Global Banking & Finance Review Issue 24 - Business & Finance Magazine

Issue 24

Rifat Sayim & Ben-Florian Henke Co-owners & Founders of GBE brokers Ltd.

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EDITORS LETTER

FROM THE

Chairman and CEO Varun Sash

editor

Editor Wanda Rich email: wrich@gbafmag.com Web Development and Maintenance Anand Giri

Dear Readers’ I am pleased to present Issue 24 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

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Featured on the front cover are Rifat Sayim and Ben-Florian Henke Founders and Co-owners of GBE brokers Ltd. GBE brokers Ltd. enables private investors to trade CFDs on shares, indices, currencies (including crypto-currencies) and commodities. In addition, the company is also active in institutional business through the GBE Prime division. I recently had the opportunity to speak with them about the evolution of the company, the solutions they offer traders and the forex market. Read the full interview on page 26.

Issue 24 is filled with engaging interviews and insightful commentary from industry experts. Inside you’ll discover how OTP Bank is tackling the changing environment following the impact of COVID-19 from my recent conversation with Volodymyr Mudryi, CEO of OTP Bank Ukraine. Don’t miss my exclusive interview with João Bugalho, Managing Director – Operations & Asset Servicing Southern Europe at Arrow Global and Whitestar Asset Solutions S.A. CEO. As part of the Arrow Global Group, Whitestar Asset Solutions S.A. is Portugal’s leading credit and real estate portfolio management company. Their unique track record based on extensive experience underscores its position as a ‘onestop-shop,’ providing investors with an integrated asset management service.

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

®

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Issue 24 | 03

CONTENTS

FINANCE

BANKING

19

Why empathy is the missing ingredient in banks’ digital customer experiences Nick Caley, VP of UK & Ireland, at digital identity specialists ForgeRock

Vicky Wordsworth, CFO , Bailie Group

10

It’s time to revolutionise collections and arrears Why lenders need to fundamentally change their arrears and collection strategies when payment holidays end

Katie Pender, Head of Client Solutions, Target Group

BUSINESS

46

How can finance leaders regain a long-term planning focus amidst the Covid crisis?

8

34

International Women’s Day: Eliminating gender bias in finance Sharon Lee, Research and Innovation Manager, Cambridge Innovation Centre, OneSpan

Protecting a shareholder from unfair prejudice.

Senior Associate Sylvia Yendall and Partner Rick Munro at BDB Pitmans

FINTECH

22

40

The future of fintech: Forging ahead with digital transformation Andrew Warren, Head of Banking and Financial Services, UK and Ireland, Cognizant

TECHNOLOGY

14 22

Top five Low-code Predictions for 2021 Don Schuerman, Chief Technology Officer, Pegasystems

Regulatory Compliance: What are the market trends for indoor positioning technologies?

Graham Jarvis, Freelance Business and Technology Journalist

38

Hybrid Cloud Security in the Financial Services Sector Renee Tarun, Deputy CISO, Fortinet

50

Five technology challenges that are holding back legal innovation Akber Datoo

04 | Issue 24

CONTENTS

26 Cover Story THE FOUNDERS OF GBE BROKERS LTD. TALK ON ITS INCEPTION, GROWTH AND THRIVING DURING A PANDEMIC Rifat Sayim & Ben-Florian Henke Founders and Co-owners GBE brokers Ltd.

Issue 24 | 05

CONTENTS

16 WHITESTAR ASSET SOLUTIONS: AWARD-WINNING SUCCESS THROUGH BUILDING BETTER FINANCIAL FUTURES João Bugalho, Whitestar Asset Solutions S.A. CEO and Managing Director of Operations & Asset Servicing for Southern Europe at Arrow Global

44 OTP BANK UKRAINE: A CONVERSATION WITH CEO VOLODYMYR MUDRYI Volodymyr Mudryi, CEO, OTP Bank Ukraine

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  

Euler Hermes’ Global Supply Chain Survey took place between mid-October and early November 2020. A total of 1,181 companies across five countries (the US, the UK, France, Germany and Italy) and six sectors (IT, tech and telecoms; machinery and equipment; chemicals; energy and utilities; automotive and agrifood) responded to the survey.

1

FINANCE

How can finance leaders regain a long-term planning focus amidst the Covid crisis?

Vicky Wordsworth CFO of Bailie Group

Vicky Wordsworth carved a reputation as a financial management specialist within private-equity backed businesses, before becoming CFO of the 158-year-old family-owned group of communications specialists – Bailie Group. Here, she considers the need for finance leaders to look beyond the turbulence of the pandemic and plan for the future…

The role of a finance leader is multifaceted. At the core, is a need to protect the balance sheet. However, in supporting the strategic progress of a business, there is increasingly a need for the profession to manage uncertainty to mitigate risks and leverage opportunities too.

This was true long before the onset of Covid-19. A Gartner guide from 2019 for example, highlighted that finance leaders were spending 25-50% of their time navigating unfamiliar

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situations, even then. And many years earlier, a Wall Street Journal article from 2014 cited advice from Deloitte which encouraged senior finance executives to drive corporatewide, critical decision-making, that balances strategy, risk and finance in uncertain times.

So, while the health crisis has been a colossal blow to not just the world of commerce, but humanity on the whole, from a finance perspective, we do know what to do.

The onset of short-termism Another Gartner report, issued in the earlier wave of the pandemic, warned CFOs against short-term and unsustainable cost cutting measures, and understandably so – knee-jerk financial decisions can have devastating longer-term consequences in terms of everything from supply chain security to the retention of valued talent.

FINANCE

However, for many organisations – particularly those without the luxury of healthy cash reserves – it very quickly became about survival. So yes, finance leaders may have been forced to take some rapid actions they would have rather not, but in most cases the decisions will not have been made recklessly. They will still have been considered, albeit at pace.

This agility is an important trait for finance professionals – crisis or no crisis.

As a private equity CFO – my former role – the fluidity of decision making reflected the speed with which stakeholders wanted to drive up the value of the business and realise an ROI as quickly as possible. Here aggressive targets may have been the pressure points – not a global pandemic – but the need to act fast and think about a comparatively more short-term outlook, was key.

Moving the dial For businesses that are a going concern, the objectives are very different to those associated with the PE model. So, the challenge for CFOs in these environments, is to regain a longer-term outlook, ASAP. Admittedly this isn’t easy amidst so much economic turbulence, and some companies, sadly, are having to manage cash on a daily basis just to ensure staff get paid. But we know that pure short-termism can jeopardise the future financial integrity of businesses, while stifling innovation in the process.

At Bailie Group, for example, the purpose of our organisation is to invest in ideas and people which make a positive difference, and properties that inspire. We therefore have some bold ambitions – not to mention a sharp monthly reporting rigour – and we’re continually growing, both organically and via acquisition. But we naturally have a longer horizon too, which cannot – and will not – fall by the wayside because of Covid. The board needs to support the company, the people within it, and society, far into the future.

Looking inwardly to develop long-term plans To do this, last March was all about looking inwardly to check that we were OK. We temporarily paused a commercial property overhaul for example, and some due diligence work on an impending acquisition also took a momentary back seat while we ensured our ‘house was in order’.

Thankfully, in our case, we have a robust management structure and strong cash reserves from previous years’ reinvestment, so our position was stable. But this evaluation exercise was important nonetheless as we certainly didn’t have ‘global pandemic’ on our risk register.

We formed a Covid-19 committee who met every day to make rapid decisions, under pressure, for the benefit of the business, our people, and clients. But we were quick to look outwardly again – after only 1-2 months – to begin focusing on the medium term.

The pace with which this shift can take place will naturally vary from one organisation to the next, and it would be wrong to suggest it’s easy. But the most important point to note is that the adjustment is almost always essential, as soon as practicably possible, and it’s never too late to turn the dial.

Nurturing a vision Personally, 2020 was less about long-term planning for Bailie Group, as we were already in the final year of a three-year plan. We’re fortunate, in that respect, to have previously had that vision, not to mention an operating model which doesn’t bog decision makers down in tactical constraints.

But even without these fortunate elements, and however prolonged this period of difficulty may feel, finance executives and their senior management teams can still be visionary.

Presuming organisations have taken advantage of all funding currently available, and undertaken sensible cost reviews to remove unnecessary spend, the next key action is to devise a plan inclusive of clear milestones, roles and responsibilities, to bring it to life. Love or loathe the term ‘pivot’, it is evidence that lateral thinking can ignite previously untapped revenue streams, and some businesses may be yet to fully realise their potential here.

We’re about to currently formalise our new three-year plan – purely because we’re at that part in our strategic cycle, not because of Covid. And while our tactical goals for the next 12 months naturally reflect the current climate, our purpose remains true, and so our strategy is largely unchanged as a result. We’re going to push boundaries and drive more positive change in our communities, because that’s why we exist. We’re still looking out for additional acquisition opportunities, having completed on one in October 2020, and we have recently announced a substantial innovation fund to ignite the fire in the bellies of our progressive Group companies.

We’ve earmarked investment for wellbeing too, as the health of our people will prove crucial to our longer-term success, and training and development is currently in sharp focus.

We’re keen to ensure our colleagues feel engaged, fulfilled and supported now, in readiness for us returning to some degree of BAU, in the future. In fact, this has been an essential part of our budget setting.

We also feel prepared, which is important. Nobody can say with any real certainty what the future holds for the economy. If confidence starts to build, particularly in H2, we will see GDP rise and market opportunities open up once again. We have to maintain that optimism, but we’re continually looking outwardly for cues that influence our ongoing decision making, and advice from peers who also want British business to succeed.

Issue 24 | 09

FINANCE

It’s time to revolutionise collections and arrears Why lenders need to fundamentally change their arrears and collection strategies when payment holidays end

Banking has undergone a wholesale shift during the pandemic. It’s forced one of the world’s oldest and most influential sectors to work in new ways – digitisation and automation have come to the fore, we’re seeing drastically reduced high street traffic, and online has become king. Whilst the sector has managed to navigate the turbulence relatively well, it’s also benefitted from emergency government schemes to help keep the country liquid (such as reducing the amount of capital required to set against lending). The increase in lending power has no doubt helped operations, and allowed lenders to execute roll outs of schemes such as the Bounce Back Loan Scheme and mortgage payment holidays.

However, whilst lenders have adapted relatively well, the same can’t be said for all their customers. It’s fair to say that the pandemic has put many businesses and consumers into financial positions that would have seemed incomprehensible just 12 months ago. Government schemes have looked to support people across the spectrum, from job losses to freeing up extra monthly cash. But it’s now

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getting close to the point that some of this emergency funding will need to be repaid. For those reliant on the State to help them through month-tomonth, this cliff-edge will have a severe consequence on their income and ability to pay off debt.

