In support of the tenth annual My Money Week last week, Equifax partnered with Young Enterprise in order to equip young people to grow-up with the life skills, knowledge and confidence they need to successfully earn and manage money.

Underlining the need for broader awareness amongst young people of the cost of the things they want – and how they might be financed - the credit information provider has released research which reveals that a third of parents admitted feeling pressured by their child to buy them the latest technology, and 35% felt pressured to buy fashionable clothing for their children.

“Our findings suggest that some parents are feeling under pressure to spend on their children when they may already be financially stretched,” explains David Stiffler, Vice President of Global Corporate Social Responsibility at Equifax. “As well as spending money on technology, nearly a quarter of parents said they have been put under pressure to keep up with the latest gaming devices and online apps, and a further 29% said their child pressured them to buy the latest toy craze.

“More than ever before, Equifax is committed to making a difference to the communities in which we live and work and My Money Week is a fantastic opportunity to encourage both parents and schools to help the younger generation appreciate financial values. The right attitude about money management starts at home so it is very encouraging to see a campaign that will teach children more about managing money in a way that is practical and relevant to them.”

The Equifax research also highlights how 11% of parents will spend between £51-£100 just on technology such as tablets, laptops and smart phones, for their child every school year. A further 10% admit to spending between £151- £200.

Russell Winnard, Head of Educator Facing Programme and Services at Young Enterprise, said: “It is important to have the right foundations from an early age to ensure that young people continue to manage their money well throughout their life. The aim of My Money Week is to improve financial capability for young people in primary and secondary schools. It’s all about teachers and parents inspiring young people to be financially literate, and the statistics from Equifax demonstrate just how important it is to learn about finances from an early age.”

To help parents keep control of their budget, Equifax has added an interactive Equifax Budget Planner to the tools on its website.

(Source: Equifax)

Nine out of ten workers are ‘financially sleepwalking’ into retirement, reveals new research.

Carried out by deVere Group, the research finds that 89% of all new, working age clients did not realise how much money they would need in order to fulfil their own retirement ambitions before they began working with an independent financial adviser.

More than 750 new and potential clients in the UK, the US, Australia, South Africa, Hong Kong, Spain, Qatar, France, Germany, and the United Arab Emirates participated.

Of the findings, Nigel Green, founder and CEO of deVere Group comments: “It is very alarming indeed that nine out of ten workers are financially sleepwalking into their retirement.

“The poll concludes that the overwhelming majority simply do not know just how much they will need to save during their working lives to fund the retirement they desire. Not knowing how much they will need for something as important as funding their retirement is worrying.”

He continues: “It’s particularly concerning in this day and age because we’re all living longer meaning the money we save has to last longer. Also, because governments are unlikely to offer the same level of support as they have done for generations before due to an ageing population and shrinking workforces; because living, health and care costs will increase significantly; and because company pensions are less generous, if they exist at all.”

How much people need to be putting aside now, and in the years to come, in order to be able to enjoy the retirement they want for themselves and their families does vary from person to person, of course.

However, as Nigel Green observes, there is a consistent theme: “Before they have an initial meeting with an adviser, the vast majority of people underestimate how much they need to be putting aside for their retirement. This is the case across all incomes, working age brackets and nationalities.”

He adds: “People are typically shocked when it is revealed how much they should be saving now to realise their own retirement ambitions later on. They have usually considerably underestimated the money they will need.”

The deVere CEO concludes: “Despite the shocking poll, there are always methods to plan and maximise retirement savings at every stage of your working life.

“But it cannot be stressed enough that the earlier you start your retirement planning strategy, the easier the journey to hitting your goals will typically be. I would urge people to take their heads out of the sand and get informed.

“By putting in place a clear, workable plan, you’re laying the foundations to have a comfortable and financially secure retirement.”

(Source: deVere Group)

Over the past several weeks, insolvency and companies facing severe cash flow issues have hit the headlines. Carillion announced their liquidation in early 2018, becoming the largest insolvency procedure of the year. Quickly following suit, Toys R Us and Maplin announced their failure to negotiate payments with creditors, and both retail companies have now entered the administration process. Only several weeks later, New Look, announced plans to close 60 stores as part of their CVA, with agreements in place with their creditors. Similarly, Grainger Games closed all 67 of their stores abruptly, as multiple investors pulled their credit offerings.

