Auditors have become punching bags for governments that have struggled to respond to the aftermaths of the financial crisis. Anger and distrust remains in the public domain. There is little sense of accountability for misconduct for executives or their intermediaries. The few trials against individuals have resulted in little to no jail time. Intermediaries such as bankers have gone largely unscathed.

The weaknesses in capitalism have never been felt with such intensity, so raw and painful. We are wrestling with issues of inequality, with dwindling expectations or hopes for more shared prosperity. Capitalism is rightfully under attack for delivering uneven prosperity and leaving so many behind. There are important voices in business such as Warren Buffett and Larry Fink who have been calling for more responsible leadership and investing to address the shortcomings. Amidst these daunting challenges, auditors present an easy target for governments to signal accountability and reform.

We must resist following myopic and uninformed views. Reforms are needed to make capitalism more effective. Audit reforms won’t prevent bad judgements in business or avoid governance and business collapses. The failure rates in auditing are extremely low in comparison to the number of audit opinions issued every day. That is not to say that processes within audit firms could not be improved, as identified from various reviews. But true audit failures – those where audit opinions missed material frauds and such failures led to business collapses – are exceptionally rare. Simply put, material accounting frauds are rare events and this has not changed in the last decade.

The weaknesses in capitalism have never been felt with such intensity, so raw and painful.

The limitations of financial reporting will inevitably remain and therefore the probability of future business failures occurring may not necessarily change by altering the audit market. Specifically, accounting is reliant on the historical cost convention and mark-to-market adjustments, based on rules set internationally. Additionally, the ‘expectation’ gap for auditors to be guardians against fraud will largely remain. When management and third-party collusion is involved, fraud, corruption, and money laundering will remain increasingly difficult to detect for an organisation’s internal controls and the best auditors.

The work ahead

Although questions remain about how to best implement reforms, it is clear that there are valid trust and credibility issues affecting the accounting profession that need to be studied and addressed. There is legitimate public anger and frustration from corporate failures. It is correct to demand that executives involved in misconduct (or who are wilfully blind to it) are held personally accountable and face prosecution. The same should apply to those that facilitate misconduct as intermediaries or gatekeepers.

Business and auditing failures have contributed to the erosion of trust and it is incumbent on all of us to restore trust in both business and its gatekeepers. The profession can and should take further steps to improve audit quality.

To find effective solutions, it is important to apply a more holistic approach and analyse concerns, issues and solutions in the context of the entire business and reporting ecosystem. Using auditors as punching bags today is distracting from the important reform work ahead to address the shortcomings of our current form of capitalism.

About the author:

José Hernandez is the CEO of Ortus Strategies and the author of the new book Broken Business: Seven Steps to Reform Good Companies Gone Bad (published by Wiley), which is available now in hardback and ebook.

Website: http://www.ortusstrategies.com/

While many traditional methods and procedures are still in play, firms are adopting modern and innovative strategies to draw in a hipper and younger, yet more demanding, clientele.

From new technologies to fresher approaches to client service, here are the top trends that are sweeping and changing wealth management today.

A Digital Industry

2018 witnessed a firm-wide and strategic digitalization of wealth management companies. The trend continues to this day as big and small firms reshape the different aspects of their business to embody the change.

As the industry prepares for a generation of younger and tech-savvy clientele, integrating digital strategies to their marketing efforts and creating more efficient client-advisor interaction channels become essential.

Firms that have already taken the lead in implementing a centralized digital management strategy are raising the bar and driving competitors to do the same.

In the words of FinTech Advisor and ASEAN/India Retail Banking and Wealth Management Expert, Arvind Sankaran, “We are witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!”

Sustainable Investing Is Here To Stay

The Institute for Sustainable Investing’s 2017 “Sustainable Signals" report showed that there is a growing interest in sustainable investing and the adoption of its principles among investors. What's even more interesting is that millennials are taking charge.

Millennials take sustainable to the center stage as they search for more socially and environmentally conscious investment opportunities.

This increasing demand for sustainable ventures will continue to push wealth managers to take impact investing more seriously. Thus, the next years may see financial advisors incorporating the environmental, social, and government (ESG) philosophy into their services and financial planning approaches.

The Rise of AI and Robo-Advisors

Taking into account the millennials’ fascination with anything technologically-inclined, it’s not at all surprising that the idea of Robo-Advisors resonated and connected with young investors quite well.

In a statement, the automated investment service firm, Wealthfront, commended the ability of software-based solutions in delivering investment management services at a “much lower cost than traditional investment management services.”

While it can be argued that Robo-advisors can never replace competent human financial advisors in terms of creating customized long term investments or tax and retirements plans, the competition between automated and human advisors have benefited the clientele. For one, it drove the costs asset management down. More importantly, it forced financial planners to step up their game and prove their worth.

Basing on current trends, digital assistants (Robo-advisors, chatbots, and other forms of AI interactions) will continue to play a significant role in empowering client-advisor experience. We might be looking at a future where AI becomes a fundamental element in crafting large-scale hybrid advice offerings.

A Focus on Customer Experience

2018’s World Wealth Report identified that many clients think the relationship they have with their financial advisors and wealth managers falls short of their expectations and can use some improvement.

This is clearly a heads up for advisors and managers out there. In the wealth management industry, customer experience holds great weight for clients. For most investors, client-advisor relationships are critical because they believe in their in-depth implications on the realization of financial and life goals.

These days, investors are gradually witnessing moves towards better customer satisfaction as wealth management companies embrace automation and hybrid models of financial management, and re-engineer their strategies to satisfy demands and ensure that customers have the best possible experience during interactions.