Living costs, utilities, food – I could go on – are becoming more expensive, so interest added repayments will be another worry for millions.

This position that many customers find themselves in will present the financial sector with a new set of unique challenges. Whether it’s a mortgage payment holiday or a business loan, lenders will now need to cope with the operational demand of a spike in arrears whilst balancing the needs of customers – many of whom will not be able to instantly recover and return to the previous status quo. Lenders themselves will also need to dedicate more time and resources to managing these collections, whilst battling legacy IT systems and a hybrid workforce who may require specialist training.

Whilst the sector may be revelling in the benefits of automation, collections and

arrears is not something that can be solved by a chatbot. It requires specialist teams, negotiations and dealing with very human emotions, including guilt, embarrassment and hopelessness.

So, what can financial institutions do to manage this spike?

First, they need to appreciate then re-evaluate their customer base, the demographics of which will have shifted significantly over the past 12 months. We expect to see the following segments in the customer base: • Uncertain: Whilst this will be a feeling for many, for the self-employed or those on furlough, the next 6-12 months could see significant changes. All of these people are facing uncertainty and will have needs beyond payment holidays. They will need further support to understand what additional help is available to them both in the short and longer term until they can be sure of more stability.

• Troubled: These customers may have experienced an unexpected redundancy, perhaps after a period of furlough. They

FINANCE

may well have found new employment, but at lower pay. They will have suffered a significant financial impact and will be at risk of not being able to meet payments in the short as well as the longer-term. They are likely to seek urgent support to manage existing debt, or to avoid falling into future debt.

• Curtailed: Some people will have faced lower levels of income due to furlough or pay cuts, leading them to request payment holidays. They may want, or be able to make over-payments to rebalance their increased instalments over time, or conversely extend their terms to avoid higher payments over the same term.

• Fortuitous: Whilst affected by the wider economic uncertainty, this section of customers may have seen surplus income during the pandemic due to reduced spending. They may wish to plan to avoid future risks, perhaps by saving more or to repay any money owed more quickly than planned.

Whatever the financial impact of the pandemic, there is also the mental health impact of over 12 months of disruption, meaning now more than ever it’s vital to focus on good outcomes.

Here are three tactics which can

facilitate not only preparing for the spike in collections and arrears, but also good outcomes.

1. Forbearance, affordability and empathy are key Data is vital across every part of financial services, and this is no different when it comes to collections.

In fact, open banking will change how lenders are able to structure repayment plans, as it provides a more holistic and accurate view of people’s financial situations – something the customers themselves are too embarrassed to provide. Sadly, financial matters are still a taboo topic, and resultantly, many customers are not truthful about how much they are able to afford, which can then make collections difficult.

Open Banking and analytics provide insight into previous spending and behavioural patterns, allowing lenders to evaluate the current situation and a customer’s genuine affordability. It can also be used to predict how this may change in the future. This now allows for flexible decision-making – adapting support for the customer as their financial position evolves. There is no

one-size-fits-all for arrears, and as a customer’s situation changes – be this for better or for worse – lenders should be able to be flexible in their approach to enable fair treatment of the customer and quickly adjust their payments.

Lenders should also ensure that specialist trained agents are available to support vulnerable customers, those who have complex needs or those in uncertain situations; those who are able to readily display empathy and understanding and work towards achieving the best outcome for all.

2. Leverage different channels and encourage self-service where appropriate Financial Services was one of the first verticals to adopt online, and today’s customers are used to accessing and providing financial information that way.

With lenders now dealing with multiple generations as customers – all with different preferences, offering different platforms is a way to engage multiple stakeholders simultaneously. Many will still prefer face to face or over the phone, but some will prefer online, and using self-service provisions – at a time and place that suits them.

Issue 24 | 11

FINANCE

Self-service is a cost-effective way of arranging and collecting payments, and allows for a 24/7 provision. This digital offering also goes some way to overcoming the embarrassment factor.

Online expenditure assessments and the setting up of payments helps to remove some of those barriers. It not only provides a simple route for customers who may have otherwise ignored the problem, but it also delivers positive outcomes for lenders.

3. Forbearance drives proactivity When consumers miss, or know they are going to miss a payment, early engagement is vital to prevent debt spiralling.

It’s a situation lenders are familiar with, as according to Money Facts, 40% of customers have missed a payment for a credit card or loan. Proactivity is therefore key. Communicating clearly, and the use of education so consumers understand there are multiple ways lenders can support them is a must.

Lenders need to remove the stigma associated with debt and encourage customers to communicate with them in an open and honest manner.

Lenders should consider existing forbearance measures to ensure they are appropriate to meet consumer requirements during this unique time.

These measures should be easily understandable and flexible, and their appropriateness carefully considered based on each set of circumstances and an affordability assessment.

Whilst we’re starting to see more positive news about moving back towards a semblance of normality, sadly the true economic toll of the pandemic is not yet known. What we do know, however, is that treating customers fairly and understanding their needs and circumstances is vital, to help them and you navigate these uncertain times.

Not only is adapting debt collection a pragmatic approach, it’s also the right thing to do ethically. But by leveraging Open Banking, lenders now can take a proactive approach to helping to implement payment plans which are achievable for all parties, leading to better outcomes.

Katie Pender Head of Client Solutions Target Group

12 | Issue 24

CONTENTS

Agri Loan “Instant” decision for 1 day JSC ”OTP BANK. NBU License # 191 dd 05.10.2011

Issue 24 | 00

TECHNOLOGY

Top five Low-code Predictions for 2021 2020 has been a year like no other. Organizations everywhere had to pivot quickly, reinvent the way they do business, and focus on efficiency and productivity in order to stay afloat. For many that meant getting the most out of their employees and finding innovative ways to get things done in a disrupted and distributed world. For others, low-code technology became a critical tool for putting citizen developers to work, quickly addressing challenges, and keeping business running as usual – or as usual as can be expected during a global pandemic. Here are five predictions for what we’ll see for low code in 2021.

1. Low code will become a serious career path. The pandemic has hit the economy hard across many sectors and many out-of-work professionals are looking for alternate career paths. With developers still in high demand, low code will help break down barriers for people who have found themselves looking to reskill and seeking a new career after their existing role vanished – either temporarily or for good. In 2021, a lack of developer skills will no longer be a barrier to entry for application development roles and more and more reskilled professionals will discover that low-code can provide them with meaningful career options. Superstars who can combine low-code development with soft skills like design thinking facilitation will be in high demand.

2. Businesses will transition from investing in one-off solutions to low-code ecosystems. While low-code enables IT and business users to collaborate to solve problems, organizations can get a greater return on investment if they focus on the principles that make low-code successful.

By surrounding and supplementing their low-code solutions with additional tools, frameworks, and best practices that really make their low-code platforms sing,

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organizations can bolster their investment.

Implementing design thinking, bringing fusion teams together, and leveraging tools like Mural can harness the power of low code into repeatable engines that boost productivity. In 2021 more organizations will evolve to low-code ecosystems enabling them to squeeze even more value from their initial investment while creating a foundation for continued growth.

3. Citizen developers will become ‘the great unifiers.’ Organizations no longer need to operate in siloes with disconnected processes. In 2021 citizen developers will hold the key to successful widespread implementation of devops. IT folks and business people will be able to collaborate on building business applications by speaking the same language – without ever having to learn how to code. IT is moving from a traditional “cost center” to the strategic driver of corporate initiatives like digital transformation, and citizen developers will be secret weapon for pulling IT and business thinking together. This is the year that citizen development will help break down traditional silos, quickly scale solutions, and bring Shadow IT out of the shadows with corporate development guardrails that don’t stifle innovation.

TECHNOLOGY

Don Schuerman Chief Technology Officer Pegasystems

4. More businesses will turn to low code for speed. The COVID-19 pandemic put immense pressure on organizations that realized they were behind in their digital transformation initiatives and needed to quickly spin up apps to fill process gaps.

As they rushed to meet the needs of their employees and customers, organizations learned that with the right tools and attitude, they can move incredibly fast. In 2020, the adoption of low code became more mainstream as organizations recognized the benefits – creating software with easy-to-use reusable templates, configurable components, and best practices – especially the ability to develop applications quickly within the parameters of corporate governance. This success will continue to fuel the explosive growth of low code in 2021 and beyond.

5. Low-code “posers” will fade away. In 2021 businesses will become more discerning when it comes to investing in low-code solutions. With low code becoming a 2020 buzzword, more and more software vendors took advantage by slapping the ‘low code’ label on anything that could remotely fit the moniker. But end users are wising up to this trick and are beginning to understand what’s really low-code and what isn’t. And as they learn to sort the wheat from the chaff, they will turn to the robust solutions that can deliver value fast while meeting their enterprise-wide needs end to end. This will further underscore the need for platforms that enable users to create enterprise-class software, leaving low-code “posers” in the dust.

In 2021, low code isn’t going anywhere, but the way we talk about it and what it means will become more clearly defined in the market. Low code’s ability to impact an organizations’ efficiency will ensure that it becomes an essential component in any enterprise’s toolbox in the year to come and beyond.

Issue 24 | 15

INTERVIEW

Whitestar Asset Solutions: Award-Winning Success Through Building Better Financial Futures

Global Banking & Finance Review editor Wanda Rich met with João Bugalho, the Whitestar Asset Solutions S.A. CEO and Managing Director of Operations & Asset Servicing for Southern Europe at Arrow Global. As part of the Arrow Global Group, Whitestar Asset Solutions S.A. is Portugal’s leading credit and real estate portfolio management company.

With regard to differentiating itself from other Portuguese firms, João attributes a number of different factors to Whitestar Asset Solutions S.A.’s continued growth and success. “We have always been able to transform a threat into an opportunity, as our journey has shown many times,” he explained. “There is an entrepreneurial approach to challenges that galvanises people to find the right solution to every problem. Also, we work with a large number of different investors, catering for different needs and requests, and that has given us flexibility and a sense of service that is highly appreciated by these clients. Above all, Whitestar is such a success story mainly due to the quality and commitment of our team.

We are a Top Employer for the second year in a row. We try our best to make people feel appreciated for what they do and provide career paths that can be both rewarding and motivational.”

Whitestar Asset Solutions S.A.’s unique track record based on extensive experience underscores its position as

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a ‘one-stop-shop,’ providing investors with an integrated asset management service. “We offer a complete and integrated solution to investors and originators,” João said. “This is supported by in-house capabilities such as portfolio acquisitions (due diligence, valuations and pricing), structuring and securitisation, servicing of performing, sub-performing and non-performing loans (unsecured, secured and corporate) and real estate management (legal, development, rentals and sales).”