The recent headlines have only highlighted the necessity of carefully analysing your cash flow, and that of your clients. While it’s not always clear if a client is failing, there are several signs indicating a company’s financial health. The warning signs act as evidence of potential trouble. Business Rescue Expert, leading insolvency practitioners in the UK, are sharing the indicators your clients may be in financial distress.

1. Poor communication

Poor communication is a significant indication of financial distress. Should your clients no longer return calls or answer emails, it is a strong indication that something is not right. If you happened to enjoy an amicable business relationship, yet cannot get in touch with management regarding invoices - you should look into formal proceedings.

Alternatively, look to see how the company corresponds when you do get hold of senior management. If their tone is more formal than previous, it could signify they are undertaking legal proceedings and, possibly, looking for alleged breaches of contract.

2. Disputing invoices

Further to the above point, your clients may attempt to avoid payment by raising invoice disputes. These disputes could relate to issues with performance, stock etc. and could be an attempt to shed unprofitable contracts to save payments. Again, the tone of their correspondence could suggest something is wrong with your clients, and they could be preparing a trail of evidence. Disputing their invoices also provides the company with a little breathing time, so you should be wary of clients disputing invoices where there doesn’t appear to be clear issues.

3. Loss of reputation

Reputation is critical to the success of business. A fall in reputation - especially when it comes to payment - should set off several alarms. If you hear the company is losing trust with other clients, it’s time to sit down and get to the root cause of their issues. A huge loss in reputation can often prove irreversible, as it takes time and investment to gain back consumers trust.

Toys R Us is a prime example of a company losing reputation. Initially, Toys R Us entered a CVA, but failed to pay the debts owed at the time agreed. Subsequently, the damage of their reputation with creditors led to them entering administration.

4. Relaunch and rebranding

You should always be wary of companies rebranding every so often, under similar names. Alarm bells should ring as to why they have had to sell and rebrand previously. Is the rebrand just plastering over the initial cracks of the cash flow issues? Likewise, if a company relaunches yet offers the same trade to their consumers, without any extra income, it’s more than likely they will continue to face the same problems. In the worst case, your company could suffer a loss of reputation due to the association.

5. Low staff morale

Staff mean the difference between success and failure, and companies should always take care of their workforce. A company who doesn’t and boasts a massive turn around is instant trouble, and a huge indicator of potential cash flow issues. More often than not, staff will get a feel for cash flow issues before creditors - particularly those within the sale team. If there happens to be a feel of unease, or a high number of resignations, you can expect cash flow issues are at the heart.

6. Senior staff resignations

A sharp indicator of what is to come is senior staff resignations. If directors are leaving the sinking ship, you need to ask why. Likewise, if directors are under investigation, something is very wrong with the company. If those in charge of the company’s finances have resigned, it may be as this is their only option. We urge you to take note of these departures and, if it continues, seek immediate advice.

7. Clients refusing to trade with the company

If you have spotted any of these signs with your clients, you must speak to professionals immediately to discuss your options. We suggest attempting to communicate with your client to establish the cause and, perhaps, set out a payment plan. You can also track their company progress or obtain accounts through Companies House.

Far from taking human jobs in future, Artificial Intelligence (AI) and Machine Learning (ML) technologies are going to free up finance professionals from spending too much time on monotonous tasks and allow them to focus on more strategic tasks of higher value to the business. Does this mean that finance roles will mostly be driven by robots? Below Tim Wakeford, VP of financials product strategy EMEA at Workday, discusses with Finance Monthly.

A recent EY study revealed that the majority (65%) of finance leaders said that having standardised and automated processes—with agility and quality built into those processes—was a significant priority when it came to investing in emerging AI and other technologies. And, following on from this, 67% of finance leaders said that improving the relationship between finance and the wider business strategy was also a key priority.