With the new breed of investors putting a prime on user experience and opening themselves to the possibility of switching to other wealth management providers if their expectations aren’t met, the best way forward is to innovate and shift to strategies that put the client and their needs at the core.

More than a third of financial institutions (37%) find that legacy data platforms are the biggest obstacles to improving their data management and analytics capabilities, according to research from Asset Control. Whereas, for 31%, the cost of change is seen as the biggest hindrance to progress.

The poll of finance professionals, conducted through Adox Research Ltd., also revealed that for more than half of financial institutions (56%), the integration of legacy systems is the biggest consideration as they plan investment in future data management and analytics capabilities.

“What we’re seeing is financial institutions being held back by legacy data management platforms which they have acquired or developed over the years. These systems can slow down organisations as they are costly to maintain, miss audit or lineage information, often cannot scale to new volume requirements, and do not quickly and easily provide business users the data they require. While businesses recognise there is a need to update their data management systems they are sometimes reluctant to do so due to cost of change and perceived difficulties of integrating their systems with new solutions. Although I understand where these concerns come from, businesses also see the risks posed by inertia,” says Mark Hepsworth, CEO, Asset Control.

However, when it comes to considering new data management and analytics capabilities, firms remain focused on the fundamentals. More than a third (36%) of respondents cited ease of use and flexible deployment as their top business consideration, while 41% deemed ROI to be the biggest determiner.

“It is clear that while firms are currently being held back by the cost of change and legacy systems, they can see that both these challenges can be overcome with the right solution. While ROI is, of course, important in any business, these organisations must also consider how much their current data management systems are holding them back by delaying processes, lowering productivity and causing data discrepancies because they lack a clear and comprehensive view on their sourcing and validation process,” adds Hepsworth.

(Source: Asset Control)

The growing necessity to adapt rapidly to disruptive technologies and react to shifts in the market at an accelerated pace, is driving ‘agility’ in the financial services sector. Below Adam Gates, Principal at Odgers Connect, explains why the financial services sector is increasingly turning to independent consultants over traditional management consultancies.

Firms are increasingly looking at how they can evolve their organisations to operate more flexible business models and become more responsive to customer expectations. It’s a growing trend that is reflected in the way financial services firms are using consulting support.

The UK’s consulting market is estimated to be worth anywhere between £9 and £10 billion. Almost one-fifth of this is being delivered by a growing number of independent professionals. Often called the ‘professional gig-economy’, this cohort of freelance consultants is, for the most part, made up of ex-Big Four partners or senior managers. It’s a pool of highly-experienced individuals that the financial services sector is increasingly calling upon.

Offering a blend of strategic direction and hands-on implementation, independent consultants are a highly flexible resource that can be used for a range of business issues. Our latest research has found that it’s because of this level of flexibility that 43% of financial services firms are choosing to work with independent consultants over traditional management consultancies.

Of course, when it comes to meeting mass capacity demands, the big consultancies have teams of people available. It’s why 57% of businesses in the financial services sector cite this as the primary reason for working with a traditional consulting firm. This is however, becoming an unwieldy approach to delivering strategy, especially when staying ahead of the competition means operating at pace and being able to adapt to the whims of regulators and shifting market currents.

This competition is coming in the form challenger banks and ‘digital native’ fintechs who have a level of inherent flexibility that is enabling them to bring products to market faster and more readily adapt to the needs of customers. As a result, a trend towards agility is emerging in the financial services sector which coincides with the use of more flexible consulting support.

What’s more, owing to the level of experience they have built during the course of their careers, independent consultants tend to deliver a better quality of work, which is why most financial services firms will seek out specific skills from independent consultants, rather than from a big consultancy. This ‘area expertise’ means organisations will often expect an independent consultant to ‘get things moving’ within the first couple of weeks of coming on board; something that links an independent so closely to this aspect of flexibility.

That said, quality assurance remains an area of contention. Whilst an independent professional offers that much needed level of flexibility for financial services firms, a mainstream consultancy can often be seen as the safer bet; if things aren’t going well, you can always escalate the problem ‘up the chain’.

It is clear however, that with organisations in the financial services sector now focusing on meeting the changing expectations of their customers at the same time as staying ahead of continuous disruption, flexible consulting support is going to become that much more critical.

You’ve seen a lot of content, articles, warning and advice on cybersecurity, with hundreds of firms trying to sell you next level cyber protection. So, before you do anything else, you need to know what exactly it is you’re protecting yourself against. Below Suid Adeyanju, Managing Director of RiverSafe, lists 10 threats you need to be aware of.

In early July IBM Security and the Ponemon Institute released a new report titled ‘Cost of a Data Breach Study’. In this study it was reported that that the global average cost of a data breach and the average cost for lost or stolen information both increased. The former is up 6.4% to £2.94 million while the latter increased by 4.8% year over year to $112.57. This shows that cyberattacks on enterprises continue to rise. In particular over the last two years there has been a continual stream of concerning data security breaches.

One of the ways that organisations can defend against attacks is to ensure staff understand and are educated about the cyber threat landscape.

Understanding Threats to your Business

Getting the right technology, services, and security professionals is only a part of tackling the cyber security problem. It is also important that companies get a clear understanding of the cyber threat landscape. This means knowing where these types of attacks can come from and in turn, who is leading the attack (whether it be an individual or group). Often, knowing the answer to these types of questions leads to an understanding of the motive and makes countering the attacks easier. So, in this article, I wanted to highlight the areas of the cyber threat landscape that enterprises should be aware of.

