Finance Monthly hears from Lynne Darcey-Quigley, founder and CEO of Know-It, on the problem of fraud plaguing UK firms and how they can protect themselves from it.
Throughout the 1960s, Frank Abagnale famously faked eight different identities, including a pilot, lawyer and a physician, to gain free flights and defraud banks. There was subsequently a film titled ‘Catch me if you can’, starring Leonardo DiCaprio, made about his life and how he conned people. Arguably his most ingenious (or in fact worrying) tactic was his ability to write personal cheques on his own overdrawn account. This, however, would work for only a limited time before the bank demanded payment, so he moved on to opening other accounts at different banks, eventually creating new identities to sustain this charade and continue to defraud financial institutions.
Although time has passed and technologies and systems have been put in place to weed out the Frank Abegnales, the issue of fraud and financial crime continues to linger. This has been made plainly obvious throughout the COVID-19 pandemic, where the Coronavirus Bounce Back Loan (BBLS) scheme has been plagued by fraudulent applications.
As a result, the National Audit Office (NAO) has estimated that taxpayers could lose as much as £26 billion from fraud, organised crime or default, as up to 60% of the loans may never be repaid.
An all too familiar story
For businesses across the UK, this may not be a surprise. Even before the pandemic, a study from PwC found that half of all UK companies had been the victim of fraud or economic crime between 2016 and 2018. The research found that for more than half of the organisations affected, criminal activity resulted in losses of around £72,000.
Fraud and financial crime, therefore, has clearly not been born as a result of the ongoing COVID-19 pandemic, nor will it diminish once the virus has passed. The case of COVID-19 loan fraud should, therefore, provide businesses, government and other stakeholders with a wake-up call and a chance to reflect on how they can reduce the risks of falling victim to financial fraud. But what lessons can these stakeholders learn and what needs to change?
Even before the pandemic, a study from PwC found that half of all UK companies had been the victim of fraud or economic crime between 2016 and 2018.
Always do your homework
We understand that the issuing of COVID-19 loan schemes was a unique situation. Lenders have been under huge amounts of pressure to approve loans quickly and help support struggling businesses. Unfortunately, this simply doesn’t give them the time they need to conduct the checks that are needed to protect themselves from fraud and financial crime. Yet this echoes similar findings from PwC’s research from a few years ago: UK organisations are generally not doing enough to prevent fraud, with only half carrying out a fraud risk assessment in the last two years.
Regardless of whether your organisation is an SME, a large enterprise or a national government, basic and thorough credit checks must be in place as part of the process of protecting your business. Through establishing the validity of a customer your business is looking to establish a working relationship with, you are immediately reducing the risk of exposing yourself to fraud or financial crime. But why stop there? Compiling credit reports and verifying a business’ status on Companies House before committing to a commercial arrangement are also effective measures that can help protect your business.
These checks go a long way for business owners, particularly SMEs, as late payments and of course, fraud, can cause disruptions to business cash flow. Cash flow issues can prove fatal for smaller business owners, which is why credit checking, building credit reports and validating other businesses and its financial status is key to survival.
Ensuring a smooth recovery
When it comes to government support loans, businesses do not have to begin paying back the money from May 2021 onwards. However, this time large time period isn’t a luxury when it comes to collecting payment from customers. Consequently, implementing a responsive and robust debt recovery process is essential to minimising the risk of non and late payment issues, helping business protect their cash flow and minimise risk.
Agreeing and making a record of credit terms in advance ensures that no business transactions can be disputed, which could later lead to businesses losing out on payment from customers Under the BBLS, the government provided lenders with a 100% guarantee for the loan. For SMEs in particular, this approach simply cannot be taken, especially if debt recovery steps, such as ensuring credit terms between businesses, are not agreed and recorded beforehand.
[ymal]
Chasing owed payments is far easier after the checks to validate a business have been made. Businesses can take measures which include; credit holding, which involves pausing services to a client until they have paid. Issuing final notices is also essential to the debt recovery process, the final correspondence before taking up legal proceedings usually resolves any delayed payment issues. The problem facing the government is that fraudsters applying for support loans will do so illegitimately, therefore remaining anonymous and slipping through the debt recovery net. This reiterates the importance of verifying and checking recipients during the early stages of a business agreement, as this eases the rest of the debt recovery process.
A final word on SMEs
However, it is not just the initial checks before the first commercial transaction that must be invested in. To truly protect themselves, infrastructure must be put in place to continually monitor and chase customers. In larger businesses it is common to have a designated department or employee who will handle this process – usually this person will be known as a ‘credit controller’. Yet, we understand that many – particularly smaller businesses – do not have the resources readily available to continuously check the credit status of their customers and conduct due diligence.
