Reaction to today’s ONS retail figures

There was a little bit of optimism in both the non-retail and fuel sectors but food stores took a little bite.

The key findings from the Office for National Statistics showed:

  • In the three months to February 2019, the quantity bought increased by 0.7% when compared with the previous three months, with strong growth in non-store retailing and fuel.
  • The monthly growth rate in the quantity bought in February 2019 increased by 0.4%, with a decline of 1.2% in food stores offset by growth in all other main sectors.
  • The monthly fall in food stores was the strongest decline since December 2016 at negative 1.5%, reversing the increase of 0.9% in January 2019, with food retailers suggesting that “getting back to normal” following the January sales had contributed to this fall.
  • Year-on-year growth in the quantity bought in February 2019 increased by 4.0%, with growth in all main sectors, while the only sub-sector to show a decline within non-food stores was household goods stores at negative 1.3%.
  • Online sales as a proportion of all retailing fell to 17.6% in February 2019 from the 18.8% reported in January 2019; this was a year-on-year increase of 9.4% when compared with February 2018.

Phil Mullis, Partner and Head of Retail and Wholesale at leading accountancy firm, Wilkins Kennedy, said: “Despite the continued uncertainty with Brexit, consumers have been reasonably resilient throughout February and seem to be just getting on with it.

“From a retailers’ perspective it is evident they are continuing to make plans and create strategies for dealing with Brexit. My clients have been changing supply chains but retailers are still demanding certainty across every aspect of their operations. Consumers may be bored by Brexit but retailers want certainty so that they can plan.

“February is always driven by Valentine’s Day for retailers and there was a slight uptake in inflation but the amount of food we have bought has dipped so we may be trying to tighten our belts.

“It is interesting that the quantity of alcohol that was sold in February fell. I would have expected that in ‘dry January’ and then an increase last month. It is always difficult to predict a trend from one or two months data but it may indicate that consumers are choosing more healthier lifestyles.

“Even though online sales as a proportion of retail fell, which surprised me, overall the continued dichotomy between people heading to the High Street and buying online continues.

“Discounting has reduced following the Christmas and January sales so clothes in particular are returning to their normal prices, and it will be interesting to see next month’s figures as talks remain over the UK’s exit from the EU and whether we are any further forward in reaching a conclusion.”

The money laundering implications of Brexit – Opinion from Rahman Ravelli

Among the political turmoil over Brexit and the UK’s future relationship with Europe, the issue of money laundering seems to have been overlooked so far. And that would be a big mistake.

There can be no conclusive estimates of the scale of money laundering in Europe. But we are talking about many billions a year.

Many commentators would say the EU has been far from perfect when it comes to tackling money laundering. But it has at least introduced a series of money laundering directives in recent years that aim to stop the proceeds of crime flowing into its member states.

The most recent one, the Fifth Money Laundering Directive (5MLD), is set for implementation in 2020. Following on from the Fourth Money Laundering Directive, which ordered major changes to how businesses should take a risk-based approach to money laundering and removed automatic exemptions from due diligence, 5MLD will regulate virtual currencies, improve precautions for transactions involving high-risk countries and enhance the centralisation of bank data in member states. In short, it is a further removal of weaknesses that allow money laundering to flourish.

Membership of the EU has been no guarantee of protection against laundering, especially as some of its smaller members lack either the expertise or the resources to tackle it – as has been shown in a number of financial scandals in recent years. Such problems have led to louder calls for an EU-wide organisation to see greater consistency between member states’ identification and prevention of laundering.                 

Yet now such arguments are now overshadowed by Brexit. Whether the EU states come to miss the UK’s expertise in identifying sources of illegal wealth and its movement around Europe and the rest of the world remains to be seen. But what has to give concern is the issue of how the UK’s investigating agencies will be able to continue to track those proceeds of crime if they cannot benefit from the sharing of intelligence that currently goes on between them and their European counterparts.

We are obviously yet to see how this problem is resolved. It is possible that, given time, new relationships will be forged on a country-to-country basis between the UK and EU members. But how quickly they are put in place and how effective an alternative to EU membership they prove to be in tackling money laundering remain to be seen.