1. Nation State: This kind of hacking is often government versus government. It is often functionally indistinguishable from cyber terrorism, but the defining trait is that the attack is officially sanctioned by a country’s government. These attacks can involve not only hacking but the use of more traditional spying as well.
2. Insider Threat: This is one area where many businesses least expect a threat to come from: inside the business itself. A reportfrom A10 Networks revealed that employee negligence is a major cause of cyber attacks. Employees unknowingly allowing hackers into the business through unauthorised apps. And, on the very rare occasion, a disgruntled employee could try and bring the business down in revenge, so it is always important to investigate who could have access because there is every chance that the threat could come from the inside.
3. Individual Attackers: When you think of the stereotypical hacker most thoughts turn to a hooded youth sitting alone in their room. This is the individual attacker and their motives are often more one of curiosity and learning. They want to see if they can hack a system rather than attempt anything malicious. This is the most neutral cyber threat.
4. Industrial Espionage: Sometimes an unrelated group and other times a rival business, cyber threats that deal with industrial espionage have the motive of creating problems for your business. The most common reason for industrial espionage is to discover the secrets of a rival business, often through spying. However, it could also involve destroying valuable data or, with some IoT devices, physically breaking the technology. Anything that can push a business over a competitor.
5. Cybercriminals: Much like the individual attackers, cybercriminals are an all-encompassing cyber threat. Almost all hackers are criminals in some way and the motives can vary from demanding money, to setting up crypto-mining, to damaging company property. Whatever they do it won’t be a good thing.
6. Phishing and Ransomware: These are some of the most common types of attacks you’ll find cyber criminals performing. These attacks are motivated purely by financials and exist to either scam a business out of money or hold valuable company data at ransom. Sometimes this can be a distraction to hide something more nefarious. Therefore, organisations need to make sure they are prepared for any escalation.
7. Ethical Hackers: An ethical hacker is the opposite of a cybercriminal, as the term ‘ethical’ implies. These types of threats are often undertaken for the sake of a company, and often have been paid for by the business to see if it can hack into its own servers. These hackers test the security resilience of a business and locate areas that are vulnerable, before an ‘unethical’ hacker comes along.
8. Hacktivists: A hacktivist is a sub-set of cybercriminals whose motives are more ideological. As the name references, a hacktivist is essentially a cyber activist. They are using hacking purely to push an agenda, whether political, religious, or otherwise, rather than a financial motive. A hacktivist attack can be something as simple as changing the text on a company website to a more nefarious act that interferes with the day to day running of the business.
9. Cyber Terrorism: While hacktivists don’t always cause damage, a cyber-terrorist will. Just like real terrorism, cyber terrorism exists to bring terror to your business, country and customers. Examples include the attacks on the NHSlast year which aimed to bring systems down in hospitals and cause chaos and fear.

By understanding all the different types of attacks in the cyber threat landscape it can help you build your cyber defence by identifying a motive and being able to trace what kind of opponent your business is facing, as well as if this is an attack aimed primarily at an individual, an organisation or a national-level threat where the solution would be to work with other companies to stop the attack as a team.

If the recent software failures in the financial industry are anything to go by, then disruption to payment systems are becoming the ‘new normal’. This week David O Riordan, Principal Technical Engineer, SQS Group, delves into the benefits of blockchain, in particular in the aftermath of a software disaster.

The VISA card payment outages, Faster Payments issues and disruption to card payments at BP petrol garages, all within the first half of 2018, have caused many to question the regulatory environment around financial institutions. And with the Bank of England and FCA requesting banks to report on how prepared they are for IT meltdowns, stating that any outages should be limited to just 48 hours, the finance industry is under real scrutiny when it comes to technology.

Corporations are now expected to have a Disaster Recovery (DR) and business continuity plan put into place to avoid falling victim to software failures. Nevertheless, what business leaders need to understand is that while no IT solution is completely foolproof, and will likely go down from time to time, the key is knowing how a potential internal failure can be mitigated without affecting the overall performance. This can only be achieved with a well-practiced DR plan that is second nature to the responsible parties and can be executed in the desired timeline. However, this can be both costly and time-consuming to set up. How can such incidents be minimised, or potentially eliminated, in the future? Blockchain is an alternative technology solution business leaders should consider, as it has fraud protection already built-in and is highly resistant to all type of attacks and failures.

Blockchain for Business Continuity

Built-in Fraud Protection:

Blockchain is a de-centralised platform, where every node in the network works in concert to administer the network and no single node can be compromised to bring down the entire system. It is a form of distributed ledger where each participant maintains, calculates and updates new entries into the database. All nodes work together to ensure they are all coming to the same conclusions, providing in-built security for the network.

Most centralised databases keep information that is up-to-date at a particular moment. Whereas blockchain databases can keep information that is relevant now, but also all the historical information that has come before. But it is the expense required to compromise or change these databases that have led people to call a blockchain database undisputable. It is also where one can start to see the evolution of the database into a system of record. In the case of VISA and other payment systems, this can be used as an audit trail to track the state of transactions at all stages.

Ingrained Resiliency:

Additionally, blockchain removes the need for a centralised infrastructure as the distributed ledger automatically synchronises and runs across all nodes in the network by design. As a result, Disaster Recovery (DR) is essentially built in, eliminating the need for a synchronised DR plan. The inability to alter entries in the ledger also contributes to the overall security of the blockchain, improving resilience against malicious attacks.

This is unlike traditional large centralised systems where resilience is provided by failover within a cluster, as well as site-to-site Disaster Recovery at a higher level. Disaster Recovery plans and procedures can be costly due to a large amount of hardware and data replication required. Furthermore, most businesses often do not execute it, so when disaster strikes, corporations are not prepared to deal with the aftermath; as seen with VISAs outage problems.

