How London Achieved, And Maintained, Its Leadership In International Finance

Tom Groenfeldt

As a guide to the issues facing the City of London during Brexit, who could be better than Tony Norfield, a university Marxist-turned-City-trader now sporting a Ph.D. in economics from the University of London?

With 20 years of experience in dealing rooms at money center banks in London, he explains how finance concentrates power and profits in just a few financial centers, and London leads as an international center. As England and Europe prepare to set the terms of Brexit, Norfield’s historical perspective on how England has promoted finance is fascinating.

For fintech firms wondering if they should stay in London, follow the siren calls from Berlin, apply to the French Tech Ticket program, or look at Lisbon. Norfield has some history to offer: The City, with backing from both Labor and Conservative governments and the Bank of England, has adapted remarkably well to change. It shifted from lending to acting as an intermediary. It used the Big Bang to bring in foreign competition and capital. It shifted from sterling to doing business in the U.S. dollar and dozens of other currencies. And it has welcomed Arab capital with 22 Islamic banks, more than all other western countries combined.

Writing before the Brexit referendum, Norfield predicted that Europe might act against the financial domination of the UK and U.S., and that does appear, sporadically, to be happening. French President François Hollande recently called for a hard Brexit to discourage other countries from following the UK’s example, but the erratic nature of French politics confirms Norfield’s emphasis on the value arising from the security and centuries-long stability of the British state. Unlike Paris, London did not erupt in 1968 and it hasn’t experienced a leadership assassination attempt like the one on DeGaulle. (Norfield kindly omits comparisons with the U.S. on this topic.)

London,which holds a substantial lead over New York as an international financial center, has a geographical advantage, sitting in a time zone between Asia and the U.S., so it can trade with both during regular working hours. It also enjoys a regulatory climate that has long favored finance by allowing its banks, for example, to work with communist countries during the Cold War.

The author occasionally mentions his personal experience at some key points in finance. He was working at a Japanese bank when that country’s surging economy imploded, and he was at ABN AMRO when it moved its securities business to London, but left FX in Amsterdam. A stint in Sydney showed him Australia’s time-zone disadvantage, and he was in regular chats with a Bundesbank officer in London when Britain pulled out of the Exchange Rate Mechanism (ERM).

Norfield uses the term imperialism to describe the role of financial power centers.

The concentration of financial power is a little startling. In 2013, Norfield writes, 75% of the top 100 international corporations were in just six countries — the U.S., UK, France, Germany, Japan, and Switzerland.

“All forms of international finance, and even commerce, can also be seen as parasitic on the value created elsewhere,” he wrote. Countries with advanced finance find customers in countries, rich or poor, with less sophisticated finance. In 2013, the U.S. had a net gain of $209 billion from its  foreign investments, equivalent to receiving the entire economic output of the Czech Republic.

Finance is intertwined with politics, with corporations and with competition between the U.S. and UK for primacy. American banking laws have sometimes handicapped the U.S. financial services industry. Even as the U.S. was trying to gain access to the British Empire and trade with Commonwealth countries, American restrictions on foreign banking clashed with its large corporations which were seeking international expansion.

One result was the euromarket, which grew from $1 billion in 1960 to $1,050 billion by 1983, drawing European finance houses to expand their London operations. German banks, Norfield notes, do most of their securities business in London. U.S. banks also expanded London offices because they could serve international corporate clients with funding that was not so readily, or cheaply, available in the U.S. By 1971 the eurodollar market was equal to the money supply of France, and London had attracted 160 banks from 48 countries.

Staying outside the euro has also been a key to London’s position. British political leaders saw in 1976 and 1992 that inside Europe’s monetary system, it would be constrained by other states, particularly Germany.

Norfield believes global developments, often first visible in the financial sphere, can destabilize relationships between major powers.

It is likely that finance will continue to have the support of the British government to help it adjust.

“Above all, there was more consistent promotion of international financial business by the British authorities, which included an implicit promise not to distract financial interests with any changes in legislation,” he wrote.

