Global Banking & Finance Review Issue 49 - Business & Finance Magazine

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editor FROM THE

Dear Readers’

I am pleased to present Issue 49 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

This issue is filled with exclusive insights from financial leaders across the globe.

The global innovation-driven consumer group, Fosun International, has become known as a practitioner, promoter, and pioneer of globalisation. Headquartered in Shanghai, and with a vision to create an ecosystem that fulfils the needs of worldwide families in health, happiness and wealth. Turn to page 26 to read our exclusive interview with Co-CEO, Mr. Xu Xiaoliang.

In “Navigating the sanctions strain: technology is transforming trade finance compliance processes”, Marc Smith, founder and director at Conpend, outlines how artificial intelligence is helping to build informed risk profiles and combat maritime fraud. (Page 34)

We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook. We have gone that extra mile to ensure we give you the best from the world of finance.

Send me your thoughts on how I can continue to improve and what you’d like to see in the future.

Enjoy!

Wanda Rich Editor

Stay

FINANCE

Navigating the sanctions strain: technology is transforming trade finance compliance processes

TECHNOLOGY

Making the leap: Why the missing link between ambition and action is key to next-level insurtech

Yann Gautier, President EMEA, Appnovation

Can digital B2B payments help ease financial pressures?

Andy Downman, Director at B2B payment specialist, Adflex

Beating inflation over the long term: compound interest and tax efficiency

How financial institutions can chart a roadmap to postquantum security

Ben Packman, Senior Vice President of Strategy, PQShield

Protecting your customers: Mitigating cyber-threats in the financial sector

Thorsten Stremlau, Co-Chair, TCG Marketing Workgroup

Marc Smith, Founder and Director, Conpend

Jatin Ondhia, Co-Founder and CEO, of Shojin

Risky Business: FATF Short Lists

Identify Global Anti-Money

Laundering Deficiencies

Adam McLaughlin, Global Head of Financial Crime Strategy & Marketing, AML, NICE Actimize

read it on page 10

The Role of Trust in the Shift to Sustainability

Helena Müller, VP Banking Europe, Diebold Nixdorf

read it on page 24

FEATURE INTERVIEW

Fosun International: A Forward-Looking Strategy for Sustainable Momentum; Focusing on Core Businesses and Streamlining the Organization

Xu Xiaoliang

Co-CEO

Fosun International

read it on page 26

Risky Business: FATF Short Lists Identify Global Anti-Money Laundering Deficiencies

Three times a year, the Financial Action Task Force (FATF) identifies and documents countries with strong AML controls relating to the FATF 40 recommendations and those without. Those countries with sufficient cause for concern that they have insufficient controls but are committed to improving their controls are added to the FATF watch list, referred to as the Grey List. Countries that do not conform to the 40 FATF recommendations and are making no attempts to conform are added to the Black List, a list no country wants to be on. FATF’s objective is publicly to identify countries with weak AML/ CFT regimes.

As of February 2023, FATF has reviewed 125 countries and jurisdictions and publicly identified 98 of them. To date, of those 98, 72 have since made the necessary reforms to address their AML/CFT weaknesses and have been removed from the process.

What are the implications of being grey-listed, the step right before total backlisting? A country that is added to the FATF Grey List knows that that this identification has far-reaching ramifications both reputationally and financially. Any country being considered as a new addition to the grey list will try desperately to ensure they’re not added. Showing up on a FATF Grey List can adversely impact investment into the country, overall growth, and it can affect the country’s currency—making goods and services more expensive.

Impact to Financial Institutions

To third parties outside a financial institution, risk heightens significantly dealing with a country on the grey list or any of its entities which may be operating within that country. Any organization, especially in financial services, will conduct enhanced due diligence on grey-listed organizations. In the most extreme of cases, it can result in de-risking, which means that international financial institutions will completely exit a customer relationship.

This impact can be devastating for a country, especially if correspondent banking services are exited or heavily restricted. FATF does offer a remediation step by FATF to prevent a country from being promoted to b blacklisted. Which countries still remain at the top of the lists?

Currently there are three countries on the FATF Black List. These countries are the Democratic People’s Republic of Korea, Iran and Myanmar. After the 2023 FATF Plenary held in Paris during February, two countries were removed from the Grey List (Cambodia and Morocco.) However, two new countries were added to the FATF Grey List: South Africa and Nigeria.

For those new countries making these short lists, what happens next?

South Africa – Showing Improvements

It wasn’t a surprise that South Africa was added to the Grey List. The result of their mutual evaluation was released in October 2021. It was identified that South Africa has a relatively high volume and intensity of crime, with more than half the reported crimes falling into categories which generate proceeds. The main crimes being corruption, tax crimes, and fraud, then followed by drug trafficking and environmental crime, including wildlife crime.

South Africa, in FATF’s latest assessment, was deemed largely compliant or compliant in 20 of the 40 FATF recommendations. By and large, South African financial institutions (FIs) are doing a good job in understanding risks and taking appropriate action to manage and mitigate these risks. The FATF report does call out some of the smaller South African FIs not all having comprehensive and effective programs. There is mention of DNFBPs stating many have limited compliance functions and low SAR numbers.

So why was South Africa grey-listed, and what can they do to improve their rating?

There are eight focus areas on the FATF action plan where South Africa need to improve compliance. The first focus areas for South Africa is to improve its response to Mutual Legal Assistance (MLA) requests that help facilitate money laundering and terrorist financing investigations and confiscation of different types of assets.

It was also noted that South African needs to Improve risk-based supervision and the risk-based approach taken by some smaller FIs and Designated Non-Financial Businesses and Professions. It has been identified that some of these organizations are ticking a box rather than understanding and mitigating their organizations financial crime risk, as evidenced by the low numbers of SAR reports filed by some of these high-risk sectors.

Explained Adam McLaughlin, Global Head of Financial Crime Strategy & Marketing, AML, NICE Actimize, “Corporate transparency and accuracy is a glaring issue in South Africa. particularly in beneficial ownership information. Some institutions in the region need to substantially improve their mechanisms for ensuring that verified and up-todate beneficial ownership information is available to competent authorities and consider having an authority responsible for this. South Africa also needs to apply sanctions for breaches by legal persons to beneficial ownership obligations.”

According to FATF analysts, South Africa Law Enforcement Agencies (LEAs) must also show an increase in requests for information from the Financial Intelligence Centre (FIC) to support and start new criminal investigations. The challenge identified by FATF is that the LEAs lack the required skills and resources to proactively investigate money laundering or terrorist financing, possibly, in part, because of the lack of intelligence due to limited interaction with the FIC.

Closely linked to law enforcement collaboration is that in South Africa, proactive identification and investigation of money laundering networks and professional enablers is not occurring says FATF. Most money laundering convictions are as a result of fraud offences rather than other high- risk money laundering offences or the crimes which generate criminal proceeds. ‘State capture’ is specifically called out as being insufficiently pursued. One of the action points is for South Africa to demonstrate an increase in investigations and prosecutions of serious and complex money laundering and terrorist financing offenses.

Following on from investigations, it was found by FATF that asset recovery is low, especially in the case of ‘state capture’. Therefore, the FATF action is for South Africa to enhance its identification, seizure, and confiscation of proceeds of crime. South Africa needs to update its terrorist financing risk assessment and implement a comprehensive national counter financing of terrorism strategy.

Finally, FATF expects South Africa to ensure effective implementation of targeted financial sanctions and demonstrate an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.

In the original FATF report, there was repeated mention of “State Capture”, basically corruption. This sustained corruption had generated significant proceeds and undermined agencies that combat this activity. Though this was not called out extensively in the FATF action plan, South Africa is taking steps to address it. However, corruption is still a systemic problem in South Africa and needs to be addressed.

Nigeria and Terrorist Financing

A bigger surprise was the addition of Nigeria to the FATF Grey List. Nigeria was assessed and the mutual evaluation report was released in August 2021. In the report, Nigeria was found to be compliant or largely compliant in 26 of the 40 FATF recommendations. They were partially compliant in 11 of 40 recommendations, and non-compliant in 3 of the 40 recommendations,

Interestingly, where FATF states that Nigeria needs to improve in their AML and CTF measures is quite similar to improvements needed in South Africa. There are nine areas that FATF feels that Nigeria must address. Nigeria is required to complete its residual money laundering and terrorist financing risk assessment and update its national strategy to ensure alignment with other strategies relating to high-risk predicate offences.

It appears cooperation needs to be enhanced in African nations, as FATF’s action plan includes the requirement for Nigeria to enhance international cooperation in line with ML and TF risks, including timely responses to MLAs.

DNFBPs is another area which appears consistently in multiple, different jurisdictions. One of Nigeria’s action items is to improve AML and CFT risk-based supervision DNFBPs and enhance implementation of preventive measures for high-risk sectors. They also need to improve supervision of FIs.

Another area which appears to be a challenge around the globe is understanding Beneficial Ownership (BO). FATF requires Nigeria to improve access to BO information and ensure it is up to date. Nigeria has to put in place processes to ensure competent authorities have timely access to accurate and up-to-date BO information on legal persons, but also ensure appropriate application of sanctions for breaches of BO obligations.

Like South Africa, Nigeria needs to demonstrate an increase in the dissemination of financial intelligence by the FIU and facilitate appropriate use of this information by LEAs.

Notes McLaughlin, “Nigeria needs to increase its investigation and prosecutions of terrorist financing (TF) activity. This is especially prevalent where terrorist organizations such as Boko Haram and Islamic State are prevalent and active. Nigeria must demonstrate sustained increase in investigations and prosecutions of different types of activities and enhance interagency cooperation on TF investigations.”

The final action required of Nigeria is to conduct an assessment to understand the risk of Terrorist Financing, specifically with identifying and engaging with Not-forProfit Organizations (NPOs) at risk. Nigeria also needs to implement risk-based monitoring for the NPOs at risk without adversely impacting legitimate NPO activities.

Nigeria and South Africa Improvements

There are several AML and CTF areas where both Nigeria and South Africa need to improve in order to convince FATF that they have comprehensive and effective controls to manage AML and CTF risks to help mitigate financial crime. What is interesting is that they share a number of improvement areas in the actions outlined by FATF. Both countries need to increase their cooperation with third-party country law enforcement authorities, with the use of financial intelligence, and to increase and improve the effectiveness of their ML law enforcement investigations.

Observed McLaughlin, “Other areas where South Africa and Nigeria need to improve is increased BO transparency, access to BO information, and effective supervision of DNFBPs. Interestingly, these areas are areas of focus around the globe. There is a constant battle to increase corporate transparency, but also challenges in regulating and supervising DNFBPs, with recent blocking of the Enablers Act in the U.S. by the DNFBPs who would have ultimately been supervised as a result of the act.

