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Among other social issues, climate change awareness has increased significantly in circles of investors, and institutions are taking notice. Indeed, the extent to which a company is recognised for its environmental, social and corporate governance (ESG) has emerged in recent years as a key criterion for investment, and this is clearly more than a fleeting trend. Today, sustainable investing, also known as ESG investing, is a significant market force. 

As a result, institutions have begun implementing ESG goals in their portfolios. While these goals have rendered previously profitable investment sectors no-go zones (tobacco, fossil fuels), new sectors are emerging as potentially lucrative hotspots.

One of these sectors is the supply chain. Massive investment in supply chain visibility has increased efficiency. A side-effect of this investment has been greater control over emissions. Coupled with reduced waste and the potential for greater emission controls, investors stand to gain significantly.

Here's how supply chain visibility can help you achieve your ESG and broader portfolio goals.

A better understanding of Scope 2 and 3 emissions

The supply chain world is a complex one, with multiple entities interacting to produce results. This web of interdependencies makes tracking emissions a tough task. For instance, a manufacturer might use sustainable raw materials and environmentally-friendly production techniques. Yet, if its logistics partners rely on unsustainable sources of energy, the manufacturer's ESG efforts are moot.

Traditional reporting has targeted Scope 1 or direct emissions. These days, ESG guidelines prescribe measuring Scope 2 and 3 emissions created by indirect consumption. For instance, emissions generated through the purchase of utilities such as electricity and water fall under Scope 2. Emissions generated in a company's value chain (such as last-mile emissions) are considered part of Scope 3.

Data visibility in the supply chain is a function of interconnected systems. A logistics company's technical infrastructure integrates with a manufacturer's, allowing everyone access to shipment information relating to locations and conditions. As a result, manufacturers can measure delivery time and track emissions generated per delivery.

Insight into these datasets gives stakeholders a chance to plug ESG leaks. For instance, how well are vendors performing? Are they adhering to ESG guidelines or greenwashing performance? Data allows stakeholders to educate their partners and prioritise ESG goals while maintaining margins, thereby increasing their firm’s attractiveness to investors.

Revisiting product recyclability concepts

Sustainable consumption is becoming an important value among shoppers. As fast fashion companies are increasingly discovering, consumers are not afraid of voting with their wallets. The food and healthcare sectors have felt this impact as well, as moves towards local produce and vegan lifestyles attest.

Manufacturers can leverage supply chain data to understand consumer needs and design reusable products. Data relating to product returns, purchase frequencies, and product damages provide stakeholders with key information regarding product life cycles.

In the past, manufacturers maximised profits by creating fragile products that would inevitably need replacing within a few years. However, as consumer behaviour changes, this manufacturing trend will likely be replaced by a move towards longer-lasting goods

Multiple supply chain datasets generated via condition monitoring, inventory, manufacturing line IoT instruments, and customer returns help manufacturers understand their products' life cycles so they can curb waste. Greater visibility also gives manufacturers insight into the impact green materials have on their sales.

By developing interconnected systems, manufacturers can correlate the use of sustainable materials with retail sales and returns. Powerful analytics platforms can detect changes in consumer preferences as they occur, helping manufacturers redesign their processes as needed.

Supply chain visibility data can also be passed on to consumers, offering them ESG validation. For instance, medical packaging in the EU comes with a QR code that gives customer information on product sources and ingredients. Similar moves in retail and food are underway, giving companies the ability to use ESG as an edge in the markets.

Better routes for freight and last miles

Delivery route design is an intricate process, with logistics companies balancing several variables. For instance, vehicle capacity, technology, weather, geopolitical conditions, and infrastructure en route are a few variables that need balancing. They’re also under tremendous market pressure to deliver products on time and in optimal condition.

It's easy to believe that ESG will take a backseat, given these variables. However, supply chain visibility data naturally boosts ESG by reducing waste in the delivery chain. For instance, optimal route design automatically reduces waste caused by improper storage and good handling. 

Automated alerts generated by IoT devices attached to shipments prevent goods from falling out of ideal conditions while in transit. These datasets also reveal the state of infrastructure along delivery routes, allowing companies easy route evaluation.

Given the sophisticated nature of these models, adding a layer of ESG-related goals is relatively straightforward. For instance, designing routes with fewer emissions while balancing other variables is simple thanks to advanced technology such as smart contracts and AI.

Sophisticated route modelling techniques also allow stakeholders to model deliveries before executing them. Thus, emissions and related ESG data can be projected in the scenario planning phase. Any deviations from these expected levels can be examined and addressed to create even more efficient systems.