Fortunately, this is where advancement in technology play a critical role. For example, by using technology to automate the credit control process, this can help businesses streamline this process so they can credit check and monitor and conduct due diligence, all from one place. Automating this process, firms can collate the information and identify areas of concern, without expending huge amounts of time and precious resources, ultimately helping them to limit risk and reduce fraud.
Finance Monthly hears from Jay Floyd, Senior Principal Financial Crime Consultant at ACI Worldwide, on the threat faced by banks and countermeasures they can employ against it.
Fraudsters are natural opportunists and extremely innovative with their methods. Whether through authorised push payment (APP) fraud scams, phishing attacks or even targeting vulnerable people during the COVID-19 crisis, they will always find new ways to make money with no remorse.
Making the task of protecting consumers and companies from fraudsters relentless activities an increasingly challenging one for banks. Especially during a time of global crisis and uncertainty along with growing payment channels through Open Banking.
However, by thinking seriously about how they (banks) can embrace strategic anti-fraud technologies and ensuring that their Open Banking platforms are secure by engaging with QTSPs (Qualified Trust Service Providers), banks can protect their customers against fraudsters both today and tomorrow.
Fraud is constantly evolving and growing
A decade ago, deploying malware was the easiest and most common method of getting into someone’s account. But as banks have strengthened their technical defences, fraudsters have increasingly turned to social engineering. Whether via email or telephone, many criminal gangs now impersonate a victim’s bank or other authorities like the police, persuading the victim to hand over account authentication codes or even make fraudulent transactions themselves.
Taking this one step further, some fraudsters are even combining remote access trojans with social engineering. Persuading victims to install malicious software on their device so they can carry out their fraudulent activity without needing to engage with the victim in the future. With such scams constantly evolving, it is increasingly difficult for banks to combat fraud.
Fraudsters are natural opportunists and extremely innovative with their methods.
As such, instant payments fraud is growing at an alarming speed. And while it should be acknowledged instant payments have revolutionised banking – in an era of pandemics, it’s no exaggeration to say we are dealing with a payments pandemic.
Recent figures from UK Finance add stark colour to this picture. Card fraud (both debit and credit) accounted for £288 million in the first half of 2020 – an 8% decrease compared to the same period in 2019. However, cases of remote banking fraud and APP fraud both increased – by 59% and 15% respectively. When combined, this amounts to £287.5 million lost to remote banking and APP fraud in the first half of 2020 – almost on par with card fraud. Though there are industry initiatives such as ‘Confirmation of Payee’, in the very near future, it is expected that remote banking and APP fraud will overtake card fraud across Europe and UK. And this is worrying.
Engage with QTSPs to mitigate fraud
The rise in remote banking fraud may further be accentuated by the proliferation of open banking services. But despite the fact fraudsters will look to exploit weakness in Open Banking, this relatively new service should be embraced. Its benefits cannot be underestimated or denied. In fact, recent OBIE data suggests 50% of UK small businesses now use open banking services to see their accounts in real time, forecast their cashflow and issue paperless invoices to clients. But banks do need to think seriously about weakness and loop holes and how they protect customers from fraud in the coming months and years.
Fraudsters are already exploiting the vulnerabilities around open banking, especially when it comes to Account Information Service Providers (AISPs). Authorised to retrieve account data provided by banks and financial institutions, AISPs are a critical piece of the open banking infrastructure jigsaw. However, it is believed criminals are starting to create fake AISPs. In some cases, pretending to be legitimate AISPs, much like doxing, to gain access and data to customers’ accounts.
[ymal]
To mitigate this risk, banks need to think seriously about how they engage with Qualified Trust Service Providers (QTSPs) to certify and validate AISPs and PISPs. QTSPs provide banks the digital certificate for AISPs and PISPs, and are themselves regulated under the eIDAS directive. But while they have been around since early 2019, QTSPs still remain largely invisible in the financial community. Banks must configure their anti-fraud technology to monitor AISP and PISP activities and also establish a process to validate eIDAS certificates via QTSP’s to ensure that they only release access to customers’ accounts to the right people. Not only will this help banks mitigate the risk of fraudulent AISPs and PISP’s or man in the middle attacks, it will also enable them to meet a range of other electronic security requirements as well.
Real time payments bring a sense of urgency for both the fraudster and the victim of the bank. And while instant payments and open banking have undoubtedly brought countless benefits, the rising levels of fraud are real cause for concern. Fraudsters will always find new ways to make money illegally. But by ensuring they have the right fraud technology and aligning that technology to integrate with Open Banking messages and with QTSPs, banks can put themselves in the best position to detect fraudulent AISPs / PISP’s and prevent as much fraud as possible.