Fortunately, their support for investors has been upheld while navigating the current global challenges. He listed several strategic initiatives the company has implemented in the last year, such as focusing on recovering cash from court through special dedicated teams while court activity is down, property price reviews of certain asset types (commercial, retail, offices) to anticipate negative HPI, converting property sales to rentals and increased capex to improve multiples, as well as special campaigns to accelerate unsecured collections.

In terms of operational performance, the effect of COVID-19 has been felt, but also mitigated. “The last 12 months were not easy from an operational perspective,” João confirmed. “As full COVID lockdowns were implemented and courts´ activity restricted, we started to experience slowness on

collections. There was an inevitable impact on the financial situation of our customers which led to an increasing number of renegotiations due to layoff and unemployment, but our teams kept our approach to customers by finding the best solution within the fair treatment of their current situation. Still we were able to deliver our operational targets, and 2020 ended up being very positive, mainly due to real estate sales in the last quarter.”

The company’s success has in part been assisted by its approach to risk management.

João said, “Whitestar adopted the Three Lines of Defence methodology where the responsibilities are well defined. By providing continuous training and the proper tools, we ensure that everyone knows what is expected of them and acts accordingly with the company standards.”

Of course, business operations have had to be adapted in order to manage the current environment. “When the first lockdown was announced in March 2020, we moved all our 600 employees to the home office in 15 days without major operational impacts,” he said.

“The difficulties we felt in the first 2-3 months were mainly due to external factors that were not under our control to solve. We’ve kept everyone operating from home since then and

INTERVIEW

João Bugalho Whitestar Asset Solutions S.A. CEO and Managing Director of Operations & Asset Servicing for Southern Europe at Arrow Global

started preparing for our future, which will be a blend between presential and remote work. We encourage a continuous improvement culture through KPI monitoring and process standardisation. Our operational teams were used to a daily meeting dynamic that was brought into remote work and this continuity allowed us to keep focus on our objectives, keep the KPIs under control and maintain social activity between employees.”

The ways that Whitestar Asset Solutions S.A. supports the community demonstrate how CSR remains a priority. “At Whitestar we are proud of our family values and we cherish working together, respecting and supporting our community. Our overarching mission is to build better financial futures across a multitude of stakeholders in our community: our shareholders, our investors, our customers, our employees and our local communities.

“One example is our flagship programme in partnership with Junior Achievement Portugal,” João continued.

“This is a platform where our employees contribute voluntarily to educate

our local youth on matters such as entrepreneurship, financial planning and how money works in general, once again in line with our ambition of building better financial futures. In 2020 we had more than 60 volunteers who reached more than 2,000 youngsters in our local communities.

“Last but not least, Arrow Group – our shareholder – is highly committed to its ESG agenda. We recently created a Sustainability Committee, with a roadmap of key initiatives that will positively impact our community. As an example, we are reviewing our car fleet, aiming to making it greener in order to decrease our carbon footprint. Also recently, we appointed a Group Head of Sustainability which shows how serious we are on this front.”

Despite the unpredictability of 2020, João feels positive regarding Whitestar’s strategy for this year.

and an economic environment that inevitably hit us - a countless number of difficulties.

“But the fact is that the last quarter was very strong at every level, giving us positive indications for 2021. We gained all the NPL transactions we were involved in, the selling of real estate hit record volumes and we ended the year with more than €10bn worth of assets under management.

The mood changed significantly and we are very positive for 2021. Besides the business-as-usual activities, where we expect to actively participate in whatever NPL transactions come to market, we will continue working towards higher efficiency gains.

Entering into production of a new core system we have been working on for the last 2 years will make a substantial difference to our processes and quality of delivery, and we hope to raise our competencies and capabilities in the corporate segment.”

“2020 was one of the most challenging years ever. The world became upside down. We went through credit moratoriums, layoffs, moving the team to working-from-home mode, a market that almost stopped for several months

Issue 24 | 17

We are advancing towards a new approach to banking.

Better prepared for the future.

Based on innovative digital solutions and driven by our commitment to sustainability.

Because of this, we have been named

BEST DIGITAL BANK ANDORRA 2021

BEST CSR BANK ANDORRA 2021

Andorra Luxembourg Spain Switzerland USA Mexico Panama Chile creditandorragroup.com

BANKING

Why empathy is the missing ingredient in banks’ digital customer experiences Online banking has become an essential service during the pandemic, and banks have been scrambling to accelerate their digital transformation efforts to keep up with demand, relieve staff from overly complex processes and stand out from their competitors.

A big focus has been on providing streamlined, personalised online experiences. These were previously the reserve of digital natives like Google and Facebook then more recently the challenger banks, but consumers have come to expect them across all services. So far, it’s been working – a recent ForgeRock survey found that most global consumers surveyed now prefer to check their account balance (86%) and make a bank transfer (84%) online.

But amid the pandemic’s many stresses and strains, all banks’ digital transformation efforts will be for nothing if customer interactions come across as robotic, faceless experiences.

Banks therefore need to deliver digital experiences with a healthy dose of that all important human element - empathy.

So what does this mean in practical terms? Here’s how banks can deliver empathic experiences which drive customer loyalty, now and in the future.

The empathy imperative Over the past 12 months, we’ve already seen a number of brands put empathy at the centre of their marketing strategy. eBay’s ‘Up and Running’ campaign; IKEA’s ‘Making Home Count’ campaign; Burger King’s promotion of independent

competitors; or Allbirds’s ‘We’re Better Together’ campaign; the list goes on.

While this has been catalysed by the Covid-19 pandemic, it’s something that consumers have been coming to expect for some time. Pre-pandemic, a study from marketing firm Braze, found that UK consumers were 54% more likely to engage with a brand when it effectively demonstrated human communication, with 57% were more likely to remain loyal to that brand.

However, while empathy has proven to be an important marketing strategy, banks, who sit at the very centre of people’s financial wellbeing, can’t rely on being empathic in their marketing alone. Empathy should be at the heart of everything they do – particularly in how they design their customer journey.

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BANKING

This goes far beyond merely streamlining processes. It’s about understanding what your customers really need, and giving them what they require. From conducting simple transactions via mobile app, to speaking to customer support, consumers now require a joined up, personalised service that demonstrates an understanding of their needs and concerns like never before.

Technology with a human touch How well banks can deliver an empathic customer experience depends on successfully joining up the various technologies they have implemented as part of their digital transformation, so customers can quickly get to the service they need, with as little friction as possible.

For example, one side effect of the pandemic is the added pressure it has placed on banks’ contact centres.

Customers are still often required to speak to a human to complete certain complex tasks - particularly when a higher level of security is needed or when things go wrong. And with customers doing more things remotely, contact centres have picked up many of the processes that were previously conducted in-branch.

This has created a runaway cost for many banks and, with lengthy hold times and tedious, resource-draining authentication processes, this can lead to a frustrating experience for the customer.

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The recent push to implement bots and other digital innovations has been seen as one solution to maintaining a streamlined experience while keeping up with demand. But bots can only do so much, and too often present friction, with inadequate navigation options and stock answers. Perhaps most importantly, bots are devoid of empathy, making dealing with them like speaking to a wall. I’m sure most of us can relate to furiously clicking through a bot’s decision tree until it presents us with a human!

Thankfully, it doesn’t have to be this way. An alternative approach is for banks to embrace digital identity to provide context-aware responses to individual touchpoints at every step of the customer journey. In practice, this just means knowing who a customer is, which part of the business they are interacting with and how they are interacting, and connecting that with relevant information about their needs.

That sounds simple. But it has some important consequences as far as empathy is concerned. First, digital identity allows banks to develop a 360-view of customers and develop a mutually beneficial value exchange built on trust. When underpinned by a set of explainable consent options that put the customer in control of their data, digital identity can create a virtuous circle where organisations gain a better understanding of their customers, encouraging users to share more actionable information.

This can then be used to create authentic, engaging and personalised customer experiences that bolster loyal customer relationships.

Second, by taking an identitycentric approach, and treating data as a shared asset that benefits the customer as much as the bank, banks will be able to recognise, understand and adapt to each customer as an individual, regardless of how the customer chooses to interact with them. It will also enable banks to make best use of new technologies such as AI-driven analytics and intelligent authentication to provide richer, more personalised experiences.

And third, this approach has benefits on a security level. A modern digital identity platform can help protect against malicious attacks and identity fraud through multi-layered security models, while making the customer feel known. This can be combined with the latest biometric and other authentication technologies such as multi-factor authentication (MFA) for added security with less of the unnecessary friction. If a bank can take a more adaptive, context based approach to risk, it will make it easier for them to demonstrate that they trust a customer, ultimately making the customer feel known as a person rather than just a set of credentials.

What does all this mean in practice? To return to the contact centre example, a strong understanding of who the customer is and what they need to speak to someone about could be

BANKING

intelligently shared with the contact centre before they even reach an agent. By the time the customer gets to the agent, they could have been authenticated via the chat channel, thereby avoiding additional security questions and as it will be immediately known where they have got to in their online journey, the agent will be able to pick up from the right point. The customer immediately feels listened to, and won’t have to repeat themselves.

People and technology can work together in a symbiotic relationship that creates more space for empathy and understanding.

The rise of the empathic executive Of course, none of this is possible if teams aren’t working together towards a shared goal. Empathy works internally too - and should be a value held by those from top to bottom.

As banks’ digital journeys become ever more central to how they interact with their customers, they’re no longer just a concern for the IT department. Now, the whole bank needs to rally behind the digital experience, which exists as a front door to the bank’s multiple functions and departments.

Executives in particular need to recognise this. Just as they should strive to understand their customers and meet their needs, they must also listen to their colleagues (whether that’s their closest VP or the teller in a branch) and understand their individual requirements too. Time consuming, overly complex processes will benefit

from automation and especially orchestration of back office user journeys, ensuring that appropriate access is granted to the right people at the right time.

An organisational ethos based on empathy will be essential in the years to come. Responsible, ethical banking is more important than ever, and customers are increasingly turning to those brands that are able to demonstrate strong values which prioritise people above profit.

Without empathic executives who treat their customers and employees as humans with individual needs and desires, any brand risks falling short of the expectations of tomorrow.

Nick Caley VP of UK & Ireland at digital identity specialists ForgeRock

Peace, love and personalisation Despite the horror of the last 12 months, there have been a lot of positives too. We’ve seen communities band together, companies realising their social responsibility must be more than just good PR, and the triumphant development of life saving vaccines in record time.

While our connected world is not going away any time soon, neither is our desire for human understanding.

Rebuilding businesses and lives severely affected by the pandemic takes time, a lot of effort and much needed support, especially financial. Banks therefore need to place a premium on empathy if their digital transformation is to deliver positive customer experiences and build loyal customers for years to come.

