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HOW FINANCE SETS THE PACE FOR BUSINESS TO THRIVE

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By Laura Wiler, Vice President of Finance and Business Operations, Sage

 

COVID-19 has added to the complexity of an already unprecedented year for finance professionals. While many continue to grapple with the challenges of the pandemic, great shifts are happening in the industry powered by technology, changing priorities and attitudes. To survive, and thrive in the future, business has to adapt and rapidly.

Yet who leads the innovation effort in an organisation? Despite the organisation-wide impact of the pandemic, the role of Finance cannot be ignored. With control over the company purse strings, the CFO has an instrumental role in driving the digital transformation so needed by organisations.

 

CFO 3.0

Juggling business continuity in the present with planning for an unknown future, a great deal depends on the CFO. Indeed, UK financial leaders consider the effects of COVID-19 to be the greatest threat facing their business, and by a wide margin. Yet what is expected of CFOs in this time of uncertainty?

Cashflow remains a challenge for many businesses, and the CFO – holding responsibility over the financial health and resilience of the business – is best placed to resolve it. However, financial leaders can’t just live in the now. Of course they need to make decisions that help the business survive for today, but they’re also responsible for ensuring it thrives into the future.

The CFO of the past was a historian of previous performance. Then they were an analyser of real-time organisational data. But CFO 3.0 has to be a visionary today. They need to have a long-term view of all their decisions, predicting how their impacts will change the business in the future.

Amid the ongoing uncertainty of COVID-19, this visionary aspect has never been more important. The decision to reduce headcount may ease cashflow challenges in the present, but it could also leave the business vulnerable and lacking the talent it needs to grow. Today’s financial leaders can’t just analyse and respond, they need to predict, lead and innovate. More than ever, they also need to display emotional intelligence and strong interpersonal skills – such as managing stress and lending support to colleagues working with them.

These changes have been rumbling on for some time – 95% of CFOs say their roles have changed significantly over the last five years, with 70% now given full responsibility over digital transformation. COVID-19 has been a catalyst, pushing the remainder into the role of change-leader across multiple business domains. CFOs can navigate this new direction, following the examples of the best global finance leaders and innovators.

 

Technology: a CFO’s best friend

Success increasingly lies in targeted, pre-emptive investment – in the channels, services and technologies that will deliver growth in the long term. The responsibility of driving through these upgrades for the finance function and beyond ultimately falls to the CFO. More and more, they are expected to advise the C-suite on the investments that will achieve their strategic goals and carry the business into the future.

To do this, financial leaders need in-depth, real-time insight. Gut instinct isn’t enough – advice must be supported by data that everyone has confidence in. Yet this data can be hard to unlock in the heavily siloed, poorly integrated IT infrastructures of many businesses. On average, small businesses use 40 different apps spread across multiple functions – increasing to 211 apps for enterprise-level organisations.

Different apps and data environments hold precious insight that helps the CFO spot crucial opportunities for growth and investment – but only if they can access them quickly and easily. Centralising organisational data in the Cloud creates a central repository of useful insight, accessible at any time and from any location. When the CFO has access to data from all functions – including HR, marketing and operations – they have greater power to spot valuable opportunities for the business and more time to take advantage of them.

Another benefit of the cloud-native approach is that it gives financial leaders access to the latest tools, which run purely in the Cloud and with no manual upkeep. As finance becomes more data-centric, leaders can find strategies that streamline the processes of data management.

The most effective CFOs use automation tools, embedded in cloud data platforms and utilising self-learning machine intelligence, to eradicate the need for resource-heavy manual labour. This gives CFOs more time to focus on understanding how the business moves and breathes, with an emphasis on the thing that makes all businesses successful – their people.

 

A team effort

It’s important to stress that tools alone won’t enable the CFO to achieve their digital potential. Increasingly, CFOs aren’t just leaders for change, they’re leaders of people. They need to mentor and be supported by diverse teams with core competencies in analytical skills, digital technologies and automation. Those with expertise in AI, ML and data skills will be the most valuable in driving greater innovation and efficiency.

To succeed in the present, CFOs should lead their teams on a period of transition. For the time being, they should invest in retraining or upskilling those who lack core competencies, while turning to ‘gig’ or contract workers to fill gaps as needed. The next objective should be to make the business an engaging and supportive environment that attracts the best people. As disruption continues, Finance requires flexibility, versatility, and a commitment to personal development to roll with the punches.