More than 30 countries have imposed travel bans on the UK after a new strain of COVID-19 – which may be as much as 70% more infectious than the original strain – was detected in the country. Nations closing their borders include France, Germany, Italy, the Netherlands, Austria, Belgium and Israel.
Some of the travel bans imposed on the UK will last for 48 hours as leaders formulate plans to contain the spread of the mutant COVID-19 strain, while others are set to last until the end of January.
The news has caused immense disruption to accompanied UK freight, with the immediate future uncertain for the 10,000 lorries that pass through Dover each day. British supermarket group Sainsbury’s warned on Monday of fresh produce shortages if transport between the UK and Europe is not quickly restored.
The FTSE 100, London’s blue-chip index, fell as much as 2% on the open with British Airways owner International Airlines Group and Rolls-Royce down 16% and 9% respectively. As much as £33 billion was wiped out from the index’s shares.
Germany’s DAX fell 2.3%, France’s CAC 40 fell 2.4%, and the pan-European Stoxx 600 fell 1.8%, with travel and leisure stocks taking the brunt of the sell-off.
While the FTSE’s losses fell to 1.1% by the end of the first hour of trading, the impact on sterling was more extreme. The pound, which last week reached a two-year high, plunged as much as 2% to $1.3259 and 1.6% to €1.0864.
[ymal]
The impact on the pound was aggravated by continued uncertainty as to whether the UK will secure a Brexit deal ahead of the end-of-year deadline, after which existing trade stopgaps with the EU will no longer remain in effect.
Business growth consultant Daniel Groves offers Finance Monthly an analysis of the current role of offices and his predictions on how it will shift in 2021 and beyond.
COVID-19 has had a big impact on offices around the world, with lockdown guidelines and social distancing measures leading many to work from home. There have been many proponents of home working, from a better work-life balance to cutting down on the expenses of commuting. But what does this mean for offices going forward?
While there is still going to be a need for offices beyond the pandemic, the role they play in modern businesses will need to evolve to adapt to the ‘new normal’. These are some of the ways that offices are likely to change in the future to meet the demands of running a business while also maintaining the wellbeing of staff.
The office is still important
In spite of the rise in remote working, offices are still important to how businesses operate. Many people like the idea of dividing their work life between in-person and remote, in order to gain a better split between their personal life and their career.
What’s more, some businesses have no choice but to have a central location for staff to work from in order to comply with data security. But in order to stay relevant, businesses require their office spaces to adapt and change with the times. The offices of the future will be shaped from the lessons learned through the pandemic and this means that they need to become a space where the benefits reaped from working there are worth the extra effort required to get there.
From how they look to how they make employees feel and how staff are treated within them, offices need to be worth the journey and over the coming months as we navigate the pandemic and its aftermath, offices will be under closer inspection.
In spite of the rise in remote working, offices are still important to how businesses operate.
A new focus
The focus of the office has now changed – it’s no longer the hub of the company but rather a space for collaboration and creativity. In response to the pandemic, offices are now better suited to providing a place to come together with colleagues and brainstorm ideas. Co-working spaces need to be inspiring and encourage ideation and participation.
So, modern businesses need to accommodate this and provide break out areas and flexible open plan spaces. Business owners need to recognise that staff need collaborative areas that can be adapted to suit different needs, both for social interactions as well as quieter spaces to concentrate.
More working remotely
COVID-19 has resulted in more people working remotely than ever before, which has placed a greater importance on having access to good digital services. Employees need to be able to utilise software to collaborate effectively, from making better use of calendars and time management tools to arrange meetings, to using cloud software to share and access files and documents.
It’s also vital that all staff have great connectivity in order to make the best use of these tools. Businesses need to support teamwork through the right organisational aids so that staff can coordinate and share resources efficiently.
Design focused around people
More than ever before, companies need to pay attention to how their offices are designed in order to keep staff and visitors safe. While mistakes in the office layout prior to the pandemic may have been inconvenient, it could now be unsafe or even illegal.
“The pandemic has accelerated the move towards genuinely people-focused design,” says Roderick Altman, CEO at SAS International. “This means designing workspaces that accommodate the needs of each and every person rather than considering office workers as a herd. Some of the major issues are reduced density of people, fixed desk working, increased focus on cleanliness and closed ceilings”.
[ymal]
It’s not just desks and cubicles that need to be considered, but also other areas of the building such as meeting rooms, canteens, lifts and corridors.
Hot desking is no more (for the moment)
Hot desking was popular before COVID-19 hit, but it’s no longer a safe option. For companies with smaller offices, a better and safer option may be to consider that only certain people come into the office while others work remotely. But there’s no one-size-fits-all solution and the answer will vary depending on which talent is required for the business and how much collaboration is necessary.