The FATF findings show that there is more to be done globally by governments, government agencies, FIs and all other stakeholders to increase legislation, processes, controls, and cooperation. Additionally, working together to make it a hostile environment, globally, for criminals to operate, move, and clean their illicit wealth. The FATF findings show the importance of us all working together, sharing best practices, learning, and adapting to changing criminal threats.

Public and private partnerships are excellent examples of where collaboration has shown tangible results in helping to tackle financial crime: By sharing intelligence, knowledge, and experience to mitigate financial crime and identify criminals who are abusing the financial system.

Technology and Tackling These Issues Technology can and should play a big part in any plan to tackle financial crime. There are a number of proven technologies that can help to break down barriers between agencies and FIs, facilitating information sharing in a controlled and compliant manner. If used correctly, this would help to resolve some of the action points around the sharing and use of intelligence. It’s vital to aid law enforcement in conducting targeted and effective financial crime investigations, help the FIC to gather relevant information, and ensure FIs fully understand today’s threats and take necessary steps to monitor and mitigate them.

Beyond this, information sharing could help with the challenges of BO transparency, providing collective intelligence on corporate structures. BOs would help to validate and verify this information, ensuring effectiveness against one of FATF’s action points. Technology can also aid in information gathering from structured and unstructured third-party sources.

Explains NICE Actimize’s McLaughlin, “Technology that learns, such as machine learning, will analyze data, looking at changes and decisions against historic data and data across peers to ensure continuous optimization. This will drive ongoing effectiveness for all relevant stakeholders who have an interest in monitoring and mitigating financial crime. It ensures changing and emerging trends and financial crime patterns are spotted early and action can be taken to manage and reduce the risk.”

Nigeria and South Africa will eventually be removed from the Grey List. When they do, they will be stronger and better equipped, across both the public and private sectors, to monitor, manage and fight financial crime.

NICE Actimize

Adam McLaughlin

Making the leap:

Why the missing link between ambition and action is key to next-level insurtech

The insurance industry is in the middle of a global renaissance propelled by evolving customer expectations and transformational digital tools. These driving forces are paving the way for an insurance industry that is efficient, scalable, agile and personalized. Not only is the industry increasingly moving towards customer-facing benefits such as instant claims processing and tailored products and services, but new technologies are enabling companies to future-proof their businesses.

Despite worldwide financial uncertainty, industry data suggests 74% of insurance companies increased spending on AI last year, as 72% planned to invest more in cloud computing and 67% targeted an increase in their data and analytics spending.

Yet digital transformations that spark dramatic business growth are significant undertakings. Most leading insurance companies comprise complex decentralized organizational structures broken down by group, country and market (due to the nature of the regulations they operate under). Drilling down further, they typically sub-divide further into products, services and business units. In other words, implementation is being introduced against a complex backdrop of legacy workflows, ingrained hierarchies and crystallized attitudes.

To bridge the gap between old and new worlds, integrating new tech into unwieldy procedures and updating protocols that may have gone unchallenged for years, insurers need to think strategically. Here’s how:

1. Prioritize change management: Change management focuses on the human dimension, the people who make up teams. If people aren’t willing to get on board with new tools and processes, an organization is left with an expensive digital ecosystem and technology stack that no one uses. The key to avoiding this is involving people early and keeping them engaged.

A change management strategy helps achieve this. One way to do this is by ensuring the strategy is tailored to meet the needs of the organization it is being applied to. For example, companies should treat it as a starting point instead of taking an existing framework to use as-is, tailoring each element to its own distinct culture.

Northwestern Mutual, a $34 billion revenue insurance firm in the US, leads by example here. NWM wanted to roll out a new proprietary financial-planning tool called PX, but one of the biggest obstacles it faced was an entrepreneurial network of remote advisors with an established way of working. Key to achieving alignment between HQ and the frontline was a cocreation model that saw the advisors help build PX functionality – after which they became advocates.

2. Embrace Global Design Systems (GDS): GDS can help large insurance companies to create consistent customer experiences across channels. Simply put, GDS is a unified design language that transforms brand guidelines into atomic components that can be combined to create web pages or digital interfaces. It also provides the tools and processes needed for agility and scalability in tech and operations. While GDS is new terrain for the insurance industry, global companies such as Uber and Airbnb have used these systems successfully for years.

Similarly, the global music streaming service, Spotify, relies heavily on its Encore Foundations which sits at the center of its design system. Every designer, writer or engineer responsible for building a Spotify product must start their journey at EF.

Perhaps the closest brand in character to insurers that has embraced the power of GDS is Morgan Stanley-owned online brokerage firm E*Trade. E*Trade’s design language helps deliver a consistent and accessible UX while facilitating flexibility and scalability – important considerations given that Morgan Stanley spent $13bn on the business in 2020.

3. Adopt a Continuous Delivery Model

When approached strategically, a tailored continuous delivery model can help companies maintain the benefits of project delivery, such as agility, while providing more consistency in customer experience, design and governance. Successful tech firms such as Google and Spotify use continuous development to allow them to develop and release new features on a regular basis. With the insurance sector hindered by legacy tech and a very siloed structure, adopting a continuous development approach can help to accelerate innovation and decrease the cost and time involved in innovation projects.

The specific benefits of continuous development are that it’s a repeatable and reliable process. From a software engineering perspective it lends itself well to automation, allowing teams to automate repetitive tasks, freeing up time and budget. What’s more, because teams are focussed on continually improving a product or service, rather than quality control being a box that needs to be checked pre-release, quality becomes embedded into the process. As a result, new features can be released more quickly, team morale is higher and customer satisfaction levels increase.

Final thought

Insurers need to move deftly but with patience – because heavy-duty transformation is an ongoing, not a one-off finite journey. Developing a continuous delivery model, embracing GDS and prioritizing change management are key steps in the process, allowing insurance companies to meet customer needs better and more effectively. And that has to be a goal worth fighting for.

Yann Gautier President EMEA, global digital partner Appnovation

How banks can manage climate risks and opportunities

With increased regulatory scrutiny and accusations of greenwashing, banks should make sure that their climate disclosures are transparent, accurate, and aligned with industry standards. Additionally, they should disclose information on their exposure to climate-related risks and the steps they are taking to mitigate those risks.

The global banking industry has an opportunity to play a significant role in addressing the challenges climate change presents. Banks can take proactive steps to manage climate risks and opportunities by anticipating regulatory requirements, measuring emissions, understanding the risks in their loan and investment portfolios, and playing a role in the transition to a sustainable future – and many banks are already leading the way.

Anticipating regulatory requirements

Regulatory requirements related to climate change are rapidly evolving, and banks need to stay up to date with these changes to effectively manage climate risks and opportunities. Many jurisdictions, including the European Union, Singapore, Canada, Japan, South Africa, the United Kingdom, and New Zealand have mandatory climate risk disclosures effective now or by 2025. Additional jurisdictions including the United States also have proposed rules. Banks can follow the lead of the central banks and the Basel Committee’s principles for the effective management and supervision of climate-related financial risks.

The Securities and Exchange Commission also has introduced reporting requirements for ESG funds, which include disclosing information on the environmental and social impact of their investments. This guidance puts pressure on banks to improve their ESG reporting and confirm that their investments align with their sustainability commitments.

By anticipating regulatory requirements, staying informed of developments, and participating in industry initiatives that promote sustainable finance, banks can be better prepared to meet regulatory requirements, and they can position themselves as leaders in sustainable finance.

Measuring emissions

Measuring greenhouse gas (GHG) emissions is another critical action banks can take to manage climate risks and opportunities. Banks should analyze emissions on two fronts: their own emissions and their financed emissions.

As responsible organizations, banks should measure emissions from their own operations, such as energy use and business travel. Banks also should measure and report on the greenhouse gas emissions associated with the companies and projects they finance. It’s important for banks to plan for a learning curve in understanding climate risks, and they should consider conducting a materiality assessment and designing processes for gathering historical and current climate data.

Banks can account for emissions using a variety of methodologies, such as the Greenhouse Gas Protocol and the Global GHG Accounting and Reporting Standard for the Financial Industry. Once emissions are counted, banks might set targets to reduce emissions by using renewable energy sources or financing low-carbon projects.

Understanding risks in loan and investment portfolios

Managing risk extends from emissions to portfolios. Banks should incorporate climate risk into their underwriting and portfolio analyses. For example, increased weather events can affect real estate values and the probability of loan default. Climate-related risks can include physical risks, such as damage to infrastructure from extreme weather events, and transition risks, such as regulatory, legal, technological, reputational, and market risks.

Understanding that climate-related risks typically have a longer time horizon, banks can use scenario analysis to assess the potential impact of different climate scenarios on their loan and investment portfolios. In addition to scenario analysis, banks can engage with companies and borrowers to holistically understand their portfolios, including asking for disclosures on climate-related risks and opportunities, conducting due diligence on new loans and investments, or engaging with companies to encourage them to adopt sustainable practices.

Playing a role in the transition to a sustainable future

Banks can play a significant role in the transition to a sustainable future by financing low-carbon projects, promoting sustainable products, and considering their own environmental footprint.

Supporting and financing low-carbon projects

by providing financing for renewable energy projects, such as wind and solar power, is one way banks are already working toward sustainability. In addition to financing, banks can provide expertise on structuring and financing renewable energy projects, which can help accelerate the transition to a lowcarbon economy.

Many banks promote sustainable products. Governments are introducing incentives for companies to participate in the transition to a lower carbon economy, and banks can support these efforts by offering green bonds or sustainability-linked building loans. These products are designed to incentivize companies to adopt sustainable practices by offering favorable terms for meeting sustainability targets. Recent examples include credits and deductions under the United States’ Inflation and Reduction Act of 2022 and initiatives in the European Commission’s Green Deal Industrial Plan.

As potential leaders in the transition to a sustainable future, banks can set a good example by considering the impact of climate change on their own operations and taking steps to reduce their environmental footprint. Such steps include reducing their energy consumption, adopting sustainable procurement practices, and promoting sustainable travel and commuting options for their employees.

Managing the risks and opportunities of climate change

As regulatory and industry trends continue to evolve, banks can take important steps now to effectively manage these risks and seize opportunities. Ultimately, taking proactive, intentional action can benefit the environment and the long-term sustainability of the banking industry itself.

Gregg Anderson Managing Director, Financial Services Consulting Crowe

Chris McClure ESG Services Leader Crowe

Operational maturity removes three major blockers to business success

Market competition is fierce, customer expectations are high, and organisations face real challenges addressing three key areas of concern: customer churn, unplanned operational incidents, and IT downtime. Each of which significantly impacts the smooth running of a business and bottom-line revenue.