Again, this is an area where automation and AI technologies are helping free up time for finance to spend more time working with other teams within the business. This enables them to figure out where to go next as opposed to looking backwards and dealing with unproductive and time-consuming legacy finance systems.

Freeing up talent to focus on high-value tasks

Freeing people up from repetitive jobs to enable them to focus on high-value tasks is the opposite of the oft-cited “robots putting people out of work” narrative.

Indeed, automation is a huge opportunity to reduce the unnecessary burden and pressure that’s put on finance professionals, particularly around traditional tasks such as transaction processing, and audit and compliance.

The adoption of AI applications within finance enables forward-thinking executives to move info far more strategic business advisory roles. This means that they can focus less on number crunching and more on financial analytics and forecasting, strategic risk and resilience, and compliance and control. This shift to data-driven financial management delivers a much wider benefit across the business.

The Rise of the robots: AI in finance

Computer systems performing tasks that previously required human intelligence is the definition of AI, with experts viewing AI and automation as viable solutions to efficiently deal with compliance and risk challenges across different sectors.

With the rise of the ‘big data’ era comes a parallel growth in the need to analyse data for financial executives to be able to properly manage compliance and risk.

This is another reason why finance teams cannot ignore the opportunities that embracing AI technologies offers them. It allows them to process vast amounts of data faster and easier than large teams of humans can.

Individuals are then able to make better strategic decisions based on the information that AI is able to rapidly extract from what were previously time-consuming and repetitive and monotonous tasks such as transaction processing.

Jobs least likely to go to robots

Forward-thinking and highly-skilled financial executives are happily embracing AI, as they see the clear opportunity it presents to play a more valuable and strategic role within their organisation.

“The challenge for managers will be to identify where automation could transform their organisations, and then figure out where to unlock value, given the cost of replacing human labour with machines and the complexity of adapting business processes to a changed workplace.” This is how writers James Manyika, Michael Chui and Mehdi Miremadi so fittingly describe the process in their book These Are the Jobs Least Likely to Go to Robots.

“Most benefits may come not from reducing labour costs but from raising productivity through fewer errors, higher output, and improved quality, safety, and speed.”

AI and automation in finance has to be about reducing repetitive manual tasks and raising overall productivity through data-driven business strategy. The bottom line is this: any technology that can reduce manual input and the associated human errors for transaction processing and governance, risk, and control (GRC) will free up finance professionals for more strategic work.

Any organisation’s most important asset is its people. And finding out which emergent AI technologies and applications are the best for a business and its people is going to be key for the future of finance.

Giving skilled finance staff the autonomy and opportunity to move into far more strategic data interpretation roles and letting the machines take on the grunt work is a necessary shift in the finance function.

As well as automating a large part of the finance function, AI technology will also help skilled finance executives to make a far more sophisticated analysis of complex data sets and to provide genuinely valuable insight to drive the business forward.

There is very little doubt that the future of finance will be one that embraces technological innovations to improve effectiveness, increase efficiency, and enhance insight.

The London Assembly Economy Committee report ‘Short changed: the financial health of Londoners’, published in January makes a number of recommendations for the Mayor of London, including:

• Work with the financial services industry, schools and colleges to create a young person’s banking charter, with the aim of ensuring all 16-18 year olds has a bank account. The Charter should include a commitment from banks to provide young people with a bank account by default.
• Commission an annual survey of London households on their financial activity, in order to get a better understanding of London’s ‘underbanked’ communities.^[6]
• Hold a Money Advice Week to promote affordable credit and use TfL advertising space to promote credit unions.
• Work with schools, charities and the financial services industry to deliver high quality financial education for young people.

Some of the reports findings include:

• 44% of people in the UK, who are in financial difficulty are between the ages of 18 and 34.
• Around a quarter (27%) of 18 to 30 year olds in London say they are in debt all the time.
• A third of all users of high-cost loans are 18-34 year olds.
• 40% of 18-24 year olds are less confident about managing their money, compared to 22% of the rest of the UK adult population.

Caroline Russell AM, Chair of the Economy Committee, said: “The cost of living has increased in the capital and many Londoners are cut off from accessing affordable financial services, such as loans and credit cards. They have to turn to high-cost credit, like payday lenders to make ends meet.