Better visibility, more sustainability

Visibility data is giving supply chain stakeholders the chance to create efficient processes. A direct result of these efforts is better net margins thanks to reduced costs and waste. Investors stand to gain significantly from these advances while meeting their portfolios' ESG goals.

New data from the Office for National Statistics (ONS) shows that GDP rose just 0.1% in the month, below the 0.4% forecasted by economists, thanks to ongoing supply chain disruptions and staff shortages.

The figure remains below the pre-pandemic level of 0.5% seen in February 2020 and suggests that the UK economy was struggling even before the emergence of the Omicron variant in late November.  

The ONS said that services output grew back to its pre-pandemic levels, growing 0.4% in October. Meanwhile, output in consumer-facing services was up by 0.3% on the month largely due to an 8.1% increase in the wholesale and retail trade. However, output at hotels and restaurants dropped by 5.5%. 

Growth disappointed in October, reinforcing concerns about the resilience of the UK’s economic recovery to the Omicron variant and the impact of further restrictions,” Alpesh Paleja, CBI lead economist, said.

We need to create consistency in our approach and build confidence by reducing the oscillation between normal life and restrictions as we learn to live with the virus and its variants."

Meanwhile, supply pressures remain acute and further rises in inflation are looming. We expect growth to build further momentum ahead, but more action is needed to address longer-term challenges, including “scarring” from COVID and poor productivity."

James Pow, senior retail adviser at business advisory firm Quantuma, analyses the departure of Asos CEO Nick Beighton and the reasons for the profit drop the company is expected to see.

The departure of Nick Beighton from Asos as chief executive should not have come as a complete surprise. There are multiple reasons for his departure, culminating in the profit drop the company is expecting to see throughout the remainder of this year and into 2022.

Asos had become a darling of the online sector, selling well over 850 brands globally and the share price had performed extremely well in the last year. However, the retailer had warned of slowing revenue growth and attracting increased costs related initially to Brexit, but with growing issues in the global supply chain becoming increasingly evident. All this was against a positive background of reported revenues accelerating to circa £1.3 billion for the four months to 30 June. This was well up on the £1.1 billion of like for like revenues of last year.

The immediate impact of the pandemic on its supply chain, freight and associated indirect labour costs have started and will continue to dampen profits. The company reported that it still expected to meet annual profit expectations and not surprisingly the shares closed 18% wiping circa £750 million from its market valuation and thrusting it to its lowest stock level in almost a year.

Reading behind this somewhat contradictory statement on expected annual profit, the group stated that the costs of shipping from China had risen ten-fold along with increased airfreight associated costs and further premiums now being incurred with fewer planes in the sky. It went on to state that Brexit had added two weeks to its existing supply chain between the UK and Europe. The company acknowledged that this was negatively affecting consumer anticipated delivery and one would ascertain that their existing systems were struggling to respond to these mounting changes on demand.

What is concerning and illustrates in some part the downgrading in the share price, is that this was not factored in earlier in the company’s risk assessments as most other companies would have done in their strategic response, particularly with strong balance sheets.

Nick Beighton initially said that customer prices for Asos had not risen and that the company had “invested heavily” in keeping prices low and was committed to continuing to do so. The chief executive said the company would be “mindful of the continued impacts of the pandemic on our customers in the short term” adding that the changes brought about by COVID-19 would still benefit online retailers in the long run.

There is a degree of contradiction in Beighton’s remarks, suggesting strategically that Asos would maintain lower prices to its customers while announcing such increasing costs on its retail model. All of this while declaring the expectation of meeting the annual profit outturn.

The recent quarterly drop in the margin of 1.5% due to higher freight costs and unfavourable foreign exchange rate movements is another factor and reason for the Asos share price drop and the CEO’s departure.

The Asos share price had performed well over the last year. However, the share dropped after the company released its trading statement. Management cited the continued uncertainty brought about by the pandemic, inclement weather and supply chain issues as contributors to their weak market demand. This clearly raised fears of the sustainability of their share price.

Like other businesses, management urged caution on the outlook for the rest of 2021 in light of the rising cases of COVID-19. Travel restrictions, delayed and cancelled holidays were a factor in making planned wardrobe purchases difficult. Total group revenue did grow by 21% to £1.3 billion, mainly driven by the strong performance of 36% in the UK domestic market. Impressive growth in the USA of 20% market share also assisted in driving the active customer base from 24.9 million to 26.1 million at the end of February 2021.