A 2014 Gartner report estimated that the average cost of IT downtime was $5,600 per minute. In 2020, a Statista study validated these costs. Both can be attributed to the vastly increased digitalization of society in the past decade, with services delivered online or by app becoming central to business offerings.

Operational maturity improves overall operational capability, allowing for a level of excellence where organisations can deliver consistent, reliable, and predictable services. It should be thought of as a journey through several stages. The starting point is where an organisation is reactive to operational issues, and the end point is a proactive and continuous culture of improvement. In between, there are three levels of compliance, standardisation, and optimisation which organisations must pass through to achieve full maturity.

Technology leaders must impress on the business that operational maturity will allow the organisation to actually ‘do more with less’. Difficult economic times should not mean that the business cannot improve its endto-end technology, operations, and customer experience. It controls costs, helps delight customers, and maintains business predictability.

Delivering operational maturity as a scaling business

The journey to full maturity consists of five definable stages.

MANUAL – This stage involves no inbound integrations, and incidents are initiated manually.

REACTIVE – There are some inbound integrations, but no other configurations are present. There are also no defined processes for managing incidents.

RESPONSIVE – Call-out schedules are defined, with multiple escalation levels. Teams are also moving towards full-service ownership.

PROACTIVE – Outbound integrations, service dependencies, change events, and response plays are utilised to fix issues before customers are aware.

PREVENTATIVE – This involves the adoption of event intelligence features or consumption of analytics to allow predictive remediation.

As an organisation progresses through the stages, it increases its ability to manage unplanned incidents and better allocate resources to improve the stability of its operational systems. Growth through the phases of this five-stage model reduces unplanned incidents and downtime, major causes of customer churn.

Before embarking on the journey, technology leaders must first understand the current workload and practices of the delivery team. PagerDuty’s most recent State of Digital Operations Report disclosed that 42% of technical teams were working more hours in 2021 than previously and more than half (54%) reported being interrupted outside of working hours. Such demands demonstrate the need for a preventative stance. Out-of-hours interruptions and break-fix work are symptoms of a less operationally mature state.

Secondly, there must be a level of understanding that impacted teams will not be capable of delivering major projects to schedule without support. The answer to this challenge is investment in incident management, automation and orchestration to democratise and delegate automation, automate diagnostic and remediation activities, and make better use of people’s available capacity. These are some of the core tenets of the operations cloud model. Businesses must establish digital operations resilience as they optimise infrastructure, software, and mission-critical applications, and drive down technical debt – the remedial work required to improve systems built just ‘good enough’ previously. Just as cloud computing abstracts and enhances IT processes, greater levels of automation empower operational teams by interpreting the firehose of observability metrics and translating them into relevant actions.

Automation streamlines business operational processes, reducing the risk of human error and increasing efficiency. Automating workflows reduces the time and effort of manual work required, freeing up teams for more value-added activities. Automated diagnostic gathering and automated remediation can also help businesses respond more quickly to operational incidents, minimising the impact on customers and reducing downtime – and thereby churn.

And finally, to achieve operational maturity, businesses need to focus on standardisation and compliance. Implementing standard processes and procedures ensures that operations are consistent and predictable, reducing the risk of incidents and downtime even further.

Delivering on operational maturity to beat the blockers

There are a set of quick wins that can be put in motion to move along the journey:

• Provide teams with accessible and available tools. The default should be remote-first and distributed to support any crisis management activity. Any solutions used must be available across all business platforms used.

• Use the business’ current technology stack to communicate. Engineers must be able to pass on updates about evolving real-time events in the collaboration, ITSM, Customer Service, and operations tools they are familiar with. Introduce tooling that consolidates and synchronises messages from these disparate tools so that the organisation can see and understand technical updates without friction.

• Introduce accountability and ownership. With higher operational maturity comes greater team responsibility and control. Machine learning techniques filter out ‘noise’, while automation quickly brings in the right team to respond to any situation – whether planned or unplanned. Reducing the blast radius of events gives back more innovation time to your business – commit to using the saved time on high-impact projects.

To move a business to the Preventative stage, focus should be firmly set on delivering automated solutions but in a way that makes sense based on business priorities, available budget and technical ability. Ensuring that engineers and developers get the training and support they need to move from a break-fix world to one based on the operations cloud will futureproof technology and business transformation projects and hence increase the stability of the business infrastructure and cut down churn, incidents, and downtime.

Business without the blockers of churn, incidents, and downtime

The Hackett Group suggests that digital excellence significantly improves productivity and reduces the costs of technology infrastructure by 20%. Deloitte’s research, ‘Uncovering the connection between digital maturity and financial performance’ goes into further detail, with higher-maturity companies reporting industry-leading revenue growth and profit margins.

Embarking on the journey to operational maturity helps remove blockers to growth, reduce incidents, downtime and customer churn. It is also part of a transformation that actually allows the operations team to do more with less – that is, contribute to major cost savings whilst returning valuable innovation time to developers. It can even help reduce staff turnover and burnout. Commitment to operational maturity is the future-proofing needed to thrive in this economic environment.

Lee Fredricks Director Solutions Consulting, EMEA at PagerDuty

U.S. Bank Invests In Digital Customer Service To Build Customer Loyalty and Trust

Achieving customer trust is a top priority for banks in the new digital era. Trust is the foundation of a bank’s relationship with its customers, and it is this trust which gives banks access to customers’ most personal information: their data, financial information, and livelihood. As a result of growing consumer expectations, banks have had to reimagine their approach to customer experience to continue winning their customers’ loyalty.

Today’s consumers expect instant gratification and are fearless in moving to another bank if their needs are not met. As a result, it’s more important than ever for brands to meet their customers wherever they are in their journey, on any touchpoint, and at every time. A key component of this new market standard is CXi, customer experience interactions. CXi means using data and analytics to make a business more intelligent and effective across its customers' journeys for agent and agentless interactions.

To master CXi, financial institutions including the nation’s fifth-largest bank, U.S. Bank, have increased investments in agent experience powered by A.I., intelligent selfservice, and digital entry points. When deployed correctly and holistically, a CXi-focused contact center helps businesses optimize their operations, improve response time, and drive customer retention, loyalty, and trust.

Taking a Digital-First Approach

To build trust in its customer service operations, U.S. Bank needed to understand and improve its overall service quality. Moreover, their new solution had to be scalable – U.S. Bank operates 12 different domestic contact centers that employ more than 4,000 agents to serve their growing customer base. In all, the company handles around 55 million customer interactions annually.

After reviewing their current operations, U.S. Bank realized they were only capturing roughly 2025% of interaction data, stunting progress, and missing out entirely on actionable data and insights that could inform changes in strategy and operational improvements. Moreover, interaction data, performance reviews, and coaching plans were sorted and evaluated manually. That meant valuable insights were being missed, preventing the business from uncovering further operational and staffing challenges and, as a result, hindering growth and improvement opportunities.

“We needed a net with much more intricate webbing,” Jason Bettini, U.S. Bank’s Customer Analytics Leader said, “to help us capture the other 80% of interactions that were getting away.” He continued, “Interaction Analytics became our large, intricately webbed net.”

U.S. Bank concluded that the key to building customer trust was a digital, omnichannel, CXi-fluent contact center built from foundational, comprehensive interaction capture. U.S. Bank chose NICE Interaction Analytics, focusing on omnichannel capabilities and text- and speech-based sentiment to create a truly digital, intelligent contact center. Other benefits of this platform was its ability to generate advanced data reports to help give the bank insight into ongoing pain points, trends in interaction data across phone, text, social, email, and more, as well as personnel and staffing challenges, including the effects of employee churn.

By holistically capturing this data and drawing insights, the deployment of NICE Interaction Analytics bridged the gaps in U.S. Bank’s understanding of its customers’ experience and ways to foster improvements, beginning with average handle time (AHT), call avoidance, volume reduction, and dead air root cause. According to U.S. Bank, since the deployment began, it has improved service levels and overall experience drastically and increased the number of customers served.

Adopting NICE technology has improved U.S. Bank’s bottom line as well. An example of this is the bank has seen increased savings by optimizing operations across the organizations, including $65,000 saved with optimized agent service and $18,000 saved with optimized fraud-prevention adherence, all over 90 days.

Elizabeth

Head

According to US Bank, another example of the improvements they are seeing is additional dollars were saved through a lower AHT, reducing lengthy calls and "dead air " periods of silence hold times accrued throughout a call. Even more so, U.S. Bank projects a total increase of $2.6 million saved across their enterprise – a massive consideration as many organizations, including banks, are faced with recession fears and looming layoffs to better balance their businesses.

A Smarter, Secure Path Forward

When customers have a problem, they expect it to be solved in a fast, seamless experience on the digital touchpoint of their choosing. For U.S. Bank to achieve this, that meant rapidly implementing a solution with comprehensive interaction capture that also provides insights from deep-dive analytics with easy-to-use interactivity.

By prioritizing data at the heart of everything they do, U.S. Bank has improved its CX through various selfservice and agent-assisted channels. Similarly, agents feel empowered to provide meaningful customer experience through enhanced agent training and coaching. Altogether, U.S. Bank's data-driven solution has taken its CX to the next level, building a model that customers can trust to carry them into the digital future.

Tobey

of Marketing, FluenCX, NICE

The Role of Trust in the Shift to Sustainability

Sustainability is one of the key forces driving change across the industry right now. From investment decisions to how workforces operate, sustainability is a topic that is being discussed across all levels of the organisation within financial services. As part of this shift to embrace sustainability, or at least move in the right direction, what role does trust play? Creating meaningful change requires a basic level of trust, but how can this be embraced to truly harness sustainability effectively?

Starting from the top

Strategic priorities often shift and evolve and are of course typically aligned with the individual financial institution. With the rise of sustainability as a global topic this is changing, and we are seeing organisations now looking to address a common objective of becoming more environmentally friendly across the board.

With this united goal a new focus is required and a fresh approach. CEOs and leadership teams need to tackle the topic from the ‘inside out,’ and delivering tangible results will require a culture of sustainability to be engrained in every part of the organisation. This will often mean evolving the dynamics of how people work and even acquiring new leadership skill sets, to create a platform for trust and visible action. With the potential to unlock $12 trillion worth of savings and revenue annually, plus the creation of an additional 380 million more jobs, the potential positive impacts are huge.

Maturing operations in this way can also bring about greater security for organisations. Geopolitical instability, global changes and macro-economic challenges are all creating uncertainty. Therefore, the more efficient, pro-active and coordinated an organisation can be, the more resilient it is likely to be. This not only helps foster long-term profitability and success, but can also support short-term goals; for example, taking action to reduce energy consumption during the current energy crisis to help manage the associated costs.

One team, one goal

Change is far easier and more effective when everyone is included in the journey. Engaging employees in the sustainability roadmap is the only way to truly evolve and harmonise sustainable operations. This may require investment in educating and upskilling staff, but the results are clear. Going green has been shown to not only help retain employees, but also attract new ones.