The Mayor of London has committed to tackle financial exclusion in London. While technology and innovation is one part of the solution, we want the Mayor to show real leadership in improving the financial health of Londoners.

It is absolutely crucial that young people are given the right support in terms of their finances, when they leave school. For many, it is the first time they will be responsible for their own money.

Education and support are key, as actions at this critical stage can have real consequences, in terms of credit ratings and long-term financial health. We strongly urge the Mayor to target his efforts in helping this group specifically.”

(Source: London Assembly Economy Committee)

Below Felicia Meyerowitz Singh, Co-founder & CEO at Akoni Hub, talks Finance Monthly through the implementation of PSD2 legislation this weekend, with an overview of open banking, what it means for financial services, and what opportunities are in store for banking customers.

It’s been a long time coming but we are entering an era of greater access and better financial services that will finally put the needs of customers first.

The catalyst of achieving this much needed and long overdue result is the culmination of big debate, endless lobbying and necessary government legislation.

For years banks have sat on the most valuable asset to any business: the infinite transactional and financial data of customers that essentially define individual’s tastes, preferences, budgets and - crucially - their requirements for building and planning their lives.

High street banks - reluctant to share their oligarchy of power, held on tightly to this data - unwilling to share it with others - or use it to enrich their consumer experience and put them at the heart of their business model.

With open banking, this power will be wrestled from the big incumbents and data will be available to third parties, SMEs and new digital players. This will lead to a better future for financial services, one that increases competition and creates a greater consumer experience. More businesses will finally have a shot at delivering services that are tailored and relevant to individual customers.

Open Banking will also strengthen the role and influence of FinTech companies that have the agility and open APIs to make data sharing possible and to disrupt the status quo. We have already seen new banks like Starling Bank taking the lead, by creating partnerships with other FinTechs to create a customer rich ‘Amazon of Banking’ experience.

Together with multiple significant other sources of data being made available with consent and through API format, this will finally deliver financial products in a simple and meaningful manner, with automated prompts as companies or market products change, resulting in data innovation and improved financial outcomes, as well as removing the hassle for enterprises, saving time and money.

Key to this is delivering analytics in an easily understandable form without overwhelming businesses - leveraging the rapidly advancing data science technologies, machine learning and AI, as well as outstanding design and user experience is part of the market change we are moving towards. While the UK and EU lead the way, there are early sprigs of global growth for international solutions.

Incumbents are not resting on their laurels. Many banks and financial institutions that make up the global sector are making impressive strides to capitalise on open banking, while also exploring valuable collaborations with new innovators that can help them harness the immense value of their data.

A great example is BBVA, which has embraced the digital movement and has set itself apart from other global offerings and is putting the client front and centre. The Spanish bank has nurtured the development of impressive FinTech firms – such as the digital ID startup Covault- while also making some canny acquisitions to keep it at the forefront of innovation that resonates with a new generation of consumers and keeps them agile and technology focused. This includes the purchase of digital bank Simple.

Open banking also presents some challenges. Exposing large quantities of personal consumer data could increase the risk of cyber-attacks, hacking and identify-theft. The possible reluctance of customers to share their personal data could also derail the initiative. Educating consumers and gaining their trust around data sharing will therefore be crucial to the success of this initiative. So too the need for businesses to share information within a secure platform and for online payment providers to be scrutinised by the rigorous laws in place.

If all goes well, the developments of open banking – and the opportunities they bring to consumers– cannot be overstated. Banks will get another chance at creating better value-added services, while SMEs will finally have the access they need to deliver what their customers truly want and ultimately transform their consumer experience. Additionally, corporates are also now included in the scope of Open banking, increasing pressure on banks to deliver improved services to the neglected business market.

We only hope that customers will see the value of it all to willingly share their data and banks will leverage their relationships of trust to deliver solutions of value to their commercial client base. With their consent, the blueprint for a better future of finance can be mapped out for generations to come.

Below Finance Monthly hears from Managing Director of Equiniti Credit Services, Richard Carter, who discusses the impact of digitalization on the lending market, rising interest rates and his predictions for the 2018 landscape.