Asos did have cause to celebrate following the announcement of its partnership with

US-based multi-channel retailer Nordstrom, based on the West Coast. Nordstrom is embarking on a minority interest in the company’s brands including Topshop, Topman, Miss Selfridge and HIIT and previously sold Topshop and Topman clothes in the US when the brands were owned and run by Arcadia.

In securing the collaboration, Nick Beighton had performed well. The deal demonstrates the future need of businesses to team up where over-lying synergies exist in their consumer profiles. This is a strategically important requirement that intelligent businesses will embrace as they seek to both retain and increase their customer numbers.

Asos revenue growth has been exemplary in the past, notably benefiting from the pandemic as High Street retailers were closed. This led to a windfall and strong demand for e-commerce platforms.

However, changes to customer habits were cited by management in Asos’ earnings statement as a factor; the inclement weather assertions drove customers to winter wear from spring/summer wear. This all points to pressure on their current systems in dealing with these fluxing impacts from the supply chain, the pandemic, Brexit and resultantly the management of the cost base.

The recent quarterly drop in the margin of 1.5% due to higher freight costs and unfavourable foreign exchange rate movements is another factor and reason for the Asos share price drop and the CEO’s departure.

With the easing of COVID-19 restrictions and the opening of retail, I would expect that the demand for online retail may soften somewhat. In my view, the company has experienced timing mismanagement of expectations - both in its statements and trading updates, worsened by the contractions alluded to earlier.In realising this, the Asos board were left with no other option than to part company with its chief executive in a bid to appease disgruntled shareholders and the financial analysts who had reacted so alarmingly to the trading releases. Moving forward, Asos will appoint a new chief executive, hoping to resolve their current fall from grace under the new leadership.

A surge of freight volumes has caused gridlock in UK ports, and the government has been warned by port operators that further disruption could be on the way once new Brexit checks come into force.

Felixstowe, the UK’s biggest deep-sea port that handles 40% of the country’s container trade, has been handling around 30% more goods than usual as businesses have rushed to replenish stock after the end of the recent England-wide lockdown and ahead of the final days of the Brexit transition period. The disruption has also been felt in other major ports including Southampton and London Gateway, impacting several industries.

Shortages of essential products like washing machines and fridges have been reported by several high street retail chains. Builders are also running short on tools and supplies, with Builders Merchants Federation CEO John Newcomb describing the ports as a “major issue” for members.

“There appears to be an increasing issue getting products through ports,” Newcomb said. “Rather than taking a maximum of one week to unload, it is taking up to four.”

Elsewhere, Honda was forced to close its 370-acre factory in Swindon – its largest plant in Europe – which operates a “just in time” manufacturing supply chain. As the punctual arrival of goods is essential to the continuity of its production line, congestion at ports left the factory unable to function.

From 1 January, UK exporters and lorries will be subject to new checks on agricultural and animal products at EU ports, which logistics industry heads fear will disrupt mainland imports. Equally concerning are the health and safety checks that the UK plans to impose on EU imports, including food, potentially causing shortages.

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In a letter to cabinet office minister Michael Gove in November, British Ports Association CEO Richard Ballantyne warned of a “severe impact” on trade and essential supplies.

“Some ports are being told by customers that these volumes of interventions could ‘kill off’ particular trades,” Ballantyne wrote, raising fresh-cut flowers and salad and meat supplies for supermarkets as some of the most at-risk areas.

The COVID-19 pandemic now dominates every aspect of business and personal life, creating enormous public health and economic challenges across the world. In addition to the large-scale loss of life, we are facing unprecedented disruption to work and business activity. Even if some sectors are bailed out, a glut of insolvencies and bankruptcies seems inevitable. But where will the axe fall? Chris Robinson, a specialist corporate lawyer at Excello Law, explains.

Global supply chains in Europe, the current centre of the pandemic, face protracted disruption as the COVID-19 crisis highlights their fragility: the failure of one link can cause extensive disruption throughout the chain. Supply chains and labour markets are often complex and unstructured, even in ordinary circumstances. But COVID-19 is extraordinary:  the myriad effects of losses created by it will be diverse, disparate and on a scale never previously seen.

Ideally, supply chains are configured with back-to-back contracts and pay-when-paid clauses that allocate the loss appropriately and proportionately across the supply chain, or to parties who are insured. But this is the exception rather than the rule. The reality is that the loss will often fall on the weakest link in the chain, the small business who has not been able to negotiate let-outs, either with their customers or suppliers. You can be liable for breach of contract, including damages for loss of profits or wasted costs, even if the failure was beyond your control.