Withdrawal from the EU means the UK is no longer part of the EU’s law enforcement agency, Europol. Europol’s centralised intelligence database for members, the Europol Information System (EIS), is arguably one of the world’s most valuable assets when it comes to sharing information across borders to tackle crime. And money laundering is certainly a crime that crosses borders.

Yet it seems unlikely that the UK will be able to continue to use this, which has to hamper its attempts to tackle flows of laundered money. And a lack of such cooperation will also be to the detriment of countries who are still in the EU. They are unlikely to be able to call on UK expertise and intelligence as part of their money laundering investigations as seamlessly as they can while the UK is still in the EU.

The EU has been criticised for its efforts to tackle money laundering in its member states not being concerted or consistent enough. But at least its members have an infrastructure and working relationships in place.

The UK can boast tough anti-money laundering legislation. Its recent use of unexplained wealth orders and account freezing orders are testimony to its authorities’ willingness to tackle money laundering. But soon it will not have those working relationships in place that EU members benefit from in their efforts to tackle money laundering.

No doubt attempts will be made to instigate replacement arrangements. But the speed with which a patchwork of anti-money laundering agreements between the UK and other countries can be established – and the value of those arrangements compared to EU membership – has to be a cause for concern. For both the UK and those nations still in the EU.

Aziz Rahman of business crime solicitors Rahman Ravelli examines the worrying money laundering implications for the UK when Brexit becomes a reality.

Elliptic makes senior hires to drive growth and support increasing demand

Elliptic, the world’s leading cryptocurrency compliance company, today announces a series of strategic hires to strengthen its senior leadership team.

Experienced tech executive Christopher Scoggins has become a member of Elliptic’s Board of Directors, with Dustin Dean joining in the newly created role of Chief Revenue Officer.

Christopher Scoggins, Board Director, Elliptic:

Scoggins, a former senior executive at Oracle, brings more than 20 years’ experience building technology companies and recently managed global revenues, partnerships and strategy for Oracle Data Cloud.

Scoggins joined Oracle after it acquired Datalogix in January 2015, where he managed the digital business from its inception. Prior to Datalogix he spent six years in the venture capital industry with Sequel Venture Partners and The Sprout Group, specialising in SaaS and digital advertising technology businesses.

He graduated Phi Beta Kappa with a BS from Trinity University and holds a MBA from Stanford University.
Dustin Dean, Chief Revenue Officer, Elliptic:

Dean has 20 years’ experience in SaaS technology, including 13 years at LivePerson – a provider of cloud-based mobile and online business to consumer messaging solutions.

As the Executive Vice President of Global Sales and Customer Success, Dustin was responsible for driving strategic business expansion, acquiring new customers, and developing LivePerson’s growing global user base.

During his time with LivePerson, Dustin served in many key leadership roles as the company grew from $17M in annual revenue to more than $200M. He joined the company in 2005 as a direct sales executive and held progressively more senior leadership roles during his tenure, including senior vice president of the global strategic segment, director of business development, director of global channels, and general manager of APAC.

The appointments coincide with a period of rapid growth for Elliptic following the firm’s international expansion to the US and Asia.

James Smith, co-founder and CEO of Elliptic, comments: “As an entrepreneur and an early-stage investor, Chris has been involved in building many successful software and data businesses from scratch over the last 20 years. We are excited to add his experience and expertise to our company, which will help as we continue our expansion into new markets, to be at the forefront of cryptocurrency intelligence gathering across the globe. As cryptocurrencies continue to grow in usage, Dustin’s extensive experience at bringing on board new customers and working in different international markets will be essential to delivering our core mission of making digital money safer to use.”

Scoggins comments: “At Datalogix we used proprietary data sets and machine learning to predict consumer preferences – basically, what brands and products are you interested in at a given moment in time. Elliptic is using very similar techniques and strategies to answer a different set of questions – how do financial institutions and regulators score and manage the various risks associated with crypto assets – almost like a credit score for the global crypto ecosystem. This is a big idea.”

