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BOUNCING BACK IN 2021: DIGITAL TRANSFORMATION IS NO LONGER A CHOICE AS DEPENDENCE ON 5G, IOT AND DATA INCREASES IN SOCIETY AND BUSINESS

Ivan Ericsson, Head of Quality Management, Expleo Group Limited

 

The global pandemic has put enormous strain on businesses and brought into sharp focus the importance of being agile, adaptable and able to increase the pace of innovation and change at short notice – catapulting technology right to the top of the agenda for many organisations.

As the economy works to get back on its feet, technology is only going to play a bigger role in our lives. At Expleo, as experts in digital transformation and the reliable implementation of technological innovations, we’ve outlined the biggest tech-driven trends that we expect to see in 2021 and beyond.

 

1)     “Digital transformation” no longer a choice

If the COVID-19 pandemic has taught businesses anything, it’s that they need to be poised to respond to abrupt market disruption at any moment, making digital transformation mandatory overnight.

With no room for delay, hugely complex corporations – that have historically been slow to adopt technology – have had to accelerate their reliance on technology just to keep afloat in recent months. Digital change, at speed, has become the norm.

Even last year, the idea of an unscheduled video conference call might put people on edge – now most of us wouldn’t think twice about calling a colleague over Teams or Zoom even for a 2-minute conversation. At the same time, social infrastructure has moved with the needs of its users, with telecoms giants strengthening and opening up networks so we can keep communicating despite social distancing.

There are now very few excuses left for operating in a non-digital way. All businesses need to be intelligent businesses that can change direction nimbly, with speed, confidence and composure. As we see more businesses putting this into practice, it’ll likely result in an increased number embracing and normalising some of the behaviours of tech-savvy giants like Apple and Amazon, who have no doubt thrived during this period.

Their success can largely be attributed to normalising an agile approach. By ensuring all applications have testing facilities built in – a “quality shadow” if you will – it allows for continuous improvements, and the ability to change direction quickly and confidently, when needed. This is particularly valuable today as the world becomes more fast-paced and increasingly unpredictable.

 

2)     Big data/AI/predictive analytics 

We’re moving into a space where big data can be extracted from the most seemingly innocuous places. In a hyper-connected world, a move as simple as a dog walk could offer huge swathes of data to the right companies. Many businesses already realise the benefits of capturing and utilising big data, but not all have taken advantage of it. The businesses that move quickest are most likely to reap the rewards in a more impactful way than their ‘data shy’ competitors. Where data used to be a side effect of business operation, it is now the driving force.

As businesses begin to rely more heavily on data to make critical decisions, independent assurance becomes increasingly important to get those decisions right. Forward-thinking, data-driven organisations must therefore assure that the data is correct in the first place, to avoid giving businesses false confidence and risk them moving in the wrong direction – something that is rarely affordable in today’s competitive and fast-paced environment. If businesses are not 100% confident in assuring the quality and accuracy of their own data, they should look to a third party for support.

A key data trend we expect to see moving further into 2021 is the increased use of predictive analytics. At the moment, businesses will often use data analytics to give us insights into our past activities, or to tell us where we are right now. However, the real value lies in knowing where we are going and how we are going to get there. Data analytics will help to identify the optional levels that can be pulled to drive change and realise business benefit.

Secondly, as intuitive technology advances and becomes more accessible, we expect over the next 12 months to see companies of all sizes begin to adopt artificial intelligence (AI) to drive intelligent analytics. In this context, AI refers to various technologies that allow machines to learn, sifting through ‘messy’ big data in order to find and unlock valuable predictive insights into future events. This allows businesses to better adapt their strategy to likely future outcomes and get a head start in the market.

However, with this ever-increasing emphasis on data and data protection, ethical AI will have a more prominent role to play in 2021 and beyond. Protected, usable Data is a by-product of good data security and privacy measures; however, the public remain wary of how their data is being used, particularly after the fallout from Cambridge Analytica’s use of data to influence an election[1]. Businesses, therefore, must give their customers confidence that their data is secure and protected.

 

3)     Moral relevance/corporate altruism

Research shows that young people are increasingly researching and considering the ethics of brands they’re purchasing from. And it won’t be long before this attitude starts seeping into every other aspect of their lives, with more and more people wanting to work for what they consider to be “purpose-driven” businesses.

Talent is the lifeblood of any company, so for big corporations, many of whom were born to create profit, this could put them in a tricky position. They might already be influencing society in a positive way – but this is unlikely to have ever been their main goal.

Moving forward, however, all organisations will have to start thinking about the “Triple Bottom Line”. That means considering the environmental and social impact of your business, alongside your commercial imperative.

We’ll soon see a mindset switch across businesses, from ‘competing’ to ‘advancing’. Instead of wanting to be the “best,” the question will be, how can I better serve the world around me?

In line with this, businesses will have to start thinking more about how to use tech for good, as we’ve seen with the likes of Microsoft Teams connecting tens of millions of people every day, during this very dark time[2].