Fintech firms and banks based in London might find Britain’s consistency encouraging. For updates, check Norfield’s blogs about Brexit and other finance topics. And for regular reports on the status of international finance centers, see Z/YEN’s Global Financial Centres Index.

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About Tom Groenfeldt

Tom Groenfeldt is a freelance reporter who focuses largely on finance and technology including trading, risk, back-office systems, big data, analytics, retail banking, international banking, and e-commerce. His work appears in several publications, including Forbes.com in the U.S. and Banking Technology in London. In 2015, he was named to the "FinServ 25," the top 25 top global influencers in banking, by The Financial Brand.

How To Mitigate Foreign Corrupt Practice Act (FCPA) Risk In A Global Business Landscape

Payton Burger

The term “bribery” often conjures up thoughts of large sums of money being used to sway powerful officials one way or another. But when it comes to the rules and regulations set forth by the Foreign Corrupt Practice Act (FCPA), the terms “bribery” and “government officials” apply to a wide spectrum of actions and personnel. How can organizations ensure that they are not unintentionally breaking any rules and putting their business at risk of an FCPA-related audit?

In today’s fast-paced world, having a global presence is essential to stay competitive, but that leaves you exposed to more regulatory risks and fraud opportunities. Below, we’ll review the processes, procedures, and tools you should have in place to help mitigate these risks and ensure compliance with FCPA guidelines.

Understanding the ambiguity

Anti-bribery provisions state that an organization cannot give “anything of value” to a foreign official to obtain or retain business in their market. While this seems straightforward, enforcement actions are often based on allegations around leisure activities such as travel, meals, gifts, and entertainment, all of which are typically legal and socially acceptable. However, what might appear to be innocent exchanges are viewed as bribery to the FCPA.

And if that is not vague enough, the definition of a “government official” goes beyond someone who works directly for the government, and includes employees of government departments or agencies, state-owned enterprises (SOES), healthcare providers, and even third-party consultants helping with the planning of a hospitality event.

So how can your organization navigate this ambiguity—especially as you grow and expand globally and domestically —and implement the right checks and balances to mitigate risk related to the FCPA?

5 steps for FCPA compliance

  1. Understand your business network. The first step in protecting against the inadvertent bribery of a government official is ensuring that the employees engaging in cross-border business dealings have a firm understanding of all points of contact they will be directly or indirectly working with. In turn, leaders need to take a step back and consider how the organization works with various points of contact during the business process so they can more easily identify situations that may put them at risk of an FCPA violation.
  1. Implement the appropriate controls. The knowledge and expertise of your organization’s finance and compliance teams is imperative to successfully mitigating FCPA risk. Configuring expense systems with the appropriate workflows, attendee and expense types, conditional and custom fields, and requiring manager approval before “anything of value” is purchased is key to catching potential FCPA violations before they occur. Having these types of checks and balances in place also creates an audit trail with documentation that proves that your organization is doing its due diligence to prevent instances of bribery.
  1. Maintain clear and correct records. The FCPA also has provisions around financial books, record-keeping, and internal controls that put even more pressure on your financial teams. When it comes to your financial books and records, you must maintain reasonable detail that accurately and fairly reflects transactions surrounding foreign officials. Anything that is falsely represented or misleading can lead to an enforcement action. In addition, internal controls must be in place, meaning that you must be able to provide reasonable assurance that the transactions are properly authorized, recorded, and accounted for.
  1. Implement a comprehensive audit process. While these provisions are broad, creating an internal system that includes effective oversight and reporting capabilities will help maintain FCPA compliance. Build an audit process that has rules to account for regulatory violations. Consider these approaches:

– Audit receipt types and itemizations

– Audit cash expenses

– Conduct random checks

– Identify location and type of expense and where

– Verify employment and look for patterns of behavior

– Use a third-party auditor to maintain credibility and help your finance teams scale

  1. Proactively educate around clear policies. While preventative measures and audits are essential, don’t underestimate the importance of proactive education. Ensure that your finance team is properly trained and has a firm understanding of what constitutes both bribery and foreign officials. In addition, build clear, easy-to-understand organization-wide policies around what is and is not permitted when it comes to working with foreign officials to ensure that everyone is on the same page and maintains compliance.