Firms increasingly cautious on risk-taking in the supply chain

Companies are increasingly cautious over taking risks in their supply chain, with fears over their level of dependence on suppliers and sourcing from high-risk countries dominating their thinking, data in a new report shows.

The Q4 2018 Global Supply Chain Risk Report, published today by Cranfield School of Management and Dun & Bradstreet, investigates the level of perceived supply chain risk faced by European companies with international supplier relationships.

The data shows a decreasing trend in buying companies sourcing from suppliers in high-risk countries, chiefly driven by a 25% drop in the manufacturing sector but also influenced by smaller but significant decreases in the wholesale, retail and finance sectors. Meanwhile, companies’ perceived dependence on suppliers increased during Q4 2018, thanks in part to a marked increase in the construction sector.

Buyers in the retail sector have the highest perceived level of dependence on their suppliers, with 89% of relationships in Q4 2018 categorised as critical or key. The biggest increase is in the construction sector, where 40% more relationships are considered critical than in the previous quarter, taking perceived reliance on key suppliers to a total of 80%.

The report suggests sourcing from high-risk countries is most prevalent in the manufacturing sector, but a 25% decrease in this metric during Q4 2018 suggests companies in that sector may be adopting a more cautious approach.

Dr Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield, said: “It is interesting to note that companies’ perception of their dependence on their suppliers has increased, especially in the construction sector. There are a number of reasons why this could be happening. Increasing levels of demand in the sector, possibly driven by Government incentives such as Help-to-Buy, may have put pressure on the domestic supply market. Equally, construction market consolidation could also cause this trend.”

Chris Laws, Head of Global Product Development – Supply & Compliance at Dun & Bradstreet, said: “Sourcing from high-risk countries has historically been highest in the manufacturing sector, but this most recent data shows a significant reduction. This could mean that companies are more cautious about offshoring to low cost economies, which are sometimes characterised by higher country risk.”

The quarterly Global Supply Chain Risk Report uses four key metrics – supplier criticality, supplier financial risk, global sourcing risk and foreign exchange risk – to assess overall supply chain risk and provides businesses with a view of trends within their industry sector and the wider economy. By analysing trends by sector, the report highlights areas for monitoring and consideration in procurement decisions.

Analysis in the Q4 2018 report was carried out using proprietary commercial data supplied by Dun & Bradstreet, which included around 200,000 transactions between anonymous European buying companies and their suppliers in more than 150 countries worldwide.

Fiduciam expands into Germany with a new office with aim to help UK brokers leverage property overseas

Fiduciam, the short to medium term lender renowned for its business and overseas lending, has just expanded into another European country, opening an office in Frankfurt, Germany.

Fiduciam has set up a lending structure in co-operation with Germany’s MHB-Bank in Frankfurt. It has set up a German subsidiary, Fiduciam GmbH, which received its licence in January, to offer German SMEs and entrepreneurs bridging finance solutions. It will also provide loans through UK brokers who have clients with property in Germany.

Last year Fiduciam expanded its lending over real estate security in France and Spain and opened up an office in Utrecht in the Netherlands. This means Fiduciam is now providing bridging loans secured over real estate in the UK, Ireland, the Netherlands, Spain, France and Germany.

Fiduciam will grant loans in Germany ranging from €500k to €25 million, with interest rates starting at just 0.6% per month with terms of up to three years.

Johan Groothaert, CEO of Fiduciam says, “Germany is facing substantial housing shortages, with population growth picking up after two decades of stagnation. This is driving an active real estate market with strengthening prices. At the same time, the German economy is characterized by a very dynamic SME sector, which continues to go from strength to strength, now representing more than 50% of the total added value generated by the German corporate sector. This makes it the perfect time to enter the German market with array of short and medium-term loans aimed at SMEs.” 

Robin Felgenhauer, Fiduciam’s BDM for Germany comments, “The savings banks and co-operative people’s banks which traditionally financed German entrepreneurs, have been in retreat, as their loan books are now subject to Basel III regulations. In particular, there is clearly a shortage of supply for loans under €10 million, which is Fiduciam’s sweet spot.”