Digital fluency and a thirst for convenience are making the UK’s borrowers more capricious and cost-sensitive than ever, says Richard Carter, Managing Director, Equiniti Credit Services, in this collection of predictions for 2018. Interest rate rises, and new regulations will add fuel to this fire next year, and lenders that can’t keep up will get burned.

1. Lowest price wins

In the digitised age of credit price comparison sites, brand loyalty equals bought loyalty. In 2018, lenders must earn their custom by delivering market-beating products. As interest rates continue to rise, the lenders that can drive down the cost of credit stand to prosper the most. Simply reducing margins, however, makes little business sense. But in a rising market there is a balance to be struck between protecting profit and increasing sales. Some may be willing to take a short term hit to capitalise on the rising market conditions, taking the view that volume sales justify smaller margins.

Adoption of automated and agile credit technologies will help lenders to drive down costs, reducing time-to-revenue for new products and enabling savings to be passed on to the customer in the form of more competitive rates.

2. Lenders adjust to curbing enthusiasm

The rise in interest rates are also likely to have a knock-on effect on what borrowers use credit for.

Recent research from Equiniti Credit Services[1] indicates that borrowers’ use of credit is split equally between funding aspirational items such as cars and holidays, and managing existing debt. To offset rising rates, 2018 will see lenders adjust their standard payment terms, allowing monthly repayments to remain consistent. It remains to be seen whether credit will continue to fund aspirational items at the same rate, especially since the falling pound has already driven up the cost of foreign travel and overseas goods considerably.

3. Application declines will no longer mean ‘no’

Regardless of whether lenders adjust their repayment terms, rate rises will still have an impact on affordability assessments, meaning borderline candidates will be excluded from products they once qualified for. This will trigger an increase in declined credit applications, before customer expectations have time to recalibrate.

In 2018, lenders will start to turn this to their advantage. Instead of abandoning the customer at the point of decline, they can automatically identify suitable alternatives, ideally from their own portfolio, or from other lenders. Doing so enables them to protect their relationship and ensures their customer doesn’t tarnish their credit score from repeated declined applications. Agile credit technologies hold the key to this win-win scenario, by providing a whole of market view and matching applicants to alternative loan products instantly, at the point of decline.

In a market where consumers can identify an alternative provider in a split second via a comparison site the ability of a lender to hold their attention throughout a decline and then convert them to an alternative product is a valuable coup.

4. Contact centres will need to be rethought

Equiniti’s 2014 research report revealed that 61% of consumers preferred a telephone call or face to face meeting to explore a loan application. In 2017, that figure has dropped to just 48%. We can expect this trend to continue next year, reflecting a growing desire for self-service applications. In response lenders should be rethinking their use of contact centre resources next year. As simple queries are increasingly resolved online, the role of contact centre staff will elevate to handle more complex queries, and lenders must prepare their resources accordingly. Outsourcing this function to a dedicated specialist partner is a cost effective and efficient way to manage both sporadic call volumes and complex queries, and ensures all calls are handled by skilled, FCA accredited individuals.

5. PSD2 will change everything

Driven by the advent of the Second Payment Services Directive (PSD2) in January, APIs are being opened up across the banking industry, enabling customer-permitted apps and services to access never-before-seen levels of transaction data. Lenders must embrace this new world. Here, data is the new currency, and the combination of customer-centricity and low cost is the key to attracting – and keeping - new customers. The regulation amounts to EU-sponsored digital transformation in financial services, and outsourcers will play a crucial role in helping lenders keep up, stay relevant and harness their use of new data sources to learn more about their customers and get ahead of the competition.

6. Social media data begins to play a part in credit decision making

Thanks to digitalization, the sharp decline in verbal and face-to-face communication means lenders must seek alternative ways to get a sense of who they are dealing with. Social media platforms provide a window into borrower’s lives and give lenders a data source that can be used to contribute to their assessment of an applicant. Sure, social media data will never determine whether to grant or decline a credit application, but as automation and AI technologies continue to be applied to this space in 2018, there is no reason why a lender shouldn’t include social media data in the mix.