Setting out clear goals that guide how the organisation runs and empowering all teams to contribute to achieving key milestones greatly increases the chances of delivering excellent results. As part of its transition to a greener future, BBVA implemented a reskilling program that allowed employees to undertake sustainability training tailored to their role. With some employees also able to achieve international

accreditation through the program, this is a great example of embedding a commitment to sustainability success at every level.

Creating and driving such behaviour shifts will certainly make a tangible difference to achieving key green milestones, and this again leads back to the topic of trust. Becoming a more environmentally friendly and inclusive organisation requires the involvement of all, built on a foundation of trust, loyalty and the willingness to make a change.

Collaboration across the value chain

If an organisation wide commitment to environment, social and governance is going to be truly effective, then it of course needs to include the wider supplier and stakeholder ecosystem. This is a much bigger undertaking and will require time and commitment on both sides. Back to trust and the need for open and visible relationships across the value chain.

IKEA is a well-known advocate of driving sustainability at every stage of its operations and supply chain. From promoting Better Cotton initiatives, to publishing a map on the origin of its wood supply, this is a good example of a holistic approach to becoming a greener and more responsible organisation.

Outside of the supplier landscape, there is also an opportunity for financial institutions to work closely with businesses at the other end

of the value chain. When approving products such as loans, financial providers have the power to encourage companies to act responsibly and support those who are treading the path towards sustainability.

Where banks make investments can also be a hot topic across the value chain. Dutch based Triodos are a good example of eco-friendly investing, with a commitment to only financing projects that support people or our planet; demonstrating how protecting our future needs to be embedded into the ethos of all operations.

Creating win-win opportunities for consumers

Sustainability is of course not just gaining momentum amongst businesses, but also for consumers as they become more and more conscious of the impact of their everyday actions. Consumers are looking to industries to help drive positive change and trusting leadership teams to act sustainably.

Aligning with consumer mindsets in this way creates opportunities for organisations to derive competitive positioning from prioritising environmental, social and governance. Operating as a trusted partner, financial

institutions can educate and support consumers with go greener actions in their everyday lives, as well as with ways to bank more sustainability. For example, offering customers advice and education on digital skills and digital literacy, using technology and digital as vehicles to drive such change.

Offering such wrap-around, ‘valueadded’ services in support of a more sustainable future will surely enable organisations to leap ahead with their brand image. In a highly competitive environment and with empowered consumers, building bridges of trust, value and emotional connection can go a long way in securing brand affinity and loyalty – with consumers wanting to use and be associated with responsible banking.

Creating a core purpose to support a more sustainable future is essential, and this needs to be underpinned by the power of trust. From risk management and employee advocacy to stakeholder engagement and consumer satisfaction, internalising sustainability goals and fostering an unwavering commitment is the only way to create change for good. It’s the right thing to do, not only for the future of banking, but also for society as a whole.

Helena Müller VP Banking Europe Diebold Nixdorf

A Forward-Looking Strategy for Sustainable Momentum;

Focusing on Core Businesses and Streamlining the Organization

Global innovation-driven consumer group

Fosun International has become known as a practitioner, promoter, and pioneer of globalisation. Headquartered in Shanghai, and with a vision to create an ecosystem that fulfils the needs of worldwide families in health, happiness and wealth. Its business presence in various fields cover over 35 countries and regions, and it ranks No. 589 on Forbes' Global 2000 list in 2022.

By accumulating profound technology and innovation capabilities since its founding in 1992, Fosun has continued to embrace change and closely observe emerging markets, meeting customers’ needs with innovative thinking and by promoting the continuous evolution of products and organisations.

"Fosun has gone through different stages of development, but we always adhere to the original aspiration of 'Self-improvement, Teamwork, Performance, and Contribution to Society,'" says Xu Xiaoliang, the Co-CEO of Fosun International. "Through the continuous improvement and upgrading of our strategies of global operations and technology innovation-led development, we remain committed to our vision of bringing healthier, happier, and wealthier lives to families worldwide."

Based on its mission and vision, Fosun has maintained its focus on core businesses in the household consumption sector, which is also the fundamental reason behind its strategy of 'streamlining the organisation' in recent years. This strategy has been greatly accelerated in 2022, in the face of ample influences in the external environment such as geopolitical tensions disrupting the economy, USD interest hikes, and the recurrent effects of the pandemic. Fosun Chairman Guo Guangchang has been quoted as describing last year as the "perfect storm," but a storm that is being ridden out; data for Q1 2023 has shown a strong upward trend, and tourism and commercial businesses—the sectors most severely affected by COVID-19 in the last three years— have shown resilience in their recovery.

Entering 2023, Yuyuan Inc. remains one of Fosun’s business segments that have made solid strides in emerging from the haze of the pandemic. "In 2022, the total revenue of Yuyuan reached RMB50.1 billion, and the net profit attributable to owners of the parent exceeded RMB3.8 billion, representing a year-on-year increase of 1.5%," Mr. Xu reports. "Among them, the sales revenue from the consumption industry increased by 17% year-on-year to RMB38.6 billion, accounting for 77%."

Positive movement has also been seen in the operation of industries within the fashion and lifestyle sector, with Fosun's jewellery businesses expanding against the sluggish market trend. "More than 600 new stores have been opened every year for four consecutive years, and more than 4,500 online stores in total," he says. "In terms of strategy, Laomiao ( 老廟) has been focusing on the core business districts of first and second-tier cities, and Yayi ( 亞 一) has been committed to penetrating

into third, fourth and fifth-tier markets. The sales of its blockbuster product Guyun Gold ( 古韻金) exceeded RMB5.0 billion in 2022, representing a year-on-year increase of 40%. Since its launch just over three years ago, the cumulative sales have exceeded RMB10.0 billion."

Other highlights include Shede Spirits, the core platform for Fosun's long-term investment in the internationalisation of Chinese liquor, which recorded revenue of more than RMB6.0 billion, representing a year-on-year increase of 21.86%. The net profit attributable to shareholders of the listed company was RMB1.685 billion, a year-on-year increase of approximately 35%. Then there is Songhelou, the Suzhou-style noodle shop, which has established more than 160 shops since the implementation of the single-store model in 2019. Last year, it opened 86 new shops, with sales of the packaged noodle brand Zhengchangjia ( 真嘗家) exceeding RMB30.00 million.

Xu Xiaoliang Co-CEO Fosun International

Furthermore, the annual Yuyuan Garden Lantern Festival, now a signiture event of the Chinese Lunar New Year festivities, was newly upgraded this year, inspired by the Chinese classic text Shanhaijing , (also known as the Classic of Mountains and Seas) and "powered by AR and other digital technology, the festival presented a world of the magical adventure of mountains and seas," Mr. Xu says. "It received wide recognition in China and overseas, drawing more than 4 million visitors and including many foreign diplomats and envoys from all over the world." He adds, "Yuyuan has also enjoyed growth in terms of membership operation, acquiring more than 7.20 million new members in 2022, representing a year-on-year increase of 40%. The proportion of member sales increased to 64%."

A second subsidiary to see growth since the lifting of COVID-19-related policies was Fosun Tourism Group (FTG), which includes its two core businesses of Club Med and the Atlantis Sanya resort. The Group's revenue for 2022 reached RMB13.8 billion, representing a yearon-year increase of 49%; business volume of tourism operation reached RMB14.5 billion, a year-on-year increase of 85%, while adjusted EBITDA increased tenfold to RMB2.3 billion.

"The business volume and adjusted EBITDA of Club Med have basically returned to pre-pandemic levels, and the business volume of Club Med in Europe, the Middle East, Africa and the Americas exceeded that of 2019," Mr. Xu reveals. "Further, in the first two months of 2023, the business volume rose by 55% yearon-year, exceeding the 26% increase in the same period in 2019."

Despite only operating normally for three months in 2022, Atlantis Sanya recorded a business volume of RMB880 million and an adjusted EBITDA of RMB290 million for the year. He

confirms that like Club Med, it too went on to experience a record high in January and February of this year. "The business volume of nearly RMB400 million in this period represents a year-on-year increase of 10%. In particular, during the Chinese New Year holiday period in 2023 (from 21 January 2023 to 5 February 2023), Atlantis Sanya achieved a total business volume of approximately RMB159.5 million, exceeding that of 2022 and 2019, with a room occupancy rate of approximately 98.6%, an average daily room rate of approximately RMB3,950, and total visits of over 470,000.

"Additionally, the business volume of Lijiang Foliday Town surged 149% year-on-year. Taicang Foliday Town is scheduled to open in the second half of this year. Tourism-related property sales have picked up rapidly; 54 sets were pre-sold in the first two months of 2023 and more than 100 sets have been sold since March."

Fosun's luxury fashion subsidiary, Lanvin Group, performed far beyond expectations in 2022 and, recorded a double-digit growth in e-commerce. On 15 December 2022, Lanvin Group was listed on the New York Stock Exchange under the ticker symbol LANV, making it the first company in which Fosun holds a controlling stake to be listed in the US. "While 2023 is a challenging year for businesses due to macroeconomic factors, the global luxury market continues to prove its resilience," says Mr. Xu. "We believe that Lanvin Group has great growth potential in Greater China in 2023."

Fosun implemented the strategic mindset of "focusing on core business" and stepped up its efforts in the divestment' of non-core assets in 2022, further optimising its asset portfolio. "The amount of divested assets by contract value for the year exceeded RMB40.0 billion, bringing a cash inflow of nearly RMB30.0 billion," Mr. Xu reports. "This included

the systematic divestment of the iron and steel asset, the transfer of certain equity interests in Yong'n P&C Insurance, and the sale of secondary market equity interests in Tsingtao Brewery, Zhaojin Mining, and Zhongshan Public Utilities. "We will continue to adhere to this strategy, and focus on core businesses in the household consumption sector as we streamline the organisation."

Concurrently, Fosun has also made continuous efforts in financing. In 2022, the Group completed syndicated loans of US$875 million and RMB1.66 billion, completed the issuance and resale of domestic bonds equivalent to RMB10.2 billion, and redeemed several offshore bonds in advance. In January this year, Fosun entered into a syndicated loan agreement for the amount of RMB12 billion with domestic banks, led by five major state-owned banks in cooperation with policy banks and joint-stock banks. This followed the announcement of 'encouraging and supporting the development of the private economy and private enterprises' at the Central Economic Working Conference in December 2022. According to outside commentators, this move reflects the confidence of financial institutions, especially state-owned commercial banks, in Fosun's capital and business strategies, and further reduces Fosun's reliance on public market financing, increasing its risk tolerance to cope with fluctuations in the international capital market.