Even within each business, the needs could vary across different teams and geographies, and varying demands throughout the year. Offices can still be used as a central meeting hub for everyone, but if there isn’t the space for every member of staff to work safely, then businesses need to offer an alternative.
Final thoughts
The uniqueness of our current situation means that there’s no template for how to move forward or work post-lockdown. The key to success is flexibility and encouraging collaboration between staff, while having continuity measures in place should a second wave hit. From changing office layouts to create a safer work environment to providing staff with the digital tools they need to maintain contact and collaboration with colleagues, businesses need to be willing to adapt and utilise office premises in different ways to adhere to the guidelines as they evolve.
UK telecoms giant TalkTalk has agreed to a £1.1 billion takeover deal proposed by Toscafund – its second-largest shareholder – and private equity investors Penta.
TalkTalk announced details of the takeover bid early on Thursday. Should they approve the deal, TalkTalk investors will receive 97 pence per share, a 16.4% premium on its share price on 7 October when talks first began. If this occurs, TalkTalk will be de-listed from the London Stock Exchange.
Including debt, the deal values TalkTalk at around £1.8 billion. Toscafund, which is controlled by hedge fund tycoon Martin Hughes, already controls a 30% stake in the company.
Sir Charles Dunstone, chairman of TalkTalk, spoke optimistically about the benefits the deal would bring for the ISP. “Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide,” he said.
“The telecoms industry is going through a fundamental reset and we are keen to play our part in it.”
TalkTalk is a budget broadband and phone provider that provides services to around 4.2 million UK customers. In addition to announcing the takeover deal, it published its half-year results on Thursday, showing a statutory pre-tax loss of £3 million during the six months leading up to 30 September compared to a £29 million profit during the same period in 2019.
[ymal]
The company said it had been heavily impacted by the COVID-19 pandemic, which had left engineers unable to visit customer premises to connect them to the network. It also noted that the closure of third-party overseas call centres had been a detriment to its customer service capabilities. While revenues from phone calls also slipped, the broadband provider noted that data usage had increased more than 40% during lockdown periods.
Shares in TalkTalk were up 1.7% in early Thursday trading. The Toscafund-Penta takeover is slated to take place in the first quarter of 2021.
Jamie Johnson, CEO of FJP Investment, offers his thoughts on the trends that will influence the UK real estate market in the year to come.
With the Pfizer/BioNTech vaccine starting to be administered to UK citizens, it’s safe to say that the end of COVID-19 could be in sight. After almost one full year of lockdowns, social distancing measures and job retention schemes; we may be soon returning to something resembling normality.
However, our transition to the “new normal” will be notably different to the pre-COVID-19 environment. Tax reforms and spending cuts are looking likely, as the UK government scrambles to make up the shortfall for what it spent combating COVID-19’s economic impact.
The UK has been long been heralded as one of the world’s leading investment destinations. There is good reason to believe this will remain the case, despite the obstacles on the horizon. A recent piece of research commissioned by FJP investment revealed that 42% of investors are confident the UK shall remain a global investment hub following COVID-19 and Brexit.
So, given all of this, which assets have investors been retreating to amongst all of this uncertainty? Based on what we have been witnessing at the moment, there is no denying that residential property remains high on the list for sophisticated investors.
Spotlight on property
Amidst all the market volatility and global uncertainty witnessed throughout 2020, British real estate has demonstrated strength, resilience, and perseverance.
In fact, market demand for property has been rising at an impressive rate. If we use house price growth as measure of buyer demand, this is evident. Halifax’s House Price Index for November revealed that house prices have risen annually by 7.6%.
Amidst all the market volatility and global uncertainty witnessed throughout 2020, British real estate has demonstrated strength, resilience, and perseverance.
Understandably, it looks as those some buyers are investing in UK property to hedge against any financial uncertainty. While other asset classes are suffering from high volatility as financial markets adjust to new COVID-19 developments, the price of UK property has consistently trended upwards throughout H2 2020.
This is a reflection of the positive sentiment investors hold towards bricks and mortar. FJP Investment’s aforementioned research also found that a majority (51%) firmly believe UK real estate will remain a sound investment regardless of how Brexit and COVID-19 play out. And, as the year comes to a close, I believe that this optimism will soon translate into record levels of transactions. Already transaction numbers are high, with October 2020 witnessing approximately 8.1% more transactions than October 2019. What’s more, with the Stamp Duty Land Tax (SDLT) holiday coming to an end on 31 March 2021, we are likely to see transactions numbers spike further.
