Jon Bennett, Chief Growth Officer at CloudStratex
Many financial organisations have now taken vital steps towards achieving an operationally resilient (OR) status. However, a speech recently delivered by the Bank of England’s Duncan Mackinnon rightly suggests that the process is far from complete.
With the passing of the March 2022 deadline, financial firms will have identified important services, set impact tolerances, and undertaken mapping and testing. However, the Bank of England has immediately turned its attention to the actions needed by 2025 – alongside some of the deficiencies identified in its findings thus far.
But what does this mean in a practical sense?
A key theme of the speech is that many organisations don’t yet have a detailed or consistent understanding of their own capacities for absorbing disruption – which means they need to embrace practices that promote visibility and understanding of their business and IT infrastructure
Further work for setting tolerances
Perhaps the key takeaway offered by this speech is simply that operational resilience involves a high degree of complexity.
This has certainly been our experience in helping clients to improve their resilience. After all, in large financial or finance-adjacent organisations, risk can take on a number of forms and appear across any and all aspects of an enterprise’s operations.
Finance departments will think about disruption in terms of its impact on financial reporting or project funding, for example, whereas the security side of a given firm might be more concerned over infrastructure vulnerabilities.
As a result of this layered and challenging environment – what Duncan Mackinnon calls the “ever-more complex and interconnected” operational nature of finance organisations – the speech suggests that firms moving towards operational resilience will need to make sure their processes for setting impact tolerances are suitably sophisticated.
Duncan Mackinnon illustrates this need by pointing out a high degree of variance between organisations that offer the same services, yet which point to highly different impact tolerances for those services.
The safety and soundness tolerances for CHAPS payments, for example, varied from two days to two weeks depending on the firm in question.
For Duncan Mackinnon, this means that “firms will have to justify how they came to the conclusions they have,” meaning that firms will need to have a clear understanding of the underlying causes of disruption in order to validate their self-assessments.
Understanding through effective service mapping
In order to achieve this level of understanding – particularly in light of the high degrees of complexity and interconnectedness in today’s IT infrastructure – service mapping is essential.
Service mapping is a means of discovering the application services in a given organisation, allowing firms to build a map comprising its various devices, applications, and configuration profiles.
The value of mapping isn’t just implicit in the broader project of achieving OR, but a primary focus of Duncan Mackinnon’s speech.
As he points out, “we expect firms’ mapping to include all critical resources and consider internal and external dependencies. Mapping should rapidly become more sophisticated, in line with firms’ potential impact. It should enable firms to identify vulnerabilities and inform the development of scenario testing.”
The firm message here is that current service mapping processes are not currently hitting the heights of sophistication that regulators require.
This isn’t surprising. Service maps are difficult and time consuming to create manually, and a lack of business context – especially when combined with the dynamic nature of modern networks – often leaves IT teams struggling with limited, out-of-date service maps which aren’t equal to the task of providing a full view of possible outages and impacted services.
Upgrading mapping practices
Addressing the common flaws in current mapping processes isn’t straightforward.
With the right third party support, however, it’s possible to take mapping to the heights of sophistication required for full OR compliance.
A good advisory service will, for example, consider opting for a top-down discovery process as opposed to horizontal. This means that devices and applications won’t be considered as independent or standalone, but as deeply interconnected.
By extension, a top-down approach to mapping helps organisations to immediately identify the impact of a compromised or disrupted object on the rest of the application service operation.
These changes will be increasingly essential for firms looking to shore up their OR to the regulatory standards suggested by Duncan Mackinnon.
Time is of the essence
Service mapping isn’t the be-all and end-all of operational resilience – but it represents a vital building block for identifying and correcting and possible causes of disruption, and one well worth establishing as soon as possible.
As the speech notes, “the longer firms take to map to the required level of sophistication and to run robust scenario tests, the shorter the period they will have to address their vulnerabilities and build resilience.”
Operational resilience is a journey – and, like many journeys, it will be greatly facilitated by a reliable map. With regulatory compliance located at the end of the road, it’s a journey well worth taking properly.