Knowledge is key

Maintaining FCPA compliance boils down to having the proper knowledge surrounding what the FCPA considers bribery to a foreign official, and building the appropriate policies to combat that. Ensuring that you have the right knowledge, systems, and tools in place gives your finance team, and organization, what they need to be successful in reducing FCPA risk.

Learn about how the Concur can help your company monitor for compliance with the FCPA and other anti-corruption legislation here.

Learn how organizations are gaining instant financial insights and using them to make better decisions—both now and in the future. Register now for 2017 Financial Excellence Forum, Oct. 10-11 in New York City.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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Payton Burger

About Payton Burger

Payton Burger is Client Marketing Manager for Concur.

School’s Back! Do You Have The Right Skill Set For Dynamic Planning?

Brian Kalish

Part 7 in the Dynamic Planning Series

“Do I have the right skill set for FP&A in 2017 and beyond?” That is a question I am asked all the time, whether I’m in Kuala Lumpur, Montevideo, or San Francisco. The role of the modern FP&A professional has changed greatly over the past 20 years, but the change I have witnessed over the past five years has truly been amazing.

When I would add talent to my FP&A teams 10 years ago, what I wanted was a Jedi master in Excel who had a strong background in accounting. Those days are long gone, because the scope and scale of what our FP&A teams can actually accomplish, as far as planning, budgeting, and forecasting are concerned, have grown at an accelerating pace.

Due to advances that have occurred in the technology and tools available today, activities that we could only dream of accomplishing a few years ago are either possible right now or will be possible in the very near future. Gone are the days of scheduled (and instantly out-of-date) plans and static reporting. We now live in a world of dynamic planning and real-time reporting. We can incorporate our actuals, in real time, to be able to determine if we are on track to reach our goals and objectives and if not, to make changes to our activities. We now regularly incorporate integrated reporting into the normal course of our communications with our stakeholders.

Planning, budgeting, and forecasting 101: new curriculum

All of this change has created opportunities as well as challenges for today’s FP&A professional. While being able to utilize Excel is important (it’s never going away, folks), along with a strong understanding of accounting, those are merely table stakes in today’s world. The three key skill sets that today’s FP&A pro must possess are financial acumen, technology and communication fluency, and a keen insight into the business. A strong dose of curiosity is also critical to being a best-in-class FP&A professional.

Those FP&A professionals who are able to master these new technologies and tools that are coming down the pike will be the ones in the greatest demand. I hear from CFOs from around the world that they expect the amount of strategic work their FP&A teams will be doing to double over the next few years. The majority of these same CFOs believe they have the proper number of people in their FP&A teams. How do they expect to close this chasm between the expected increase in workload without a corresponding increase in headcount? The overwhelming response is technology.

The challenge for organizations will be to determine if they have the right people in place to maximize the ROI for their outlays of these new technologies and tools. Not to minimize my skill set, but you can give me the most advanced surgical devices available to mankind, and I can guarantee that you don’t want me operating on you. Similarly, for FP&A talent to succeed, they will need the flexibility and agility to learn, master, and leverage these new technologies into their organizations as they come online.

The knack to be able to explain our plans or tell a story about our budgets, forecasts, analyses, insights, and foresights to a wide array of audiences, is critical to the success of our organizations. When you enter into the world of dynamic planning, the importance of communications grows ten-fold, as organizations must be able to explain why change is necessary to achieve success.

In a future blog, I’ll expand upon my thoughts and ideas on the importance of understanding the business in order to maximize the value FP&A professionals can bring to our business partners as well as the company as a whole.

I hope to see you at the upcoming Financial Excellence Forum in New York City October 10–11. You can register here. We will be touching on these issues and much more.