The SDLT holiday, implemented in June and potentially saving house buyers up to £15,000, has been credited with successfully luring investment back into British real estate after the first summer lockdown earlier this year. Given the considerable savings this tax break allows for, I suspect that investors will flock to property in the new year before the holiday ends.
Constructing new builds to meet demand
With regards to infrastructure and potential new builds, it’s up to the government as to whether they wish to push forward with their plans from earlier this year for a "housebuilding revolution". The UK is still suffering from a mis-matched housing sector, with demand far outstripping supply, so fulfilling the promises made during the 2019 General Election to ‘level up’ the nation via pouring billions into new builds should be welcomed by investors and seasoned property experts alike.
Allocating such funds for infrastructure and housebuilding not only fulfils electoral pledges but is paramount for facilitating a wider post-COVID-19 economic recovery. For this reason and others, I’m confident that Prime Minister Boris Johnson will push forward with previous plans to help fund construction and development projects in 2021.
[ymal]
Regarding other plans, such as extending the SDLT holiday or implementing negative interest rates, it is difficult to make assured predictions at the moment. However, for property investors and housing developers, I’m personally optimistic about what 2021 may hold. Given the incredibly strong performance of UK property throughout this year’s pandemic, I’m confident that this sector will remain a prime destination for investment and a source of impressive long-term gains for the foreseeable future.
The number of people being made redundant in the UK reached a record high in October amid the second coronavirus wave, new data has revealed.
The Office for National Statistics (ONS) said on Tuesday that redundancies rose to 370,000 in the three months leading up to October as jobs were cut in the run-up to the withdrawal of the government’s furlough support scheme which had been slated to close at the end of the month. The wage subsidy scheme was then extended until the end of March 2021 as rapid acceleration in COVID-19 infections prompted a second national lockdown in England and tighter controls elsewhere in the UK.
ONS data revealed employment has fallen at its fastest pace in a decade. There are now 819,000 fewer people on UK company payrolls than there were in February when the pandemic first hit, the employment having risen to 4.9% in October.
Meanwhile, the number of people claiming unemployment- and low pay-related benefits reached 2.7 million, an increase of 64,300.
Worst affected by the rise in redundancies were young men aged between 18 and 24, with unemployment levels in this bracket having risen by 39% since February. The worst-affected sectors were hospitality and retail, which have respectively shed around 297,000 and 160,000 jobs this year.
Business chiefs have warned that the rise in unemployment in the UK is likely to accelerate further as London and other parts of the UK prepare to enter Tier 3 of England’s regional lockdown system, which will see pubs, restaurants, cinemas, museums and other venues shut down from Wednesday. This will mark the third time these venues have been forced to close since the onset of the pandemic earlier this year.
[ymal]
“While the roll-out of the vaccine has buoyed employers, it won’t automatically undo the damage done to their businesses by the pandemic,” warned Tej Parikh, chief economist at the Institute of Directors, who suggested that cutting employer national insurance contributions could help their cashflow troubles and keep the furlough scheme’s new March wind-down date from becoming another financial cliff-edge.
AstraZeneca, the British pharmaceutical company currently working in collaboration with Osford University on a COVID-19 vaccine, announced on Saturday that it would acquire US drugmaker Alexion for $39 billion.
As part of the deal, the FTSE 100 firm said that Alexion shareholders will receive $60 in cash and about $114 worth of equity per share, a premium of more than $50 per share. Alexion shareholders will own around 15% of the merged company.
The boards of both firms unanimously approved AstraZeneca’s takeover, which is expected to close in Q3 2021. The deal was the result of exclusive talks with no competitor involved, and will broaden AstraZeneca’s portfolio with access to Alexion’s rare-disease and immunology drugs.
"Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases,” AstraZeneca CEO Pascal Soirot said in a statement. “This acquisition allows us to enhance our presence in immunology.”
Ludwig Hantson, CEO of Alexion, also hailed the deal: "We bring to AstraZeneca a strong portfolio, innovative rare disease pipeline, a talented global workforce and strong manufacturing capabilities in biologics.”
Shares in AstraZeneca fell 9% on Monday as investors moved to price in the deal, which is now awaiting regulatory approval before it can go ahead. Shares in the company have fallen by around 17% from their peak in July, as Pfizer and Moderna have made swifter progress in developing and receiving approval for their COVID-19 vaccines.
[ymal]
AstraZeneca also revealed on Monday that it will take out a £13 billion ($17 billion) bridging loan to finance its takeover bid.
Rob May, Managing Director and founder of ramsac, looks at some emerging trends in cybercrime and how firms can best defend themselves.