Deal or no deal: Why ESG has become the M&A stepping stone
Over the past year, with the reopening of the world economy, we’ve witnessed a resurgence in M&A activity. In line with record breaking deal activity, a number of core trends and priorities have emerged in the c.
Specifically, we’re seeing increased investment in technology, following the crucial role played by digital solutions in facilitating M&A even at the height of the pandemic. Focus is also increasing on financial due diligence, with buyers becoming more dependent on third-party deal finance in today’s market. as well as the rapidly rising prominence of Environmental, Social and Governance (ESG) standards.
These focus areas are proving to be crucial for deal makers as they navigate today’s high inflation environment and ongoing uncertainties related to geopolitics, government regulation and COVID-19 pandemic-related disruptions.
Investment in ESG in particular has become a stepping stone between deal or no deal in the M&A process. According to Mergermarket, 60% of global dealmakers said they have walked away from an investment due to a negative assessment on ESG issues at a potential target.
Meanwhile, 52% say their ESG investment strategy has had a positive impact on overall investment returns – when done right, ESG investment can have a direct influence on business outcomes.
Understanding specific ESG requirements for businesses will therefore be one of the most critical areas to get right for dealmakers today. Let’s take a look at why this is so important today.
Rising ESG scrutiny
The main challenge with ESG is that the space remains incredibly broad – it covers everything and anything. From climate change risk to social issues, ESG considerations will play a role in every M&A transaction moving forwards.
This is why ESG scrutiny in M&A transactions is so critical. It will allow organisations to be appropriately advised on the consequences and opportunities associated with the ESG regulatory environment. Recent research found that a staggering 90 percent of dealmakers predict an increase in scrutiny of deals for ESG implications over the next three years, with almost half believing the increase will be significant.
A key focus in the near-term will be on how different ESG regulations apply to an organisation. While not every ESG regulation will apply to every business, buyers will increasingly scrutinise a target’s ESG credentials during the due diligence process, homing in on reputational risks as well as regulatory concerns. Organisations will therefore be required to comply in the most effective way and fully understand how they can measure up to those regulations.
This may also lead to the demise of some firms that are already finding themselves under significant pressure, particularly in today’s high inflation environment. ESG compliance could ultimately be the straw that breaks the camel’s back.
ESG + cybersecurity = ESGc
Cybersecurity is increasingly being tied into the ESG agenda because of the huge impact it has on a company’s integrity. Firms that hold personal data have an unavoidable societal responsibility to protect that information.
As a result, it has never been more important to find a balance between risk management and value creation. Organisations must understand the seriousness of cybersecurity and organise all assets with this in mind, in order to be fit for purpose in the current environment.
As a first step, developing a cyber resilience strategy will help identify any risks that businesses are facing. This ensures they can mitigate any issues and protect sensitive information, which is critical today in the face of tightening regulations.
The full ESG journey
With rising scrutiny on ESG, there’s a sense of urgency to define pertinent ESG issues in M&A from the start of the deal making process. Pinpointing which relevant regulatory areas need to be considered and addressing them early on will make the due diligence process easier across the board, both for businesses and dealmakers.
What’s more, with a shift in consumer and workforce demographics, pressures to address social issues are now coming from the bottom up, as well as from investors and regulatory bodies. For future targets or acquirers, ESG must be embedded into the enterprise at all levels.
Businesses today have no choice but to put time, resources and effort into understanding what is relevant to the industry they’re in and the jurisdictions in which they operate. They must then find effective ways to roll these changes out across the enterprise – such as through behavioural motivations and incentives.
To help navigate this ESG journey, we’re seeing more organisations hiring experts in the space. This helps to make sure that ESG requirements aren’t overlooked, as this can have major impacts both legally and on the organisation’s value when a buyer takes an interest.
It’s time to act now
With the growing perception that ESG performance directly correlates to commercial strength, ESG will undoubtedly have a defining impact on dealmaking over the next 12 months.
