe Biden’s green policies, “there will be a host of new tax concessions and incentives for businesses to better integrate green thinking,” says Kate Barton, Global Vice Chair – Tax, EY. Varley elaborates on this point: “Businesses have the power to drive prosperity and create value for a wide variety of stakeholders – from our shareholders, to our employees, to the communities in which we operate.” He believes we now have the opportunity to create green jobs at scale, that help communities grow and prosper in a sustainable way. We also have the responsibility to help carefully manage the transition from a high-carbon to a low-carbon world, in a way that mitigates any potential societal risks like unemployment or energy poverty due to increased energy costs.

Neil MacKinnon says: “climate change is already impacting macroeconomic stability and growth prospects and there is a need for guidance on international carbon price floors and border carbon adjustments.” This requires the need for climate assessment risks and stress testing for financial institutions, and corporate disclosure of climate-related financial risks. Climate change is also affecting how macro policymakers adapt monetary and fiscal strategies. In the UK, Chancellor of the Exchequer, Rishi Sunak is promoting the use of UK ‘green’ government bonds and the Bank of England Governor, Andrew Bailey, said recently that his objective is to build a UK financial system resilient to the risks from climate change and supportive of a transition to a carbon net-zero economy.

 

The weight of responsibility
In the Eurozone, European Central Bank (ECB) President Christine Lagarde has said incorporating climate change risk into monetary policy is “mission critical”. The ECB is likely to incorporate ‘green bond’ purchases into its asset purchase programmes (the ECB currently holds 20 percent of the eligible green corporate bonds) and this could eventually help pave the way to fiscal union, a capital markets union, debt mutualisation, and a deepening of the green financial market. Ironically, the pandemic has acted as an accelerator of new technologies that will restructure our economies. As Isabel Schnabel of the ECB’s Executive Board recently put it, the pandemic is helping build “a deeper and greener financial market that reduces the cost of transitioning towards a low-carbon economy.”

What the situation will be in May when the WEF Annual Meeting takes place is anyone’s guess. But one thing that won’t change is the urgency for restricting carbon emissions. In late 2020, the UN reported that 2020 is on track to be one of the three hottest on record, completing a run of six years that were all hotter than any year ever measured before and that the world could hit the climate change milestone (exceeding 1.5°C above pre-industrial era levels) by 2024.

The Digital World Economic Forum events during January 2021

    • Monday 25: Designing cohesive, sustainable and resilient economic systems.
    • Tuesday 26: Driving responsible industry transformation and growth.
    • Wednesday 27: Enhancing stewardship of our global commons.
    • Thursday 28: Harnessing the technologies of the Fourth Industrial Revolution.
    • Friday 29: Advancing global and regional co-operation.

The shadow of a hard Brexit

Posted on by itsupport

The quest for national sovereignty – or a sovereignty recognised by a majority of Brexiteers – is almost at an end for Boris Johnson’s government. By the time World Finance goes to press, the picture will be clearer and several decades of mutual trading cooperation and easy travel will cease between the UK and the EU. New trading frictions will commence. Even with an agreement ratified by the end of 2020, the vast amount of red tape won’t be hugely reduced – the government’s harder Brexit line and quitting the customs union and single market has seen to that.

As early winter unfurled with much of the City of London emptied of life, Johnson did little to reduce the risk of an accidental no-deal. Though the influence of core Brexiteers was cut thanks to November’s ejection of chief adviser, Dominic Cummings, bringing much relief across Whitehall, there was little softening of the line from UK chief negotiator David Frost. In late November, Chancellor Rishi Sunak went on the offensive, claiming COVID-19 was a bigger threat to the economy than a no-deal scenario. Bank of England governor Andrew Bailey disagreed, however, and the London School of Economics supports his contradictory views.

Since quitting the EU on January 31, 2020, the consequences of a hard position – which is what the UK has now largely chosen – have become more stark. The UK exports more than £25bn worth of financial services a year. Did the government do enough to protect it? “Very early on, we called for regulatory equivalence for financial services to be at the heart of a post-Brexit trade deal,” London mayor Sadiq Khan said as negotiations neared the last furlough. “But the government has instead placed its red lines around symbolic, but relatively niche ground.” The niche ground Khan referred to in barely coded words is fisheries. Fish is a subject that pulls in public – and therefore voting – interest as opposed to the City of London, even if the City employs more than 500,000 and the fishing industry 24,000. The nautical roots run deep.

Across the channel, European leaders have been overwhelmed by COVID-19, putting pressure on Michel Barnier, forced into isolation in late November, to keep dialogue on track despite the threat of on-off suspensions (both Barnier and David Frost contracted the virus earlier in the year). If Barnier pulls off an agreement it still must chunter through a number of committees before a plenary vote. It has to be translated, be legally tight and approval must come from both the European Parliament and the EU Council.