2021 is likely to bring even more inroads when it comes to using technology to improve society, whether it’s developing bespoke problem-solving technologies or using IT to ‘eco-proof’ existing sectors, the goal for businesses is to rise to this challenge and build a better future for people and the planet through the use of technology. But all organisations will continue to need to be able to justify technology use and prove that they’re using it ethically, and in a secure manner.

 

4)     5G new networks – just about all big trends are driven by/reliant upon faster networks – particularly relevant for a more distributed workforce 

Greater access and utilisation of 5G networks across the country will underpin and accelerate all of the key trends discussed. Everything we do on our smart devices we can expect to do at higher speed, greater capacity and with lower lag times.

As our digital footprints extend beyond simple web browsing and into our daily lives through smart technology, we are creating huge amounts of data every minute. This vast flow of data is increasingly dependent on new high bandwidth networks to facilitate it. Therefore, the merging of technology and engineering will become critical in ensuring big data is carried successfully to drive analytics and drive business.

The fact we have managed to successfully work from home during COVID is a glowing recommendation for the quality of the networks as they exist today, and they will only get better.

The telecoms industry is already working overtime to ensure that people all over the country get reliable access to the internet – and the fact that there is still inequality in this area proves just how challenging this is. But, in line with this trend toward hyper automation, which will make data extraction and analysis a part of everyday life for businesses, the consolidation of tech and engineering will be ever more important.

Forward-thinking companies will look to incorporate 5G networks into their business strategy. This could be from an internal perspective to enhance the abilities of their remote workforce. Alternatively, this could relate to their own products or offerings – developing an internet of things (IoT) strategy, improve user experience, or bring products to market faster by analysing big data and adapting quicker. Either way, with increasingly improved networks, businesses are expected to take advantage of the huge increase in accessible and usable data.

 

Concluding comments:

For businesses to truly reap the benefits of these new technologies, they must be developed and adopted in the right way.

Quality assurance, trust and security are three key requirements that the technology of the future depends on to succeed. Having these requirements at the heart of any digital transformation will ensure that systems perform reliably, having been tested and assured.

By prioritising a seamless customer experience combined with an ability to create, test, and scale digital solutions and operationalise at pace, businesses will be in the best possible position to take advantage of the potential being unlocked by these new technologies.

 

Business

LAST DAYS OF LIBOR? WHAT ASSET MANAGERS AND FUND ADMINISTRATORS SHOULD DO NEXT…

By: Sern Tham, Product Director, Temenos Multifonds

 

The replacement of LIBOR with new reference rates in 2021 is not a simple substitution – existing valuation systems will require an overhaul

 

LIBOR (the London Interbank Offered Rate) will be replaced with alternative reference rate by the end of 2021. This is a gamechanger for the financial services industry, particularly when you consider an estimated $350 trillion of financial instruments including bonds, loans, deposits and derivatives used LIBOR as the benchmark rate. Asset managers and fund administrators need to act now and start asking the right questions of their teams and their technology providers.

LIBOR is a forward-looking rate produced daily by the Intercontinental Exchange (ICE), and it is the lack of actual transaction data underlying LIBOR and other IBORs that made them so prone to manipulation. To avoid this risk, central banks around the world have established new ‘Risk-Free Rates’ (RFRs) that are backward-looking, based on actual transactional data of rates offered in liquid markets on the previous day.

The new RFRs that will replace LIBOR will change the way valuations are calculated. The result is wide-ranging consequences on operations, risk calculations and the way institutions will conduct business in the future.  The new observed rates cannot simply replace LIBOR in a floating rate contract, because RFRs are based on observed overnight rates that are compounded over the period. In addition, different market conventions will be adopted to deal with lookback and lockout periods.

Therefore, to accurately reflect the value of the holdings once LIBOR is replaced by RFRs, asset managers and fund administrators will need to make sure their systems are capable of supporting the new methodology. Otherwise, investors buying and selling into a fund could be short-changed, leading to censure from regulators and clients alike.

Acting on the considerations listed below, will save any operational headaches once LIBOR has had its last dance.  Asset managers and fund administrators must be aware of all the securities and contracts that are impacted.  LIBOR’s role as the primary benchmark reference rate for trillions of dollars’ worth of financial instruments means it is deeply embedded in the financial industry. Firms must assess the scale of their exposure. This could be derivatives linked to LIBOR, cash instruments which reference it, or money market funds, which invest heavily in LIBOR rates. Mapping out all the affected instruments is an essential first step.

Alternative rates are already being published by the Federal Reserve Bank of New York, the European Central Bank, the Bank of England and Switzerland’s SIX Exchange. Regulators including the Financial Conduct Authority in the UK have emphasized the importance of early preparation for the transition.

Because the shift to the new reference rates will happen on an instrument-by-instrument basis, asset managers and fund administrators also need an overview of when instruments mature. If they have instruments tied to the LIBOR rate that mature after 2021, they need to be clear on when they will migrate to the new rates in order to meet the current deadline for the end of 2021.