[1] https://equiniti.com/news-and-views/eq-views/great-expectations-the-demanding-market-for-credit/

A report from MHA MacIntyre Hudson and Charity Finance Group based on a survey of over 120 trustees has raised concerns about complacency on financial governance within charities.

57% of respondents said that they understood strategic financial governance matters well or very well, with only 12% saying that they had a poor or inadequate understanding. This is very positive and indicates that boards are taking financial matters seriously.

Yet 84% of respondents said that it would be beneficial for their charity to have a better understanding of strategic financial governance matters.

This could be linked to the fact that only 16% of respondents always assessed board competency for charity finance skills, with 28% assessing skills sometimes and 30% occasionally. This was compounded by the fact that 47% of respondents never or only occasionally assessed the effectiveness of their financial governance.

Other interesting findings were:

• Only 22% of charities indicated that they always made available charity finance training for trustees that needed it.
• Less than one in five respondents considered that they had the complete skills and knowledge required to fulfil their responsibilities.
• 49% of respondents said that they had used the latest Charity Commission guidance on charity finance.

Commenting on the findings of this report, Sudhir Singh, Partner and Head of Not for Profit, MHA MacIntyre Hudson said: “Strong financial governance is a major contributor to successful and effective charities, so whilst we don’t want to be overly critical of the good intentions of most trustees and charities, it is difficult to escape the very clear conclusion that many people just need to do better.

Andrew O’Brien, Director of Policy and Engagement, Charity Finance Group said: “This report is an important wake up call for the charity trustees and executive teams. Every charity should be regularly assessing its skills and understanding at board level to ensure that it has the ability to govern itself financially. There are lots of resources out there, but charities need to make a commitment to using them Complacency is simply not an option.”

(Source: MHA MacIntyre Hudson)

Banks that demonstrate low fraud rates will be able to offer frictionless customer experience by escaping legal requirement for extra authentication.

The upcoming Payment Services Directive - due to come into full force in January - has the sometimes competing objectives of facilitating innovation while also strengthening security and protecting customers.

New technology developments in the industry have been known to create sharp increases in the amount of fraud. Losses due to online banking fraud grew by 64 percent from £81.million in 2014 to reach £133.5million in 2015. Yet, high levels of investment in fraud detection and prevention technologies by banks have now helped to reverse the trend - with losses falling 24% in 2016.[1]

The developments under PSD2 will require a new emphasis on tackling the issue. The number of payment service providers who have access to customer data will increase. A greater range of companies will become part of the transaction chain.

Whilst the PSD2 seeks to bring more frictionless transactions for customers, it also includes a legal requirement for payment service providers to use Strong Customer Authentication (SCA) if their fraud detection and prevention rates are not robust enough. Firms will pay a double price if fraud rates increase after PSD2, as they will be required to introduce more friction into the customer experience of payments.

As PSD2 opens up the transaction chain to more providers, Farida Gibbs, of technology consultancy Gibbs Hybrid, warns that banks will have to adapt their fraud detection systems, but can use their fraud prevention capabilities to deliver real competitive advantage.

Farida Gibbs, CEO of Gibbs Hybrid, comments: “As Open Banking creates increased competition in payment services, it will be increasingly important for banks to demonstrate low levels of fraud. SCA, which requires added authentication from the user and can result in customers searching for an alternative payment processor, which is able to process payments without this layer.

“Banks and other financial services firms have put a lot of time and effort into technologies behind fraud detection and prevention. Technology that enables a firm to pick up early warning signs of fraud and promptly send text and email alerts to customers, for example, has been very important in keeping losses to a minimum. And banks have had to implement this despite the challenges of legacy systems and outdated technology processes.

“Their success in reducing the level of fraud losses through online banking is testament to the forward-thinking work that is being done. This will become even more important as Open Banking approaches.

“The legal requirement to put in place Strong Customer Authentication (SCA) will create much greater friction for consumers, but those firms who are able to demonstrate outstanding fraud management will be allowed to use Transaction Risk Analysis (TRA) instead. This has the great benefit of being invisible to customers, introducing no further delays into their payments.