Henrik Takkenberg, co-founder of Fiduciam who is spearheading the German project adds, “We have been impressed by the strong demand of applications we have received already, in particular from German developers, some of them coming through London brokerage channels.  We believe Germany will represent an important part of the Fiduciam loan book as our company continues to develop.”

Paradigm launch guide to Senior Managers & Certification Regime

Paradigm Mortgage Services, the mortgage services proposition, has today (18th March 2019) announced the launch of a new free Guide for all directly authorised advisory firms covering their responsibilities under the FCA’s Senior Managers & Certification Regime (SM&CR) and how they can meet them.

The SM&CR is already in place in the banking industry (from March 2016) and came into force for product providers in December 2018. As it stands, advisory firms are currently regulated under the FCA’s Approved Persons Regime however this will be replaced by the SM&CR from the 9th December 2019.

The overriding requirement that the SM&CR brings about for financial services firms is that senior management must evidence good culture and ethics, and this is to be driven from the top.

Paradigm has produced its free SM&CR Guide to provide firms with an overview of the new regime and the key points it covers including senior management functions, the certification regime, and the conduct rules that come with it.

Senior management will also be expected to write their own ‘Statement of Responsibility’ (SOR) to confirm the personal responsibility they are taking for the conduct of their firm, while senior managers will also certify annually that certain individuals within the firm are fit and proper, and competent to perform a controlled function.

The Guide also analyses where the duty of responsibility lies, where firms should start in terms of their preparations for the new regime, the immediate actions that are required, plus it covers the support which is available via Paradigm.

The Guide is available to all advisers, not just members of Paradigm, and to back up the guide, at all Paradigm’s 2019 mortgage masterclasses, Christine Newell – Mortgages Technical Director – will be providing help and support on the SM&CR as part of her regular compliance update.

In addition, Paradigm is running two, half-day ‘Best Practice’ events this June in Tunbridge Wells (11th June) and Bristol (13th June) which will focus solely on preparing for the SM&CR. Attendees will get a full run-down on the changes that need to be implemented and will be provided with resources and tools in order to ensure their firm’s compliance – topics under consideration include: culture and leadership within a firm; the approach to rewarding and managing people; governance arrangements; the SM&CR; and the duty of responsibility for firms. These events are open to all advisers, not just existing Paradigm members.

Bob Hunt, Chief Executive of Paradigm Mortgage Services, commented: “With less than 270 days to go until the implementation of the SM&CR regime, advisory firms should be undertaking the work required in order to ensure they meet the new standards.

“The SM&CR is all about leadership and culture within a regulated advisory firm. The clear expectation is that business owners take the lead in this and, not only take responsibility for their own actions but also leading their entire firm. It also means that every member of staff who interacts with a customer or performs a role that could affect the outcome of any advice or services provided to that customer must meet a certain standard of behaviour set by the business owners, and that they adhere to the conduct rules at all times.

“This Guide on the SM&CR not only provides an overview of the requirements but it also steers firms in the right direction so they can begin work immediately and ensure they meet the 9th December deadline. Given this is an industry-wide issue, we’re very pleased to make this available to all intermediary firms, as part of our ongoing support to firms ahead of SM&CR. In addition to the support available on our website, directly authorised firms attending one of our CPD events will also benefit from detailed information and analysis from Paradigm staff in order to help them fulfil their SM&CR obligations.”

Firms pay bosses more and shareholders less after a cybersecurity breach, study reveals

Bosses are more likely to receive a pay rise after their firm suffers a cybersecurity breach, a study has found.

Researchers at Warwick Business School found that media reports of a cyber-attack led to a stock market “shock” as investors sold their shares, but this only lasted a few days.

Security breaches did have a lasting impact on the way firms were run, as they typically paid lower dividends and invested less in research and development up to five years after the attack.

Yet they were no more likely to fire their chief executive. On the contrary, bosses were more likely to receive an increase in total and incentive pay several years after a security breach.

Average CEO pay at firms that were not targeted by hackers fell by more than $2 million per year over the same five year period.

Daniele Bianchi, assistant professor of finance at Warwick Business School, said: “Firms that suffer a data breach do not typically respond by firing the management, but by investing more in the existing CEO. At first sight, these results may look puzzling.