Dealmakers are holding companies to a higher standard today. Business leaders must act now to get on top of the ESG agenda and carefully consider relevant regulations to embed specific ESG frameworks successfully into their whole organisation.
How Dynamic Pricing Impacts Product Valuations & Brand Reputation
Author: Gediminas Rickevičius, VP of Global Partnerships at Oxylabs
Dynamic pricing, in one form or the other, has been around ever since people have been exchanging things among themselves. After all, in this most basic setting, the price is negotiated between the seller and the buyer and may thus vary depending on circumstances.
Negotiations between buyer and seller are also the defining factor of the market value of any product or service, albeit on a grander scale. Ultimately, the price of the product is constituted as the middle ground where consumers are willing to buy and the supplier is willing to sell.
On the one hand, dynamic pricing is clearly based on the idea that a product’s or service’s market value is not set in stone. On the other hand, with the surge of dynamic pricing strategies, we now witness a more interesting phenomenon – valuations changing due to the unstable character of pricing.
Scarcity and strategic buying
Special offers are the most familiar (slow) form of dynamic pricing that we, as customers, constantly encounter. Another way in which dynamic pricing has made its mark on the markets is as the staple of the travel and hospitality industries, where factors such as dates might change the value of a service.
Buyers accept them both as understandable price fluctuations over time due to the changing scarcity of certain products. However, they are different with respect to the possible effects on valuations.
Studies of online markets also recognize strategic buying as one of the aspects influencing buying decisions in dynamic pricing environments. When buyers are strategic and recognize the dynamic aspect of prices, it is likely that the perceived scarcity of the commodity will have a great effect on valuation.
These phenomena ground the difference between such industries as the restaurant industry on the one side and the travel and hospitality industries on the other. An opportunity to eat a meal that you like at a restaurant is usually not perceived as scarce. While seats on a plane or rooms at a hotel, when tied to particular dates, are finite.
Web scraping remains the main method of figuring out what sort of pricing strategies are likely to bring the best results. Naturally, companies first and foremost utilize web scraping to watch the prices of the competitors to see whether they have some room to outprice them.
However, web scraping might be even more effective when used to monitor the stock of other online stores. Nowadays, companies tend to freely display the availability of each product on their websites. They do it to avoid situations when only after ordering does a customer realize that the product is out of stock.
Scraping these sites to find out if the competitors are running out of stocks allows them to identify the approaching scarcity of particular commodities. Thus, prices can be adjusted to predict the rising valuation of these goods. And as scraping provides information almost as soon as it is reported online, it will also let the retailers immediately shift back to the lower prices when stocks get refilled.
In turn, such a process induces an overall advantage for the consumer. Outside of monopolies and cartel agreements, dynamic pricing creates near-equilibrium in product value across many different companies, making the competition much more fierce.
A dynamic pricing feedback loop
The rapid spread of information, which is one of the defining features of our times, is also one of the main factors affecting valuation in dynamic pricing settings. While price matching is the most common way to implement dynamicity, rising interests and trends might also play a role.
For example, artificial price changes can be used to boost customer awareness of the product or service. Lower prices for limited periods of time might help the provider to reach the high-valuation buyers it would have not with fixed higher prices. Such a step away from automated pricing algorithms might produce increased attention for the company.
On the other hand, if increased interest becomes apparent, dynamic pricing should be undertaken with care as it can lead to unintended consequences. This happens, for example, when customers realize that someone else paid significantly less for the same product.
Disgruntled customers may ask for businesses to cover the differences, leave bad reviews, or, worse, start shopping elsewhere. As a result, dynamic pricing can lead to a negative feedback loop where changing prices might cause effects that end up costing the company more than the additional profit made.
Since low prices were the main selling point, customers felt cheated when seeing the updated pricing, leading to decreased sales. The speed of the information flow first formed certain expectations, then led to their disappointment on account of the pricing algorithm reacting to changing market value too fast. Yet, negative perceptions often last longer than pricing changes, which can negatively affect the brand’s reputation.