Issue 24 | 21

TECHNOLOGY

Raili Maripuu CEO Mobilewatch

22 | Issue 24

TECHNOLOGY

Regulatory Compliance: According to the Financial Times, ‘Bankers crave return of in-person trading floors’ because “the human factor matters”. Strengthened with effective personal mobile device surveillance, whether traders are on the trading floor or at home, they matter. However, there is also a role for technology to prevent market abuse. Human factors, such as trust, can’t prevent it.

In banking and finance – particularly on trading floors, trust is often considered to be at the core of maintaining and achieving compliance. The sector’s traditional approach involves implementing soft policies that are focused on mutual trust, which isn’t sufficient to prevent significant and costly regulatory breaches in regulated areas, such as trading floors. In fact, rather than focusing on trust, banks and financial organisations should predominantly concentrate on compliance.

Concentrate on compliance The sector has what are called ‘regulated areas’ to prevent insider trading and market abuse. They include trading floors. Raili Maripuu, CEO of Mobilewatch, reveals that personal mobile devices in regulated areas can be used to facilitate market abuse. She explains why: “Controversially, this is mainly because the majority of the banks address the problem with ‘soft policies’, sometimes combined with some (largely minimal) supervisory labour.”

“10 years ago, such an approach was indeed enough, as mobile phones were much simpler, there were less of them and there was no surveillance

What are the market trends for indoor positioning technologies?

technology to address the problem.

This is no longer the case. Nokia-type brick phones have evolved into complex smartphones and the technology to ‘see’ such devices along with them.”

Soft policies are predominantly used to monitor personal mobile devices in banks, and because they are based on trust, they are often found to be wanting. Polices that focus on trust more than on compliance are often not 100% effective.

Maripuu reveals that open policies are also very much prevalent within the banking and finance industry, and there is strikingly a lack of effective device monitoring. “The huge risk is clearly evident and on the increase; and so, they should ideally deploy indoor positioning technology to advise the Surveillance and Compliance teams by highlighting what activity is happening, when it happens and with historical recording for investigations and demonstrable regulatory reporting.”

If soft and open policy-based trust was completely effective, Market Non-Public Information (MNPI) abuse would be eliminated. She believes banks should go beyond trust. They must, in her view, “look at technologies that enable true compliance as the regulators intended, such as indoor positioning technologies.

This will support compliance by identifying all personal mobile device activity in any particular regulated space every hour of every day.” Personal mobile device surveillance, using indoor positioning technology, enables supervisors to spot and report regulatory and policy breaches.

Use technology sensitively To many, indoor positioning might seem a bit like Big Brother is watching, and there is a need to use technology sensitively to avoid trust issues. However, Maripuu argues that this is a misconception.

She explains why: “People think indoor technology positioning is another Big Brother technology because they are not aware of how the technology works.

There are numerous other surveillance technologies, including voice recording and CCTV, that are ten times more intrusive than passive indoor positioning technology, which simply collects information that is already publicly transmitted.”

“Regulatory environments already employ many other technologies, such as chat room and voice surveillance. These are already accepted by traders as normal and expected. If there was an employee concern about Big Brother, it started over 10 years ago. Banks and its employees also need to remind themselves what the purpose is of these surveillance technologies. They are ultimately there to protect the consumer from market abuse - trust cannot do this alone.”

She elaborates that the nature of trading is that it’s highly regulated and, subsequently, continuously monitored.

In fact, trading floors typically deploy an increasing number of surveillance methods and technologies to ensure compliance with the goal of preventing market abuse. Indoor positioning involves passive monitoring in comparison to many of them and it involves monitoring – for example - publicly available mobile phone transmissions. “So, the Big Brother argument really falls flat on its face here”, comments Maripuu.

Issue 24 | 23

TECHNOLOGY

She adds that indoor positioning technology was created to spot and identify breaches of all types of mobile devices in unauthorised, high security areas. The technology is typically deployed by governments, law enforcement and corporate security. It can also be utilised to manage smart working in corporate environments, to manage large crowds at public events, as well as assess shopper behaviour in supermarkets and shopping centres, “where such information is used to negotiate appropriate tenancy agreements.”

Highly specialised “Within financial services, indoor positioning is a new niche, highly specialised market”, comments Maripuu. She finds that the use of personal mobile devices within regulated spaces is rising, and some banks are operating an open or any device policy – creating a significantly increased risk of MNPI abuse.

“This has also been compounded by the home working requirements of today’s Covid-19 pandemic world, where the regulated space must now also reside”, she says. Financial services organisations expected the regulations associated with personal

24 | Issue 24

mobile devices to be enforced. So, she believes “the race is on to move away from the ineffective soft policies currently employed and implement a 24x7 automated ‘eyes always on’ solution instead, only achievable through technology.”

Regulatory requirements In the UK, for example, the Financial Conduct Authority (FCA), requires banks to ensure that personal devices are not used for any business communications. The Financial Conduct Authority’s Handbook Statistics in SYSC 10A:1.7 states: “A firm must take all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant telephone conversations and electronic communications on privately-owned equipment that the firm is unable to record or copy.”

Maripuu cites Julia Hoggett, the former Director of Market Oversight at the FCA, who said in a recent speech that the expectation going forward is that office and home working arrangements should be equivalent.

Maripuu adds: “This requirement by the regulators is no longer held back by technology. Banks are hiding behind the fact that regulators are implicit in

stating what is required, but not the ‘how’. The surveillance achieved in the home environment can equal that of the office, effectively extending the regulated space seamlessly for those working from home.”

She adds, referring to the desire of traders to return to the office: “Although the FCA anticipated an increase in market abuse reporting during over the past 12 months, due to new working practices, the reality is that this has decreased. There is a clear disconnection. Traders returning to the office to find new socialdistance operations in place.”

“In effect, supervisors may have the same number of people to oversee, but over a greater area. The result is a reduced ability to spot offenders sending a quick text or use another personal mobile device. Outside of trading hours, the space remains regulated, although the supervisors have gone home. With security staff, cleaning and, IT contractors carrying out their duties, the regulated space currently remains unmonitored.

These are weak security points which Banks turn a blind eye too, that will be until the regulatory enforcement is in place.”

TECHNOLOGY

Achieving compliance To achieve compliance, the only way this can effectively be tackled is by using technology that can monitor all devices in a regulated area. With indoor positioning technologies you can capture 100% of personal mobile device activity, bringing immediate awareness to employees that it is present all of the time, round the clock every day.

The challenge is that firms do not have the authority to record or copy privately owned personal mobile devices. Yet soft and open policies are opening up to permit them in regulated spaces.

This disconnection means that the effective monitoring of these devices is essential and mandatory to, as she explains, “protect the consumer from MNPI abuse” by using technology to capture everything.

“This is a huge deterrent of unscrupulous activities and this can prevent a sporadic opportunity of the theft and abuse of MNPI, in itself”, she says. Furthermore, the use of artificial intelligence can in her view “determine patterns of activity including times, movements and stationary periods.” With AI and the captured data, it’s possible to identify the potential risks before they occur.

Also, as banks are mindful of the well-being of their employees, they can use this technology to better identify and educate their staff, rather than catch and heavily fine them – and/or fire them.

“Since the pandemic, the use of work mobile devices in regulated spaces increased by 500% and the average length of a mobile call jumped from 48 seconds to over 3 minutes,” she reveals. Interestingly, she highlights that industry statistics find that there is a significant decrease in the number of calls made in regulated areas during the pandemic - largely in the work-fromhome environment.

This is compared to the pre-Covid situation, where trading activities – including calls – occurred in largely controlled and supervised office environments. She concludes that this suggests the missing number of calls have been transferred elsewhere, such as to personal devices – which no-one monitors. So, the need for personal mobile surveillance is now more important than ever. This means that, over the next 5 years, regulatory enforcement is going to be tightened up, allowing little wiggle room to be used by the financial services industry.

“This technology, when combined with AI, provides rich behavioural analysis and benefits to its employees; whether it’s an employee looking on their work app to see which hot-desks are available, to building security identifying where exactly people are in the event of an emergency, to helping route people away from an incident; or for an employee to simply check how busy the in-house fitness centre is; the appetite and applications for indoor positioning technologies is on the rise.”

So, as well as enforcing compliance, the technology provides an opportunity to motivate staff, even in a crisis.

Many other benefits By embracing indoor positioning technology, banks will discover there are many other benefits to personal mobile device surveillance that go far beyond that of compliance. Maripuu explains with reference to the banks’ concerns for staff well-being:

Graham Jarvis Freelance Business and Technology Journalist

Home-working risks However, with more traders working remotely and, increasingly from home, it’s becoming more important to monitor home-based versions of regulated areas because the risk of market abuse via mobile devices has increased. Remote working from home can reduce the ability of banks to have control over whether these mobile phones, smart watches, tablet and laptops are stored away from the home-working area.

Issue 24 | 25

COVER STORY

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COVER STORY

The Founders of GBE brokers Ltd. Talk On Its Inception, Growth and Thriving During a Pandemic GBE brokers Ltd. enables private investors to trade CFDs on shares, indices, currencies (including crypto-currencies) and commodities.

In addition, the company is also active in institutional business through the GBE Prime division. GBE brokers serves its German clients through its branch office in Hamburg, which was founded in 2016, and its international clients through its headquarters in Cyprus.

GBE brokers is a fully licensed and regulated CFD broker under the regulatory authorities of CySEC and BaFin. Wanda Rich, editor of Global Banking & Finance Review, spoke to GBE brokers Ltd. founders and co-owners, Ben-Florian Henke and Rifat Sayim.

Rifat is co-owner and Head of Sales in Germany.

Born in Germany, he started his financial career in 2007 in a reputable German investment bank.

His vision from the beginning was to make GBE brokers Ltd. a strong and ethical business.

Ben is co-owner, Branch Manager and Head of GBE Prime. He has strong financial and investment banking experience and has been a part of the Forex and CFD industry for over 10 years. He focuses primarily on leading GBE broker Ltd.’s institutional business.

Rifat began by explaining what led them to create GBE brokers Ltd. “Before we founded GBE brokers Ltd., our professional experience with various financial service providers enabled us to understand the problems that private traders experience. We therefore wanted to go down a path that would allow everyone to become active on the stock market in a simple way with professional support.”

Thanks to this approach, GBE brokers Ltd. has grown and evolved since its origin. “Our vision is to make online trading more accessible to private individuals,” Ben said. “Never before has it been more important for private traders to have an experienced and trustworthy broker at their side who understands the needs and concerns of their clients. Because of that we continuously improve our processes, the scope of our services and our product portfolio. In recent years we have seen solid growth, both in terms of client numbers and trading volumes.

Added to this is the increased market presence, which has developed enormously positively over the same period.”