Technology may be the engine of innovation, but the CFO is its driver. They can identify and analyse the data they seek, and lead the charge in employing technology that will benefit the business holistically. Yet they can’t do it alone. Cloud technology, automation tools and a skilled, diverse team will empower them to achieve their true potential.

 

Business

Know Your Business (KYB): Exceeding KYC

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Victor Fredung, CEO at Shufti Pro

 

Money laundering costs the UK more than £100 billion pounds a year, according to the National Crime Agency, emphasising the need for stringent ID verification of individuals and businesses.

ID verification, however, remains a moving target. The UK’s fraud prevention community CIFAS has warned of surging ID theft. The National Fraud Database increased by 11% in the first six months of 2021, with almost 180,000 instances of fraudulent conduct filed in the first six months of the year. This reflected the aftermath of the 2008 financial crisis, which recorded a 32% increase in identity fraud the following year. CIFAS is warning UK businesses and consumers to expect a continuation of the steep rise in identity fraud for 2021 and 2022 as criminals exploit businesses under pressure.

Businesses can respond with resilient Know Your Customer (KYC) software and protocols. KYC establishes customer identity; understands customers’ activities; qualifies the legitimacy of funding sources; and assesses money laundering risks associated with customers. To date, almost 6,000 financial institutions are using the SWIFT KYC Registry to publish their KYC data and receive data from their correspondent banks.

KYC regulations and procedures are appropriate when the customer or consumer is a named individual.  However, it’s not enough to verify the identity of individuals. It is also important to verify the identity of businesses.  Know Your Business (KYB) tools and regulations are designed for cases where the customer is a business or corporate entity. KYB is particularly important as criminals seek to exploit crypto currencies which can thwart verification techniques, such as anti-money laundering (AML) and KYC.

KYB verifies businesses by obtaining official commercial register data via APIs. By using the registration numbers and jurisdiction code of a business, a digital KYB service can collect confirmable information for the business. This enables corporate organisations to determine if they are dealing with authentic businesses or fake shell companies. KYB services particularly help financial institutions handling the funds of a large customer base and corporate entities.  During this process businesses must improve the customer digital enrolment and authentication experience. End-users resist proving their identity through for example, showing scans of their bank account statements and may abandon service providers whose online enrolment processes increase friction.

Usefully, KYB uses access to automated commercial registers through a data-powered business verification service, expedites due diligence and eliminates errors.  With advances in digital technologies and virtual data sets, KYB compliance and verification tools can mark businesses involved in undercover activities, gathering background data on the company including the registered address, status, company type, ultimate beneficial ownership structures, previous names and trademark registration. A financial summary of the company’s operational accounts is also provided by the authentication service, to help validate its authenticity.

Here, Artificial Intelligence (AI) can come into its own, determining the identity of individuals and the financial risk attached to that person with AML Compliance solutions. AML services can check the involvement of an individual company in any watchlist or financial risk database, at scale. Machine learning algorithms can detect forged documents or disguised ownership structures. Nationality verification and geolocation targeting can determine the true country of origin of international clients and the jurisdiction of the company.

However, adoption of KYB processes has been sluggish: last year research undertaken by kompany indicated only 5% of financial institutions (FIs) have an automated B2B or corporate banking onboarding process, with 75% of FIs still relying on Google searches to identify Ultimate Beneficial Owners (UBOs), annual filings and financial accounts. Financial services organisations also struggle to manage the complexity of KYB, and the siloed approach to managing information within an FI can make KYB adoption more challenging.

A further challenge for KYB compliance lies in accessing beneficial ownership information, especially in jurisdictions that do not require companies to submit relevant documentation. A lack of shareholder information makes it harder to investigate money trails and business authenticity. Timely availability of data, across international borders in the right format, is another hindrance, especially as company structures and management change over time. This is why geography and industry specific vendors will be of value to businesses needing to conduct ID checks. It is also why businesses must find the right vendors who can be a one stop shop to manage their KYB adoption and must prioritise the user-experience for frictionless onboarding and regulatory compliance.

Banks have experienced difficulties with KYC verification for their customer onboarding, transaction authentication, and remote banking services. This why they may find it hard to trust a KYB service provider. However, FIs and businesses face a pressing need to determine the ultimate beneficial ownership structure of the corporations they are dealing with. The need for a credible, cross-border KYB provider has rarely been more pressing, and according to Forrester, Know-your-business IDV will ‘make or break Identity Verification players.

Know-your-business IDV can make critical difference in identity verification.  With the increase in B2B commerce it has become more urgent to verify both individuals and organisations and their representatives.