Dynamic pricing affects significantly more than the prices of products and services. As all of them have underlying value, which buyers intuitively grasp, dynamic pricing has the potential to affect it. If price flexibility is perceived as understandable or even beneficial from the buyer’s side, it will raise the market value of products and services.
However, the perceived value will drop rapidly if the buyers feel that they are being taken for a ride. Which will be the case when in the vast volume of information available to them they will not find sufficient reasoning for specific price changes. As a result, improperly implemented dynamic pricing can negatively affect brand reputation.
Know Your Business (KYB): Exceeding KYC
Victor Fredung, CEO at Shufti Pro Money laundering costs the UK more than £100 billion pounds a year, according...
Tax giveaway is a boost for business, but will it drive growth or fuel inflation? Chancellor Kwasi Kwarteng has...
A zero trust environment is critical for financial services
Boris Bialek, Managing Director of Industry Solutions at MongoDB Not long ago security professionals were still focused on protecting their...
Digital Banking – a hedge against uncertainty?
Ankit Shah, Head of Digital Banking, Apex Group The story of the 2020’s thus far is one of crisis....
Union Bank of India goes live with RuPay Credit Card on UPI with Kiya.ai as a technology partner
Nitesh Ranjan, ED Union Bank of India with Rajesh Mirjankar, Managing Director & CEO, Kiya.ai at the launch Kiya.ai,...
Anyone Can Become an R&D Tax Expert with the Right Foundations
Ian Cashin is a Customer Success Manager at Fintech company and R&D tax software provider WhisperClaims For accounting firms,...
Addressing the ongoing global pilot shortage issue
By Bhanu Choudhrie, Founder of Alpha Aviation The Covid-19 pandemic brought the aviation industry to a halt, causing vast...
How exporters can mitigate risks and operate smoothly in stormy, post-Brexit waters
By Morgan Terigi is Co-Founder and CEO of Incomlend The past few years have presented a series of hurdles...
From employees to customers, workforce management can benefit the entire banking ecosystem
Michael Cupps, SVP of Marketing of ActiveOps explores the significant impact workforce management can have on the employees and customers...
Redefining the human touch with digital transformation
Simon Kearsley, CEO of bluQube It may not be a new phrase, but digital transformation is still inducing anxiety...
CFOs – the forgotten ally in the fight against ransomware
Justin Vaughan-Brown, VP Market Insight at Deep Instinct Ransomware attacks have nearly doubled in the past couple of years....
7 cost benefits of cloud accounting software
By Paul Sparkes, Commercial Director of iplicit, an award-winning accounting software developer Is your accounting software having a laugh...
How does Identity Access & Privileged Access Management help in PCI DSS Compliance?
Narendra Sahoo is a director of VISTA InfoSec. Introduction The Payment Card Industry Data Security Standard also commonly referred to...
Listed private debt deserves a closer look from investors
By Michel Degosciu, Managing Partner, LPX AG Over the past few years, the private debt asset class is attracting serious...
Security vs online payment convenience: which one is tipping the scales for customers?
Chirag Patel, President of Digital Wallets at Paysafe. While keeping their payment details safe is a top priority for...
The Tool and Tips to Truly Get Started with No-Code Development
Author: Chris Obdam, CEO of Betty Blocks Throughout the legal industry, firms and in-house departments are leveraging legal tech...
How ReFi Will Transform Finance
– by Ransu Salovaara, CEO of carbon platform Likvidi Humanity faces a multitude of threats, many of which are...
THE NEXT WAVE OF FINTECH IS HERE
Much has been made of the ‘second generation’ fintech movement recently, but what have these businesses learned from those entering...
UK leaves Europe trailing in its embrace of digital banking
People in the UK have embraced digital and online banking in a way that those across the rest of Europe...
The rise of automation and its impact on the CFO & CIO
By: Gert-Jan Wijman, VP Europe, Middle East and Africa at Celigo On the back of the pandemic, organisations have...