Issue 24 | 27

COVER STORY

Ben-Florian Henke

Founder and Co-owner GBE brokers Ltd.

“Of course, the past year has spurred the trading boom among young and old,” Rifat added. “In peak months we reached a trading volume of over 50 billion dollars and we are looking back on a 20 million trades year, just to give your readers an idea of the size of GBE brokers Ltd. This has made us one of the leading CFD providers in Germany.”

Given the amount of Forex brokers in the market, Wanda asked how GBE brokers Ltd. differentiates itself from its competition. “First of all, we are not just a traditional Forex broker,” Rifat pointed out. “In fact, we are a CFD broker. This means that we offer our clients the possibility to trade on a CFD basis, currency pairs but also shares, indices, bonds, commodities and cryptocurrencies. Overall they can choose from over 500 different instruments. CFDs, or Contracts For Difference, offer a simple and flexible way to speculate with leverage on price changes - regardless of whether prices are rising or falling. The profit or loss results from the difference of the traded underlying asset.”

“Our unique selling point is clearly our excellent customer support,” Ben said.

“Our team of experienced employees has been working together for over 10 years and receives great feedback from our customers on a daily basis, which is also reflected on review sites such as Google and Trustpilot as well as on our social media channels. The positive reviews also often refer to our offered trading platforms MetaTrader 4 and 5, which can also be used as a webtrader version. This software has efficient and extensive analysis tools, which can be expanded with additional functions and tools with our GBE Booster package.

This allows us to offer our clients a certain advantage in the market compared to other brokers.”

Both offered some insight as to some of the ways that the foreign exchange market has changed over the last few

28 | Issue 24

COVER STORY

years. “The increasing intelligence of financial technologies is forcing brokers and technology providers to adapt their strategies to keep up,” Ben revealed.

“The foreign exchange market has come a long way and is subject to the same trends seen in technology in general.

The market is accessible to everyone these days and there are different types of trading.

“In the past, trading was still largely done over the phone and written down manually,” he went on. “This method was prone to error. Only large institutions could participate in FX trading. Over time, trading platforms were developed that allowed trading and post-trading to be done electronically. This change has made trading easier and cheaper; the average volume per trade has decreased, but the number of trades has increased. This means that the platforms today have to process a much larger number of trades and participants. Furthermore, the way trading is done has changed a lot in the last 20 years. The first FX trading apps were dedicated computers or installed apps. Now, traders are much more mobile and the demand for mobile apps and web apps has increased greatly.

Algorithmic trading has also increased a lot. What only the biggest banks could afford in the beginning, anyone can do today with their own strategy.”

“The last 20 years have shown that the market can change massively,” Rifat agreed. “Technical innovations play only a minor role here. Today, the market is accessible to everyone that’s the main thing. In order to remain competitive, brokers have to come up with something otherwise they have nothing that distinguishes them from their competitors.

“In addition, clients now demand a minimum set of functionalities, such as mobile trading apps, round-theclock support, charts with drawings and indicators, one-click trading,

Rifat Sayim

Founder and Co-owner GBE brokers Ltd.

Issue 24 | 29

COVER STORY

display of current risk positions and much more, which we of course also offer. In the future, brokers will have to further adapt their platforms to support more asset classes. In order to stay ahead of this trend, we are already exploring these avenues and are constantly improving our platforms to offer our customers the best trading experience.”

It comes as no surprise, then, that GBE brokers aims to offer its clients the best trading experience it possibly can, an area Ben was glad to expand on. “As already mentioned, we offer a wide range of instruments that are available on our excellent trading platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5), which offer a great selection of tools for a successful trading experience. In our view, the best possible trading experience also includes ultra-fast order execution and outstanding liquidity, which we are able to offer our clients via our Liquidity Provider Service GBE Prime. Besides this, traders can be sure that a personal support person with a great deal of profound expert knowledge will be at their side so that they can trade confidently with us.”

Of course, the needs of individual traders all need to be accommodated for among GBE brokers’ trading solutions. “Thanks to the numerous reviews on various rating portals and the social media channels, we are able to get an accurate picture of our customers and their needs, and subsequently incorporate these directly into an effective improvement of our service,” Rifat said. “Through our helpful account managers, we also have daily contact with our customers and can analyse their feedback to incorporate it into the development of our trading platforms.”

30 | Issue 24

Fortunately, the impact of the current pandemic has on the whole been favourable, as Ben explained. “Overall, brokers in the Forex and CFD industry have benefited from the coronavirus pandemic, as increased volatility has led to increased trading activity,” he said. “This in turn has led to higher volumes and turnover for brokers.

Economically, I don't personally know of any broker who did poor business during the pandemic, or would complain about a significant increase in trading volume in the industry or high volatility.

“Of course, there are also some negative effects - for example, the now missing personal client contact, which is currently only possible via online platforms, telephone or email. Also, active customer acquisition via trade fairs, which exists online but works much better face to face.”

Another effect has been the changes in the ways people are trading. “More people are trading since the beginning of the pandemic than before. The way they trade is as different as each person is,” Rifat confirmed. “Nevertheless, there is a trend towards speculative products because quick profits, as seen in the hype on the GameStop share or Tesla, attract many who don't just want to let their money lie around, but make it work for them. The advantage of CFD products is that only a fraction of the value of a share is needed to trade it, and thanks to the leverage effect, the profits - and thus also the losses - are much higher in relation to the capital invested than with funds, ETFs or shares.”

Ben-Florian Henke and Rifat Sayim’s Top 5 Tips for Traders Greed eats brain: Don't get carried away by your emotions. Trade more consciously and consider quality instead of quantity.

Goal management: Set your own goal that you want to achieve with the investment.

Set stop loss: This limits your losses to a certain amount and forms a lower limit for an open position. Do not always go all-in; sometimes less is more.

Risk management: The main task of sound risk management is to control risk. This is already achieved through skilful diversification to noncorrelated financial assets.

The trend is your friend: We don't recommend following every trend every time, but ignoring a trend completely will most certainly lead to failure. Trends can show you what is coming and so you can proactively adjust your trading.

Ben finished up by telling Wanda what we can expect to see from GBE brokers Ltd. over the next year. “Further solid growth, that is the overriding goal. To achieve this, we will strengthen our market presence and recruit new staff. In particular, we want to strengthen the media area and expand the social media presence with videos, news and webinars to reach customers and provide them with quality support for their daily trading.”

The New Normal: Holistic Consulting Award-Winning Newfields Consulting provides a holistic range of cutting-edge solutions to transform & evolve businesses across the Middle East, Europe & Africa Established amidst the unprecedented global slowdown in 2020, and based in Dubai International Financial Centre, Newfields group of companies has quickly made strides to position itself as a leading consulting group and managing office within the MEA region by offering a compelling complete suite of ‘principal-aligned’ services. As a innovative consulting practice formed by seasoned professionals with a passion for delivering meaningful and implementable change, Newfields Consulting was honoured with the award of Best New Corporate Advisory Firm – Middle East 2021 from Global Banking & Finance Review magazine.

Quickly recognised as a regional leader in its sectors of expertise, Newfields is one of the only management consulting firms specializing in comprehensive organizational transformation, digitalisation, adoption of technology, real estate and hospitality within the world-class professional district of the Dubai International Financial Centre. What differentiates Newfields in the market is the firm’s defined perspective; as principals themselves owning and managing their own portfolio of investments the partners can leverage their expertise to provide principal-focused consulting services to their clients.

Newfields manages HFA Group of companies – an ambitious real estate development company which sets out to help resolve an important and ubiquitous problem across Africa – the lack of good-quality, affordable housing on a mass scale. That initiative and the importance of the objectives, with the vision and substantial achievements to date has also been recognised, giving HFA Group its first prestigious award – Best New Residential Real Estate Developer – Africa 2021 from Global Banking & Finance Review magazine.

Professional Management Consulting Services with World-Class Results www.newfieldsgroup.com enquiries@newfieldsgroup.com T: +971 4 343 4001

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2021

Matt Phillips VP, Head of Financial Services UK and Ireland Diebold Nixdorf

FINANCE

International Women’s Day: Eliminating gender bias in finance The disruption caused by the pandemic has driven a major shift to online and digital platforms.

Our world was already becoming increasingly interconnected, but over the past year this shift has been dramatically accelerated, creating vast amounts of data around our daily banking habits.

Artificial Intelligence (AI) and Machine Learning (ML) have given banks and financial institutions critical capabilities to act instantaneously in today’s fastpaced digital world. Not so long ago, it would have seemed mind-boggling to many people that these digital tools would be able to detect suspicious, potentially fraudulent activity in enormous amount of data in real-time.

However, while these tools are exceptional for pattern recognition in big data and automating decision making such as detecting fraudulent activity and subsequently implementing additional security measures, other tasks utilising the technologies have raised concerns. For example, in 2019 Apple’s credit card was labelled as ‘sexist’ when it was revealed that the algorithms used to determine credit limits were biased against women. In one case, Steve Wozniak, co-founder of Apple, was offered almost ten times the amount that his wife was.

This demonstrates that, while AI and ML tools can be cost-effective and greatly increase operational efficiencies, there’s still more work to be done to ensure technology doesn’t discriminate against certain minority groups such as women. To begin to understand how we can improve the use of AI and ML in finance, we must learn from past examples in the industry as well as wider society.

34 | Issue 24

Instances of bias technology in society AI and ML technology already play major roles in business as well as wider society, and their usage is predicted to continue growing over the coming decade. As adoption increases, there needs to be a greater focus on minimising the risk of discrimination and bias as effectively as possible.

The problem right now is that AI and ML models get fed massive data which could be biased in the first place, because the data may not be a representative sample of the real world, or it simply captures biases in our society. ML models are capable of recognising patterns in the data including the biases, and therefore discriminating against a specific group of people because of their gender.

This also applies to factors such as age, economic background and race. For example, universities using AI technology for candidate screening may adversely select prospective students based on their personal information such as race, hometown, household income. Similar algorithmic biases may also present in processing job applications.

AI and ML algorithms don’t understand what discrimination is, so organisations need to be aware about the potential AI biases and develop a strategy to detect and mitigate their ability to do so, or to better understand why they make certain decisions based on data. Gaining this understanding will allow banks and FIs to create better models that are more capable of eliminating biases in AI and ML technologies.

FINANCE

Issue 24 | 35

FINANCE

Improving AI technologies to shape an equal future To begin to create a fair and equal future using AI and ML technologies, we need to establish an understanding of why an AI tool makes a certain decision. Why did Apple’s credit card algorithm offer a woman less credit than a man, even when both of their assets and credit history were the same? Organisations automating their operations using these technologies require a transparent and accountable way of ensuring that cases of AI biases which could potentially lead to discrimination are swiftly identified and dealt with.