Calculating valuations differently will be the biggest change for asset managers and fund administrators.  Firms should not assume their systems are going to cope with this change. The bigger the size of assets involved, the more complex the change will likely be. Accounting, collateral management and middle office derivatives programs should all be stress-tested to ensure the fund’s entire ecosystem can cope with the change.

Finally, the clock is ticking fast.  Firms will need to have a solution in place by the end of 2021, which means the timeframe for action is shrinking. Starting with assessing their exposure and then upgrading and testing systems, the transition will take time.  Upgrades should be completed in early 2021 to allow testing to start by mid-year, ensuring firms are in a place of strength before the deadline. Firms must act now to ensure their systems are ready for the end of 2021.

 

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Business

THE ROLE OF THE CFO IN ILLUSTRATING THE SUCCESS OF DIGITAL TRANSFORMATION

Tim Scammell, Finance, Treasury and Risk Solutions at SAP

 

It’s no secret that there are changes occurring within the modern corporation. While roles were evolving as a result of the move to digitisation and automation prior to Covid-19, the pandemic has further accelerated this movement as executives face new challenges. The most obvious is of course, the volatile economy we’re facing which has been the primary focus of the CFO within businesses. According to a recent survey, three-quarters of CFOs expect the pandemic to have either a ‘significant’ or ‘severe’ negative effect on their business in the next 12 months. But the same Deloitte report highlights that for CFOs, business transformation is a top priority, with a strong focus on digitisation and automation.

As such, we’re seeing the role of the CFO change most drastically. While the traditional demands of product evolution and revenue generation remain unchanged, they are also now playing a pivotal role in the wide-ranging ramifications of digitisation in terms of evaluating new dimensions like customer experience, channel management, IoT, blockchain and the associated compliance and legal exposures that lurk within the digital economy. CFOs are therefore vital in pushing digital transformation forward for several reasons and business executives would be wise to harness their skills in the journey.

 

Translating compliance and regulatory concerns

The digital journey is undoubtedly an exciting one, and for many industries, it’s a much-needed overhaul to ensure relevancy and success. However, it’s easy to get caught up in the excitement of implementing new programmes, products and services without thinking about the more mundane aspects. Primarily, the associated necessities that come with any new business operation, like regulation and compliance for example. However, the CFO is uniquely poised to tackle this dichotomy due to their ability to drive digital transformation forward but also deal with the more ‘analogue’ world aspects. The CFO is still dealing with the demands of regulatory reporting, tax, and compliance, which demand significant manual intervention and judgment.

As such, the CFO has the ability to break down the tension between the digital and analogue. The broader C-Suite is often focused on shaping the future and is grappling with the changing landscape of a hyper-competitive digital economy whilst pursuing the resulting revenue opportunities. Aspects like compliance normally don’t fit into this fast-paced thinking. As such, businesses should be harnessing the ability of the CFO to translate the actions of the C-Suite implementing digital transformation initiatives into a different language, one that satisfies stakeholders and legislative requirements. This translation demands the talents of an excellent communicator who understands the digital journey the company is undertaking and can articulate the consequences of these decisions using the analogue languages of compliance and regulatory reporting.

 

Pulling on past experiences

Not only can this best of breed, digital-savvy CFO make this translation due to their understanding of the digital and analogue worlds of compliance, but their extensive experience in building governance models should be maximised by the business too. CFOs are well versed in feeding the necessary information to decision-makers, particularly when it comes to unpredictability. The successful transition to a digital company is accelerated by observing how operational risk reacts to the unpredictable nature of the digital market. As such, organisations should bring the CFO into the digital transformation journey early in the planning stages as they are able to use their experiences to best plan for potential operational risks. What’s more, they can then  plan for the resulting avalanche of data that these digital business models generate and navigate a way of ingesting and processing this information.

 

Highlighting success

But this dynamic can only be achieved when the CFO is able to integrate data from across the organisation to produce the numbers they require for decision making. Such a platform will only exist when businesses make a dedicated effort to bring the CFO into digital transformation plans early so that they can explicitly coordinate actions and create a harmonised view of all aspects of performance, in the digital market.

Through this harmonisation of information, contemporary CFOs are critical to the great digital transformation as the insights obtained from big data and associated technological challenges are all manifested in the numerical results collected by the finance team. Financial results that track the impact the digital revolution has on the company’s competitive landscape and revenue projections. Financial results that enable a confident executive team to drive decisions that result in positive outcomes.

Clearly, the digital-savvy CFO is under a tremendous load. They occupy a wholly unglamorous position in the executive team and one where the consequences of failure could quickly derail the digital transformation of the company. Yet, if the CFO is given the means to draw together the right information, from a large number of sources, they can aggregate this quickly, and with the correct analysis, will be able to covert this governance to a strong position in the digital economy.

 

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