“However, they are consistent with the idea that the average response is to invest more in the management to address possible structural flaws, as well as maintaining the integrity of the firm in response to the reputational damage it has suffered.

“In the long run security breaches appear to have a more significant impact on firms’ strategies and policies than their cash flow.”

The latest annual Cost of Data Breach Study for IBM estimates that the average cyber-attack cost $7.9 million in 2017. That equates to a record $225 cost for each record compromised.

Dr Bianchi and Onur Tosun, from Warwick Business School, analysed data breaches at 41 publicly listed companies in the US between 2004 and 2016 for their paper, Cyber attacks and stock market activity.

They focused solely on breaches reported by the media, including stolen hardware, insider attacks, poor security and hacking. These occurred at large companies, with an average size of $35.4 million, consistent with existing evidence that hackers are more likely to choose high-profile targets.

The share value and liquidity of a firm dropped significantly on the day a breach was disclosed and the day after, but this reaction vanished after just two days.

For example, shares in Sony Pictures plunged more than 10 per cent after hackers Guardians of Peace stole copies of unreleased films, emails, and the personal information about employees and their families in November 2014.

While operating performance recovered after a cyber-attack, these companies tended to invest less in research and development and paid lower dividends over the next five years as they sought to manage the financial risks caused by data breaches.

Dr Tosun, assistant professor of finance at Warwick Business School, said: “Incidents of security breaches that reveal sensitive and confidential information can lead to litigation and government sanctions, but also to a loss of competitive edge against competitors through a reduction of resources dedicated to R&D, dividend payments, or investments more generally.

“For this reason, companies are often reluctant to reveal information about security breaches due to fear of both short-term and long-term market reactions. However, many firms won’t have a choice with tighter regulations demanding that firms report data breaches within 72 hours.

“Cybersecurity will therefore become an increasingly important consideration for companies to avoid the damaging fallout once a breach is made public.”

Euler Hermes launches its open data portal, granting public access to millions of exclusive data

Euler Hermes has released its open data platform for anyone to access, use and share its valuable data on international B2B trade and is committed to expanding it based on public request.

Data has always been at the core of Euler Hermes’ credit risk underwriting. It represents a powerful tool helping clients select the right prospects and do business with confidence. In recent years, Euler Hermes studied the development of open data portals, which often took the shape of government-led initiatives, for transparency or compliance purposes. As a key player in data intelligence, Euler Hermes seeks to set an example in the global data community by sharing its unique data on international B2B trade.

A platform that helps users make sense of international trade data

This public online data platform gives free access to a first dataset of around 1,800,000 data points collected by Euler Hermes over a three-year period (2016-2017-2018). Euler Hermes’ open data portal meets the highest standards: it is available via API or on the web with various options for manual processing and data vizualisation. The platform, hosted by OpenDataSoft, provides academics, journalists, data scientists and the like with the necessary data to carry out their analysis.

The Euler Hermes portal shares anonymized data both by country and by trade sector. It includes valuable insights such as the impact of a company’s country of incorporation on the likelihood to obtain payment: for example, companies legally registered in Russia and exporting to China will be able to compare how likely they are to get paid compared to firms also exporting to China but registered in Germany.

Tighter collaboration within the corporate world and beyond

From the early stages of the project, Euler Hermes sought to build bridges within and beyond the corporate world. The company collaborated with Professor Christophe Pérignon, Head of Research at the HEC Paris Business School to identify relevant data for academics, data scientists and economists:

“Euler Hermes’ willingness to share data is of tremendous value to the academic community. It means we are now able to work on real-life data from a large number of countries, thanks to Euler Hermes’ international presence. It is the first time that a large corporation reaches out to us with an open-access data project. This action in itself shows a strong sense of corporate social responsibility”, explains Christophe Pérignon.

By sharing their data with a larger audience, corporations like Euler Hermes can help drive the creation of innovative businesses and services. “Our goal in making the unique Euler Hermes data available to all is to create a community around international B2B trade data. We want to turn this data into action and help solve business challenges across sectors. Ultimately, we hope to set an example and encourage other companies to open data to better serve society”, explains Jennifer Baert, Global Head of Information & Credit Risk at Euler Hermes.