Work has begun on explainable AI (XAI) models to help shed light into the decision making processes of such algorithms. Some organisations are already working towards this type of technology. In finance, gaining this understanding will allow banks and FIs to identify potential causes of discrimination such as gender bias.

36 | Issue 24

AI and ML technologies certainly can cut costs and enhance operational efficiency, but there still needs to be a human element in these processes to ensure that no one is at a disadvantage because of their gender, or any other identifiable characteristic.

Regulators tend to lag behind issuing legislation for such innovative technologies, but it’s quickly becoming apparent that a legal framework is needed to guide the real life application of AI and ML technologies. Since they are already being widely used across different sectors, it’s likely to be something that we’ll see governments and industry bodies deal with in the forseeable future. In the meantime, as an industry it’ll be important to continue to collaborate with both private and public sector organisations to create a transparent market and a fair society for all.

Sharon Lee Research and Innovation Manager Cambridge Innovation Centre, OneSpan

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TECHNOLOGY

Hybrid Cloud Security in the Financial Services Sector

Enterprise Cloud Index Report from Nutanix. The report also found that 43% of financial services companies plan to increase their investment in private cloud over the next year. That figure is 10% higher than the global average (33%), which indicates that private cloud adoption is a necessity for creating a modern hybrid cloud.

Like most other industries, the financial services sector had to make the sudden and widespread transition to remote work last year. Correspondingly, digital services became more important than ever. This, of course, brought on new opportunities for cybercriminals to exploit weak points in the security infrastructure of financial institutions to gain access to highly targeted and lucrative data. These threat landscape trends aren’t going away in 2021, and that means CISOs need to take a hard look at their strategies to identify any potential gaps.

to see an increased reliance on the cloud as digital services continue, maintaining visibility and control across their cloud, on-prem and hybrid environments will be pivotal.

While a hybrid cloud or multi-cloud approach does offer a certain number of advantages, this approach also comes with its own set of security considerations. Securing a multi-cloud/ hybrid cloud environment requires a new approach, one in which the convergence of networking and security can play a key role.

There is some important data that organizations prefer to keep onpremises, and hybrid environments make this possible. Hybrid cloud allows them to maintain full control over sensitive assets, while also taking full advantage of the scalability and agility that the cloud provides. However, as organizations become more hybrid and distributed, their security needs to be able to span across all environments.

Because the financial services industry is such a highly prized target for cybercriminals, financial institutions must consider agile, flexible solutions to enable IT and security to scale and adapt without compromising security and performance. Since we expect

The rise of hybrid and multicloud strategies

Securing the hybrid cloud

Adoption of hybrid cloud is expected to increase by 39% over the next five years, driven largely by the COVID-19 pandemic, according to the third annual

The above-mentioned survey found that security concerns are driving private cloud adoption in particular, with financial services ranking security/compliance/

38 | Issue 24

TECHNOLOGY

privacy as the most concerning (62%) when running applications within public cloud solutions.

With a combination of private cloud services, a public cloud and on-premises infrastructure—all orchestrated to work together as seamlessly as possible—hybrid cloud environments provide for greater flexibility. However, a hybrid cloud that uses on-premises data centers and public cloud platforms requires rigorous security management.

Security must span all clouds. It needs to be consistent and universal across an enterprise’s infrastructure, from branch offices and data centers to multiple public clouds. Anything less presents gaps in visibility and control that threat actors will target.

Key components of a hybrid cloud security strategy for FSI A hybrid cloud that uses on-premises data centers and public cloud platforms requires rigorous security management.

An effective security solution purposebuilt for a hybrid cloud infrastructure should include: •

Site-to-site VPN connectivity to migrate workloads

•

Auto-scale capabilities for network security and capacity

•

Centralized management for automatic provisioning

•

Full transparency and control for compliance governance

•

Segmentation of persistent connections to deliver end-toend security

Security must be integrated • Multiple disadvantages arise for organizations that lack integrated security. Vulnerabilities are not patched and both misconfigured devices and malicious behavior go undetected.

Many applications and workflows now span several environments in a single transaction, and security needs to be consistently applied end to end – from your WAN edge infrastructure like SDWAN to your LAN connections to your hybrid cloud environments.

Cybercriminals know all about such vulnerabilities. They also know that a comprehensive security strategy often lags behind network expansion in many organizations. But these organizations don’t need to sacrifice security to maximize agility and enhance performance among these interconnected edges – all of these elements can and should be realized.

A secure cloud experience Last year’s rush to remote work enabled financial service organizations to survive and keep serving customers, but it also opened many vectors for malicious actors to potentially sneak in through. They will continue to exploit these opportunities until financial institutions erect the barriers appropriate to today’s circumstances.

More and more, that looks like hybrid and multi-cloud approaches that enable organizations to keep some data on-premises as needed. But this only works if security is integrated into the cloud strategy. Make sure your security plan includes the elements noted above so you can continue to serve customers with the highest assurance of data safety.

Renee Tarun Deputy CISO Fortinet

Renee Tarun is Deputy CISO at Fortinet. She is focused on enterprise security, compliance and governance, and product security. She is also co-author to the book, Cyber Safe. Renee joined Fortinet as the Vice President, Information Security in early 2017. Immediately prior to joining Fortinet, she served as Special Assistant to the Director, National Security Agency (NSA), for Cyber and Director of NSA’s Cyber Task Force, in which she advanced NSA’s execution of its cybersecurity and cyber-related missions by acquiring, investing and overseeing resources; defining and integrating mission capabilities; and shaping agency strategy and nationallevel policy.

Issue 24 | 39

FINTECH

The future of fintech: Forging ahead with digital transformation

As we all begin to look beyond the COVID-19 pandemic and towards what we hope will be a full economic recovery, the Banking and Financial Services (BFS) sector in the UK and Ireland has reason to be cautiously optimistic about its immediate future.

Even before the pandemic, the BFS industry was already experiencing significant transformation, led by changing customer expectations, increased regulation, increased competition from new entrants, and significant advancements to technology.

The events of 2020 forced banks and financial institutions to accelerate their digital transformation projects, leaving many to struggle with developing and executing a coherent transformation strategy. New approaches have been key in maintaining operational resilience and reaching customers.

For example, we have seen banks use digital tools and processes to fill the void of branches, offices, and call centres created by restrictions associated with the COVID-19 pandemic. Contactless payments have also dramatically increased as consumers limit contact in stores and shift towards online shopping.

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Meanwhile, hundreds of thousands of BFS professionals transformed their ways of working by adopting new virtual work practices—literally overnight—which may ultimately trigger a fundamental rethink in how banks use brick-and-mortar sites and offices from now on.

This is all just the start. What is clear is that there is no going back—instead we expect to see these trends develop further. Here’s a taste of how:

From cloud to multi-cloud The days of banks lumbering on legacy systems are long gone. A significant majority of financial institutions have already integrated cloud solutions.

However, they are now realising that cloud migration alone does not necessarily solve all problems.

One common issue is that financial institutions are selecting one cloud provider and sticking with it. As a result, they are inevitably experiencing limitations—the dependency on a single provider often means a lack of agility, high cost, and sub-par performance, along with risk and compliance challenges. To counter this, many BFS businesses are now looking to adopt a multi-cloud strategy.

For many BFS businesses, cloud retains enormous potential to transform and underpin the sector, but this is only possible through a multi-cloud approach. Multi-cloud allows banks to operate in a mixed economy—taking the best parts of various cloud offerings to suit their needs. This approach requires skills in strategic deployment and governance of cloud systems.

Too often, the extraction risk from legacy platforms is making it either financially crippling or operationally unfeasible to take the desired course of action. One positive approach would be to introduce an interoperability standard, where the way in which a cloud platform is set up does not then preclude switching providers at a later stage.

Staying secure As tech usage increases in a sensitive data-heavy sector, the everlasting issue of risk and fincrime exposure for financial institutions remains. In some ways, this directly links to cloud deployment, as security measures need to be the starting point of any cloud modernisation projects and must not be viewed as something that gets layered on top. In fact, the UK’s Financial Conduct Authority recently

FINTECH

issued a letter to retail banks’ CEOs in support of a stronger focus on implementing technology change, including cloud transformation and the growing use of AI and analytics.

For banks to secure their operations, multicloud can be one solution—ensuring they are using the very best technology available from all their providers. But it is crucial that multicloud is prioritised as early as possible and integrated properly.

Banks can also improve their general approach to security. When their customers are exploited, they absorb the cost and compensate them, which is a positive on the surface but also means the root cause of fincrime often is not fully investigated or resolved—something the regulator might start to look at, demanding more proactivity in preventing threats. This is a where a ‘utility banking’ solution could add huge value. As banks spend more on developing their own ‘monoline’ defences, the case for an industry utility becomes more compelling. For example, fraud monitoring would aggregate data at an industry level and enable

shared infrastructure costs to help institutions remain one step ahead of fraudsters, both in detection and prevention along the chain.

The next step towards making this a reality is that banks need to prioritise using the vast amount of data available to them to identify fraud pattern— and even predict them. Through analytics, they can more accurately identify when financial crime is happening in real-time, understand the patterns so that it can be prevented, and customers can be better protected.

Technology companies flex their muscles The popular narrative over the last decade has surrounded the threat fintech poses to the traditional major players in the BFS sector, and how these agile and innovative newcomers—the most prominent being the likes of Revolut, Monzo, and Starling—will disrupt the status quo. While these companies have made strides, they have carved out their own place within the banking ecosystem rather than supplanting the big banks.

Issue 24 | 41

FINTECH

Instead, global technology companies are well positioned to challenge the sector due to their ability to combine open banking with new payment guidelines coming across the UK and Europe, ultimately giving them the opportunity to redefine how consumers pay for things. They already have global customer bases and do not need the major banks’ infrastructure or capital, eliminating the competitive edge the banks currently have over the smaller fintech upstarts.

Alongside the competition from large technology companies is the concern that peer-to-peer payments will accelerate the advance they have made, allowing everyone to send money via smartphones to a known contact without even leaving a messaging app or logging into our banks. Because tech is driving and enabling these advances, it stands to reason that powerful technology companies, rather than banks, are likely to be best placed to benefit. The expectation is that a payments war is looming —and the global reach and power of Big Tech poses a serious challenge to the sector.

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The industry is therefore watching anxiously for technology companies to make their next move, and this year could see this sector at something of a crossroads, as it has been with fintech: forced to decide whether to ignore the threat or partner with it, as acquisition is not an option given the value and clout that some technology companies bring.

Data and trust Customers expect banks to be doing better than they currently are at predicting and responding to their needs.