"After streamlining the organisation, we will mainly focus on profound industry operations, improving the operation of core enterprises such as Fosun Pharma, Yuyuan, FTG, and Fosun Insurance Portugal," Mr. Xu explains. "At the same time, we will continue to increase R&D investment to enhance Fosun's overall competitiveness."

Long viewed as a promotor of globalisation, Fosun International has developed into one of the few domestic companies that is equipped with global operations and investment capabilities, which clearly inform the future direction of its development.

"Fosun has been developing globally. While being rooted in China and thoroughly developing the Chinese market, it has achieved a revenue of more than RMB100 million in 35 countries and regions around the world and built core capabilities in global operations, investment and financing," he says. "It links up its various businesses and resources in different territories, actively expands the geographical markets of the Group’s member companies, and facilitates the rapid development of such member companies’ business outside their home countries. In 2022, Fosun’s overseas revenue accounted for 44% of total revenue, representing a year-on-year increase of 14%. In addition, the establishment of the European Finance Sharing Center has reduced costs, enhanced efficiency, and increased the scientificity and transparency of the Group's management and control."

The globalisation journey of Fosun started in 2007 when Fosun International was listed in Hong Kong. Nearly 16 years later, Fosun continues to deepen and expand the coverage of its globalisation strategy. As of the end of the Reporting Period, Fosun has 43 overseas brand enterprises. "Our business presence in many countries around the world is only the foundation of globalisation," he continues. "Globalisation is about looking at the world from the perspective of China. Fosun’s globalisation strategy aims to look at the world from a global perspective and serve families worldwide through strengthening global operations and integrating global resources."

Since 2022, Fosun’s globalisation strategy has entered the third stage of 'global organisation + local operations' to foster the cross-regional, cross-cultural and cross-organisational operation capabilities of its global business ecosystem, thereby providing new impetus for the improvement and expansion of its industry operations. Fosun's Co-CEO believes that compared to the previous model of 'mutual empowerment between China and the world' that aimed to complement each other's strengths, Fosun’s Globalisation 3.0 strategy takes a holistic approach to the world. "Through deepening its global business presence and building a diverse talent pool, Fosun aims to use the most suitable resources to deeply cultivate key areas, accumulate industrial knowledge, and attract the highest quality funds, partners, technologies and talents to create the most competitive products and services. The strategy also aims to achieve mutual empowerment and multiplied growth within the ecosystem."

Cross-national and cross-cultural empowerment makes Fosun’s globalisation capabilities more prescious. A prime example is Lanvin, the French couture house, which was acquired by Fosun in 2018. Lanvin has since maintained robust growth, and its operating parent company, Lanvin Group, has become one of the fastest-growing companies in Asia's luxury goods industry. As Mr. Xu says, "By leveraging Fosun’s ecosystem and operational management capabilities, and preserving the historical heritage and aesthetic foundation of the oldest fashion brand in France, we can help the brand achieve a rebirth by building on its past success and bringing beautiful elements, with a blend of Chinese and Western influences, to global consumers."

Fosun has never spared any effort to promote the innovation development of the Group and its subsidiaries. Having just celebrated its thirtieth year of establishment, Fosun insists on taking 'technology innovation' as the core driving force for sustainable development in the next thirty years, while improving the intensity and efficiency of investment in R&D. This is evidenced by Fosun’s R&D investment in 2022, reached RMB10.4 billion, representing a year-on-year increase of 17%. Meanwhile, the total number of patents for invention increased from 1,500+ by the end of 2021 to 1,771 by the end of 2022.

"Fosun has always emphasised the 'innovation-driven technology' strategy," Mr. Xu says. "We have maintained high investment in R&D for many years, disclosing relevant figures in the hope of demonstrating the concrete actions that Fosun has taken in technology innovation."

In the face of cutting-edge technologies and unmet material, cultural and health needs among families worldwide, Fosun's technology innovation strategy, he reveals, is based on four focal points: "First, in the field of hard technology, focus on the R&D of technology platforms and products for health and intelligent manufacturing; second, agile product innovation for consumers; third, innovation in the field of cultural creativity and design, and fourth, solving bottlenecks in manufacturing."

He goes on to outline a number of Fosun’s key achievements and highlights in innovation in the past year. "Core enterprises have successively established technology innovation centres. For example, Shanghai Henlius established a global innovation centre; Yuyuan newly established a cultural catering technology innovation centre and a wine industry technology innovation centre; Shede Spirits established three major professional research platforms, namely a microbial molecular biological laboratory, the Lujiu experimental platform, and a spirit flavour research platform. Fusionride has built new R&D centres in Munich, London and Nanjing."

Under its Health ecosystem, Fosun has continued to make progress in terms of vaccines and innovative drugs. Comirnaty BNT162b2 (i.e. mRNA COVID-19 vaccine BNT162b2) and Comirnaty Bivalent (i.e. mRNA COVID-19 Original/Omicron BA.4/BA.5adapted bivalent vaccine) were officially registered as drugs/products in Hong Kong; the 13-valent pneumococcal conjugate vaccine (multivalent combination) is in Phase III of clinical trials in China (excluding Hong Kong, Macau and Taiwan regions; the same applies below). Shanghai Henlius’ HANSIZHUANG (serplulimab injection), the world's first PD-1 monoclonal antibody for the first-line treatment of small cell lung cancer, was approved for marketing in March 2022. Yi Kai Da (Ejilunsai injection), Fosun Kite's first CAR-T cell therapy approved for marketing in China, was included in urban customised commercial health insurance in more than 70 provinces and municipalities in the first year of its launch.

Innovation and creativity have also been at the forefront in consumer product development. "Through increased investment in R&D, Yuyuan officially launched its first fully self-incubated skincare product, YOGAN ( 愈感), in July 2022," Mr. Xu explains. "In addition, the Yuyuan Garden Lantern Festival’s 'magical adventure of mountains and seas' and the Rabbit Lantern were highly popular at home and abroad, spreading the concept of oriental lifestyle aesthetics among family consumers."

Concurrent with its pursuit of commercial value, Fosun's active contributions to improve the business and natural environments of China in support of its economy and culture are substantial. Its efforts to become a responsible corporate citizen through 'Self-improvement, Teamwork, Performance, and Contribution to Society' date back to the company's genesis, developing into an ongoing commitment that Mr. Xu attributes to Fosun's cultural values.

"Fosun started its ESG work very early," he says. "Since the beginning of our business, we have made clear our mission of 'Contributing to Society.' We aim to create not only commercial value, but also social value, and to develop business for good.

"We have also made some new breakthroughs in the field of ESG in the past few years. On the environmental front, Fosun made a commitment to the society in 2021 to achieve emission peak by 2028 and carbon neutrality by 2050’,' and contributes to the 1.5°C target of the Paris Agreement by developing effective climate change mitigation and adaptation strategies," he continues. "In 2022, we initiated the preparation of the TCFD (Task Force on Climate Related Financial Disclosures) report, and will publish our first report in 2023."

"And on the social front, in May last year, Nanjing Iron & Steel obtained the first SA8000 social accountability management system certification in the domestic steel industry, demonstrating the responsibility of corporate citizens. In addition, Fosun continues to contribute to the Rural Doctors Program, building a malaria-free world, and disaster relief."

Regarding corporate governance, the Group discloses an ESG report every year in accordance with the ESG Reporting Guide issued by the Hong Kong Stock Exchange and GRI standards. Mr. Xu states that Fosun continuously standardises and strengthens information disclosure, and protects the rights and interests of investors and other stakeholders. "As a global company, Fosun attaches great importance to assessing its own development with global standards, and ESG is one of the important criteria. Fosun has joined the United Nations Global Compact and the China ESG Leaders Association to promote the development of ESG across the Group."

Thanks to its active involvement and strong ESG performance, Fosun has been recognised by mainstream rating agencies. "As the only conglomerate in Greater China with an MSCI ESG rating of AA, Fosun continues to be a constituent stock on the MSCI China ESG Leaders 10-40 Index, the Hang Seng ESG 50 Index, and the Hang Seng Corporate Sustainability Benchmark Index," Mr. Xu confirms. "Moreover, Fosun International was selected as one of the constituents of the FTSE4Good Index Series for the first time in 2022, and its S&P CSA ESG score outperformed 91% of its peers around the world. In March this year, FTG was awarded an MSCI ESG rating of AAA, the only company in the hotel and travel industry to achieve this rating in the Greater China region."

He concludes by discussing Fosun's plan for future development and steady, sustainable growth of its operations. "After more than a decade of development, we have largely completed our global layout and started to focus on global operations, which includes streamlining the organisation."

"The growth of Fosun depends fundamentally on its core enterprises. Core enterprises in different stages have different growth objectives. At the same time, such growth is measurable according to standards."

First of all, these core enterprises must be the species of the FC2M ecosystem (Fosun's client-to-maker model).

"On the C-end, core enterprises must onboard customers to a membership system and form a digital operation system to classify members by category and tier. The supply chain on the Link end must be both flexible

and resilient. At the same time, core enterprises need more mature sales and business development teams to link products and consumers effectively. On the M-end, core enterprises must continue to increase innovation and R&D capabilities to consistently create blockbuster products with high gross profit."

Second, each core enterprise must be capable of global operations. "Fosun's operations must be based on the global operations of each PL, and must view the world from a global perspective."

Third, online capabilities are as crucial to a core enterprise as offline. "In the future, both online and offline business operations and development will be indispensable. During the pandemic, the importance of online operations became particularly prominent. Therefore, online and offline business development is not a choice, but a must."

Fourth, a core enterprise must be driven by two forces, driving operations and strengthening them through investment. "Investment is not independent. The positive capital cycle of investment, financing, management and divestment continuously supports the twin-driver of 'investment + operations.'"

Fosun considers its growth to be dependent on core enterprises, and its investment value on its multiplying growth. "This is also the fundamental reason why the capital market invests in Fosun, not just every core company," Mr. Xu says. "We must show the market the horizontal ecosystem effect and multiplier effect among enterprises within Fosun's ecosystem, which are reflected in three ways.

"The first of these is product cocreation. Through collaboration and co-creation, we provide customers with more ecosystem products and experience. We better combine Fosun's medical, health and wellness resources to provide customers with one-stop elderly care services, and diversified experiences such as aesthetic medicine, sports (Wolves FC), vacations, fashion, etc.

"The second element is member sharing. Since they are both species of the FC2M ecosystem that operates globally and serves family customers, the member resources of each business can be shared.

"Finally, spread brand resonance. Fosun's overseas headquarters in each country should aggregate local Fosun corporate resources, convey a common voice of Fosun, and build Fosun’s brand awareness among local customers through networks such as local business associations and governments."