 

Higher downside pound risk
Speaking to World Finance, Western Union International Bank currency strategist George Vessey said markets had broadly priced in a deal, and that compromise was more likely to come from the UK than Brussels. “In terms of traders holding short or long positions on the pound,” said Vessey, “it’s pretty much flat. If you compare that to the majority of the last four years, around 80 percent of the time traders have held a bearish position on the pound, expecting it to devalue.”

So while there is anticipation for a deal, with that comes more downside risk for sterling. “If we get a deal, then the pound should start to appreciate, but the upside potential to appreciate is definitely less so than the downside risk, should we end up in a no-deal scenario. That is the concern – that markets are anticipating a deal exposes more downside risk to the pound if it doesn’t come to fruition.” The many overlapping EU and UK rules – one example of the possible chaos may see EU banks re-route derivative trades via New York if working equivalence isn’t agreed – is just one of the City anxieties. The scale of derivatives trading is huge. The Paris-based European Securities and Markets Authority, an EU agency, has been working on a solution, but detail has been scant.

 

Does a post-Brexit European banking crisis loom?

The number of non-performing loans as a result of COVID-19 could hit levels well beyond those of the 2008 financial crisis thinks Andrea Enria, chairman of the supervisory board of the European Central Bank. “The European Central Bank,” Enria warned in the FT, “estimates that in a severe but plausible scenario, non-performing loans with euro area banks could reach €1.4tn, well above the levels of the 2008 financial and 2011 EU sovereign debt crises.”

 

Journey to the edge
Meanwhile, many British registered financial operators will lose their right to sell funds or give debt or insurance advice right across the EU, even if Barnier pulls off an agreement. But ex-EU trade spokesman Peter Guilford was confident that emotions, in the end, will be overcome. “The EU Commission’s job is to broker deals between forces bigger than itself, within Europe and outside,” he said in the FT. “It has nerves of steel, the hide of an ox and no fear of cliff edges.”

Stakes in previous trade negotiations – the so-called Uruguay Round, spanning 123 countries – he points out, “were higher than those of Brexit: more countries were involved, there were more sticking points and a less united EU, not to mention entrenched opposition from European and US farmers to a deal at all.” Practically, for British consumers, some food shortages may occur as around 40 percent of the UK’s food and agricultural products are currently EU-sourced. Grocer Sainsbury’s has already flagged up concerns about the supply of dairy and fish products unless EU controls for larger traders are waived. Fresh food supplies are certainly at higher risk. Inevitably, some supermarket prices will rise.

For Boris Johnson now comes the hardest part – piloting a responsible path out of the pandemic while reviving his government

Another issue surrounding potential shortages is the current supply to the UK shores. The UK’s biggest container terminal, Felixstowe, has been ranked the worst-performing container port when benchmarked against key competitors, including Hamburg and Rotterdam. The so-called ‘Port of Britain’ – it absorbs more than 35 percent of all the UK’s container goods – is subject to constant congestion, according to new data from IHS Markit. Felixstowe Ports is owned by Hutchison Ports, which blames Brexit stockpiling and COVID-19 related pressures for current delays, including around 11,000 containers of PPE. Some shipping companies have redirected ships away from Felixstowe due to worries about unloading capacity or berthing slots.

There are also complaints about the port’s vehicle booking system from trucking companies struggling to get loading slots, a problem that may be exacerbated without a trade agreement. Most Brexit voters gave Ireland little thought in the June 2016 referendum. But Northern Ireland is leaving the EU – sort of. While goods and people can move freely between Northern Ireland and the Republic of Ireland – a priority for peace – a customs border in the Irish Sea means goods coming from Britain are subject to EU customs rules. That means a customs declaration and detailed checks, in some cases. This remains in place for six years. Many Northern Ireland unionists deeply resent the so-called ‘sea border,’ seeing it as a move that undermines their existing membership with the UK. The threat to override parts of the UK-EU withdrawal agreement via the recent Internal Market Bill, breaching international law, has ratcheted up tensions.

Across the Atlantic, the Biden administration will be intent on putting pressure on Johnson to ensure that the Good Friday Agreement is linked to future trade negotiations. Johnson’s – at times slavish – relationship with Donald Trump has gone down badly with Biden and we should expect Biden to bypass Johnson in favour of Angela Merkel, at least initially. If there is no deal and a lack of commitment to the Withdrawal Agreement then a US-UK trade deal gets much trickier.