The challenge banks face revolves around their inadequacy using their existing data to their advantage. For example, analytics can now do far more in defining problems and underwriting loans, foreseeing sectors where disruption may occur and understanding why—and, crucially, which products or services customers require next.

However, a fundamental user experience issue occurs when people feel like their bank does not really know them. This is not helped by clumsy approaches from banks such as trying to push services a customer has already signed up for, or asking for basic information long-standing customers have already supplied.

This in turn makes them less likely to share more personal data and insights, which prevents banks from making improvements; it is also the reason challenger banks and apps, with more demonstrable benefits for the customer in how data is used, engender greater engagement and acceptance.

On the surface, trust would not necessarily be an area where banks should be as a disadvantage when compared to Big Tech, for example.

However, the major tech players offer such a convenient and intuitive service

FINTECH

that people do not question the data they agree to share. Their platforms have been designed to prioritise the customer experience, not their own needs, which is the opposite way round for many BFS institutions.

Banks need to adopt a similar approach to providing a convenient, essential service. They need to use existing data better to evolve their products to be more personalised and userfriendly. In doing so, they will create an experience that makes those users more comfortable sharing more data, in turn improving the overall product.

The return of outsourcing An ongoing frustration within the BFS sector is its inability to deploy the latest technology and fully utilise the wealth of data it has at its disposal, whether to improve payments, personalise customer experience, or just simplify internal processes.

For many companies, the solution is in finding the right talent. Over the last few years banks have sought the expertise of data scientists to join their teams, but unfortunately in many cases have been unable to have significant impact: either personnel are not good enough or they are poorly resourced and working with limited and badly organised datasets.

Moving forward, we expect to see banks adopting a smarter approach to outsourcing, especially in their endeavours to maximise the use of AI and data analytics, and a different

approach to extracting value from talent. This may include co-sourcing specialist staff, which can help banks to spread some of the risk and investment cost while benefiting from improved external training. It may also provide a more attractive proposition for the top AI talent who may usually be hesitant to join a single in-house team when they are in demand across all sectors.

However, the regulator is scrutinising these arrangements closely. Banks are the regulated entity, not the service provider, and tough measures are being applied for failures by service providers that cause breaches. Co-sourcing, rather than outsourcing altogether, may prove to be a good way to mitigate some of these concerns. Consultancies, as well as collaborations, will therefore become more attractive, and in turn will help banks to access better skills in the crucial digital battleground of data and AI.

Andrew Warren Head of Banking and Financial Services UK and Ireland, Cognizant

The after-effects of a year of such upheaval will be felt for years to come, but the BFS sector can in many regards approach its future with optimism, having been spurred into quick improvements it might otherwise have waited longer to make.

Nevertheless, more can still be done to improve digital operations across the industry. Most encouraging of all, these solutions are already available and beginning to be deployed, positive effects both internally and by customers. Now is the time to continue these improvements and ensure the sector stays ahead of any future challenges.

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INTERVIEW

OTP Bank Ukraine: A Conversation with CEO Volodymyr Mudryi OTP Bank has been represented in the Ukrainian market since 1998, and is the recognised leader of Ukraine’s financial sector. Wanda Rich, the editor of Global Banking & Finance Review, recently spoke with Volodymyr Mudryi to discuss customer relations, product development, challenges within the crucial Agri sector and how OTP Bank is tackling the changing environment following the impact of COVID-19.

Volodymyr began by telling Wanda about the initiatives that OTP Bank has implemented that he feels most contribute to its success. “Any real market leader is to have a clear competitive advantage for its actual and potential clientele,” he said. “Our core advantage is deep, long expertise in lending processes, so we provide both standard and specific loans for special target groups of private individuals or their separate need satisfaction. This includes plenty of car loans, cash loans, different consumer loans, loans for new construction, mortgages and others.

“We do this better, faster and more efficiently than our competitors.

Moreover, today we have the biggest range of retail loans and other products in the Ukrainian market among all the retail banks. That reflects our approach that a bank, in its classical understanding, has to be a core loan supplier to both household consumers and a country's economy in general. In the future, we plan to implement a mobile application focused on private individuals’ lending in the simplest and fastest way.”

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With Agri-Business being such a core sector in Ukraine, the challenges Agri customers face are varied. “It’s one of the most dynamic and export-oriented sectors in Ukraine,” Volodymyr said.

“Many banks strive for leadership achievement and loan share growth in this sector. However, there are plenty of natural challenges quite common to Agri-Business, and probably everywhere to some extent. They include the risk of further yield loss or damage, collateral safety, prices volatility and exchange rate risks. The latest negatively impacted the EBITDA of Ukrainian Agri companies in 2019-2020 since they focused on export and faced losses, due to both UAH devaluation and revaluation, depending on the season.

“The 2020 pandemic strengthened some of these issues significantly: prices volatility increased the prices of core Ukrainian products like oil, and sugar fell on the global market. Surely, that could not help but harm AgriBusiness' financial standing and its borrowers' status.”

In light of these challenges, OTP Bank is supporting the growth of AgriBusiness customers by opening up financial opportunities. “In 2020, OTP Bank continued to develop a unique and innovative local market project launched in 2017 — a separate unit for AgriBusiness customers, which operates as a conveying unit,” Volodymyr told Wanda.

“This project aims to provide small- and mid-sized farmers and other Agri sector enterprises with different funding options, tariff bundles and other products adapted to their specific needs and features. In particular, the farmers can get funding

just against warehouse receipts within nine days. Owing to this, OTP Bank has become a leader among all the creditors who work with this tool; the whole volume of warehouse receipts issued in OTP Bank's favour reached 24% of all such receipts issued in Ukraine.

“On top of that, in 2020 the bank entered proactive cooperation with different partners and concluded about 30 new partnership programmes with leading suppliers to Agri-Business,” he went on.

“Among them are Binfield, AgriPartner, WexlerAgro, UPG, Landtex, Timak Agro and other famous companies. Besides, the cooperation conditions with the actual partners and the leaders of the plant protection products market, e.g. Syngenta, UkraVit, АlfaSmartAgro and UkrAgroCom, were improved considerably. These programmes allowed us to fund our clients with a rate starting from 0.01% p.a.

“As a result, in 2020 the OTP Bank's loan volume to Agri-Business almost reached 45% of the overall bank's loan volume, while the whole loan volume of OTP Bank Agri Factory covered 360 borrowers - Agri companies.”

Unsurprisingly, the bank has had to take measures to adapt to the current pandemic. “Our first and core goal was to protect our employees and the clientele from COVID-19 contamination as much as possible,” Volodymyr explained. “First, we implemented the possibility of remote work for our employees, flexible working hours and free COVID tests. Then during 2020, the bank implemented a range of additional online services, including various

INTERVIEW

applications, statement requests, instant payments and others via a mobile application to let our clients avoid visiting the bank's branches. For the business customers who suffered a lot from the quarantine restrictions, especially trade, HORECA and tourism, the bank proposed a specific loans restructuring programme to support them in such a completely different environment. Despite this, the quarantine restrictions and profitability decrease caused business activity to stop in some sectors.

“OTP Bank continued to provide loans both to legal entities and private individuals. Notably, due to the macroeconomic situation, the National Bank of Ukraine decreased the base rate to its historical minimum, down to 6% p.a. Thus, we managed to make our UAH loans to the business segment as affordable as possible, which was highly significant to our clientele in the current environment.”

As one of the bank’s top priorities, building strong customer relationships maintains considerable focus with OTP Bank. “Our bank's strategic vision is ‘easy to deal with,’ which we try to implement in our activities, including product development and client relations management,” he said. “We constantly improve business processes to meet customers' needs and wants, which occur depending on the market and economic circumstances. For this purpose, regular collection of feedback from our customers was implemented in 2020. On top of this, we have launched a CRM system specifically for our premium clientele, which allowed us to take the quality of our services and client relations up a notch.”

Customer relations goes hand-in-hand with product development at OTP Bank, and is the driver behind much of its innovation. “As I have already mentioned, OTP Bank has the biggest range of specific products, services and special offers, especially in loans, for both private individuals and business customers in the Ukrainian market,” Volodymyr stated. “The main driver for the development and ‘go-live’ is the clientele and its needs, specific requests, financial behaviour and status. When we develop products we analyse these needs, take customer opinion polls and test our solution. That is the fastest way to become familiar with a customer.

“It is also an opportunity to make tailored offers under standard products if corresponding solutions for massive sales are inexpedient or as yet unneeded.

Thus, the greatest value that technology brings to us is the possibility to make highly tailored offers to our clients easily, online and at the correct time.”

Volodymyr Mudryi CEO OTP Bank Ukraine

Issue 24 | 45

BUSINESS

Protecting a shareholder from unfair prejudice.

Shareholders who may have previously been less happy with seeing their company build up its own assets to the detriment of paying dividends are more likely now to be grateful that the company’s financial director is able to reach for the life-jacket (in the form of a “fortress balance sheet”) to help the company weather the financial storm caused by the Covid pandemic.

Shareholder activism has, many commentators concur, been quieted by the pandemic, but that activism is quiescent, with a return to normality expected once “normality” returns.

Shareholder activism is usually driven by a desire to see a change in the way a company is managed or operated, seeking financial or non-financial outcomes as a result. The financial outcome is generally seeking to cut costs and the non-financial outcome is generally based on ethical grounds.

The exercise of a shareholder’s power can be persuasive in nature (for example, a small shareholding group with compellingly persuasive arguments) or based on a sufficiently large stake in the company’s share to carry the day at general meetings, requiring the company’s management to act in accordance with the shareholder’s wishes.

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An activist shareholder is more likely to be found involved in publicly traded companies. A shareholder in a private company is more likely to be bound by a shareholders’ agreement, or be sufficiently involved in the management of the company that it does not need to use its sway or holding to push through changes or policies that the management are otherwise unwilling to adopt.

What then, of a minority shareholder in a private company – what can he do if he feels that his position as minority shareholder is being disregarded to the detriment of himself or other shareholders? Activism, which in this instance is the art of persuasion, may not be enough to bring about the desired resolution.

Shares in a company may be of more than one class, and different rights can attach to different classes of share.

The different rights which attach to a share will have been decided upon by the company, through shareholder meetings and enshrined in the company’s articles of association. The shareholders are largely free to arrange how different share categories are to be arranged, what rights are allocated

to the different categories and how those rights are entitled to be used.

A company’s articles of association will usually set out the rules for shareholders and its management alike in determining powers and rights.

In addition, statute has an important role to play, usually under the Companies Act 2006 (“CA 06”), providing a clear framework which sets out the requirements for, by way of example, if there is to be a redenomination of shares, an increase or reduction in share capital, a share buy-back or how a variation in class rights must be dealt with if this is not specified in a company’s own articles of association. The CA 06 sets out clear rules on when a distribution to shareholders in the form of dividends can be made – in short there must be distributable profits or reserves, and the distribution must be justified by reference to relevant accounts.