The cost of not adopting KYB technology is dwarfed by the prospect of data breaches, fraud and reputational damage. For financial institutions, legitimacy and verification of the business is key for growth. The software solutions exist and are ready to be implemented.  he National Fraud Database increased by 11% in the first six months of 2021, with almost 180,000 instances of fraudulent conduct filed in the first six months of the year. This reflected the aftermath of the 2008 financial crisis, which recorded a 32% increase in identity fraud the following year. CIFAS is warning UK businesses and consumers to expect a continuation of the steep rise in identity fraud for 2021 and 2022 as criminals exploit businesses under pressure.

Businesses can respond with resilient Know Your Customer (KYC) software and protocols. KYC establishes customer identity; understands customers’ activities; qualifies the legitimacy of funding sources; and assesses money laundering risks associated with customers. To date, almost 6,000 financial institutions are using the SWIFT KYC Registry to publish their KYC data and receive data from their correspondent banks.

KYC regulations and procedures are appropriate when the customer or consumer is a named individual.  However, it’s not enough to verify the identity of individuals. It is also important to verify the identity of businesses.  Know Your Business (KYB) tools and regulations are designed for cases where the customer is a business or corporate entity. KYB is particularly important as criminals seek to exploit crypto currencies which can thwart verification techniques, such as anti-money laundering (AML) and KYC.

KYB verifies businesses by obtaining official commercial register data via APIs. By using the registration numbers and jurisdiction code of a business, a digital KYB service can collect confirmable information for the business. This enables corporate organisations to determine if they are dealing with authentic businesses or fake shell companies. KYB services particularly help financial institutions handling the funds of a large customer base and corporate entities.  During this process businesses must improve the customer digital enrolment and authentication experience. End-users resist proving their identity through for example, showing scans of their bank account statements and may abandon service providers whose online enrolment processes increase friction.

Usefully, KYB uses access to automated commercial registers through a data-powered business verification service, expedites due diligence and eliminates errors.  With advances in digital technologies and virtual data sets, KYB compliance and verification tools can mark businesses involved in undercover activities, gathering background data on the company including the registered address, status, company type, ultimate beneficial ownership structures, previous names and trademark registration. A financial summary of the company’s operational accounts is also provided by the authentication service, to help validate its authenticity.

Here, Artificial Intelligence (AI) can come into its own, determining the identity of individuals and the financial risk attached to that person with AML Compliance solutions. AML services can check the involvement of an individual company in any watchlist or financial risk database, at scale. Machine learning algorithms can detect forged documents or disguised ownership structures. Nationality verification and geolocation targeting can determine the true country of origin of international clients and the off shore status of a company.

However, adoption of KYB processes has been sluggish: last year research undertaken by kompany indicated only 5% of financial institutions (FIs) have an automated B2B or corporate banking onboarding process, with 75% of FIs still relying on Google searches to identify Ultimate Beneficial Owners (UBOs), annual filings and financial accounts. Financial services organisations also struggle to manage the complexity of KYB, and the siloed approach to managing information within an FI can make KYB adoption more challenging.

A further challenge for KYB compliance lies in accessing beneficial ownership information, especially in jurisdictions that do not require companies to submit relevant documentation. A lack of shareholder information makes it harder to investigate money trails and business authenticity. Timely availability of data, across international borders in the right format, is another hindrance, especially as company structures and management change over time. This is why geography and industry specific vendors will be of value to businesses needing to conduct ID checks. It is also why businesses must find the right vendors who can be a one stop shop to manage their KYB adoption and must prioritise the user-experience for frictionless onboarding and regulatory compliance.

Banks have experienced difficulties with KYC verification for their customer onboarding, transaction authentication, and remote banking services. This why they may find it hard to trust a KYB service provider. However, FIs and businesses face a pressing need to determine the ultimate beneficial ownership structure of the corporations they are dealing with. The need for a credible, cross-border KYB provider has rarely been more pressing, and according to Forrester, Know-your-business IDV will ‘make or break Identity Verification players.

Know-your-business IDV can make critical difference in identity verification.  With the increase in B2B commerce it has become more urgent to verify both individuals and organisations and their representatives.

The cost of not adopting KYB technology is dwarfed by the prospect of data breaches, fraud and reputational damage. For financial institutions, legitimacy and verification of the business is key for growth. The software solutions exist and are ready to be implemented.