 

The regional and local reality
Whatever happens, the outlook for much of the UK does not look promising. The lack of access to EU funds for poorer parts of the UK may mean some inter-EU relations are reduced to the level of ‘town twinning.’ Europe remains vital to much of the north east of England with strong trading links to Oslo, Gothenburg and Rotterdam, as just one example of this. The north east, with its strong manufacturing centres including the car industry, is vulnerable to higher tariffs and trade costs, as is the West Midlands. The UK’s Society of Motor Manufacturers and Traders (SMMT) warned that failure to secure a good deal could cost the UK auto sector £55.4bn by 2025. And a default WTO tariff would pile on almost £3,000 to the price of a new electric vehicle, SMMT president Dr George Gillespie predicted.

No deal or thin deal, Britain is the only country that joined the EU and left. For Johnson now comes the hardest part – piloting a responsible path out of the pandemic while reviving his government. That means reaching out to the many he has sidelined or dismissed and addressing, with sincerity, the UK’s deep regional inequalities.

Confidential Cabinet Office notes reported by the media in late November point to a higher chance of UK “systemic economic crisis” – quitting the EU, COVID-19, a bad flu season, the threat of mass unemployment and higher risk of public disorder as many people’s finances deteriorate post-Christmas. It’s a hard winter ahead.

Is America back?

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Stock markets barely turned a hair on the change-of-president news in early November 2020. There was no dive or Armageddon, no rush for the exits in anticipation of a Democratic Biden administration determined to punish climate-heating polluters and other stock market villains. But the market’s positivity was less an endorsement for the president-elect and more an exhalation of relief that the US had narrowly avoided a contested result: a constitutional crisis with Donald Trump firing grandstanding tweets, or even refusing to quit the White House. Above all, markets love certainty.

Market sentiment was also buoyed by COVID-19 vaccine hope shortly after, popping energy back into retail, travel and banking stocks. “We are still months away from any vaccine being widely available,” asset manager giant BlackRock noted in mid-November. “But the game changer is that we now know we are building a bridge to somewhere, providing more clarity for governments and companies about getting to the post-COVID-19 stage.”

But markets also have the certainty of the world’s most powerful democracy bitterly divided. In November 2020, Donald Trump pulled in the second highest number of votes in US election history, albeit less than his opponent. After four wild years, Trump’s centrifugal force is extraordinary. Chief investment officer Thomas Beckett of Punter Southall Wealth told World Finance that despite Biden’s victory, “it was a disappointing night for the Democrats and far below most expectations.

It is going to be challenging for the Biden administration to achieve anything structurally significant with the Senate in the grips (just) of the Republicans.” The disappointment for the Democrats is considerable. Biden won, yes, but without a clear majority in Congress, depriving him of a solid political base.

 

Hot influencers in a swing state
Biden’s capacity to govern may change with the Georgia run-off elections. Who wins in Georgia will determine which party controls the US Senate. Currently (as of December 2020) the Republicans have a 50–48 majority in the Senate. If Democrats take both seats in this once solid Republican state – now a swing state – Vice President-elect Kamala Harris gets the tiebreaker vote. So the stakes are enormous. Georgia has massive racial divisions and inequality. The capital, Atlanta, is the cradle of the state’s civil rights movement. Georgia hasn’t voted Democrat since Bill Clinton’s election nearly 30 years ago. Georgia, though, is increasingly polarised from rapidly changing demographics – mainly young and diverse, which favours the Democrats; think ‘hot’ influencers, Twitch and politically tinged live streams.

The 2020 election demonstrated that the economy must benefit the working class more in future if the ideological chasm between Democrats and the Republicans stands a chance of narrowing

Pollster and strategist Frank Luntz told CNBC it’s the most important Senate election in modern times – and could go either way. “Whether they roll back Trump’s tax cuts or introduce a green new deal – if the Democrats can win both of those seats back then they will be in control of the Senate and the President will have an agenda that won’t be able to be challenged by Congress.”

If Republicans win just one seat they control the majority and therefore the Biden agenda. So the Georgia run-off will determine the nuts-and-bolts of Senate decision-making and the committees spanning banking, finance, taxation and judiciary. The consensus is that the Republicans will hang onto the Senate. “US voters have this admirable ability to not give politicians too much power,” Chris Beauchamp, chief market analyst at IG, told World Finance. “The perception among many swing voters may be that while we’ve given Biden a chance, we don’t want to give him the keys for everything.”

 


Joe Biden: the 46th President of the USA core Biden quality – the capacity to work with opponents – has never grabbed headlines.

Biden is more the steady journeyman in search of a better outcome, though at some personal cost.

The twin tramlines of tragedy and success have closely tracked his life.