In a smaller company, the director shareholders may be recompensed by salary, and dividends may not be distributed. This could leave a nondirector shareholder without a share of the company’s profits. The value of the shareholding would be valued by reference to the company’s overall financial health.

BUSINESS

A dispute over the lack of a dividend is one of the many reasons why a minority shareholder may call the CA 06 to their aid, in seeking court assistance if they can show that the affairs of the company are being run in such a way as to cause unfair prejudice to the interests of members generally or them specifically in their capacity as shareholder.

Allegations of unfair prejudice may arise from many and varied issues, the commonest being based on exclusion from management of a company, excessive remuneration of directors, conflicts of interest between a director and the company, or serious mismanagement of the company.

The prejudice need not necessarily cause financial harm, but it is essential that harm of some sort has been done. What an aggrieved shareholder sees as prejudicial

conduct against him is not the decider. It is for the court to determine, on an objective basis, whether harm has occurred – so in an example, the shares of a subsidiary company were sold, against a minority shareholder’s wishes, but as the shares were sold for the best price no actual harm was caused, and no remedy granted by the court. There is a continuing and constantly developing body of case law that interprets the unfair prejudice provisions in the CA 06, applying them to the facts of each case. Recent cases include: An unsuccessful attempt to obtain a downward adjustment of the value of a company to reflect changes wrought on the company by Covid, after the court had already determined a (pre-Covid) valuation date for the shares (Dinglis v Dinglis [2020] EWHC 1363 (Ch)).

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BUSINESS

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An unsuccessful petition of alleged unfair prejudice arising from a majority shareholder pushing through a change to the articles of association, to deal with the valuation of shares on a “fair value” basis where the minority shareholder was obliged to sell his shares. There was no improper conduct in the way in which the changes to the articles were brought about, and “fair value” had the usually understood meaning of the price to be paid on the sale of shares between a willing buyer and seller, with a discount being applied to take into account that the shares being valued were a minority holding (Re Euro Accessories Ltd [2021] EWHC 47 (Ch)).

A family in dispute with various family businesses, where an allegation of unfair prejudice arose by the director/shareholder who had been the driving force in the operations for some time, but challenged steps taken by other shareholders using pre-existing constitutional company rules to limit the powers on that director, and no finding could be made of an equitable entitlement to manage the businesses despite the company’s constitution (Loveridge v Loveridge [2020] EWCA Civ 1104).

A remedy for unfair prejudice is an order winding up the company on just and equitable grounds. An application for such an order was refused, even though there was agreement between the parties that the relationship of mutual trust and confidence between shareholders in a quasi-partnership company, and the petitioner was unable to rely on his own misconduct (Re Paramount Powers (UK) Ltd [2019] EWCA Civ 1644)

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There is no “one size fits all” solution to claims for unfair prejudice – each case is fact sensitive and if the court determines there has been unfair prejudice, the court will take into account proportionality of the issues and the impact of the curative effect of the remedy, including on the company itself, in deciding how the prejudiced shareholder is to be compensated. In general, the remedy is the buying-out of the minority shareholder, with the court setting the steps to be taken in obtaining expert valuation of the shares.

The court has very wide powers and can make such order as it thinks fit. The company’s money must not be used by the majority shareholders to defend the claim unless the court can be convinced that it is both expedient and necessary, and in the interests of the company, for this to occur.

Sylvia Yendall Senior Associate BDB Pitmans

Given that many companies will be looking to shore up their financial position as the world welcomes in the “new normal”, managing directors and financial directors may start looking at weeding out shareholders that do not toe the (perceived) company line, or at those who do not put their weight behind a family business as they may be required to do. Accordingly, there is a growing potential for more shareholder disputes to arise, keeping the courts even busier.

Rick Munro Partner BDB Pitmans

TECHNOLOGY

Five technology challenges that are holding back legal innovation The “in house” Legal function has been arguably the most under-invested in department over many years in terms of IT spend, and has missed out on the benefits of available technology enablers. Yet, as an often-unrecognised consequence, so has the business the Legal function serves. Indeed, Legal has historically been viewed as a cost centre, despite the role it can play in business optimisation. As one general counsel of a major investment bank said recently during a legal transformation programme, “There is no “P” in the Legal P&L but there is an “L.”” get any work done online gawdo.com

regulation and the increasing cross-border considerations) – has to make a stronger case for investment than ever before.

Legal teams are at a tipping point. They know they need to take advantage of legal technology, but, as Damian Enskat, Programme Manager and Akber Datoo, CEO of D2 Legal Technology explain, there are five key challenges legal teams face when it comes to selecting legal technology software. The question is, how can these challenges be overcome to progress legal innovation? get any work done online gawdo.com Challenge One: Playing a different role

This approach has created a plethora of manual processes, physical documents – and haphazard software selections (often tactical solutions chosen on cost considerations only) leading to manual and often broken processes with a negative resultant impact on risk, cost and the service provided to internal and external customers. Furthermore, it has simply ignored the business value and optimisation an in-house legal function can provide.

The flipside is that there are often huge potential benefits that can be relatively easily achieved through the use of LegalTech, be it e-Billing or time-tracker systems, document automation, clause libraries, knowledge management, document storage or NLP/AI applications to extract data from legacy document portfolios. This, coupled with the drive for legal innovation, (recognising that the business processes in legal must now be scaled to address the complexity of

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Time to shed the naturally cautious legal perspective and embrace change, including a programme leadership role.

Of all the business functions, the depth of knowledge and expertise of the legal function is almost unrivalled, however the level of cross-functional project delivery experience within the legal function may often be limited to the negotiation of supplier contracts which support these projects. Yet, legal transformation projects (many of which have a software selection component) require the legal team to play a different role on these projects entirely. get any work done online gawdo.com From supporting the software contract negotiations on programmes in other functions, senior members of the legal team now must become business leads of programmes which benefit the legal function itself. They are now at the heart

of defining and ensuring delivery of the business benefit of the programme. This means that cross-functional project experience becomes crucial as the legal business lead will need to mobilise stakeholders from not just within legal, but also IT, COO office, procurement, finance, risk, and front office and to fully engage with project teams if these initiatives are to succeed.

Challenge Two: Allocation of internal resources Not having the right change management expertise is truly a false economy. Not having a dedicated independent project manager, or accepting a “free” partial resource from the software vendor to manage the project are just some of the common paths to failure.

Due to the growth in digital transformation programmes in recent years, much of an organisation’s Capital Expenditure (CapEx) – and hence the most experienced Business Change, Procurement and IT professionals – have been diverted into those functions with greatest perceived transformation potential such as the Front Office, Risk and Finance.

This means that historically, legal transformation programmes have been allocated internal resources who have less experience than is required for the role either to save money or because the resources with sufficient levels of experience have been allocated elsewhere. This often

TECHNOLOGY

means that best practice approaches are not followed. Governance/oversight models are often not fully developed, leading to unclear roles and responsibilities and insufficient accountability for business and supplier teams.

Software providers often offer “free” partial resources to help to manage the selection. This can lead to sub-optimal decision making and a final solution which is too expensive and does not meet the needs of the legal function or deliver the intended business benefit.

Challenge Three: Access to software selection tools and templates Utilisation of best practice tools and templates to help the process is critical. Managing the intended business benefit of the project through the requirements gathering process, functional and technical specification documentation, through to implementation is vital for the project to be a success.

Due to the historic focus of corporate transformation programmes on other functions, legal teams may not have access to (or even be aware of the existence of) the best tools for the software selection exercise such as detailed selection plans, governance templates, requirements documentation, proof of concept methodology, Request for Proposal (RFP) documentation, self-calculating scoresheets, supplier briefing documents and commercial negotiation templates such as those which might support an iterative sealed bid. Where legal teams are able to source some of these tools from other departments with recent software selection experience, they may not know which ones should be prioritised for their selection and how these should be adapted to ensure success.

Correct use of software selection tools and templates means that legal will have the information they need to fully consider the options prior to purchase as opposed to feeling under pressure to accept the first available option.

Challenge Four: Future-proofing the software selection decision The LegalTech market is still maturing, and there is a dearth of standards that can be seen in more mature departments. Flexibility of the system is key and requirements should be introduced which build this into the decision-making.

Once approval for a software selection decision has been achieved, it is important to futureproof the choice of software as much as possible, as when new requirements emerge after the selection it may not be easy to adjust the software, change the decision and/or realign stakeholders for a new software selection process to begin. Future-proofing can be achieved by supplementing the current list of requirements with a small number of additional future requirements, which may already exist in other legal functions within peer companies from the same industry. Some requirements can be designed in a flexible manner such as introducing tables to allow users to “soft code” certain variables.

As legal teams may not know what these additional requirements might be or have an industry network through which these can be gathered, software selection decisions often become dated very quickly, meaning that opportunities may be missed for additional business value or additional costs to the organisation may be incurred.

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TECHNOLOGY

Challenge Five: The fragmented legal sector software market There is a wide range of software options available to legal teams ranging from choosing a small number of products from large software vendors to buying from smaller vendors and new market entrants and integrating these products together. Larger organisations may also have the option to build part of the solution themselves. Careful navigation of these options is critical so a comprehensive solution can be designed which meets the needs of the legal function.

The number of software products which target the typical legal requirements (document storage, legal agreement data management, data governance, workflow and document review systems) are numerous and often dominated by very large market players, and then a number of smaller companies and new market entrants – with very little in the middle. Larger organisations may also have the option to build part of the solution themselves. Whilst these software products can be combined in various

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different configurations to meet the needs of the legal function, it can be very difficult to find the right balance between software specialisation and enterprise-level features.

The number of possible permutations are huge and navigating these options without an in-depth knowledge of the market can lead to incorrect software product(s) being purchased (or developed), resulting in “regret spend” (non-refundable software licence fees being paid and substantial additional investment being required to rectify mistakes). It is important to choose a software provider which has a broader technology roadmap aligned to the vision and goals of the legal function.

is essential, rather than facing the consequences further down the line, so getting experts in early and seeking advice is the best place to start.

There have been far too many poorly executed or failed LegalTech initiatives – it is time to go back to the basics of change and transformation and think before you spend, so essential legal innovation can thrive to the benefit of the wider business.

Conclusion It’s time for in-house legal teams to raise a hand and ask for help. Yes, the legal software sector is saturated currently with multiple vendors vying for business, but this also means there are plenty of options to give legal teams the help they need to become far more effective and well positioned to manage risk. Getting a new legal innovation project off on the right foot

Akber Datoo CEO D2 Legal Technology

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