Security, for financial clients, has had to adapt to many forms in the last decade. The most recent, and urgent, line of defence has come in response to the unexpected, novel threat of a global pandemic. But as more clients onboard their operations to digital platforms, that risk grows and becomes ever complicated. Remote operations, for example, opens a place of business to both insider attacks and outside ones.
While the financial service industry has always been one of the “most-breached sectors” (accounting for 35% of all data breaches), cyberattacks have become even more widespread and sophisticated during the global pandemic. This is, arguably, because operations have had to quickly onboard their business digitally. And, with new digital models, there are troubled spots, or weaknesses.
With more financial companies seeking to create new digital customer experiences, investing in a wealth of technology innovations, and working remotely, this could result in a new wave of extreme cyberattack scenarios leaving companies vulnerable to serious data breaches or worse.
To gain deeper insights and help guide financial companies in their decision-making when it comes to cybersecurity, we’ve rounded-up the emerging cyber threats, how they could evolve in the future, and solutions to address them during these challenging times.
Be Watchful of Malware
Cyber-risk management should be watchful and vigilant of the most common cyber-risks. Malware will breach systems and ransom, corrupt, or steal data. Even though it’s common, over the years, several US states and counties (including Texas) have observed a growing intelligence about how these attacks are delivered. One scenario noticed several malicious ransomware attacks at once, effectively a multiparty attack, reaching across jurisdictional boundaries to result in the first cybercrime event of its kind.
Cyber-risk management should be watchful and vigilant of the most common cyber-risks.
The solution, a suitable line of cyber-defence, would include early planning and preventive measures for multiparty attacks and disruptive threats. Oftentimes awareness is a helpful starting point. But defence and security measures alike need to anticipate more complicated, organized cybercrime as it becomes increasingly sophisticated.
For those in finance, a defence plan could include trial simulations to measure internal response times and mock scenarios to help security teams shape their reactions for real future attacks. Likewise, building cross-sector peers and contacts, can be helpful in organising a defence to a larger cyber-risk.
Misinformation Can Deceive
This has been one of the largest threats throughout COVID-19 and has rallied a shared, collective attempt to cull the flow of misinformation online. Many known bodies, including NASDAQ, have predicted a possible spike in market manipulation on the heels of COVID-19, where attention is split between a global pandemic response and economic recovery.
Misinformation can conflate what seems like harmless advice on stock investments, but is actually driving malicious activity. These disruptive attacks tend to prey on market volatility and flagging economic confidence. In the past, these attacks have been known to use fraudulence as sleight of hand to conflate stock values.
A reasoned solution to this issue would require financial firms to conduct extra due diligence and caution when navigating the market and instructing their clients on financial manoeuvres. As surface information could be corrupted, extra research and investigation can steer financial decisions away from malicious foul play.
Data Manipulations Are Disruptive
Traditionally, data was duplicated or destroyed. Whilst this was harmful to firms, the next evolutionary stage of cyber-crime, since the latter half of 2019, has moved onto data manipulation. There have been scenarios where data hacks can be twisted to manipulate or encrypt it. This has led to increased scrutiny for cloud security, which has known vulnerabilities.
[ymal]
Before onboarding new digital solutions for your business, ensure it can be securely bridged. New technologies can be helpful in expanding a business’s productivity, but this should be approached cautiously.
There are a range of emergent threats that result from cyber-risks. The best, more reasoned, solution is to prepare for cybercrime by having a prepared line of defence and the right security tools. The booming of digital businesses, and those migrating online, creates a greater urgency than ever to prepare security to handle a new universe of threats.
SoftBank Group Corp is considering a new strategy to go private by slowly buying back outstanding shares until CEO and founder Masayoshi Son has a large enough stake to squeeze out the remaining investors, according to a report from Bloomberg News.
Sources said that the buyback process would likely take more than a year, necessitating the sale of SoftBank assets in order to fund stock purchases. Masayoshi Son would not be buying shares himself under the plan, though his stake in the company – which now stands at around 27%, would increase as other investors sell their stock.
Once Son reaches 66% ownership, Japanese regulations would allow him to compel other shareholders to sell.
The gradual buyback plan would offer several benefits, according to insiders; it would allow the company to buy its own stock when it slips and avoid the need to pay a premium of around 25% that would come with a formal buyout. Gradual buybacks would also be more likely to receive support from shareholders.
The Japanese billionaire said in February that he thought SoftBank performed better as a public company, though he has more recently declined to comment on potential plans for going private in the future. “If our shares drop down, I will buy back more shares more aggressively,” he said during a November conference.
SoftBank owns stakes in many tech, energy and financial companies including Alibaba, Uber and DoorDash. The onset of the COVID-19 pandemic saw its shares fall by a record margin in March, wiping billions from its value, though it has since rallied more than 160%. Its market cap currently sits at $124.5 billion.