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Navigating the sanctions strain: technology is transforming trade finance compliance processes

Sanctions monitoring is a complex and time-consuming task, even at the best of times. Present circumstanceshave served to highlight how pressurised and complicated sanctions checks can be to the extreme. Digital solutions, however, can manage risks and streamline operations. Marc Smith, founder and director at Conpend, outlines how artificial intelligence is helping to build informed risk profiles and combat maritime fraud

Within days of the invasion of Ukraine, the EU, UK and US acted swiftly and decisively to sever financial and trade ties with Russia and Belarus, introducing new restrictions against businesses and wealthy individuals trying to obscure their assets. The international community has established sanctions that are global in nature, nonetheless, by no means have they been adopted by all countries and even companies.

Owing to the speed of the roll out, there is a lack of regulatory uniformity between international jurisdictions, not to mention a widespread dearth of implementation guidance is posing a particular challenge for compliance professionals. What’s more, illegal activity is also on the rise as those facing sanctions attempt to use fraud and money laundering to undermine the rules.

In a fast-moving and complex sanctions environment, compliance teams are facing increased workloads and mounting pressure. Indeed, the financial and reputational penalties for non-compliance are harsh. The

US Department of Justice, for example, can pursue fines of up to US$1 million per violation.[i] In order to navigate the sanctions landscape, many are scrambling to ensure a practical, robust and comprehensive compliancechecking process. Yet an efficient and reliable solution is within their reach.

The dilemma for trade finance

Interestingly, the trade sector and its underlying system of trade finance are feeling the sanctions strain more than any other single industry, given that 80-90% of cross-border trade relies on trade finance. If prior to the war Russia ranked among the ten largest economies in the world and played a significant hand in global trade, the conflict has severely disrupted international trade flows and supply chains at a time when the industry had yet to fully recover from the Covid-19 pandemic.

In turn, banks are responsible for the flow of documentation and finance that facilitates trade. In order to approve transactions, they perform rigorous checks on trade documentation, from letters of credit to bills of lading. To this day, documents frequently arrive as physical paper copies that require manual review, with banks processing an estimated 28.5 billion paper documents each year and representing a significant dedication of their compliance resources.

In recent years, banks’ regulatory responsibilities have expanded, as have the penalties they face for noncompliance. More and more, banks help to maintain a secure and trusted global trade ecosystem. However, the rapid influx of sanctions at the beginning of 2022 was unprecedented and banks have struggled to update and execute compliance procedures. Indeed, the introduction of sanctions may necessitate the review of a bank’s entire trade portfolio. Under the current circumstances, banks are facing mounting costs to maintain a screening process that is thorough, flexible, and centred on quality and up-to-date data.

The stakes are certainly high. If they fail to comply with the new rules, including accidental misses, banks and their executives face high financial penalties and potential jail time, not to mention significant reputational damage.

In response, some banks are choosing to “de-risk” from the sector, taking the route of excessive caution in facilitating even permissible trade. But there is another way –one that shifts the crucial, yet monotonous, work of compliance checks onto technology. By using artificial intelligence (AI) and machine learning (ML) to support document-checking processes within the bank, a digital solution can relieve the heavy and complex compliance burden, while opening the door to a plethora of rich, interpretable data.

Shifting the sanctions strain onto technology

The current geopolitical environment is driving a need for banks to meet the highest level of sanctions compliance in an operationally efficient way. By designating monitoring and checking to AI, banks can streamline their screening processes. Whether trade documentation arrives at the bank as paper or electronic copies, a digital solution performs extensive checks quickly and effectively. AI is good at detecting patterns, for example, it can verify that a particular cargo’s port of loading is consistent across of the transaction’s documents. When it spots an anomaly, the system raises an alert. However, it is worth noting that the software itself does not take action – it is the operative’s responsibility to interpret the alert and choose how to react.

In order to understand the risk profile of a transaction, a bank needs to know as much as possible about the goods being traded: what they could be used for, their destination, and their method of transport including the vessel and its route. By leveraging this information, alongside rich sources of data such as databases and trackers, a digital solution can calculate and maintain a customer risk profile.

This insight into a customer’s activity and key trends helps compliance professionals to understand, at any given moment, the risk that a customer and their transactions pose to the bank, and in turn, their correspondent partners. Based on defined metrics, the profile can be straightforwardly updated when a customer’s information or wider circumstances change.

Furthermore, by storing pieces of data, the system will create an analytical overview of each customer. For instance, the software can determine an average unit price for any particular good a customer handles based on the trade documentation reviewed. A significant deviation in that price may indicate suspicious activity. In order to track this, the bank can introduce an alert if there is a deviation of more than 10% on any new transaction.

Furthermore, automating compliance checks helps to capture accurate data at the right time. Some trade finance transactions can take months to complete, given the duration of shipping. If sanctions checks are carried on a particular transaction while a vessel is still enroute – with deferred payment only due 30, 60, or even 90 days later – a lot can happen after checks are completed.

Daily monitoring would be impractical to take on manually, but by automating sanctions checks, it is possible. Banks can receive any breaches or alerts related to the transaction to ensure compliance. As such, AI is a crucial tool in carrying out the most demanding, and tedious compliance tasks thoroughly and reliably, freeing up staff to deal with more value-added tasks.

Mounting pressure on compliance teams has driven an impetus to make all forms of documentary trade finance checks – from know-your-client (KYC) to antimoney laundering (AML) – more efficient and costeffective. Further to building a customer profile, an AI can detect missing or incomplete data captured during onboarding, helping to streamline the verification process to meet KYC requirements. If a sanctioned individual is detected in a trade document, a layered investigation can take place by running that name against the data available, and it is possible to find further useful information, including companies the individual is linked to.

New horizons for compliance checks: “know-your-vessel”

Meanwhile, the adoption of AI and analytics is helping banks to detect illicit and sanctions-breaking activities. New tactics, especially maritime fraud, have emerged to subvert the regulations. As a result, vessel checks in particular have taken on greater importance in compliance – evolving into a new area of “know your vessel” checks.

For example, a vessel associated with a sanctioned country may attempt to disguise its identity by adopting a false flag or “flags of convenience” in order to carry out illegal activity. Following the invasion of Ukraine, Russian vessel switched their flags overnight in order to avoid = sanctions that would block them from international ports. Identity laundering encompasses further tactics that disguise a ship’s true identity: zombie vessels, for instance, adopt the identity of a ship that has long since been scrapped. Alternative deceptive shipping practices seek to obscure a ship’s location: ships “go dark” by turning off their AIS transponder. This behaviour has recently hit headlines as a tactic to disguise the onloading of stolen Ukrainian grain at sanctioned Crimean ports.

It is key that banks, and indeed all stakeholders, are aware of the increasingly sophisticated sanctionsbreaking methods. Technology, however, is well-equipped to keep up to speed with new and sophisticated tactics. AI can draw on historic vessel and shipping data to detect strange sailing patterns or suspicious changes in a vessel’s appearance. The system would create an alert if, for example, a 300-meter tanker made sharp turns in a narrow sea passage or a ship that was recorded as 275 meters is recorded again as only 225 meters long.

Such checks process a significant amount of data, with historic vessel checks going back six months or more. As a manual exercise, this would mean ploughing through files, collecting vessel names, and checking them one by one in a data provider. Considering banks process hundreds of transactions each day, this degree of oversight is essentially impossible without AI.

Technology helps banks stay up to date in a fast-evolving environment

When the first round of sanctions was announced in February 2022, banks that had already adopted AI-based automation for their trade finance processes were well-positioned to handle the volume of new checks. The software offers a high level of customisation for specific sanctionsrelated issues. Instead of monitoring and implementing sanction updates manually, it is straightforward to keep watchlists updated and the system automatically adds new rules to screening and evaluation processes.

For instance, within 48 hours of Russia’s invasion, Conpend’s clients were provided with a specially developed script, upon request, enabling them to perform a keyword search across their portfolio. These helped to flag transactions associated with Russian ports, goods, entities, and vessels, providing crucial oversight on completed and ongoing transactions. What’s more, a digital solution creates an automatic audit trail, making it possible for a bank to demonstrate to regulators the checks they have completed.

Banks certainly cannot rest on their laurels. Due to the nature of the conflict, further revisions to sanctions packages are likely but unpredictable. Opting for comprehensive and adaptable digital solutions not only creates flexibility to deal with fast-moving developments but also enables better scenario and contingency planning abilities in the long term.

Marc Smith Founder and Director Conpend

Can digital B2B payments help ease financial pressures?

While consumers struggle to manage their personal finances, businesses are prioritising balancing the books. Profit margins are under pressure with everyday costs such as energy bills continuing to rise. On a global scale, inflation is driving up the cost of materials and products, and as currencies weaken, the cost of doing business internationally increases.

Global Banking & Finance Review recently sat down with Andy Downman, Director at B2B payment specialist, Adflex, to discuss how digital B2B payment transformation can support businesses during economic uncertainty.

What can businesses do to maintain margins?

The knee-jerk response to increased expenses is to raise prices to maintain profit margins. But we have to recognise that economic pressures impact buyers just as much as suppliers. Significant price hikes could be perceived as unfair and could even damage customer relationships. It cannot be the only strategy for maintaining profit margins.

Businesses should instead look for where savings can be made, which means tackling inefficiencies. B2B payments are still widely managed via paper invoicing, an area susceptible hundreds of wasted hours annually. By modernising processes, however, businesses can reduce costs and simultaneously improve cashflow.

What are the issues associated with legacy B2B payment processes?

Many business’ payment processes have remained mostly the same for several years, or even decades. This is particularly common in B2B, where other buyers still use traditional invoicing or BACS to pay suppliers.

Traditional invoicing is slow. It requires the management of large balance sheets and invoices by accounts payable (AP) teams. It is prone to human error – which requires more time and resource investment to monitor and correct. Even when managed correctly, it’s often labour-intensive. Many businesses collect payments using legacy methods, where a business calls or emails a supplier to make a payment. In cases of late payments, which are sadly all-too-common across industries, further cost is pushed onto the supplier as they have to chase up creditors. These are costs that businesses cannot afford to incur on a regular basis.

What are businesses doing to solve these issues?

The best way for a supplier to ease the late payments pain is to make it easier for a buyer to make a payment. With a line of credit offered by commercial cards, this needn’t negatively impact the buyer.

This is one reason why we’re seeing businesses increasingly turn to commercial credit cards. Linking a commercial card to a payment platform, which can be seamlessly integrated into a back-office system using APIs, a business can then extend its days payable outstanding (DPO), while minimising the supplier’s days sales outstanding (DSO) and decreasing the costs of cash collection.

Commercial cards are part of the move to digital B2B payments that can help drive further efficiencies. Straight-through processing (STP) is another of these technologies. It allows the buyer to ‘push’ a payment, instead of the supplier having ‘pull’ a payment, reducing the time burden

on both sides. In some cases it can even be automated to remove manual processes entirely. For suppliers, receiving payments faster is a huge relief at a time when day-to-day costs are rising.