“Analysing transactions behind the scenes for unusual behaviour is not a new method, and is one that banks should be able to adapt to the demands of the new Open Banking environment. The stakes are high – if they can demonstrate success in this area, providers will be able to create a great customer experience for payments, whilst keeping security uncompromised.”

(Source: Gibbs Hybrid)

By Zak Goldberg

Much like any new venture with a business, it’s a smart idea to first fully assess a number of key financial considerations with your international expansion, to make sure it’s the right move for your company.

International expansion can bring a wealth of benefits including: increased sales, more exposure for your brand, opportunities to work in other niches and much more. So, before you start making your first steps abroad, think about some of the following to get your finances in order:

The Cost of your Expansion

The first place to look is at the possible expenses incurred from your expansion. This might cover a variety of areas like:

• Time and staffing dedicated to researching and scouting overseas locations and markets
• The costs of purchasing a new headquarters
• Travel time between your current and new location
• General staff recruitment, training and provisions
• Machinery, tech and facilities for your new site(s)
• A new fleet of vehicles for your logistics

The next step here is simply be realistic about whether or not a full-scale overseas expansion is something your business can afford.

Potential Sales Revenue

When researching the location for your expansion, you will have probably looked at aspects like how receptive the markets are to your products or services. As well as this, you should use this information to inform the potential revenue you could expect from successfully working in this new country. Having a clearer idea of the possible ROI at stake could also help you determine how quickly you could recover financially from your expansion investment.

Extra Overseas Operational Costs

You’ll already appreciate just how much you need to manage and think about for your overall domestic operations and ultimately the same will apply for any locations you set up and start running overseas. You can’t simply double the typical costs of this though as you might also need to pay for local staffing or external support in areas like:

• Translation work on your company’s website, products, branding
• Networking and understanding the cultural nuances of the country
• International supply chains to support your company
• Sourcing materials and goods for any manufacturing
• The general work carried-out on and off-site

Additional Support

After you’ve done some initial planning, you may also want to look into how you can source additional funds to support this. The bigger your cash reserves the better placed you’ll be to facilitate your growth and there are several different ways you could go about this.

You might want to look at securing a business loan from a bank or lender, or pitch your expansion ideas to your investors to see if they put forward more capital for this. Anything you can gain financially, whether large or small, can be incredibly valuable.Final Thoughts

Once you have taken the above into consideration you should then be in a better place to go ahead with your expansion. A final piece of advice here would be to make sure you regularly report and reassess your financial situation, as there might be instances or circumstances where you need to spend more than you first thought. This way you can move money around to support the different areas of your company that may need it.

About the Author:

Zak Goldberg is a Law & Business Graduate from the University of Leeds who has chosen to follow his aspirations of becoming a full-time published writer, offering his expertise on FinTech and business economics.

Vincenzo Dimase (@vincedimase), Head of Market Development, Trading at Thomson Reuters (@mifidii), gives an overview of MiFID II and the many different aspects of the financial market it will affect. Visit http://mifidii.com for more information.

19^th October marks the 30^th anniversary of Black Monday, when in October 1987 stock markets around the world experienced a flash crash. The FTSE 100 fell 11% on the day, and then fell a further 12% the next day, wiping out more than a fifth of the value of the UK stock market in just two trading sessions.

As terrifying as these sharp falls were, hindsight tells us that for investors who didn’t panic, even a badly timed investment made money in the long run.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown: “Stock market crashes are a bit like the Spanish Inquisition- no-one expects them. The 1987 crash is renowned for the speed and severity of the market decline, and undoubtedly when markets are plunging so sharply, it’s hard to keep a cool head.

“Hindsight clearly shows that the best strategy in these scenarios is to sit tight and not engage in panic selling. Time has a tremendous healing power when it comes to the stock market, and price falls are typically a buying opportunity. The stock market is an unusual trading venue, in that buyers tend to stay away when there’s a sale on.

“The Footsie has recently reached a new record high, which prompts the question of whether it’s heading for a fall. There are always reasons to worry about the stock market and now is no exception. The Chinese credit bubble is front and centre of concern, along with increasing global protectionism, and the disturbing prospect of World War Three being started on Twitter.