[ymal]
SoftBank shares rose as much as 7% on early Wednesday trading following Bloomberg’s report on the stock buyback debate.
Tim Wakeford, VP for Financials Product Strategy at Workday, offers his insight to CFOs looking to lead their business back to strength.
After a year where organisations were forced to continuously change plans and rethink their approach to business recovery, the future is finally looking less turbulent, with a potential COVID-19 vaccine on the way. One fundamental transformation 2020 brought to businesses, however, will continue informing the next year. Leaders will be looking to the CFO for insights on the business and guidance to decide their next move.
If the early stages of the pandemic have taught us anything, it is that companies need good quality data to make faster decisions. The question is, what data-driven insights do CFOs have to provide companies to deliver the best response to persistent change?
It could be argued that all data is valuable. Nonetheless, CFOs must focus on three particular data-led insights to steer businesses to recovery. They need to provide visibility into working capital, empower other leaders with data, and manage investor expectations with scenario planning. In doing so, they will be in a strong position for success in 2021 and be able to guide the business through any challenges the future may bring.
Gain greater visibility into working capital
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures. This is because many businesses have seen revenues plunge during the pandemic, which had a negative impact on cash flow. In fact, 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions and facing the reality that they will need to become more agile in managing inventory. The disruption of the second wave is heightening financial pressures and will likely mean that CFOs have to reassess their budgets again and again. Without a real time view of working capital, moments of disruption can lead executives to make decisions in a panic. This could result in significant inventory spend with non-preferential suppliers, which in turn reduces the potential for savings from contractual discounts, and is common during turbulent times. Having a 360-degree view of the organisation’s working capital, however, can provide a better handle on spend management, optimising costs and overall efficiency. This will help leaders avoid risks that can set them back, and help them to accelerate recovery.
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures.
Empower the organisation to make data-driven decisions
Getting the right data-led insights into the business to guide decisions can be challenging during a constant state of change. However data-driven insights are absolutely key in empowering decision-making — even during the best of times. Providing the right data, to the right people at the right time, can only be done by breaking down the data silos still present in many companies. A global Workday study revealed that out-of-date information and siloed teams are the biggest barriers to agile decision making. On the other hand, 80% of technology leaders from more agile companies stated that employees have access to timely and relevant data without gatekeepers blocking access to such information.
The challenge is that, as many businesses have grown and evolved they have accumulated different technologies — systems that are often placed together and lack smooth integration or a single pane view of what is happening in the organisation. CFOs whose businesses have reporting scattered across different data sources will find that it is much slower and harder to monitor performance, identify variances, and surface risk. This is why CFOs and finance teams have to consider investing in overhauling their technology stacks. Our customer Equiniti, for example, found that having all HR and financial data in the same cloud helped identify challenges and respective solutions with much more agility and confidence during the pandemic. This way, they were able to fix gaps quicker, without slowing their recovery plans.
Manage investor expectations with scenario planning
The uncertainty and volatility created by the pandemic has led to markets swinging back and forth. In turn, this creates pressure from investor communities and has served to highlight one of the biggest challenges organisations face — determining the long-term future of a business. In the current state of constant change, CFOs and their teams cannot underestimate the importance of taking a strategic approach to investor relations. Besides sharing earnings reports, it’s the CFO and its team’s role to offer constant reassurance to stakeholders by communicating how management teams are dealing with the crisis.
Therefore, when talking to investors, leaders have three choices: withdraw, revise, or reaffirm guidance. A recent Deloitte report revealed that more than half of CFOs from public companies have chosen to withdraw from providing guidance. Although understandable, this could signal that leaders are unsure of their company’s prospects and have a downward impact on stocks.
[ymal]
When faced with this lack of clarity, finance leaders must stay ahead of the curve and give invaluable insights to investors by undertaking scenario planning. Many of our customers are basing their entire recovery plans on multiple pictures of their budget using what-if scenarios, and it’s proven equally important for investor insights. CFOs can build scenarios to better understand what the future may look like in areas of particular interest to investors, such as covenants. Deploying these types of forward-looking processes will help businesses prove their stability, ensuring sustained recovery and emphasising their long-term objectives with clear metrics.
The strategic role of the CFO for business recovery
The pandemic has shifted the role of the financial office for good. Everyone – from HR and commercial teams to investors – are now looking to the CFO for guidance and to spearhead the business through upcoming disruption. Armed with the right insights, plans and tools, the CFO will be able to lead their organisation to a swift recovery and prepare the business to thrive, whatever the future holds.