The Downside of Decentralised Blockchain Technology

Performance:

While blockchain can be used as a system of record, and are ideal as transaction platforms, they are slow compared to traditional database systems. The distributed networks employed in blockchain technology means they do not share and compound processing power like traditional centralised systems. Alternatively, they each independently service the network; then compare the results of their work with the rest of the network until there is an agreement that an event has happened.

Confidentiality:

In its default, blockchain is an open database. Anyone can write a new block into the chain and anyone can read it. Private blockchains, hybrid limited-access blockchains, or ‘consortium’ blockchains, can all be created, so that only those with the appropriate access can write or read them. If confidentiality is the only goal then blockchain databases offer no benefit over traditional centralised databases. Securing information on a blockchain network requires a lot of cryptography and a related computational liability for all the nodes in the network. A traditional database avoids such overhead and can be implemented ‘offline’ to make it even more secure.

Blockchain for Disaster-Relief?

As an emerging digital disruptor technology, no one can say for sure where blockchain technology will ultimately lead. While many have disregarded this technology, the potential is certainly there to attempt to solve some of the most common problems in the digital space.

However, with high customer demands on the increase within financial services and with the combination of a widespread network and substantial cost pressures, IT outages will continue to impact consumer experience. Businesses can minimise potential damage by managing communication effectively and dealing with the technical nature of the outage quickly. With a comprehensive and well-rehearsed data recovery plan, it can not only mitigate outages but maintain standards of service too. This will encourage customer retention, loyalty and growth. Therefore, blockchain should be considered, as it has a built-in check and balance to ensure a set of colluding computers can’t ‘game’ the system; as the network is virtually impossible to crack. As blockchain processing efficiency improves, it will increasingly become a more viable proposition, potentially making traditional disaster recovery unnecessary in the future.

Below Graeme Dillane, manager, financial services, InterSystems, offers insight into best practices in the financial services industry, highlighting where current weaknesses lie and how they can overcome.

Increasing trade volumes and periods of high market volatility create technology challenges for financial services firms. This is especially true for sell-side firms, which can experience extremely high transaction volumes, since they partition already high volumes of incoming orders into an even greater number of smaller orders for execution. At the same time, they must support a high number of concurrent analytic queries to provide order status, risk management, surveillance and other information for clients.

This requirement for multi-workload processing at high scale, coupled with the highest levels of performance and reliability, has historically been difficult to satisfy. Compounding the challenge, transaction volumes grow not only incrementally and within expectations, but can also spike due to unexpected world events.

A critical component of a sell-side firm’s technology infrastructure is its transaction management and analytics platform. The platform must be reliable and highly available. A failure, or even a slowdown of the platform, can have severe consequences as it can take many hours to rebuild order state and resume normal operations after a failure. In the meantime, the firm’s ability to process additional trades and provide order status is compromised and financial losses mount.

To successfully handle growth and volatility without performance or availability issues, the platform must balance transactional workloads with the concurrent analytic demands of downstream applications at scale. Financial services organisations, particularly sell-side firms, must process millions of messages per second, while simultaneously supporting thousands of analytic queries from hundreds of systems that must report on the state of orders while performing other queries.

Currently, in-memory databases are widely used, primarily due to their ability to support high-performance data-insert operations and analytic workload processing. However, in-memory databases alone are not an ideal platform for transaction management and analytics for several reasons:

• Limited ability to concurrently process transactional and analytic workloads at scale. In-memory databases are not designed to support multi-workload processing at high scale. As a result, as volumes increase, at some point both the transaction processing and the analytic queries will slow or stall.
• Scale limitations - Since the data in an in-memory database is stored in main memory, the working data set is limited by the available amount of memory. This creates risk when transaction volumes spike, compromising the ability to process new orders once the available RAM is filled.
• High costs - Since servers have hard memory limits, scaling in-memory databases beyond these limits requires purchasing and procuring additional nodes – to sustain normal operations plus headroom for unexpected volatility - increasing overall costs.
• System downtime - Since the data is stored in-memory, if the database server fails, the data that is resident in-memory on that server is lost.

Finding a Solution

So, given these challenges, how can financial services organisations find a solution that enables them to simultaneously process transactional and analytic workloads at high scale?

The answer comes in the form of the Hybrid Transaction/Analytical Processing (HTAP) database.

Traditionally, online transaction processing (OLTP) and online analytical processing (OLAP) workloads have been handled independently, by separate databases. However, operating separate databases creates complexity and latency because data must be moved from the OLTP environment to the OLAP environment for analysis. This has led to the development of a new kind of database which can process both OLTP and OLAP workloads in a single environment without having to copy the transactional data for analysis. HTAP databases are being used in multiple industries for their ability to uncover new insights, create new revenue opportunities and improve situational awareness and overall business agility for organisations.

The best HTAP database platforms deliver the performance of an in-memory database with the persistence and reliability of a traditional operational database. They are optimised to accommodate high transactional workloads and a high volume of analytic queries on the transactional data concurrently, without incident or performance degradation, even during periods of market volatility.

They have a comprehensive, multi-model database management system (DBMS) that delivers fast transactional and analytic performance without sacrificing scalability, reliability or security. They can handle relational, object-oriented, document, key-value, hierarchical, and multi-dimensional data objects in a common, persistent storage tier.

