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Wealth Management

MANAGING VOLATILITY: HOW TO PROFIT FROM STOCKS WITHOUT COMING UNSTUCK

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Dáire Ferguson, CEO, AvaTrade

 

The last few years have provided us with a series of unpredictable political and social events that have led to high levels of volatility in the stock markets. In the past four years alone, we have witnessed the Brexit vote in 2016, the inauguration of Donald Trump’s presidency in 2017, and a global pandemic in 2020. In each case, these events have gone against expectations and provoked wild market movements.

These are certainly challenging times, but current events offer traders equipped with the right knowledge and tools an opportunity to profit handsomely. Of course, volatility is a double-edged sword: traders can just as easily incur losses. So how can they capitalise on the opportunities while managing risk and protecting their assets?

 

Why volatility is lucrative

When we consider recent events that have impacted the global stock markets, traders have been given an abundance of opportunities to capitalise on the volatility. Stock prices for companies have risen and fallen astronomically owing to the far-reaching effects of the pandemic, where some have coped better than others.

Social media is one area where investment is particularly interesting because these companies are liable to grow rapidly. For example, despite already being well-established as one of the social media giants, Twitter saw its shares almost triple in value on the AvaTrade platform between July 2018 and July 2019 jumping from just above US$15 to a peak of around US$45.

When we consider recent weeks, traders could have made a generous profit on Snapchat had they bought its shares ahead of the announcement that it would stop promoting posts from US President Donald Trump. Following this announcement towards the end of June, Snapchat’s shares shot up 11% on the AvaTrade platform.

 

Dáire Ferguson

The other side of the coin

On the other hand, not all tech-based companies are finding it easy at the moment. Uber was one of the most falling stocks in the same week as Snapchat rose, dropping by 8.3%. Taxi services have understandably struggled during lockdown, so this is more than likely to be the reason for Uber’s decrease. The ride-hailing company also issued a statement around this time that all passengers need to wear facemasks which, although an admirable safety measure, may have contributed further to its drop in market value, as other taxi companies have not followed suit.

It can be relatively easy to read market reactions in hindsight, as we’ve done here. But doing so in the moment is far harder. Traders could conceivably have purchased stocks in Uber following the face mask announcement in the belief that this decision would encourage better consumer trust in the company and increase its worth. As we have seen, however, traders would have stood to make a significant loss on this call.

Undoubtedly, market volatility can be lucrative, but being able to manage risk is also critical.

 

How to protect assets

While an ear to the ground and a good nose for market movements will serve traders well, not everyone can rely on years of experience, nor can they necessarily be confident in any given situation, particularly given the unpredictability of today’s markets. To address these worries a number of risk management tools have been entering the field, offering an extra layer of security for traders. These tools can be useful for both experienced traders wanting to execute strategies in riskier climates and those relatively new to the trading world looking for additional support.

There are a number of different forms of protection available to traders. For instance, AvaTrade is one of a number of brokers that offer “take profit” and “stop loss” orders. These see traders define price points at which the system will automatically sell their asset in order to lock in profits or cut losses. This can be a valuable tool for ensuring traders make rational decisions and don’t hold onto positions for too long, risking a favourable position going sour or a bad position getting worse.

Other tools, such as AvaTrade’s AvaProtect, even go so far as to offer total protection against loss for a defined period. This approach sees the trader simply check a box to take out protection on an asset in exchange for a small fee based on the size and risk of the position. This means that if a strategy does not perform as well as initially expected, traders can recover any and all losses on the trade, minus the initial cost of taking out the protection.

As with every sector, advancements in technology continue to evolve in the trading space and, with access to the right tools, traders can feel confident that they can profit from the market without taking on too much risk.

Certainly, 2020 will continue to be a tumultuous and challenging year, especially economically. Upcoming political events, such as the US elections and a possible Brexit trade deal later in the year, combined with the ongoing impact of the coronavirus, are likely to keep triggering market shifts. For traders – armed with the tools to keep a tight grip on risks – this will mean further opportunities to profit.