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Addressing the ongoing global pilot shortage issue

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By Bhanu Choudhrie, Founder of Alpha Aviation

 

The Covid-19 pandemic brought the aviation industry to a halt, causing vast market disruption and putting the future of many key players at risk. Now, just as airlines were getting back on track, staffing shortages are causing new complications – and part of this issue is a growing pilot recruitment problem.

So, where does the sector go from here and what steps need to be taken to mitigate pilot shortages?

The root of the issue

Even before the pandemic, there was a global shortage of pilots, with people flying more due to a rise in more affordable airlines and falling fuel costs. In fact, the 2020-2029 CAE Pilot Demand Outlook suggested that the global civil aviation industry will require more than 260,000 pilots by the end of the decade.

However, when demand for air travel dropped across the globe, airlines were quick to offer early retirement packages to reduce immediate outgoings. Whilst this approach helped some airlines stay afloat during the slowdown, a wave of early retirements has left them on the back foot.

Bhanu Choudhrie

Now demand is coming back much faster than expected. In the US alone, the Bureau of Labor Statistics is expecting 14,500 openings for commercial and airline pilots each year until 2030, and this imbalance is already having a detrimental impact on the aviation industry. With flights being cancelled, travellers left stranded, and some airports losing service altogether, it is crucial that the larger aviation ecosystem comes together to work out a solution to effectively address this pilot shortage crisis, so that it can once again meet capacity demands.

Re-directing efforts to rebuild pilot pools

With vast swathes of pilots put on furlough during the pandemic – and therefore unable to maintain their license requirements, the damage isn’t just in the ongoing pilot shortage, but also in the decades of experience the industry has lost. In response to this narrative, last month a Senator in the US introduced legislation to raise the mandatory retirement age of commercial airline pilots from 65 to 67 – and the US are not alone in this shift. Last week, Air India announced that it will be raising their retirement age for pilots from 58 to 65. Now we need to see other countries and airlines follow suit to help retain the talent that can help guide and mentor the next generation of cadets.

Moreover, training schools and airlines will need to work together to challenge industry stereotypes and empower more women to pursue a career in the cockpit. Currently, just 5.1 per cent of the world’s commercial pilots are women. This means that for every twenty flights taken, only one of them will be piloted by a woman. Unfortunately, this gender imbalance has become a long-established trend within the aviation industry and, stereotypically, pursuing a career as a pilot has been considered a male occupation, with women type cast to cabin crew instead. Therefore, if we are to make proactive strides towards addressing the current pilot shortfall, finding a way to shift that percentage is essential.

The cost of training to be a pilot is also a key barrier the industry needs to address, and at pace. On average, the cost to train as an air transport pilot can exceed $100,000 – making a career in the cockpit unattainable to many. One way for the industry to help narrow the gap and mitigate what is often seen as a considerable financial risk, is to make bursaries more accessible. There are already a number of programmes in place, to support both aspiring pilots and those who need to maintain their licenses, however, now the industry needs to work on championing and expanding these support systems.

The industry also needs to start to embrace alternative approaches to alleviate this substantial outlay. For example, at Alpha Aviation, we have started running the the Multi-Crew Pilot License (MPL). This is a shorter, more simulator-focused way of training that not only opens up opportunities for prospective cadets from less privileged backgrounds, but also offers a more flexible training programme and quicker route to qualification – reducing the financial expenses for cadets to cover.

Technological innovations can also play a crucial role in advancing the training process to help support a consistent employee base. For example, e-learning programmes can enable airlines to expand cadet class sizes. No longer restricted by the physical capacity of training centres, e-learning programmes have the potential to significantly open up access to becoming an aviator and will ensure airlines can recruit the best talent, irrespective of locality. In addition to this, pilots still need to clock up over 1,500 flying hours to receive their ATP certificate. Therefore, investing in simulator training facilities is now pivotal in supporting cadets to keep on top of the legal requirements and improve their skills set at a significantly quicker pace, alongside supporting existing pilots to retrain on new aircrafts when necessary.

Looking ahead

The pressure on the aviation industry shows no signs of abating any time soon. Therefore, while it is great to see passenger numbers returning to near pre-pandemic levels, the industry needs to take this as a significant wakeup call and re-assess its pilot recruitment process.

At the end of the day, there is no quick fix – training top of their class pilots takes time, investment and enthusiasm. However, addressing the ongoing chaos and driving the sector out of this turbulent period is essential to the economic revival of the nation. Therefore, decisive action is needed – and it is needed now.

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