Moreover, the best of these embody features that make them attractive for mission-critical, high-performance transaction management and analytics applications. These include:

High-performance for transactional workloads with built-in persistence – The ideal scenario is to find a data platform that includes a high-performance database that provides transactional performance equal to, or greater than, in-memory databases along with built-in persistence at scale.

Data is not lost when a machine is turned off, eliminating the need for database recovery or re-building efforts. By using an efficient, multi-dimensional data model with sparse storage techniques, data access and updates are accomplished faster, using fewer resources and less disk capacity.

High-performance for analytic workloads – Seek out solutions that provide a range of analytic capabilities, including full SQL support, enabling you to use their existing SQL-based applications with few or no changes. Since the database stores data in efficient multidimensional structures, SQL applications achieve better performance than traditional relational databases.

Consistent high-performance for concurrent transactional and analytic workloads at scale - Ideally, solutions should provide the highest levels of performance for both transactional and analytic workloads concurrently, at high scale, without compromising performance for either type of workload. Since rising order volumes increase both the transactional and analytic workloads on the system, a data platform must scale to handle such workloads without experiencing performance or availability issues.

Positive Prospects

This article has highlighted that many financial services organisations are, for a variety of reasons, currently crying out for ways in which they can simultaneously process transactional and analytic workloads at high scale. Fortunately, help is now at hand. Thanks to the latest breed of data platforms for high-performance transaction management and analytics applications, both transaction processing and analytic queries are supported concurrently, at very high scale, with built-in durability and with the highest levels of reliability – and at a low total cost of ownership.

In the past year MIFID II has enticed change and development across the financial markets and research sector. Here Fabrice Bouland, CEO of Alphametry, analyses said change and the impact it has had on innovation.

Six months in and MiFID II research unbundling regulation has appeared to create an even worse market for investment research than we had previously. With many commentators decrying the ‘unintended consequences’ of the new legislation – namely bringing the research market to a grinding halt as asset managers assess their needs and sparking a price war which has all but crippled smaller, niche research houses – one might wonder if there is anything positive to say about the impact of MiFID II on the research market and whether anything which can be done to revive it?

In truth, MiFID II has ultimately shown us the historical ambiguity investment managers have always had with research. There has never been an easy way to answer fundamental questions like ‘what research is needed’, ‘how much should we pay for it’ and ‘how do we measure the value’. This lack of structure has been pulled well and truly into the spotlight under the new EU regulation, as well as the financial services sector’s slow take-up of new technology to answer these questions.

Thanks in some part to the new regulation, active management might be at a historic turning point. The progress in investment technologies is about to experience a quantum leap forward plus the expected deluge of new alternative data will unleash an unprecedented potential. R&D and new technology must play a leading role in this and MiFID II can claim credit for creating this opportunity to innovate.

Time to innovate

From a buy-side perspective, research providers need to adopt entirely new strategies to survive.

In the past six months, we have seen two developments. Firstly, Tier-1 providers are pushing content exclusively on their websites. This is a step back from a user experience perspective as remembering numerous passwords is impractical for portfolio managers to the extent that some have cut providers which do not provide easy access to their portals. Distributing research via aggregators or marketplaces in order to reach the maximum number of channels is another option in today’s market. This could be applied to any type of research or data, in whatever format, for the easier and faster use of the portfolio manager.

The second innovation we are starting to see is from research providers who, in response to plummeting prices, are reducing the number of analysts and opted for more automated production. Commerzbank is one provider which is experimenting with artificial intelligence to see if it can write basic analyst notes automatically to trim research costs.

Alternative research and AI

With regulation forcing active managers to value their historical research franchise, it’s become clear that research has barely evolved whereas the world of investible assets has changed dramatically. Factors affecting a company’s valuation go way beyond the simple analysis of its financials or strategy.

The rise of alternative datasets which cover a wide range of digital inputs from social media to credit card data, are becoming increasingly valuable to asset managers. In many ways, the rise of alternative data is one of the first manifestation of how research is changing for the better under MiFID II.

Similarly, the research product may no longer be exclusively research reports but also the technology layer which is able to extract intelligence from them automatically, quickly and at scale. Since the buy-side has always heavily relied on the sell-side when it comes to technology, most active investors are stuck in a technological gap. Capturing and processing a more and more sophisticated and voluminous information resource seems the way forward.

Is MiFID II helping or hindering innovation in financial markets? It already seems that asset managers are considering how tomorrow’s technology is affecting today’s research – let’s hope the speed of implementation can match the exponential changes in data volume and value which we are seeing in the wider world.

Ahead of the Russia 2018 World Cup semi-finals kick off tonight, Dun & Bradstreet have revealed that when it comes to economic risk ratings its clear who wins. Below are graphics ahead of the match tonight between France & Belgium, and tomorrow between England & Croatia.

Below you can also see a thorough table of all countries in the World Cup that accounts for FIFA rankings vs. their D&B Country Risk rating vs. the GDP per capita global ranking.

Martin Schneider began his professional career in Consulting Engineering. He then worked for ABB and ALSTOM in various international functions up to senior management level and restructured a US-based technology company. As of 2004, he’s the CEO of the BRAINFORCE Group, and as of 2007 – its owner.

BRAINFORCE Group has been a leader in interim management and expert solutions for almost 40 years. Headquartered in Zurich, Switzerland, the company has subsidiaries in Europe, the Baltics, Russia, Africa and Asia, as well as a strong network of partners in the Americas. Here, Martin tells us more about his company and the benefits of interim management.

In your opinion, how important is it to have first-hand experience of running a business in order to be an effective interim manager and to provide valuable insight to other business leaders?