Yad Jaura, Product Marketing Manager at Netcall, explores the necessary changes utility providers must make to better manage payments in a time of economic turbulence.
Missed payments and managing payment support are part and parcel for any utility provider. However, in today’s economic climate, more people than ever before are running into financial difficulties, meaning payments are getting increasingly hard to manage. In fact, a recent Financial Conduct Authority survey revealed that 12 million people in Britain will struggle to pay bills as the pandemic continues to wreak economic havoc. Water companies are facing the brunt of this – as a basic human right, providers are unable to disconnect domestic customers who are struggling to make payments. This puts water at the bottom of the pile, while other utilities such as electricity and gas take priority.
Now, as England navigates through a second national lockdown, which will see consumers and businesses faced with further financial ‘cliff edges’, issues surrounding payment support will only continue to grow. While the government has responded with a number of financial support systems, such as the furlough scheme and mortgage payment holidays, plans for extension are changing in real-time. However, these will at some point come to an end – which will leave consumers to face the stark consequences of the UK recession.
Businesses are also struggling. For many, employees have been working remotely for some time now, so paying for water for an empty office when there are more pressing costs to manage can seem unimportant. With the pandemic continuing to batter usual trading figures, Christmas trading, which many businesses rely on for growth, is likely to be severely impacted, meaning additional financial strain ahead for already-stretched companies.
The challenge for utility providers
While consumers and businesses are struggling, utility providers, which keep our nation running, will struggle too if unable to recoup payments. Water companies need to work with customers to make it as easy as possible to access payment support. Those who don’t will risk being relegated to the bottom of the pile when it comes to the customer's list of creditor priorities. The reality, however, is that current repayment systems aren’t often up to scratch. Many water companies require customers to print off and complete multi-page forms, disclosing their current circumstances to arrange a suitable payment plan. As well as being overly complex, this process can take weeks if not months to process, meaning further delays for both the customer and provider.
Water companies need to work with customers to make it as easy as possible to access payment support.
There is also the issue of changing government guidance for utility providers. Many are currently being encouraged to consider payment holidays and payment matching, while also helping customers pay their bills through WaterSure, Social Tariffs, and other affordability schemes. This will add extra complexity to existing processes, which are often not built to enable such flexibility.
Looking to innovation
In order to overcome these challenges, utility providers need to implement innovative solutions that allow them to build automated, digital platforms that not only make it easier for them to manage payment support processes internally, but also improve the customer experience. Flexible, quick-to-implement Platform as a Service (PaaS) technologies, such as low-code, can help utility providers respond with agility, enabling them to build platforms accessible from a range of devices to access information, check bills and payment statuses, and set up payment plans. Low-code enables businesses to easily make changes to a process dependent on changing government guidance, due to its agile nature.
When combined with Robotic Process Automation (RPA) technologies, systems built on low-code can also help to gather information from customer relationship management (CRM) systems about customers who are having problems with payment. RPA technology is particularly beneficial as it can be implemented over existing systems and data, minimising the disruption of current IT infrastructure.
A long-term solution
Being able to modify processes quickly and simply is an important requirement in today’s volatile climate. Moving forward, utility providers must look towards a long-term solution that can help both customers and their own bottom line. Again, low-code technology can help here, as it provides utility companies with the ability to easily implement change, adapt and scale internal and external processes according to business needs, at no additional cost.
[ymal]
While water providers do not have the same considerations as consumer companies in terms of losing household customers to competing brands, incentives such as Ofwat’s service incentive mechanism mean that customer experience should be front of mind, even when dealing with re-payments. Financial rewards are provided to companies with the best customer service ratings – something that water companies simply cannot afford to miss out on in today’s economic climate. Also, while household customers may not be able to switch between water providers, businesses certainly can. Being ranked highly could therefore provide utility companies with a competitive advantage, and help to attract future prospects.
Supporting customers through financial turbulence
As we continue to navigate through the pandemic, managing payment support will be a relatable issue across a multitude of businesses, including banks, credit card companies, landlords and legal companies. The end goal for these companies should be to provide a seamless customer journey that enables consumers to manage repayments easily and effectively. By introducing simpler processes, as well as managing existing repayments, providers can also help customers tackle debt much earlier – before it becomes a problem. For utility providers this means managing the flow of information, whatever its origin and destination, and being approachable on a range of communication channels.
Finally, with young people having been reported as the hardest hit by the financial squeeze of lockdown, businesses should therefore ensure their contact centre offering integrates with a range of communication platforms – from chatbots to social media. Especially as two-in-five consumers now prefer to use self-service channels rather than phoning a call centre. Understanding customer preferences and building solutions that enable companies to manage this while recouping payments will be essential in the months ahead.