This raises many questions, not least concerning remedies provided by the law when the performance of a contract becomes impracticable. For example, is a party liable for breach of contract if they simply cannot comply? If the contract terms provide no let-out, then (under English law) the only legal escape is the legal concept of frustration.

You can be liable for breach of contract, including damages for loss of profits or wasted costs, even if the failure was beyond your control.

A contract is frustrated if something happens after the date of the contract that is not the fault of either party that makes further performance impossible or illegal, or is so fundamental that it strikes at the root of the contract, and is beyond what was contemplated by the parties when they entered into it. Frustration ends the contract entirely, with basic rights for advance payments to be refunded and parties to be reimbursed for expenses incurred.

Circumstances arising from COVID-19 are certainly capable of amounting to frustration, but difficulties in performing, extra costs or delays would not be enough. Long-term contracts, or employment contracts, are unlikely to be frustrated.

Many contracts contain force majeure clauses, allowing the parties to suspend performance for a period of time and/or terminate the contract without liability on either side. Whether a public health emergency amounts to force majeure will depend on the wording of the clause: the situation must be beyond the control of the affected party. If compliance with Government advice is voluntary, that might not help to bring the situation within the force majeure clause. Similarly, the presence of a force majeure clause may mean that the contract is not frustrated: if the agreed terms deal with a situation, that situation will not frustrate the contract. Force majeure clauses often require formalities, such a giving notice to the other party.

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Even though the economic havoc created by COVID-19 pales into insignificance compared to the scale of human tragedy it continues to cause, the health of the economy also has a very significant impact in keeping people alive and well. As damage continues to spread throughout the economy, the losses will be uneven, affecting some a great deal more harshly than others. Much of the cost will be felt through business failures, leading to many thousands of people losing their jobs. Employees, business owners, shareholders and pension fund members will bear the cost, but not in an equitable way.

As the UK heads into another period of extreme uncertainty, many businesses will be turning to their contingency plans, and rightly so. However, in amongst all the noise from Government, there has never been a more important time to keep talking, especially for businesses and their banking institutions. This problem is not going to be short lived, so burying heads in the sand is no longer an option. Shakespeare Martineau banking partner Chris von Strandmann offers advice to businesses below.

With the latest wave of updates moving away from health to focus more on the economic impacts of COVID-19, contingency plans are bringing some relief to businesses in their time of need. For those who haven’t done so already, the single most important recommendation is to develop contingency plans and share them as early as possible with the business’ bank.

Rather than being too exact about the details – which are changing by the day - make sure the plan includes an impact analysis of a number of different scenarios. The most common areas for businesses to consider are impacts on the workforce and working environment, changing regulation, potential supply shortages, late payments and inflexible contracts, in turn, alternations to these could directly impact working capital, funding and loan arrangements, as well as other agreements with banking and financial institutions.

Working capital must be considered carefully. By stress testing some common scenarios, businesses will be able to understand the impacts on cash flow. For example, if additional stock is needed to protect against a shortage of supply or debtors delay their payments because their cash flow is under pressure; banks should be able to help alleviate the pressure on the business with temporary overdraft facilities. The Government is also bringing out multiple support packages to help them through the COVID-19 crisis.

At the core of most businesses are their people, and as the virus spreads and self-isolation is becoming a common occurrence, being able to operate on skeleton staff – or at least know what the minimum capacity is – will help leaders make crucial decisions or know when to speak to banks and lenders before it’s too late.

For those who haven’t done so already, the single most important recommendation is to develop contingency plans and share them as early as possible with the business’ bank.

With new employment regulations being added at the drop of a hat, businesses must make sure that they know what their obligations are. On March 13, the Government introduced a new regulation that stated that employees with symptoms of coronavirus, who self-isolate in accordance with published guidance, are now entitled to claim statutory sick pay from day one of their illness. Although it looks likely that the Government will refund these payments, the time lag before reimbursement could be significant. With the possibility of needing to recruit temporary workers, as well as extended sick pay obligations, cashflow could take a big hit and banks can provide a short-term capital injection while businesses recoup costs.

For many businesses, agile working is not a problem, but for some, an upfront investment of suitable IT equipment may be necessary to make this possible. Providing laptops, workstations and mobile phones to enable work to continue out of the office can be a costly exercise, but could make the difference between a business staying open, or not. Seeking funding options from the bank can help to keep your business going, without putting too much pressure on cash flow.