Business leaders are typically people with strong self-confidence about their knowledge, capabilities and skills. If they realise that their counterpart has an equivalent level of knowledge and experience, they tend to trust and accept them. Interim Managers are usually needed in difficult, non-routine situations. The goal is to achieve sustainable results as quickly as possible, based on their past learning curve, an above-average ability to lead and motivate people, and last but not least - an entrepreneurial mindset. The same way a ‘silverback ranger’ knows his forest inside-out, an interim CEO knows his profession and has been successfully steering operations through tough challenges for years.

Why is an interim manager more effective to optimise organisations? How can cultural and historical challenges be overcome?

I believe that a manager who has previously led, optimised or restructured e.g. three different management structures has a higher success rate to do the same with the fourth management structure. An interim manager comes in with an analytical mind and an unbiased view. He also has no aspirations to stay there forever, which eliminates the negative political aspects. Furthermore, he brings in leadership skills, cultural sensitivity and a portfolio of best practices from his several previous assignments in different company cultures. All these aspects are essential for the success of an interim manager. Once an interim manager “changes sides” and becomes a permanent employee, the dynamics and perceptions around him change. His gaze, as if blinkered, is restricted to the part of the road that lies immediately ahead of him and thus, the value-added of the interim management approach vanishes, from our experience, within one or two years.

An interim manager usually is able to gain the trust of the people in the company within a few weeks due to his seniority, objectivity, empathy, cultural sensitivity and strong professional track record. An interim manager usually gets to know what truly is going on in an organisation amazingly quickly. People start to talk as soon as they realise that the interim manager is there to help and to give the credit for the achievements to the internal people who were actively involved in the project.

What do you find are the most common issues that organisations struggle with, from a management perspective?

In a nutshell, I would say that weaknesses we observe are often connected to weak internal communication, slow decision-making and ‘over-engineered’, rigid and bureaucratic internal processes. An experienced interim manager has learned how to communicate effectively at all levels.

Due to the work overload and limited management resources, management decisions are not always implemented to the last consequence. An interim manager brings in additional management capacity and is dedicated and responsible for the completion of implementation.

Today’s world is heavily regulated, even over-regulated in many areas. As a consequence, management at all levels are motivated to make ‘safe’ decisions only, as opposed to brave ones and even worse - to sit out problems. Such managerial shortage is cascading down organisations.

Another major problem that I’ve seen is the belief that IT systems lead to better decisions. They should only be supporting the decision-making process, not substituting it. As there is no perfect information in this world and ambiguity is more common than clarity, despite Big Data, the human decision power based on previous experience and intuition generally leads to better results. Why are the ‘Hidden Champions’ typically family-owned and/or family-style managed companies and not corporates? Why is one of the key factors of successful corporates their ability to keep entrepreneurial behaviours alive?

100% standardised and measured processes kill people’s ability to think out-of-the-box, to respond with common sense in exceptional situations and to nourish positive creativity.

An experienced interim manager has the capacity to judge where and to what degree of sophistication new processes should be introduced, and existing ones optimised or simplified. They take a more entrepreneurial approach.

Last but not least, today’s trend towards ‘the cheapest solution is the best solution’ is detrimental to companies’ sustainable performance. In most cases, the ‘cheap’ internal solution turns out to be the most expensive solution due to the learning curve needed. Simply put, time is money. This expensive learning curve can be avoided by deploying an interim manager who has already gone through the learning curve previously. The value-added of an interim manager generally exceeds the cost of a learning curve by far.

Can interim management play a role in developing managerial talents within the business?

Certainly. In fact, we often observe businesses burning young talents by promoting them too fast to the next level when there is an unexpected early departure of their superior. In such a situation, the deployment of a well-picked interim executive for a few months can save the business a lot of money. Why? The interim manager will build-up the young manager’s skills step-by-step by assigning him new responsibilities and being his neutral mentor during this phase. An example: a young manager talent without previous restructuring experience was assigned to restructure a complex engineering and manufacturing operation. The perspective was to lead this international operation as their CEO after restructuring. The corporate management decided to save the investment for an experienced restructuring interim manager who would have further developed this young manager during the restructuring phase as his deputy. The result was that the young, promising and capable managerial talent was overwhelmed by the complexity of the restructuring situation, and left the company before the completion of the restructuring. The corporation lost time in the restructuring, as well as a good future managerial talent.

What are the advantages and disadvantages of promoting senior positions from within, vs. external recruitment?

Promoting senior positions from within is the traditionally preferred approach by most companies. The reasons are manifold: familiarity with organisation and processes, cultural fit, known strengths and weaknesses of the individual promoted, etc.

However, there are also substantial disadvantages. Without ‘fresh blood’ entering from outside, there could be rope team building, less innovation and lower agility. A typical statement one can hear very often is: “We have done things the same way for 20 years, why should we change our way of getting things done?”.

To fill senior positions from the outside is particularly important if an organisation is in a phase of transition (e.g. cultural change, disruptive technologies challenging the business such as Industry 4.0/IoT/Digitalisation, etc.). Interim managers particularly bring in the required “’fresh blood’ instantly and due to their unbiased view and changing management experience are able to break up rope teams and change the culture into a new direction. Once a new desired state is achieved by the interim CEO, he hands over the company to the new permanent CEO selected with the appropriate profile.

What are BRAINFORCE’s philosophy when helping clients with interim management and consulting services?

Our philosophy is to provide managerial solutions within days at a high-quality level, and to achieve results which exceed the investment for the interim or consulting assignment by far.

What makes your company unique?