To learn more about dynamic planning, read the whitepaper here.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | FacebookYouTube

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Brian Kalish

About Brian Kalish

Brian Kalish is founder and principal at Kalish Consulting. As a public speaker and writer addressing many of the most topical issues facing treasury and FP&A professionals today, he is passionately committed to building and connecting the global FP&A community. He hosts FP&A Roundtable meetings in North America, Europe, Asia, and South America. Brian is former executive director of the global FP&A Practice at AFP. He has over 20 years experience in finance, FP&A, treasury, and investor relations. Before joining AFP, he held a number of treasury and finance positions with the FHLB, Washington Mutual/JP Morgan, NRUCFC, Fifth Third Bank, and Fannie Mae. Brian attended Georgia Tech in Atlanta, GA for his undergraduate studies and the Pamplin College of Business at Virginia Tech for his graduate work. In 2014, Brian was awarded the Global Certified Corporate FP&A Professional designation.

Diving Deep Into Digital Experiences

Kai Goerlich

 

Google Cardboard VR goggles cost US$8
By 2019, immersive solutions
will be adopted in 20% of enterprise businesses
By 2025, the market for immersive hardware and software technology could be $182 billion
In 2017, Lowe’s launched
Holoroom How To VR DIY clinics

From Dipping a Toe to Fully Immersed

The first wave of virtual reality (VR) and augmented reality (AR) is here,

using smartphones, glasses, and goggles to place us in the middle of 360-degree digital environments or overlay digital artifacts on the physical world. Prototypes, pilot projects, and first movers have already emerged:

  • Guiding warehouse pickers, cargo loaders, and truck drivers with AR
  • Overlaying constantly updated blueprints, measurements, and other construction data on building sites in real time with AR
  • Building 3D machine prototypes in VR for virtual testing and maintenance planning
  • Exhibiting new appliances and fixtures in a VR mockup of the customer’s home
  • Teaching medicine with AR tools that overlay diagnostics and instructions on patients’ bodies

A Vast Sea of Possibilities

Immersive technologies leapt forward in spring 2017 with the introduction of three new products:

  • Nvidia’s Project Holodeck, which generates shared photorealistic VR environments
  • A cloud-based platform for industrial AR from Lenovo New Vision AR and Wikitude
  • A workspace and headset from Meta that lets users use their hands to interact with AR artifacts

The Truly Digital Workplace

New immersive experiences won’t simply be new tools for existing tasks. They promise to create entirely new ways of working.

VR avatars that look and sound like their owners will soon be able to meet in realistic virtual meeting spaces without requiring users to leave their desks or even their homes. With enough computing power and a smart-enough AI, we could soon let VR avatars act as our proxies while we’re doing other things—and (theoretically) do it well enough that no one can tell the difference.

We’ll need a way to signal when an avatar is being human driven in real time, when it’s on autopilot, and when it’s owned by a bot.


What Is Immersion?

A completely immersive experience that’s indistinguishable from real life is impossible given the current constraints on power, throughput, and battery life.

To make current digital experiences more convincing, we’ll need interactive sensors in objects and materials, more powerful infrastructure to create realistic images, and smarter interfaces to interpret and interact with data.

When everything around us is intelligent and interactive, every environment could have an AR overlay or VR presence, with use cases ranging from gaming to firefighting.

We could see a backlash touting the superiority of the unmediated physical world—but multisensory immersive experiences that we can navigate in 360-degree space will change what we consider “real.”


Download the executive brief Diving Deep Into Digital Experiences.


Read the full article Swimming in the Immersive Digital Experience.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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Jenny Dearborn: Soft Skills Will Be Essential for Future Careers

Jenny Dearborn

The Japanese culture has always shown a special reverence for its elderly. That’s why, in 1963, the government began a tradition of giving a silver dish, called a sakazuki, to each citizen who reached the age of 100 by Keiro no Hi (Respect for the Elders Day), which is celebrated on the third Monday of each September.

That first year, there were 153 recipients, according to The Japan Times. By 2016, the number had swelled to more than 65,000, and the dishes cost the already cash-strapped government more than US$2 million, Business Insider reports. Despite the country’s continued devotion to its seniors, the article continues, the government felt obliged to downgrade the finish of the dishes to silver plating to save money.