As already mentioned, it also eases the burden on accounts teams, who no longer have to chase up payments and can spend less time manually logging individual transactions and maintaining datasheets. Transparent, real-time, reporting data is key to informed business decision making, as it enables businesses to have an upto-date and clear view of cashflow to forecast resources. In the current climate, this is vital to ensuring the business can carry on as usual. And in more prosperous times, this is how a business grows.

Is now really the time for businesses to be refreshing their payment processes?

Business payments have long been talked about as a future multi-trillionpound opportunity for digitalisation. That time is now.

Those still thinking about digital B2B payments as a distant prospect run the risk of falling behind competitors. Global financial pressures mean the need to improve cashflow and cut wastage is now under the spotlight, and those that recognise the need for modernisation can get ahead of the competition.

Most implementations today can be carried out with little-tono disruption to core business processes. This is enabled by API integrations and agnostic payment platforms that provide choice for businesses of all sizes.

What impact can digital payments processes have on businesses in the future?

As rising costs and inflation take their toll on profit margins, cashflow becomes critical to survival. Those that can get rid of outdated, inefficient processes are already one step ahead of the game. Longer-term, efficiencies created today will present a competitive advantage once markets recover, with better margins enabling savings that can be passed on to customers. Ultimately this enables businesses to outprice competitors still suffering from slow and costly manual processes.

There’s a lot of tough decisions facing businesses today. Deciding whether to digitise payments is no longer one. The technology is there, the market need is more urgent than ever, and B2B businesses in almost every industry are starting to wake up and recognise that the future digitalisation they have been waiting for is right here on their doorstep.

Andy Downman Director at B2B payment specialist, Adflex

How financial institutions can chart a roadmap

to post-quantum security

Quantum computing is expected to be revolutionary for financial institutions.

During 2022, we saw a number of financial institutions partnering with leading tech companies to establish quantum projects, hoping to glean a competitive advantage from this potentially transformational technology. Goldman Sachs has partnered with AWS and HSBC is working with IBM to study the uses of quantum for pricing derivatives and portfolio optimization. Beyond these use cases, Standard Chartered has begun exploring the ESG opportunities with quantum, building on a lengthy partnership with the Universities Space Research Association.

But although quantum technology could be transformational to the future of the finance industry, it also comes with a warning. While quantum computers will have the ability to process vast amounts of data at record breaking speeds, these very capabilities will also allow them to break the current encryption standards currently relied on today to secure sensitive information, including encrypted transaction data, account details, and customer information.

Public key encryption is vulnerable to quantum attack, yet it underpins everything from the security of messaging and communications right through to online payments and physical bank cards. That’s a big problem for financial institutions whose reputation is built on the trust we put in their ability to keep our money – and personal information – safe.

New standards for cryptography

The threat of a quantum attack is so great that it is already high on the agenda of governments and security agencies worldwide. Last year, the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) announced finalist candidates for post-quantum cryptography (PQC) standardisation, creating a new kind of encryption designed to withstand attacks from quantum computers. This was followed by NSA guidelines that laid out a timeline for US government agencies and partners to start their transition to quantum-resistant software and cloud services by 2025, with the full transition process expected to be completed by 2035.

This has been bolstered by support from the White House, in the form of two presidential directives and the Quantum Computing Cybersecurity Preparedness Act that aim to mitigate the risks that quantum computers pose to national and economic security. The directives and legislation require all US government agencies to upgrade their infrastructure to new quantumresistant standards whilst also calling for increased collaboration with the private sector to drive the adoption of post-quantum cryptography.

With guidance in place from NIST and the NSA, there is no reason financial institutions should hold off before migrating their systems to the new cryptographic standards.

Harvest now, decrypt later

One of the dangerous misconceptions surrounding post-quantum cryptography is that the cybersecurity industry is overhyping a threat that’s yet to materialise, from technology that is too far in the future to warrant any concern in the present.

Financial institutions are already exposed to the threat, via what’s known as “harvest now, decrypt later” retrospective attacks. Bad actors have the capability to harvest a large amount of sensitive encrypted data today that they can decipher as soon as a quantum machine is available and used for malicious purposes. Until PQC is in place, any strategic data, sensitive intellectual property and corporate secrets are potentially exposed.

Those financial institutions that have already started laying the groundwork to transition to PQC will benefit from a first-mover advantage, both in terms of their reputation and because the transition to full quantum security will be long and complex. The sooner banks start working on it, the less painful it will ultimately be.

The road to PQC adoptio

We have already seen Mastercard roll out a quantum-secure credit card, and while this is a positive first step, without a more wholesale programme of implementation this would be similar to replacing the reinforced door on a bank vault that has no walls: every touchpoint in the transaction process, from hardware to software and data in transit, must also be quantum-secure before you can truly consider the threat managed.

Even if you were to take the view that the quantum threat is unlikely to materialise until years from now, you wouldn’t want to underestimate the timelines associated with a full-scale implementation of post-quantum cryptography solutions across all core technologies. It took almost two decades to deploy the public key cryptography infrastructure that we currently rely on, and the shift to full quantum security could be equally time-consuming. As we witness quantum technology developing at speed never seen before, delays in implementation today could prove extremely damaging a few years down the line.

So how should financial institutions start planning for the transition?

• Follow developments on quantum computing and PQC: Advances in quantum computing and PQC solutions will pave the way for the financial sector to prepare and mitigate risks properly. Understanding these developments will be key for organisations to move quickly and manoeuvre effectively.

• Train your team: Because a cryptography transition is a major, multi-year undertaking, key stakeholders also need to understand what it means and why it matters. Specialist cryptographers are available to provide training on the subject, tailored to an executive-level audience. Once technical teams have supportive leaders behind them, they are more likely to access the budget and approvals needed to manage an efficient transition to PQC.

• Conduct a cryptography audit: Organisations need to know exactly where they are using cryptography before they can start to upgrade it. The best place to start is by interviewing internal system owners and experts to find out where and how cryptography is currently in use, followed by external vendors and suppliers. Look at every place where data is kept in storage, used in applications or is in transit, and create a thorough map. Once you’ve completed your audit, you should better understand your exposure and be able to determine who would be bestplaced to start the implementation process.

• Identify risk areas: As part of a cryptography audit, financial institutions should consider the areas where data is at highest risk of attack so they can be prioritised for the transition to PQC. This means considering the sensitivity of the encrypted data being handled by each of your systems, for how long that data is expected to remain sensitive, and whether a system is public-facing. Financial institutions experience significantly more cyber attacks than any other organisations, so security for the post-quantum era is imperative.

Ben Packman Senior Vice President of Strategy at post-quantum cryptography company, PQShield

• Ensure crypto-agility: Cryptographic agility is where systems are designed to support multiple cryptographic algorithms at the same time – a smart decision at this stage in time, while NIST still has several draft standards in play. Crypto-agility provides insurance if one of your cryptographic algorithms is subsequently discovered to be vulnerable, as you can replace it easily without making disruptive and wide-scale changes to your system’s infrastructure. Ensuring crypto-agility and designing a long-term strategy for migration to a quantum ready architecture will be vital in ensuring that your organisation’s sensitive information is fully-protected from the threats of tomorrow.

Moving forward

The transition to full quantum security will be a lengthy and costly process, but in the coming year, we will see early movers in the financial sector taking advantage of the opportunity to deliver quantum-secure products to their customers.

For security and IT leaders at financial institutions, it’s time to start transition planning and making their case to the board for a dedicated post-quantum cryptography budget, ready to begin implementation.

Why prioritising customer touchpoints is key to a business’s success

It is a universal truth that the success of a business is intrinsically tied to the satisfaction of its customers, with metrics such as positive Customer Satisfaction Scores (CSAT) and Net Promoter Scores (NPS) becoming increasingly essential for companies to retain and expand their customer base.

A key part of this is customer touchpoints. This refers to any interaction, direct or indirect, a customer has with a firm, making these touchpoints vital to building and maintaining a business’s reputation with customers. Yet, for many companies, after initially selling their products or services and signing an agreement, regular touchpoints for customers become limited, resulting in a hindered chance to make a lasting impression and build longterm relationships with consumers.

Chaos for customers

Often, one of the only regular touchpoints that remains after the sales process becomes billing, but unfortunately, this is incorrect more often than it should be. Customer satisfaction research from industry experts and analysts report that the primary customer dissatisfaction point is the billing and invoicing process, meaning that failing to prioritise it comes at the cost of not only potentially losing customers, but the good reputation that a business has built up being lost. As such, it is vital that a robust touchpoint strategy is employed when it comes to billing processes to ensure customer satisfaction is maintained.

Most companies are aware that they can sometimes generate an incorrect invoice, or, because they are selling from different parts of the business or selling different solutions, must send multiple invoices to the client. However, even if every invoice a business generates is correct, the repercussions of sending too many invoices are in fact overlooked. The more invoices that are generated results in more work for their customers as financial teams need to double and triple check them all to ensure that they are accurate.

This can be a hidden threat to customer loyalty and relationships, which many businesses have ignored, and with a rapidly moving and everchanging market around consumer and enterprise sentiment for buying, it will be difficult to ignore this for much longer.

Billing customers multiple times is a less common problem when a business only offers a basic subscription model, due to invoices typically being generated at the same time each month, with just the length and billing cycle to consider. However, even this process is not always simple.

For example, imagine an enterprise business selling services to another company which consist of physical goods, software components, maintenance agreements and managed services. These are four different models of pricing that all need to come together at the same point yet two will change every month

depending on consumption. Even with these variable components in mind, the business needs to create an accurate and consumable invoice for the customer in 24 hours at the end of the month.

To overcome the issues faced with the aforementioned billing models, as well as to manage rising costs seen under the current economic circumstances, usagebased pricing models are growing in popularity with both consumers and businesses. According to an OpenView report from late 2021, a quarter of companies that currently use a UBP model say they introduced it within the previous 12 months, and 2021’s adoption of UBP exceeds that of both 2019 and 2020 combined. While offering usage-based pricing models is a great way to cater to the changing needs of customers, it also compounds the complexity of a billing process that can already produce incorrect invoices as they need to be able to capture various inbound data on user consumption and/or their subscriptions, apply it against contracted rating agreements, and create a unique, accurate bill quickly.

If businesses want to ensure their billing processes, regardless of what model they use, are fit for purpose and meet their customers’ needs, they need to be putting in place solutions that can streamline and simplify these processes for everyone. Implementing automated technologies, such as data mediation (the ability to quickly and accurately process raw-usage data), which can

Nathan Shinn Founder and CSO BillingPlatform

quickly analyse information such as a customer’s usage and their payment options, means firms can rest assured they are providing customers with accurate invoicing information at all times. This helps remove the risk of mistakes appearing in a customer’s invoice and can simplify them so that they can be reviewed and paid quickly, helping ensure that their happiness with this crucial touchpoint is maintained.