We are a fully integrated service provider and work with our own people. We do not believe in the franchise model in this demanding management field. Founded in 1979, we have a wealth of experience in the field and are proud to say that we are the ‘original’ in the interim management provider industry in continental Europe. Over the years, we have perfected our professional, quality-focused M.A.S.T.E.R.³-Pool Management and customer-relationship processes.

BRAINFORCE’s experts stand out for their extensive leadership experience, with proven successes in design and implementation, as well as having a positive mindset and a winning personality.

Contact details:

Phone: +41 44 448 41 41

Email: management@brainforce-ag.com

Website:  www.brainforce-ag.com

Finance Monthly speaks to author and President of CDR Assessment Group – Nancy Parsons about her company and their coaching tools, her philanthropic initiatives and the passion that drives her.

Tell us about CDR Assessment Group, your career path prior to co-founding the company and your books.

Twenty years ago, I co-founded CDR Assessment Group, along with my business partner Kimberly R. Leveridge, Ph.D. CDR is recognized as one of the top firms for combining the science of assessments with the art of developing people. We provide our proprietary assessments for leadership development and talent management for global clients.

Kim and I developed the CDR 3-Dimensional Assessment Suite® in 1998. The Suite digs deep beneath the surface to help each leaders’ self-awareness move to a whole new level to improve their performance, work relationships, success and satisfaction. Our coaching tools have helped leaders accurately measure their character traits and strengths, risks for derailment; and drivers & reward needs. The Suite is available in five languages (Spanish, French, Italian, German and English.) We have built a global team of certified CDR executive coaches and consultants who provide services for CDR clients.

In late 2017, I published a research-based book, Fresh Insights to End the Glass Ceiling and since publishing, I’ve been interviewed by over 50 radio hosts and a national television show. The book sheds new light on why the glass ceiling exists – and it is not what most people think. The personality-based research shared in the book reveals why so few women make it to the top, and the staggering costs of not promoting more women to senior leadership positions. My book is packed with practical solutions to end the glass ceiling for good.

I enjoy writing and have authored more than 30 articles and have had a blog since 2009. My second book, titled Transforming Leaderocrity is scheduled for release in late 2018. I have enjoyed presenting at international, national and regional industry conferences and am an NSA member. As a speaker, I have been described by others as being “refreshingly frank, gutsy, funny, wicked smart and passionate.”   When presenting to groups, I enjoy shedding new light on why people do what they do, both the good and the bad.

In 2016, I founded the Vets Coaching Vets philanthropic initiative and since then, our team has worked with six different veteran organizations to coach more than 50 transitioning veterans to accelerate their career success. Since 2000, CDR Assessment Group has been a women-owned WBENC certified business and is now affiliated with WBEA.

I am delighted to be married to the love of my life and have four grown children, three grandchildren, and three very spoiled dogs.

Can you detail the key services that CDR Assessment Group offers?

We provide consulting, executive coaching and training services that wrap around our unmatched assessment tools. We train executive coaches (both internal and external consultants) to use the assessment tools with their clients.

While most of my actual client work centers around coaching senior executives and executive coaches, CDR Assessment Group is able to reach and develop thousands of leaders and professionals each year. Of course, a good portion of my time is devoted to running and growing the business. We have a network of globally dispersed executive coaches who utilize our tools with their clients and who participate to serve as consultants and coaches for our projects as well.

One differentiator for us is that our assessments are like the Swiss Army Knife of the assessment world. In addition to using these tools for executive coaching, we use these scientifically validated measures as an integral part of our consulting and training services to help clients with:

• Employee selection;
• Succession planning decisions;
• Strategic executive team development;
• Custom Authentic Leadership learning programs combining assessments, coaching and custom workshops based on the data of the leader participants;
• Executive performance forecasts;
• Leadership capability analysis;
• Research and validity study projects.

Why would you say experienced corporate executives need the services of an external management consultant/coach?

Corporate executives need our propriety assessments and coaching so that they can gain an acute sense of self-awareness that they otherwise cannot achieve, even with the best soul-searching techniques. By completing their initial coaching debrief session with the CDR 3-D Suite (about 2.5 to 3 hours), they can hit the ground running with new, deeper insights to help them better understand their strengths, risks, vulnerabilities and motivation to a nuanced level. Equipped with this new level of self-understanding, they can improve their leadership capability well beyond their current effectiveness level. They can also begin to see what makes others tick and how to be more effective with their teams and stakeholders.

How important is it to have first-hand experience of running a business in order to provide valuable insight to other business leaders?

I think having experience as a CEO is extremely valuable as a coach because one has then walked in the shoes of strategy, operations and P&L. However, experience alone is not enough because one then only scratches the surface. By adding scientifically validated assessment tools into the coaching process, we accelerate impactful, usable real-world dialogue from the first coaching session. We don’t hold hands wasting valuable time getting to know our executive clients, we are able to dig deep and accelerate results from the first coaching session.

We then link executive team data to business strategy to be sure that the actual profiles of team members are well aligned to achieve strategic objectives.

Here’s recent feedback of a COO who is a Ph.D. in the pharmaceutical industry:

“I gained valuable insights into my leadership style and I particularly enjoyed her session on how stress impacts me as a leader. That part of our session is something I use almost every day. As a scientist, the data-based assessment was very appealing and gave me some good data to rely on when discussing my role at the company with the board and my CEO. In addition, while the assessments were very thorough, what I enjoyed most was my one-on-one coaching session with Nancy. Her advice, opinion, and experiential knowledge gave me some good perspective on my current job and also my future career. So much so that I wish I had done this years ago!”

What makes your job rewarding?