What tends to get lost in discussions about automation taking over jobs and Millennials taking over the workplace is the impact of increased longevity. In the future, people will need to be in the workforce much longer than they are today. Half of the people born in Japan today, for example, are predicted to live to 107, making their ancestors seem fragile, according to Lynda Gratton and Andrew Scott, professors at the London Business School and authors of The 100-Year Life: Living and Working in an Age of Longevity.

The End of the Three-Stage Career

Assuming that advances in healthcare continue, future generations in wealthier societies could be looking at careers lasting 65 or more years, rather than at the roughly 40 years for today’s 70-year-olds, write Gratton and Scott. The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

It will be replaced by a new model in which people continually learn new skills and shed old ones. Consider that today’s most in-demand occupations and specialties did not exist 10 years ago, according to The Future of Jobs, a report from the World Economic Forum.

And the pace of change is only going to accelerate. Sixty-five percent of children entering primary school today will ultimately end up working in jobs that don’t yet exist, the report notes.

Our current educational systems are not equipped to cope with this degree of change. For example, roughly half of the subject knowledge acquired during the first year of a four-year technical degree, such as computer science, is outdated by the time students graduate, the report continues.

Skills That Transcend the Job Market

Instead of treating post-secondary education as a jumping-off point for a specific career path, we may see a switch to a shorter school career that focuses more on skills that transcend a constantly shifting job market. Today, some of these skills, such as complex problem solving and critical thinking, are taught mostly in the context of broader disciplines, such as math or the humanities.

Other competencies that will become critically important in the future are currently treated as if they come naturally or over time with maturity or experience. We receive little, if any, formal training, for example, in creativity and innovation, empathy, emotional intelligence, cross-cultural awareness, persuasion, active listening, and acceptance of change. (No wonder the self-help marketplace continues to thrive!)

The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

These skills, which today are heaped together under the dismissive “soft” rubric, are going to harden up to become indispensable. They will become more important, thanks to artificial intelligence and machine learning, which will usher in an era of infinite information, rendering the concept of an expert in most of today’s job disciplines a quaint relic. As our ability to know more than those around us decreases, our need to be able to collaborate well (with both humans and machines) will help define our success in the future.

Individuals and organizations alike will have to learn how to become more flexible and ready to give up set-in-stone ideas about how businesses and careers are supposed to operate. Given the rapid advances in knowledge and attendant skills that the future will bring, we must be willing to say, repeatedly, that whatever we’ve learned to that point doesn’t apply anymore.

Careers will become more like life itself: a series of unpredictable, fluid experiences rather than a tightly scripted narrative. We need to think about the way forward and be more willing to accept change at the individual and organizational levels.

Rethink Employee Training

One way that organizations can help employees manage this shift is by rethinking training. Today, overworked and overwhelmed employees devote just 1% of their workweek to learning, according to a study by consultancy Bersin by Deloitte. Meanwhile, top business leaders such as Bill Gates and Nike founder Phil Knight spend about five hours a week reading, thinking, and experimenting, according to an article in Inc. magazine.

If organizations are to avoid high turnover costs in a world where the need for new skills is shifting constantly, they must give employees more time for learning and make training courses more relevant to the future needs of organizations and individuals, not just to their current needs.

The amount of learning required will vary by role. That’s why at SAP we’re creating learning personas for specific roles in the company and determining how many hours will be required for each. We’re also dividing up training hours into distinct topics:

  • Law: 10%. This is training required by law, such as training to prevent sexual harassment in the workplace.

  • Company: 20%. Company training includes internal policies and systems.

  • Business: 30%. Employees learn skills required for their current roles in their business units.

  • Future: 40%. This is internal, external, and employee-driven training to close critical skill gaps for jobs of the future.

In the future, we will always need to learn, grow, read, seek out knowledge and truth, and better ourselves with new skills. With the support of employers and educators, we will transform our hardwired fear of change into excitement for change.

We must be able to say to ourselves, “I’m excited to learn something new that I never thought I could do or that never seemed possible before.” D!

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