He became a US senator in 1972, defeating strongly liked rival J Caleb Boggs despite a campaign bereft of funding and, often, hope.But he clinched it by 3,162 votes – the closest Senate election of 1972 – thanks to an ability to connect with voters.

But this achievement was over-shadowed by the tragedy, almost immediately afterwards, of his wife Neilia and their one-year-old daughter, dying in a horrific car accident.

He’s held down torturously difficult positions on racial equality, notably the Senate school busing programme, in the 1970s.

The close relationship with ex-President Obama, a man he often calls his brother, has cemented support from African-Americans as well as blue-collar white voters.

While a big supporter of public healthcare and mental health programmes, Biden’s also faced allegations of misconduct, overcoming accusations of assault by ex-Senate employee Tara Reade.

In 2015 his son Beau, attorney general of Delaware, died of brain cancer, forcing Biden out of the race against Trump.

He now needs every ounce of his low-key bipartisan stamina and judgement to steer America back from four years of comparative isolationism to the familiar ground of multilateral agreements, compromise and the ability to work together – the essence of what the US Founding Fathers intended.

But he will also have to navigate a party with a diverse range of views. Many Democrats are going to be disappointed and the splits will be uncontainable.

 

Blue-chip help with gridlock?
If there is probable Senate gridlock then the chances of meaningful future US economic stimulus to support the economy – many states were coming to terms with more COVID-19 shutdowns back in November 2020, putting the brakes on a recovery – may fall. VTB Capital global macro strategist, Neil Mackinnon, told World Finance, “At best, it may be $1trn which would be mainly fresh income support and replacing unemployment programmes. It’s highly unlikely we’re going to get a $2.5trn package.” That $2.5trn figure had even been endorsed by Trump, going along with the Democrats, “though that had likely been driven by the opinion polls at the time” adds Mackinnon. Senate majority leader Mitch McConnell doesn’t believe Americans need a multi-trillion dollar aid package.

But Biden is determined to get collaboration from corporate America to tackle the pandemic crisis. Biden, remember, has been here before: in 2009 Barack Obama charged the President-elect with the oversight of a near $800bn stimulus package to drag the US out of the global financial crash. Little change is expected at the Federal Reserve. Fed chief Jerome Powell sees his tenure end in early 2022. Powell, a Republican, has paid attention to job growth, earning him brownie points from Democrats keen to see issues like wealth inequality – particularly racial wealth imbalances – raised. The inequality point is complex but vital: the 2020 election demonstrated that the economy must benefit the working class more in future if the ideological chasm between Democrats and the Republicans stands a chance of narrowing.

Elsewhere, hopes for sterner financial regulation, urged by Democrat senator Elizabeth Warren, could see Biden ultimately replace Powell, but the Fed boss himself has endured a fractious relationship with Trump. He remains a continuity figure. Currency moves are notoriously difficult to anticipate but a weaker dollar appears likely, helping US exports and lifting Asian currencies. While trade negotiations, particularly with China, will take a more conventional tilt, Biden leads a divided government, which impacts on the greenback because of policy uncertainty.

But with the money taps open from the Federal Reserve plus more government aid money to tackle COVID-19, inflation may climb if enough spending gets underway from both businesses and consumers. In ‘normal’ times this would reasonably see the Fed hike rates. The Fed has switched its inflation target from two percent to an average of two percent. It’s a small but important nuance, allowing it to delay hiking rates for longer. Many dollar-denominated investors may be deterred and look elsewhere for a home for their money.

 

Outlook for stocks
A normalising of geopolitical relations will likely favour biopharma companies, as Biden is keen to expand the Affordable Care Act. Chinese stocks – think e-commerce and payment names like Meituan and Tencent – may also gain thanks to a more stable trading US outlook. Some blue-chip European stocks have taken a beating from Trump tariffs, particularly on the automotive and engineering front. But Biden has pledged to rejoin the Paris Agreement, which the US pulled out of in 2017. So, spending on infrastructure for EVs, wind and battery science is good news for this sector.

Much depends on COVID-19. Biden has assembled a task force led by three respected and qualified co-chairs: David Kessler, Vivek Murthy and Marcella Nunez-Smith. Other members of this taskforce are specialists in their own right, says Russell Shor, senior market specialist at FXCM, “and bring a high level of competence to the table,” he told World Finance.
“That, to a large degree, has lifted the uncertainty of the COVID-19 spread and the insecurities accompanying lockdown,” Shor continues. “More testing is required, but two major uncertainties [Biden win and Pfizer’s and BioNTech announcement of a 90 percent potential vaccine] have diminished and this is good for markets.” The hope for the US must be for calmer waters ahead. There is a lot for Biden to get through during his four-year term and it would certainly be easier if it could start with the Trump sideshow being shown the exit door quietly.