The price of bitcoin plummeted to under $6,000 in the first half of August 2018 before ticking up again days later. Here is how cryptocurrency experts have reacted to the recent price moves.
Given how new technologies have been revolutionising customer experience across a variety of sectors, proclaiming the importance for banks to embrace digital transformation may sound like old news. Haven’t all banks already created compelling online banking services by now, to satisfy the tech-savvy consumer’s demand for anytime, anywhere banking?
Well, no. The banking and financial services industries have traditionally been digital laggards, partly as a result of the highly regulated industry in which they operate and partly because senior decision makers have been slow to recognise the potential ROI. We are now entering a critical new phase in which intelligent machines are enabling – indeed, compelling – banks to fundamentally see and do everything differently. With the growing threat of FinTech firms increasingly gaining traction with consumers due to the accessibility, flexibility and availability of the financial products which they provide, banks now have a significant incentive to accelerate the move into the digital age.
Embracing the digital age
Digital transformation will affect all working practices and the way banking organisations are structured. New intelligent technologies for augmenting human performance will make it easy to achieve things that seemed impossible before.
Employees will become more speedy and productive – as well as happier and more fulfilled.
Banks will be able to reach incredible new levels of efficiency, accuracy, safety and security, and adopt radical new approaches to the way products and services are constructed.
Banks will soon be able to digitise every conversation they have with customers and then use algorithms to anticipate problems – for example, with contactless cards or credit card misuse. Based on these predictions, glitches can be prevented before they even arise.
Another way that intelligent technology can create a win-win for banks, staff and customers alike is with Robotics Process Automation. Machines can be programmed to do mundane, repetitive tasks, thousands of times faster and more accurately than humans. This frees up employees to do more fulfilling work that needs a personal touch – significantly improving customers’ experience all round.
Reaping the benefits of early adoption
Not all banks have been slow to embrace digital transformation. Here are some examples of how digital innovation is already benefiting organisations whose technology-embracing boldness is paying off:
JPMorgan Chase
The global financial services firm recently introduced a Contract Intelligence (COiN) platform to analyse legal documents and extract relevant insights and data. If their staff manually revised 12,000 annual sales contracts, it would take around 360,000 hours. With Machine Learning technologies, the same task can be done in minutes.
The Bank of America
Meet ERICA, who works for The Bank of America. You can’t shake hands (she doesn’t have any). This is the first time Artificial Intelligence has been used to help customers manage their savings. ERICA does this using AI, Predictive Analytics and Conversational Interfaces.
N26
N26 describes itself as ‘a bank account for your phone’. Using an International Bank Account Number, customers can do everything they could with a traditional bank, except faster and from anywhere. The app is integrated with Pulse26, an analytical virtual assistant that provides personal insights based on each individual consumer’s needs.
CapitalOne
CapitalOne was the first bank to offer a new way for customers to interact through a completely different channel. It integrates online banking with Amazon Echo so that customers can ask Alexa (the virtual assistant in the device) real-time information about their bank account, and perform transactions just by using their voices.
Citibank
Citibank has recently acquired Feedzai, a Data Science company that works in real time to identify and eliminate fraud. By constantly and rapidly evaluating vast amounts of data, Feedzai identifies suspect activity and alerts customers immediately.
Act now or be left behind
As the above examples show, this technology is already revealing some astonishing benefits for financial institutions. And yet, many established banking organisations are still a long way from embracing this next stage of digital transformation. According to a recent PwC study, two banks out of three in the US have not yet adopted any meaningful application of these powerful new tools.
There are various reasons for this, such as operational, regulatory, budgetary and resource constraints. But the fact is, we are at a once-in-a-decade, pivotal moment – similar to the dawning of the internet age, back in the nineties. Leaders must transform how they run their banking organisations and embed these new technologies in their business or risk being left behind by the competition.
For those banking organisations looking to press ahead with their digital transformation journey, here are some important considerations:
Recognise the importance of agility
With the maturing world of powerful intelligent technologies such as AI, organisational agility is more essential than ever before, and many established financial institutions still lack this key requirement to digitally transform their businesses.
Engage the entire organisation
It’s imperative to have engagement from all levels of the organisation, from board level downwards. This is a fundamental transformation programme that will touch every aspect of the business. To truly benefit from these innovations, an entire organisation will need to be engaged in the journey and adopt the mind-set necessary to embrace the new technologies.
Be measured about the potential results
The potential benefits of the new technology are enormous, but it’s safer to be conservative with estimates – they will still be impressive. Organisations should exercise some healthy caution, perhaps born out of previous investments in technology that only delivered marginal improvements.
Demystify the terminology
Machine Learning, Intelligent Machines, Cognitive Platforms, Deep Learning, Intelligent Technology, Artificial Intelligence, Robotics, Robotic Process Automation, Intelligent Products, Virtual Assistants, APIs…. the list goes on and on. These new capabilities are wrapped in a language that to many is impenetrable. Find ways to simplify it. Compile a glossary. Educate everyone so you’re all speaking the same language.
Create powerful practical examples
It’s important to communicate effectively at board level, in a way that demystifies the potential of the technology. The best way to do this is by creating powerful examples that show this intelligent technology in action. Take a look at how IBM is demonstrating what these technologies can do: https://www.ibm.com/thought-leadership/you/uk-en/.
Bring in business areas early
Reinforce the idea that digital transformation is much more than a big IT initiative. Bring in other business areas early to work on proof of concepts.
For the first time, the technologies now exist to radically transform all aspects of a banking organisation. The potential of digital transformation is yet to be fully realised but the warning signs for banks are clear – those that don’t act now to embrace the future will rapidly be left behind.
More than two fifths (41%) of finance back-office processes could be automated in the next five years, a new study from global customer services provider Arvato CRM Solutions and management consulting firm A.T Kearney has found.