“However there are also reasons to be positive, with the global economy moving up a gear, borrowing costs remaining low, and stocks facing little competition from bonds and cash when it comes to offering a decent return.

“The market will of course take a tumble at some point, and it’s impossible to predict when. This makes being bearish an easy game, because you only have to wait so long before you are eventually proved right. The big question though, is how much you have lost out on in the meantime by sitting on your hands.

“It’s important to bear in mind that investing isn’t a one-time deal, savers typically invest at different times throughout their lives, and at different market levels, and sometimes they will be luckier with their timing than at others. To this end, a monthly savings plan takes the sting out of any market falls by buying shares at lower prices when the inevitable happens.

“The golden rule, of course, is to make sure you are investing money for the long term. In the short term the stock market is a capricious beast and can move sharply in either direction, but in the long run, it’s surprisingly consistent.”

After the crash

The table below shows stock market returns following the three big stock market falls of the last thirty years: 1987, 1999-2003 and 2007-2009.

The first column shows what you would have got by investing £10,000 on the eve of the crash, and pulling your money out at the bottom of the market. The remaining columns show what would have happened to your investment if you had held on to it. These numbers should be viewed as examples of what stock market returns have been if your timing is really pretty stinky, and you only happen to invest £10k once in your entire life, on the eve of a dramatic downdraft in the market.

In 1987 investors would have seen £10,000 reduced to £6,610 in a matter of weeks. However, if they had waited 5 years, their investment would have fully recovered, and 10 years later would be worth £32,690, with dividends reinvested. Today that investment would be worth £104,340.

Stock prices recovered pretty promptly after the 1987 crash, in contrast to the bursting of the tech bubble in 1999, which was compounded by the Enron scandal and the World Trade Centre attack, leading to a deep and prolonged bear market lasting until 2003. £10k invested in the stock market in 1999 would be worth £23,210 today, an annualised return of just over 5%.

Looking at these figures, it’s hard to dodge the conclusion that this was the worst of all three periods for stock market investors. It also contributed to the already declining fortunes of defined benefit schemes in the UK, and did huge reputational damage to insurance companies as the dreaded MVR (Market Value Reduction) became common parlance amongst hitherto happy With Profits policyholders.

The value of rolling up dividends shines through in the numbers below. Since the peak of the market in June 2007, £10,000 would only have grown to £11,890 based on stock price movements alone. But once dividends are counted and reinvested, that rises to £17,230, not a bad result given this money was invested at the peak of the market just before the global financial crisis took hold.

Is the Footsie about to crash?

The FTSE 100 reaching a new record high recently has of course prompted questions about whether it’s heading for a fall. However the level of the Footsie is not a measure of the value in UK stocks, seeing as it doesn’t take account of the level of earnings of companies in the index.

Below are two related measures of value of the UK stock market which take company earnings into account, but each give a slightly different picture of valuations in the UK stock market right now.

The headline historic P/E is elevated compared to its historic average, though still well short of the level seen in 1999.

The Cyclically Adjusted P/E Ratio, a valuation method championed by Nobel prize-winning economist Robert Shiller, takes a longer term view of earnings by looking over the last 10 year, which smooths out volatility in the one year P/E number.

On the cyclically adjusted measure, the UK stock market is trading below its historical average, and well below levels seen in both 1987 and 1999.

So which of these two measures should we believe? Well, we assign more weight to the Cyclically Adjusted P/E because it takes a longer term, more rounded view of stock market valuation. But if we simply take both measures into account in combination, together they suggest the market is somewhere in the middle of its historic range.

When thinking about the valuation of the stock market, it’s also worthwhile considering the valuation of alternative assets. The 10-year gilt is currently yielding 1.3%, and cash is yielding next to nothing with base rate at 0.25%. This contrasts sharply with 1987 when base rate was 9.9% and the 10-year gilt was yielding around 10%. So if you think the UK stock market’s expensive right now, then you have to take a really dim view of the value provided by bonds and cash.

(Source: Hargreaves Lansdown)