To ensure funding agreements with banking institutions don’t penalise businesses further in this time of crisis, it is worth having conversations at the earliest convenience to negotiate some flexibility if there are covenants in place. For example, some finance agreements will sometimes contain a ‘clean down’ condition requiring a business to keep its account in credit for so many days each month, and if cash flow tightens, it may find itself in a situation where achieving this may be difficult. Other covenants may be around leverage and the business’ debt servicing ability. If profits are expected to be impacted, this could trigger a breach of this type of borrowing condition.

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It pays to be prepared and, of course, banks will want to be seen to be helpful. Last week, UK banks came out with a list of emergency measures, including suspending loan repayments and fee free emergency loans to help businesses overcome some of the current challenges they’re facing.  Various lenders have already announced the availability of fee free loans for businesses that are hit by the coronavirus outbreak and it’s likely others will follow.

Banks hate surprises and they won’t know what they aren’t told. Businesses must make contact with their banks at the earliest opportunity and shouldn’t be afraid to tell them exactly how it is – if there is a place for brutal honesty, now is the time. And, it is likely that many other will be having similar conversations too. Businesses are not alone and speaking to local authorities, banks and other business leaders should not be underestimated.

Chris Laws, Global Head of Product Development, Supply & Compliance Solutions at Dun & Bradstreet, explains why the EU blacklist is an important tool to combat financial crime and will be welcomed by those responsible for the fight against money laundering. 

The EU recently updated its anti-money laundering blacklist that names countries it considers to have deficiencies in tax rules that could favour tax evasion and anti-money laundering (AML) activities. The European Commission introduced the list at the end of 2017 and recently added ten new jurisdictions including United Arab Emirates, Oman and Barbados. The updated list has been rejected by governments within the EU, and now Brussels is being forced to review the list that was established to promote tax governance and prevent tax avoidance. The published objectives include ensuring transparency and fair tax contribution, and coupled with the 5th EU Money Laundering Directive, the list was viewed as a valuable tool in the fight against money laundering, helping to protect global organisations from the reputational and financial risk of illegal activity within their supply chains.

The recent debate comes after a year of high-profile scandals engulfed some of Europe’s biggest banks and Nienke Palstra, at campaign group Global Witness believes that “Europe has a major money-laundering problem”. While organisations such as the Financial Action Task Force – a group established 30 years ago by the G7 – were set up to combat fraud at an international level, previous list have excluded countries such as Panama, which recently hit the headlines relating to high-profile financial fiascos. With a rapidly changing landscape and increasingly sophisticated financial crime, having accurate information on country level risk essential to help businesses to identify potential illegal activity and take steps to mitigate exposure.

The Brexit effect

The UK’s National Crime Agency reported a 10% rise in ‘Suspicious Activity Reports’ (SARs) in 2018 compared to the year before, with specific money laundering reports increasing by 20%. The agency’s report came as London was accused of “acting as a global laundromat, washing hundreds of billions of pounds in dirty money from around the world” and the impending departure from the EU is likely to exacerbate concerns about illegal activity within the UK.

With continued uncertainty over trade arrangements post Brexit, UK-based companies looking at trading opportunities outside of the EU will need to evaluate the risk involved with working within other markets and complete comprehensive due diligence and take steps to ensure strict controls over transactions with countries flagged as posing increased risk. According to the NCA, Brexit will increase the number of opportunities for money laundering as foreign firms could potentially look to invest ‘dirty money’ in British businesses as EU AML agreements become increasingly uncertain.

Is technology the answer?

Despite the uncertainty, businesses can evaluate potential risks and limit exposure by implementing an efficient and clear risk management policy – and ensuring they have a transparent view of supplier and partner relationships. A robust compliance process is achieved through a combination of the right data and the right technology to support effective Know Your Customer (KYC) and Know Your Vendor (KYV) activities.  A PWC report in 2016 looked at the ‘future of onboarding’ and suggested that technology provides a solution to accurate identification and verification, using technologies such as biometrics, blockchain and digital identification. The utilisation of artificial intelligence (AI) is increasing and can be a valuable tool to support compliance processes.

AI can be used to develop an informed and accurate compliance model, untangle an overwhelming volume of data and identify (and therefore reduce) false information in monitoring systems. Traditional tools and technology are simply not able to manage the increasing amount of data sources and the speed of change that artificial intelligence can process. AI systems can reduce the time spent on manual processes, allowing compliance experts to devote attention to more in-depth analysis of suspicious activity.

The ongoing fight against money laundering

The ever-increasing sophistication of criminal organisations and their ability to mask illegal activities poses a genuine challenge for businesses operating in high risk jurisdictions. It’s more important than ever to know exactly who you are doing business with and having access to details such as beneficial ownership and ‘People with significant control’ (PSC). With a recent survey suggesting anti-money laundering compliance costs U.S. financial services firms $25.3bn a year, it’s an expensive and very real issue that businesses need to take seriously.