This open data portal is a first step towards creating a culture of data openness in the corporate world and Euler Hermes is hoping other companies will soon follow its example. In the meantime, Euler Hermes will seek ways to increase access to its data and help people better understand companies’ payment practices as well as how they trade and buy goods or services.

A little ray of hope amidst uncertainty – Comment on the UK Finance lending trends

Following the UK Finance lending trends for January, Richard Pike, Phoebus Software sales and marketing director, says “The turmoil in government is undoubtedly having a huge effect on every aspect of our economy and general confidence. However, the mortgage market is keeping its head above water with first-time buyers once again showing an increase on the same month in 2018. It is also reassuring to see an increase in the number of homemover mortgages.

Who knows what the next week will bring, and how long the Brexit cloud will continue to hang over the country, but in the meantime the Chancellor did offer a little hope in the spring statement yesterday. He might not have delivered a statement with any real substance, as some might have hoped for, it was exactly as promised – a statement on the health of the economy and an update on the announcements made since the last budget. The small ray of hope that did come out of yesterday’s speech was that, despite Brexit upheaval, there is still a lot going on the background to help us reach our targets for building new homes. It may not sound like much right now, and it would be all too easy to live only in the present until we know what kind of a deal we will get, but it is good to know that government departments haven’t taken their eye off the ball and are still looking to the future. Our housing market needs all the help it can get in the long term.”

Santander Brazil Deploys New Strategies in Half the Time with Centralised Decision Engine from FICO

Santander Brazil can now deploy or change new lending strategies and new analytic models in half the time using the FICO® Decision Management Suite. The bank, which is the country’s third largest private bank and represents close to 30 percent of Santander Group’s global revenues, has reduced the workload for its IT group while gaining the ability to quickly respond to market changes and requirements. For its achievements, Santander Brazil has won a 2018 FICO® Decisions Award for Decision Management Innovation.

Santander Brazil began this journey toward a more integrated decision platform in order to adapt more quickly to the market, and also to take advantage of unstructured data and new analytics technologies, such as Python.

“We had to improve our time to market for our new strategies to quickly respond to market changes and better serve our clients,” said Francisco Munoz, associate director of Enterprise Risk Management. “To do that, we needed a solution that depended less on our IT group, and that would give our business users the power to build, change and promote strategies. Our framework of 28 decision engines across the bank, all implemented on mainframe technology, could not provide the flexibility and speed we needed.”

After a review of the market, Santander Brazil chose the FICO® Decision Management Suite to extract, transform their raw data from data lake and provide real-time decisioning capabilities. The platform was chosen due to its flexibility and robust ability to support the bank’s digital transformation.

The solution has been used to transform raw variables into ready-to-use variables in the bank’s data lake, building a “variable shelf”. The Decision Management Suite is connected directly to the bank’s Big Data and other data sources and is able to quickly access new types of data and supply them to the bank’s risk decisioning process. The risk team has also been able to deploy new forms of analytical models (Python) in the bank’s real-time risk decisions.

While the first risk decision engines are in production and new engines are being rolled out to the platform, the bank has already been able to estimate gains that the platform is bringing to their operation:

  • 80 percent reduction in internal costs for development of new projects (and strategy updates)
  • 50 percent reduction in of time-to-market of new projects, new decision strategies and new analytic models
  • 60 percent reduction of dependency on IT through more empowerment and higher independence of the business users to implement new strategies
  • 80 percent reduction in training (from five months down to one) through standardisation of programming language and consolidation of decision engines
  • 70 percent reduction in incidents with operational risk

“Along with our quantified benefits, we have the possibility to use this platform for other business units at Santander and other kinds of decisions,” Munoz said. “The FICO system has brought us all the benefits of a single, advanced decision platform for our business.”

“Centralised decisioning is one of the hot fields in software today,” said Nikhil Behl, vice president of Marketing at FICO. “Santander Brazil has impressive early results from using the FICO solution, which should continue to streamline and improve the bank’s decision processes.”