 

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Wealth Management

Keeping Cyber Insurance Premiums Down with Deep Observability

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By Mark Coates, VP EMEA, Gigamon

There is no doubt that the cyber insurance industry has experienced something of an evolution in the last five years. As the threat landscape has changed beyond recognition, so have the risk management strategies aimed at staying ahead of cybercriminals. The result is an exponential rise in premiums: 85% of cybersecurity business decision makers saw an increase in their cyber insurance premiums over the past 12 months, and 82% of insurers are expecting these rises to continue. Given that cyber insurance makes up a key component of many cybersecurity and business continuity plans, what can organisations do to keep premiums down while maximising coverage?

The key is to improve proactive protection and to embrace deep observability – employing real-time, network-level intelligence to track activity across a network. Deep observability provides IT and security teams with the ability to amplify the power of their current log and trace-based monitoring tools, rapidly detect suspicious activity and act accordingly. Achieving this ‘single source of truth’ also helps to reduce complexity and cost – a crucial benefit as premiums continue to rise and we enter a tougher economic climate.

Where it began

Against the backdrop of increasing cybercrime, the ‘NotPetya’ attack was a landmark cyber-threat for various reason. Perhaps most significantly it signalled the beginning of cyber insurance premium rises. Launched in 2017, NotPetya was a malware launched as part of a Russian state-sponsored cyberattack campaign targeting Ukrainian IT infrastructure. Beyond financial setbacks for global organisations, NotPetya’s proliferation caused the drastic rise of premiums and lowering of coverage limits, as insurers adjusted their policies to reflect the changing cyberthreat landscape.

Since then, a global pandemic and the subsequent shift to home or hybrid working created a perfect storm for the rise of ransomware. This form of cybercrime can cause such large-scale and financially destructive consequences that insurers have had no option other than hike up prices for more vulnerable businesses in order to stay profitable.

Zero Trust is an essential

With challenges comes opportunity. This upending of the cyberthreat landscape serves as a potential catalyst for organisations across verticals to optimise their cybersecurity.

According to the recent Gigamon State of Ransomware report, phishing and malware were the top routes for ransomware attacks in 2022. Cloud applications were also cited as a common ransomware attack vector, particularly by those in the UK. Protecting against a misconfigured cloud or human error isn’t the job of cyber insurance – this should be reserved to cushion the financial blowback in the event of a breach. Instead, enterprises must proactively take steps to bolster their security posture.

This includes ensuring all access across digital infrastructure is authenticated. Trust is earned, not freely given in this threat landscape. A Zero Trust architecture – which requires authentication of all users regardless of their position in an organisation – helps prevent unauthorised access and works to restrict suspicious lateral movement across a network. Fortunately, it’s now a topic regularly discussed in Boardrooms. Across EMEA in particular there is growing confidence that organisations will be able to implement this architecture in the next few years (51% agreed in 2020, compared to 83% in 2022). To get there, however, deep observability is a critical foundation; you simply cannot manage and grant access to what you cannot see.

A single source of truth

Threat actors can bypass SIEMs and endpoint detection and response tools, yet they will always leave a metadata trail. This is why deep observability is so crucial to cybersecurity. It grants security operations (SecOps) teams the ability to analyse this metadata, spot suspicious behaviour and take the appropriate steps to mitigate an intrusion before it escalates. Such enhanced visibility and control are crucial for maximising the efficacy of Zero Trust architecture and fostering a security-first approach within an enterprise.

With premiums so high, organisations also undoubtedly want to turn to solutions that provide ROI as well as better security. As more tools come into play, cost and complexity rises. Many enterprises will not have the budget to keep adding more solutions to their technology stack in hope they will improve their cybersecurity and reduce their insurance prices. Instead, they need a single source of truth and a complete view across the entire IT infrastructure – cloud included. From here, teams can identify network bottlenecks and eliminate irrelevant, duplicate or low risk traffic. Deep observability is therefore not only a must for security, but also for making budgets go further.

