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Finance

MAKING FINANCIAL SERVICES FASTER

Kevin Okell, Managing Director at Altus

 

Over the last 25 years, technology has transformed the world we live in. Computer processing power and storage capacity have increased a thousand-fold; megahertz are now gigahertz and megabytes have become gigabytes. Network speeds have increased even more dramatically. In the late 1990s, a 56kb modem was at the cutting edge of communication; now we are seeing the rollout of Gigabit broadband routers promising 2,000 times the speed of a dial-up modem.

 

This increase in raw power and capacity has fuelled an explosion in the use of the Internet from 40 million users to 4 billion, with an estimated 70 billion devices now connected. And there’s more to come from technology. Big Data, Artificial Intelligence, the Internet of Things and Blockchain are all touted to revolutionise our lives even more radically over the next 25 years.

 

Astonishing as these new technologies may be, it is important to remember that they are built on solid engineering foundations rather than magic – a fact which occasionally seems to get overlooked in some quarters. For example, since the late 1980s, it has been clear that the messaging protocol on which the internet was built (IPv4 for those who are interested) would run out of unique addresses for the dizzying range of devices being continually connected. The theoretical maximum of 4.3 billion addresses was divided up across different regions and began to be breached in some parts of the world in 2011. Fortunately, the Internet Engineering Task Force (IETF) had been working on a successor (IPv6) since the turn of the century which will support 340 trillion, trillion, trillion addresses! Which means even my new fridge freezer has its own internet address!

 

The work involved to develop, agree and roll out a global standard like IPv6 is colossal, ongoing and has already spanned decades. Coordinating input from literally thousands of contributors across the globe, managing the evolution of technical standards through hundreds of versions and convincing commercial organisations to adopt them is a gargantuan but essential task.

 

There is a parallel here in the financial services industry in the shape of ISO2022 and the securities market practice group (SMPG). A number of factors ranging from taxation to technology have combined to swell the number of UK retail investors and the regulator is demanding they should be able to switch easily between providers. Whilst not quite as daunting as designing a protocol to work across 195 different countries, the development of a portfolio transfer framework spanning all parts of the UK investment sector is still quite an achievement. Under the auspices of SMPG (and now TeX), a group of dedicated industry experts from wealth management, stockbroking, fund management and pensions came together to thrash out a messaging standard which could handle the electronic transfer of an investment portfolio between providers.

 

The standard covers a huge range of asset types and tax wrappers, from a simple ISA to a complex SIPP, and enables most of those assets to be transferred in-specie without the need to sell and re-buy. Where all the parties involved have adopted the standards, an entire portfolio can be transferred in minutes with virtually no manual intervention.

 

It is fair to say that some parts of the investment industry have been quicker to adopt the standards than others but, with increased scrutiny from the regulator over transfers, it seems only a matter of time before consumers will get to benefit from all the hard work and engineering that has gone into providing the sector with its own equivalent of IPv6.

 

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Finance

HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES

CASH FLOW

While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash flow and costs to drive success in uncertain times, says Matthew Thorpe, partner at Haines Watts Essex.

 

Managing people and expenses

There are certain costs that you just can’t avoid as a business – to keep your operation running seamlessly, but scrutinise the detail and cut down on any non-essential expenses. Check things like your SaaS subscriptions and look out for costs that auto-renew and if you do cancel, remember to also cancel your direct debits too.

You might want to put a freeze on hiring new people, but ensure that other roles and responsibilities are clearly and efficiently assigned across your team. The Coronavirus Job Retention Scheme (CJRS) has been introduced by the Government to help UK employers access support to continue paying part of their employees’ salary to avoid redundancies. Affected employees are classed as “furloughed workers”.

Once furloughed, the employee cannot work or they will not qualify for the scheme. For businesses that perhaps need to go further, there may be some roles they don’t need any more, but businesses should work sensitively with people to manage this.

 

Cash is king

In uncertain times, owner managers will need to keep operations going to ensure financial stability. You should look to manage debt more efficiently by negotiating extended payment terms with creditors. You could also renegotiate loans for longer repayment terms to give yourself a lower monthly payment, helping the business to set some cash aside each month.

 

Daily forecasting

As a business owner, you need to create a cash flow projection and update this regularly if you are to improve things. You can do this using financial information to create a picture of how the business will look in the next 12 months. The forecast needs to show revenue sources and expenses, which will show the ups and downs of business income and can be used to make sure that enough finance is in place.

 

Good house-keeping

While banks and other finance providers recognise that the cashflow of a business may be disrupted by the impact of Covid-19, they are still going to want to see that you are viable and continue to trade in these uncertain times. Make sure your business is organised and don’t let disorganisation cause unnecessary issues. You can evidence this by having detailed forecasts; current order books and projections (as best as possible).

Having instantly accessible, accurate financial information allows you to plan effectively, spot issues before they become problems and manage your money in the most efficient and rewarding way.

 

Embrace technology

Software is now incredibly user-friendly and accessible from anywhere. For a business owner embracing the technology, this means:

  • Invoicing can be done instantly when a job is complete, emailed to the customer with an easy to use link to a payment platform.
  • Comparison websites can automatically monitor and help maintain lowest cost for things such as light & heat, insurance etc.
  • Technology can be used in place of face-to-face meetings. It can also enable them to adapt production lines to different demands.

All of these things and more, used properly, can make managing your business finances quicker, easier and often cheaper.  You will also be able to bring clarity to where your business stands and prepare for the next steps.

 

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Finance

HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK

FINANCIAL SERVICES

By Alex Saric, smart procurement expert, Ivalua

 

UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.

This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.

 

More suppliers, increasing risk

One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.

The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.

A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.

 

Businesses unprepared for the worst

One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).

In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.

 

Making supplier management smarter

It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.

For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.

To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.

 

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