Tools such as the EU blacklist can play a crucial role in delivering increased transparency to deter and identify illegal activity and to ensure an enhanced level of scrutiny of business relationships to mitigate risk. Using third-party data to complement a company’s existing data set can improve due diligence, and having the latest technology in place to analyse huge volumes of data could be key to avoiding exposure to regulatory fines and reputational damage.

Artificial intelligence (AI), Big Data, and Cloud are no longer just buzzwords as enterprises globally are embracing all types of next-gen technology to drive significant business transformations. Blockchain, a more recent addition to the roster, fits within the same technology bracket and is poised to become a major disruptive force across all industries. However, despite emerging applications across supply-chain logistics, healthcare and FinTech that are promising ‘game-changing’ solutions leveraging the technology, to date, very few companies have been able to tap into the complete potential of blockchain.

The Growth of FinTech

Thanks to the rapid global proliferation of the Internet and coming of age of tech-savvy millennials, the marriage of technology and financial institutions has expanded from simple credit card and ATM transactions to online money transfers and payments. In fact, the FinTech industry has already staked its claim in adapting emerging technologies such as wireless payments and AI-enabled chatbots.

Leveraging these next-gen technologies to complete traditional financial transactions, such as money transfers and loan applications has resulted in many consumers looking to deal with FinTechs over traditional banks. Their ability to promptly, securely and successfully complete transactions have helped build customer trust over time. With the continued improvement in security and privacy measures backed by new technologies such as blockchain, the ‘trust quotient’ in the financial services industry is bound to rise manifold. Looking ahead, 77% of financial institutions are expected to adopt blockchain by 2020, according to PwC’s 2017 Global FinTech Report.

What is Blockchain?

Oftentimes incorrectly used interchangeably with the term Bitcoin, blockchain is actually a distributed ledger that is capable of maintaining an ever-growing list of records. Although it resembles a spreadsheet like Excel, there are certain unique features that set blockchain apart from traditional databases:
• Decentralised: Blockchain promotes a decentralised system where data is distributed across several servers. Its lack of a single authority makes the system fair and more secure.
• Immutable: Blockchain is a tamper-free environment. It has immutable and irreversible records that do not permit changes once a ‘block’ is written. Only new records can be written.

These key benefits make blockchain a vital tool in building trust between businesses and customers, which is especially critical in the financial services industry, by providing access to accurate data from retail banking to investment banking to insurance.

How Blockchain Helps Build Trust

In the digital era, the rate at which consumers adopt next-gen technology is among the top growth metrics for the FinTech industry; however, FinTechs face big challenges in generating trust among consumers. This is where blockchain comes into the picture. In a complete shift from how traditional banks operate - where customers have little to no insights into their banks’ operations and processes, blockchain maintains its data in a centralised repository. This shifts the ‘power’ into the hands of the consumer, effectively cutting out intermediaries and ensuring complete transparency in all transactions.

Blockchain provides companies with access to a decentralised network where they can share information in a secure environment that guarantees unalterable data transfers and ensures an agreement of obligations from both parties when processing a transaction. In addition, it simplifies financial services, such as money transfers, loan applications, and mobile payments, something that every customer yearns for in terms of augmenting their overall experience.

Ensuring the accurate authentication and authorisation of every customer and transaction is another big challenge for FinTechs when it comes to establishing trust. Blockchain technology makes these functions, as well as identity management, a lot simpler and more convenient by enabling users to choose the mode of identity and with whom they want to share it while registering. The information is then stored on a secure decentralised network, with user-only access to alter it. This helps FinTech companies save on paperwork and data servers.

Blockchain Applications in FinTech

Cross-Border Payments

Cross-border money transfers can be expensive and slow due to complex procedures. Blockchain technology is able to simplify, speed up, and make cross-border payments less expensive. Peer-to-peer transactions cut out the ‘middlemen’, resulting in faster and less expensive transactions. In fact, blockchain also helps lower the remittance costs on the total transfer amount from about 20% to a mere 3%.

Smart Contracts

Smart Contracts are arguably one of the most promising applications of blockchain in the FinTech industry. They are nothing but computer programs developed to verify or enforce agreements. These contractual clauses are either partially or fully self-executing or self-enforcing. Smart Contracts using blockchain help in recording information on a shared ledger, making it an unquestionable digital proof, thus empowering everyone from regulators to individual artists and authors with strong security features, a lowered risk of internal hacking, and the prevention of plagiarism of work by intermediaries.