Organisations need to brace themselves for a challenging economic down-turn and continued rises in cyber insurance premiums by implementing a strategy based on Zero Trust, deep observability and network-to-cloud visibility. In turn, security teams can be far more confident in their security posture, business leaders are satisfied by a lower spend and insurers become more confident when taking on their customer’s risk.

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Banking

How banks can increase customer acquisition and user engagement with sustainability

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By Karolina Szweda, Head of Growth Marketing at Connect Earth

Young people are demanding more innovation from traditional financial institutions, and are primarily in favour of lower costs and more flexible digital customer experience promised by challenger banks and other FinTech providers. The future of banking is digital, and traditional financial institutions are well aware that they need to embrace innovation to remain competitive in the digitalised market.

In order to win over the younger generations, especially Millennials and Gen Z, banks need to invest in their digital transformation and deliver more customer-centric solutions. One of the affordable low-hanging fruits is sustainability.

As the public’s attention to the climate crisis grows, consumers and businesses are increasingly interested in reducing their negative impact on the planet. BCG reports that as much as 73% of consumers are altering spending habits because of climate change, and, according to PwC, 88% of consumers want brands to help them live more sustainably. As far as businesses are concerned, they are increasingly aware of the mandatory disclosure regulations set to take effect within the next years in major economies, and the need for carbon emissions reporting.

The problem is that the vast majority of consumers and businesses do not have access to actionable data on their carbon emissions. We believe that this is where banks can step in.

Increasing customer acquisition and retention

According to Deloitte, 71% of customers are more likely to choose a bank with a positive environmental impact. In addition, Global Risk Regulator reports that 93% of people expect sustainable financial services to become the norm, and according to Tink, 62% of consumers want their bank to show them an overview of their carbon footprint.

Banks are in a unique position to respond to this increasing demand by embedding climate data in their financial services offerings, which can help attract new customers and improve brand loyalty on a large scale.

With a carbon tracking API solution integrated into a digital banking app, financial institutions can be a catalyst for change and enable their customers to understand how they can reduce their emissions. By providing carbon emissions data for each financial transaction, banks can support and encourage their retail banking clients, corporate clients and/or retail investors to act more sustainably, while also increasing customer acquisition and digital engagement.

Most importantly, banks can also measure how their customers’ spending behaviours are changing as a result of being exposed to climate-related information, which they can use to segment and understand their customers better.

Increasing digital engagement

According to EY, 61% of consumers want to access more information that can help them make better sustainable choices. Banks are in a position to empower customers to do exactly that, whilst increasing user engagement with their digital banking apps.

Educating consumers on how to make more sustainable choices can be achieved through gamification, personalised recommendations and rewards to encourage behavioural change. The analysis of spending data along with tailored educational content can enable consumers to analyse, learn and improve their consumption habits and empower them to act on this knowledge.

Before accessing their carbon emissions insights, users can enter their custom information about their lifestyle habits, such as diet (meat-based vs. plant-based), daily means of transportation (car vs. bus) and more. Machine learning models improve as users input data over time, making carbon emissions estimates more granular. The model is trained to support thousands of different user types based on their profile and enables the bank to customise the experience and gamify the emissions reduction process for users.

How banks’ customers can benefit from accessing carbon emissions data

As far as climate action is concerned, having a real-life overview of one’s carbon footprint can be a true game changer for millions of consumers worldwide. Access to carbon data increases climate change awareness and empowers people to make a real difference.

Earlier this year, our team at Connect Earth confirmed the partnership with KBC Bank in Bulgaria to help them drive customer engagement and provide their retail banking clients with climate insights into their spending. We aimed to bolster KBC Bank’s corporate sustainability strategy, whilst meeting increasing demand from climate-conscious clients.

The financial sector has historically lacked the infrastructure to support sustainable finance in a tangible way. We are happy to report that the green transition has begun.

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