In ever tougher economic circumstances, it is crucial for firms to stay ahead of the competition in order to maintain and grow their customer base. A key way they can do this is to nurture their customer relationships wherever possible, and the best place to do this is at customer touchpoints, particularly when it comes to billing as it is the most constant contact point. Through harnessing technologies that can make billing and invoicing as simple and accurate as possible, these companies will be at a tremendous advantage as the market continues to change in the foreseeable future.

Protecting your customers: Mitigating cyber-threats in the financial sector

Protecting your customers: Mitigating cyber-threats in the financial sectorBy

Thorsten Stremlau, Co-Chair of the TCG Marketing Workgroup

Ransomware attacks on the financial sector continue to grow. In 2021, more than half (55%) of organizations within the industry were victims of at least one ransomware attack. For banks and other financial institutions, a cyber-attack is more of a question of when, not if. Therefore, the need for up-to-date, appropriate security systems to ensure the protection of customers and their data has never been greater. With the number of people using internet banking services estimated to reach 2.5 billion by 2024, financial institutions must also be able to trust the standards and technologies found within the general ecosystem to protect their customers’ personal devices.

Threats against online banking

Since the COVID-19 pandemic rocked the world over two years ago, a rapid rate of digitalization within banking has taken place. Whilst online banking services were already playing a major part of people’s daily lives, the last 24 months has seen a big shift in customer behaviour towards digital experiences across many sectors including financial services. There has been a 72% rise in the use of fintech apps in Europe, and up to 80% of people now prefer online banking rather than visiting their bank.

The continual adoption of online banking comes as no surprise. The speed and convenience it enables allows users to access their accounts, view their statements, make transactions, and pay bills both in the home and on the go. However, this creates distinct challenges when it comes to cybersecurity.

Cyber-attacks against personal devices continue to grow in number and complexity. Hackers often deploy Trojans – a malicious code or software that takes on the appearance of a legitimate application – to take control of a user’s device. Once the malware is installed, hackers can then steal money from bank accounts linked to the device as well as other sensitive data. As more and more users access banking systems through their personal mobiles and laptops, banks and other financial institutions are becoming increasingly reliant on organizations such as the Trusted Computing Group (TCG) to develop standards and specifications that ensure the safety of devices, as well as the overall supply chain.

Securing the supply chain

Attacks on the supply chain also occur when a victim is breached through a compromised thirdparty vendor in the network. The attacker can then use the thirdparty vendor to circumvent security controls by creating avenues to sensitive resources. This is possible as vendors often do not take cybersecurity as seriously as their

clients. In order to successfully mitigate any vulnerabilities, each phase of a product’s lifecycle – whether it’s the design, manufacturing, transport, utilization or decommission stage – needs to be reviewed to recognize any significant risks.

Unfortunately, this is not easily achieved, with no single entity having end-to-end control of the modern supply chain. It is therefore crucial that all organizations work together to ensure that security standards for the industry are correctly defined, implemented, and adhere to security guidance measures. Banks may already have strong cybersecurity measures in place, however these become effectively useless if the vendor’s measures are not up to the same standard. Third-party risk assessments on a regular basis – especially when there are changes to a bank’s digital infrastructure – ensure that the vendor’s cybersecurity is aligned with the banks.

Staying up-to-date with education and technology

Employees and customers are also one of the biggest threats to exposing a specific organization or supply chain to a potential attack.

In September 2022, 50,000 users of the Revolut financial app within the United Kingdom had their data exposed, leaving them at a greater risk of identity theft and fraud. Social engineering was identified as the main cause of the breach, meaning

it was likely the initial cause was due to an employee sharing login details through the use of a phishing scam.

As employees continue working from home and access banking systems online, it is vital that systems are secure against threats and have the ability to recover from a potential attack. To ensure this, financial institutions should insist that their employees and customers leverage devices with Cyber Resilient Technology (CyRes) built in, which establishes a new layer of protection against these threats. Doing so enables users and vendors to develop a solid foundation built on cyber resilience, protecting both the customer’s assets and the reputation of the financial institutions they rely on. The CyRes specification allows for the detection of malware and the recovery of a device if it has become compromised. This makes cyber resilience accessible to the average user and provides assurance to financial organizations that their systems are protected.

A Cyber Resilient Module (CRM) also gives further protection and recovery of connected devices. The module can be integrated into different architecture components of devices in order to provide protection, detection and recovery solutions. The CRM can be implemented as part of a system on a chip within the main hardware of a device. This can recover successive software layers and components

found within a device, with the servicing of code and configuration potentially required for multiple layers sequentially. Banks would therefore feel safe in the knowledge that the servers they rely on would be able to recover after a successful attack.

But to avoid an attack completely, employees must still be educated against phishing emails and other threats to their digital infrastructure in order to build operational resilience for financial institutions.

A secure ecosystem

Unlike most enterprises, banks are unique in that they must rely on the security of their customers’ devices when they access banking systems. They must feel assured that the overall security ecosystem is secure in order to prevent or mitigate the damage caused by cyber-attacks within the industry. Stringent security measures and software must be made readily available and common within devices in order to ensure banks are adequately covered against threats. Specifications like CyRes are essential in the ongoing fight against malicious activity, not only for individual devices but for the technology supply chain as a whole.

Thorsten Stremlau Co-Chair of the TCG Marketing Workgroup

Beating inflation over the long term: compound interest and tax efficiency

Warren Buffet famously afforded his fortune to his location, “some lucky genes, and compound interest”. For readers who aren’t aware, with an estimated net worth of $110 bn, Warren Buffet is one of the richest people in the world and has been for decades – when it comes to making money, this is someone to take seriously. So, what did he mean by ‘compound interest’?

Well, far from being any arcane investor secret, compound interest is simply a mathematical process that involves reinvesting earned interest alongside the principal investment. Reapplying this process for a sustained period of time has the potential to generate considerable returns, although, as with any investment, risks ap

But first, let’s return to basics. How do you earn interest? Whenever you lend money to an organisation, such as governments via gilts, companies via corporate bonds, banks via savings accounts, or peer-to-peer lending via an IFISA, you accumulate interest on top of your original loan.

Most people would have encountered this as a figure given as an Annual Percentage Rate (APR). For example, an APR of 10% means that after lending £1000, you would receive £1100 back at the end of the year, generating an earned interest of £100.

After receiving your £1100, you could either: Reinvest the £1000 and spend the £100 as earnings Reinvest the total £1100

Applying the latter option is at the heart of compound interest.

The chart below highlights this exponential power. The figures show the enormous potential for returns merely by reinvesting the original £1000 alongside the interest earned each year. After 10 years, with an interest rate of 10%, you’ll have made an additional £1594.

Furthermore, the greater the amount you can invest, the greater your potential for profit. Let’s take a look at what happens if you not only reinvest your earned interest but keep investing a further £1000 each year.

After 10 years and a total investment of £10,00, you will have made an additional £7,531.

Applying this for another 10 years and the interest truly starts to deliver incredible returns.

Nothing special is going on here. It really is pure mathematics. But, as we have demonstrated, it does take time until large earnings truly start to accumulate, and investors will no doubt be aware that interest rates can vary and potential for returns is subject to risk.

However, the principles of compound investment can go a long way in helping investors maximise their returns over the long term and mitigate high inflation rates.

Tax efficiency and compound interest

With the powers of compound interest laid bare, it’s now time to turn to another weapon – tax efficiency – one which is complimentary to compound interest.

Tax efficiency may sound complicated, but the general idea is pretty simple: it’s about using the various investment vehicles and tools available to minimise the taxation on your returns and asset values. Let us take ISAs (Individual Saving Accounts) as an example, which can enable savings and investments to grow tax-free.

They are particularly tax-efficient because they protect money from taxes that would otherwise have to be paid on both the income the investment generates and on any increases in the value of the asset itself. Most valuably, they also enable investors to compound tax-free returns.

Over 20 years, you’ll have invested £20,00 but made a profit of £43,000.

There are many different types of ISAs, each made with a different target audience in mind. These include the ISA, the Lifetime ISA, Stocks and Shares ISAs, and Innovative Finance ISAs. Every year you can save or invest up to £20,000 in an ISA, choosing to select one form or spread it across many.

Cash ISAs are quite similar to traditional savings accounts and can be opened at almost every major bank across the UK. By depositing money into one of these, investors stand to benefit from an annual interest rate which closely mirrors the base rate set by the Bank of England.

While these ISAs are generally very tax efficient, typically interest rates in regular ISAs stand at around 3-4%. Currently, with inflation standing around the double-digit mark, this can make it very challenging for them to deliver real-term growth.

As the name suggests, Stocks and Shares ISAs allow savers to hold conventional forms of investments such as stocks and shares within an ISA. With their eponymous equities often varying so often, such accounts are subject to greater volatility.

Meanwhile, the Lifetime ISA is a longer-term tax-free savings account. Savers can put in up to £4,000 every tax year toward buying a home or retirement planning and the government will provide a 25% bonus on top of the savings. While this is generous, this account does come with several restrictions on the use of the savings and when the cash can be withdrawn.

Finally, Innovative Finance ISAs (IFISAs) are accounts that allow ordinary savers and investors to lend and hold more dynamic forms of finance such as peer-to-peer loans and debt-based securities.

IFISAs are classed as investments, and in large part, this is because they have the ability to generate higher returns (which are not subject to tax) than traditional saving methods. For example, average returns on IFISAs have ranged between 7% – 9% over the past 5 years, compared to the typical 3-4% you would expect on the Cash ISA.

Within the property sector, IFISAs have unlocked the ability for ordinary investors to participate in high-grade property investment opportunities via lending platforms and reap the benefits of tax savings on any returns they receive. As with any investment opportunity, risk levels vary from project to project and investors should select their options based on their own financial goals, investment objectives, and risk appetite.

With inflation presenting a great hurdle to generating real term returns, the combined powers of compound investment and tax efficiency offer investors a powerful tool to navigate the economic landscape. While such tools often work best over the long term, investors with patience will stand to gain the potential rewards.

Jatin Ondhia Co-Founder and CEO of Shojin

Jatin Ondhia is Co-Founder and CEO of Shojin, an FCA-regulated online real estate investment platform that lowers the barriers to entry for individuals across the globe looking to access institutional-grade, UKbased real estate investment opportunities. He served as Director for UBS for nine years, using his wealth of knowledge and experience to provide strategic fixedincome solutions to the bank’s top clients and expand the UBS Delta businesses in the intermediary space. Jatin also has over 20 years of property investment experience.