Share Trading

Share trading involves several third parties, such as brokers and the stock exchange. This makes the clearing and settlement process time-consuming and cumbersome with multiple stages and bureaucracy to navigate that can take up to three working days to complete. The decentralised nature of blockchain technology, however, helps remove the unnecessary intermediaries and optimise the whole lifecycle of the trade by enhancing trade accuracy, speeding up the settlement process, and reducing risks.

Trade Financing

Trade financing – financial activities related to commerce and international trade – involves lots of tedious paperwork and bureaucracy, making the process highly time-consuming and risky. Blockchain-based trade financing helps overcome these bottlenecks, streamlining the process. It eliminates the need for participants to maintain a personal database of documents as well as the risk of an error in one document being duplicated to its copies by creating a single digital document that contains all the necessary information. Blockchain also supports real-time updating of the document, which ensures all members have access to the most up-to-date information at all times.

Happily Ever After: FinTechs and Blockchain

In today’s increasingly digitised world, there is a growing need for a bridge between new technologies and financial institutions in order for the industry to meet the demands of consumers who want a convenient yet safe and secure way to complete their financial transactions. Blockchain has the ability to build that bridge and FinTechs leveraging this new technology will reap the rewards of an exponentially increasing customer base.

With the support of a trusted service delivery partner with experienced customer service agents who can knowledgeably address questions and concerns about blockchain, these new FinTech kids on the financial block are poised to take on traditional banks.

 

About Neeraj Sabharwal
Neeraj Sabharwal, Director of Cloud and Big Data Solutions at Xavient Digital - powered by TELUS International, has more than 15 years of experience in the next-gen technology industry, helping customers derive incremental value from their data. He is a true data enthusiast and enjoys writing his popular blog and regularly contributes to articles as a member of the Forbes Tech Council.

About Xavient Digital - powered by TELUS International
Xavient Digital is a US-based provider of digital IT solutions and software services, headquartered in California with offices throughout the United States and an international network of delivery centers. Xavient Digital leverages its global footprint to deploy the best talent, time to market and cost optimisation benefits for its customers. Xavient Digital’s corecompetencies are in digital transformation stacks and full lifecycle IT services across telecom, media, BFSI and consumer technology verticals.

Learn more at:

xavient.com
telusinternational.com

 

 

IBM announced a new technology called a crypto anchor verifier; which will allow consumers and businesses to track single object across supply chains. Forbes writer Michael del Castillo explains how this tech could disrupt different industries.

The recent collapse of Carillion is one of the biggest domestic insolvencies in almost a decade, characterised by some as another Lehman. For Britain’s second largest construction company, its 43,000 global employees also provided a range of facilities management and ongoing maintenance services, most notably to a variety of UK government agencies. Until last July, the combined business had a market capitalisation of nearly £1bn, but today PwC is managing the lengthy liquidation process to salvage what it can for its many creditors. Below, David Allen, Chief Operating Officer of Monimove, delves into the issues that led up to Carillion’s downfall, from contracts to supply chain management.

The current consensus is that Carillion overreached itself, taking on too many risky contracts that proved to be unprofitable. In turn, with just £29m in cash assets, this made it impossible to manage its substantial £900m of bank debt and a similarly burdensome £600m pension fund deficit. Most acutely affected by Carillion’s demise are around 30,000 dependent businesses in its supply chain. Suppliers and subcontractors are owed roughly £2bn according to Carillion’s most recent results statement for “trade and other payables”.

According to a survey by assorted industry bodies, small businesses are owed an average £141,000; those with 50 to 250 employees face a shortfall of £236,000; while £15m is the typical debt owed to larger firms. Many of these supply chain companies are at risk of financial difficulties because of unpaid services: insurers estimate that they will pay out only £3lm to affected businesses who had appropriate cover for trade credit insurance. The future of these supply chain businesses, particularly smaller firms, is in doubt since most are unlikely to be paid anything of what is owed. Inevitably, some will go under themselves.

Many suppliers were using Carillion’s Early Payment Facility system which processed more than £400m in invoices, but this has stopped since the insolvency was announced. Meanwhile some subcontractors will be offered further protection through Project Bank Accounts (PBAs) which ring-fence money from the client when a main contractor goes under. But it is not known how many PBAs have been applied in Carillion contracts.