I am rewarded by knowing that we are revolutionizing leadership and talent development by identifying true talent to a level not done before. That will help us increase leadership effectiveness which has suffered to this point. I love helping people become self-aware to a whole new level. Most executives say they wish they had done this 20 or 30 years ago. Those “aha” moments and the sheer joy people have, despite acknowledging their risks and vulnerabilities, in going through the assessment debrief is my performance fuel.

Another area that brings me a high level of satisfaction is helping individuals get onto the right career path. So many leaders, veterans and others are off track but do not quite know how to identify what is the best career for them. We are able to help these individuals find clarity of their best course forward.

I also really enjoy facilitating executive team development sessions (that are custom designed based on the CDR data) once all team members have had individual coaching debriefs with their assessments. This transforms team dynamics, effectiveness and ability to convert conflict into positive performance.

What differentiates CDR Assessment from its competitors?

• The scope, accuracy and individualized, detailed level of assessment results and proprietary coaching debrief session.
• We accelerate success. One client in the medical device industry wrote an article reporting that using our assessments shaved up to 2 years from their leadership development cycle time.
• The value added due to the multiple uses of the assessments without ever having to retest.
• Our services are boutique-like. You talk to experts, not sales people. Some of our clients have been with us for two decades so we build sustained relationships based on trust, support and service. We jump through hoops for our clients.

What do you hope to achieve with your philanthropic organization Vets Coaching Vets?

I am passionate about our philanthropic effort. We hope to build this program through building partnerships with corporations who benefit from hiring Veterans and who want to make sure they are hiring them and developing them in a way that taps into their inherent strengths and satisfies their motivational needs.

Netflix, Spotify, Airbnb and Uber are regularly cited as examples of major disruptors. However, there are many more examples on the horizon. Electric and driverless cars will soon disrupt many industries including automobile manufacturing, rental, leasing and motor insurance markets, while the growing popularity of robo-advisors already threatens the existence of traditional financial advisors. For most large companies today, it is a question of when, rather than if, digital will upend their business. Jonathan Wyatt, Managing Director and Global Head of Protiviti Digital, talks to Finance Monthly about the future and direction of management consultancy worldwide.

Management consultancies tend to thrive during periods of rapid and significant change. Many consultancies flourished in the years following the financial crisis as financial institutions struggled to comply with new regulations and needed advice on dealing with more intense regulatory scrutiny. A decade on, the global landscape is facing a more pressing strategic challenge: to innovate and develop solutions that meet consumer and business demands for efficiency, convenience and ease-of-use. The top strategic risk identified by Protiviti’s Executive Perspectives on Top Risks for 2018,[1] is the rapid speed of disruptive innovations and/or new technologies that may outpace an organisation’s ability to compete and/or manage the risk appropriately unless it makes significant changes to its business model.

Tellingly, the second risk highlighted by survey respondents relates to the overall resistance to change within the organisation. Respondents were concerned that their organisation might not be able to adjust core operations in time to make the necessary changes to the business model to keep the company competitive. Even when executives are aware of the disruptive potential of emerging technologies, it is often difficult for them to envision the nature and extent of change, and have the decisiveness to act on that vision. Management consultants are, therefore, positioning their businesses in terms of expertise and skillset to meet the demand from companies looking to conquer those internal and external digital challenges.

To date, the digital experience of many companies has been focused on the digital “veneer” as organisations look to launch and grow digital channels. This is often restricted to customer-facing products, such as websites, apps and payments channels. Often, they have not made the same progress with the digital transformation of their internal processes, even when this has a direct impact on these digital channels. For example, in the mortgage market customers can apply online for a mortgage in minutes. At many of the established banks, the digital mortgage application remains analogue, with traditional credit review and approval processes that take many weeks to complete. Surprisingly, these traditional processes often include regular communication by post rather than embracing digital signatures.

Organisations are gradually realising that core digitalisation, as well as a cultural change to embrace the digital mind-set, is necessary to compete on the new digital stage. To achieve this, some organisations must advance beyond the use of legacy technologies and systems, and they can sometimes be averse to implementing new policies and ways of working. Consultancy firms advise these organisations on modernising their security policies and demonstrating the advantages of using the advanced technology tools that are now available. This will help with the execution of certain cyber-security and digital projects and the development of proof-of-concepts, thereby improving an organisation’s overall security profile.”

Misunderstanding regulations is often given as an excuse for not innovating. Organisations think the new regulations are more complex than they really are and that by innovating/changing their systems, there is a greater chance of falling out of compliance. But digital leaders are more flexible; they look for solutions rather than excuses and are embracing advanced technology to their advantage.

The advancing tide of demand for digital services will fuel current and future business for consultancy firms. Consultancies are ramping up their expertise and skillsets to provide advice on digital strategies and change management programmes as well as implementing core digitalisation projects. Although there will be no shortage of consulting work, the move to a more digital focus will impact the traditional consulting business and pricing models. As a result, the management consultancy industry is not immune to the wave of disruptive change.

To succeed in the digital race, legacy firms need to put digital at the heart of their business, which encompasses a cultural change to think digitally first. Consultancies should challenge their teams and clients to change their mind-set, put digitalisation at the forefront of all projects and think like a technology company – using technologies such as robotic process automation, machine learning and artificial intelligence to drive efficiencies for the company and consumers. Consultancies also need to be at the forefront in digital thinking to ensure they offer the brightest talent, expertise and experience to help their clients embrace the digital challenge and face the future with confidence.

[1] Executive Perspectives on Top Risks for 2018, Protiviti and North Carolina State University’s ERM Initiative, December 2017, available at www.protiviti.com/toprisks.