Under the heading ‘Sustainable supply chain’, the Carillion website boasts: ‘With an international supplier spend of around £3 billion, we believe our supply chain partners can help us make a tangible positive impact on sustainability.’ But the reality is that Carillion was not sustainable in any sense: its collapse was predictable because of a reliance on old school technologies to manage its extensive supply chain.

Lack of modernisation over recent years meant that the Wolverhampton-based conglomerate had poor control of labour, materials and services across its broad portfolio of projects. In this context, the specific problem was Carillion’s use of ineffective and irrevocable letters of credit to its contractors and sub-contractors.

One method employed by Carillion was to sign contracts, receive a large sum of money and then delay payments to subcontractors which allowed it to generate profits from holding that money. These down payments resulted in widespread neglect of key contractual requirements.

There was a systemic failure to ensure that there were robust terms and conditions with the necessary protection of enforcement clauses in the supply of goods contracts combined with an insufficient ability to exercise such clauses and if necessary, undertake injunctive action.

Sales were also prioritised over sound management. Carillion’s use of an inefficient supplier management system facilitated late payments to suppliers – over 90 days in most cases and often up to 120 days or more – which resulted in frequent late deliveries and penalties. The combined effect caused delay in project delivery across several key projects, such as the Royal Liverpool and Midland Metropolitan hospitals, with hefty penalties imposed on Carillion itself as a result, turning what should have been profit-making contracts into loss-makers.

Furthermore, the changing specifications of materials under “value engineering” cost time and encouraged bad suppliers. Consequently, there were no clear effective agreements between contractors, subcontractors and suppliers, which meant that all parties were operating in a “grey zone” that was conducive to gross mismanagement.

Within the context of backward supply chain management, Carillion’s downfall was circumscribed while the implementation of new supply chain technology may have saved it from going under. This is not a case of being wise after the event: these problems were entirely foreseeable and preventable.

What you might not know is that blockchain isn’t just a Bitcoin thing. Across the globe, from corporations to start ups, experts are formulating and implementing new ways of using blockchain technology to improve the way we do things; and the same goes for supply chains. Below Finance Monthly hears form Lee Pruitt, the CEO of InstaSupply, on the ways blockchain can likely better supply chains for your business.

Managing a supply chain is an operational and logistical challenge for many businesses, and the more parties involved, the more complicated it is. The ‘links’ in the average chain can sometimes span hundreds of stages and dozens of locations. Keeping everything running smoothly and effectively whilst tracking unusual or anomalous events can be very difficult.

Blockchain technology – essentially, a distributed, unchangeable cryptographically secured ledger in which transactional data is stored and updated – may provide a way to improve transparency and operational efficiency. But it has to be used effectively.

Here’s how you can use blockchain technology to improve trust, maximise efficiency, and foster better vendor relationships.

Stronger audit trails

Blockchain technology serves as a repository of transaction history. Every time a payment is made, every party is registered and recorded in exacting detail.

This effectively means that every stage of the supply chain has a strong audit trail – and this is good for your business on several different levels. From a legal and ethical standpoint, it means that you can be assured that your suppliers aren’t party to any child labour or money laundering related activity. From a logistical perspective, it means you have end-to-end visibility into how physical items are sourced, delivered and stored.

Any efficiency or productivity gaps can be quickly identified and dealt with. Any items that go missing can easily be found. Delays will become rare, if not a thing of the past.

Blockchain technology means transparent and more efficient supply chains.

Trust

When supply chains aren’t fully optimised, it’s the end customer that is ultimately let down. Elon Musk recently described supply chains as ‘tricky’ – and revealed that Tesla’s new vehicles routinely miss their delivery deadlines.

Blockchain will increase trust among consumers, and among all players in the supply chain. Using shared public IDs and ratings, a clear picture of everyone’s goods and services will be readily available: if you want to consistently deliver value to your customers, they will reward you for it; if you’re looking for trustworthy suppliers, you’ll be able to select them based on clear, real time data.

The technology will also help reduce the instances of fraud – meaning your reputation and finances will be protected.

Streamlined invoicing

Blockchain technology will make the traditional invoice redundant. All purchase orders will be recorded and rendered fundamentally unalterable as blocks on the chain: accordingly, when suppliers approve the purchase order, they have essentially made a commitment to deliver the items/services for the agreed cost and only the agreed cost. An invoice could never be issued to ask for more.

Blockchain will also improve operational performance and the bottom line. Many businesses are looking for ways to integrate these new tech solutions into their daily operations, and they are right to do so. Trust, transparency, and efficiency are qualities that are not only valuable, but in increasingly short supply in current models. Blockchain offers to provide them in abundance.

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