According to the new report, 41% of finance back-office processes are set to be performed by robots by 2023, with this figure rising to 53% within the next 10 years.
Implementation of Robotic Process Automation (RPA) is set to significantly boost firms’ productivity and efficiency, as bots are 20 times faster than humans with a 10% lower error rate. Subsequently, companies that adopt this technology, could potentially receive an ROI of between 300 and 1,000% over a three-year period.
It’s also predicted that the widespread roll-out of RPA solutions will result in an annual compound market growth of 50%, with the global market set to be worth $5billion by 2020.
New developments
The research also predicts that by 2023, RPA, with the help of cognitive capabilities, will be able to make automated decisions, and by 2028 robots will be able to carry out most back-office processes independently with minimal human intervention.
The new report, named ‘Robotic Process Automation: The impact of RPA on finance back-office processes’, interviewed more than 20 technology partners and players in the field of RPA, gathering together their view on the trends and developments within the sector.
Ben Warren, vice president of Digital Transformation at Arvato CRM, Global BPS, said: “RPA will revolutionize the finance back-office, as the new technology is more accurate, efficient and can work for longer hours, depending on demand.
“This can consequently help drive revenue for a business, streamlining processes and allowing employees to spend more time on higher value tasks.
“But although the benefits of automation can be great, it’s important that firms understand that to successfully utilize the technology they will need to invest.
“A full analysis of end-to-end systems and redesign of existing processes will be initially required, and companies will need to regularly review their processes as technology continues to evolve and develop over the coming decade.”
Dr. Florian Dickgreber, partner at A.T Kearney and co-author of the study, said: “Having transformed manufacturing, bots are now set to change processes in the service sector.
“We expect RPA, the automation of structured business processes, to take over more than half of all back-office processes over the next five to 10 years.”
(Source: Arvato CRM Solutions)
In the past year MIFID II has enticed change and development across the financial markets and research sector. Here Fabrice Bouland, CEO of Alphametry, analyses said change and the impact it has had on innovation.
Six months in and MiFID II research unbundling regulation has appeared to create an even worse market for investment research than we had previously. With many commentators decrying the ‘unintended consequences’ of the new legislation – namely bringing the research market to a grinding halt as asset managers assess their needs and sparking a price war which has all but crippled smaller, niche research houses – one might wonder if there is anything positive to say about the impact of MiFID II on the research market and whether anything which can be done to revive it?
In truth, MiFID II has ultimately shown us the historical ambiguity investment managers have always had with research. There has never been an easy way to answer fundamental questions like ‘what research is needed’, ‘how much should we pay for it’ and ‘how do we measure the value’. This lack of structure has been pulled well and truly into the spotlight under the new EU regulation, as well as the financial services sector’s slow take-up of new technology to answer these questions.
Thanks in some part to the new regulation, active management might be at a historic turning point. The progress in investment technologies is about to experience a quantum leap forward plus the expected deluge of new alternative data will unleash an unprecedented potential. R&D and new technology must play a leading role in this and MiFID II can claim credit for creating this opportunity to innovate.
Time to innovate
From a buy-side perspective, research providers need to adopt entirely new strategies to survive.
In the past six months, we have seen two developments. Firstly, Tier-1 providers are pushing content exclusively on their websites. This is a step back from a user experience perspective as remembering numerous passwords is impractical for portfolio managers to the extent that some have cut providers which do not provide easy access to their portals. Distributing research via aggregators or marketplaces in order to reach the maximum number of channels is another option in today’s market. This could be applied to any type of research or data, in whatever format, for the easier and faster use of the portfolio manager.
The second innovation we are starting to see is from research providers who, in response to plummeting prices, are reducing the number of analysts and opted for more automated production. Commerzbank is one provider which is experimenting with artificial intelligence to see if it can write basic analyst notes automatically to trim research costs.
Alternative research and AI
With regulation forcing active managers to value their historical research franchise, it’s become clear that research has barely evolved whereas the world of investible assets has changed dramatically. Factors affecting a company’s valuation go way beyond the simple analysis of its financials or strategy.
The rise of alternative datasets which cover a wide range of digital inputs from social media to credit card data, are becoming increasingly valuable to asset managers. In many ways, the rise of alternative data is one of the first manifestation of how research is changing for the better under MiFID II.
Similarly, the research product may no longer be exclusively research reports but also the technology layer which is able to extract intelligence from them automatically, quickly and at scale. Since the buy-side has always heavily relied on the sell-side when it comes to technology, most active investors are stuck in a technological gap. Capturing and processing a more and more sophisticated and voluminous information resource seems the way forward.
Is MiFID II helping or hindering innovation in financial markets? It already seems that asset managers are considering how tomorrow’s technology is affecting today’s research – let’s hope the speed of implementation can match the exponential changes in data volume and value which we are seeing in the wider world.
Owning a home is one of the biggest dreams for many, yet the process of buying any property can be laborious and flooded with additional fees, delays and disappointments. Blockchain may just be able to chain that. Below Finance Monthly benefits from expert insight from Kai Peeters, the Founder and CEO of HiP, on the implementation of blockchain in the real estate sector.
We are now bearing witness to blockchain based technology coming out of its infancy, and showing how it can be applied to vastly improve multiple markets - including the archaic property market. With a few established businesses and technology giants warming to blockchain, we have to start asking more profound questions about/around how it could improve the situation for a buyer/ buyers and the real estate market as a whole.
The current housing market simply does not work for the majority of first-time buyers. Working exclusively with traditional financial institutions, real estate markets around the globe confine first-time buyers in long-term unmovable loans that put enormous pressure on young people looking to buy a home. This is why, despite interest rates being reasonably low, the number of new mortgages has been declining since the 1990s. Meanwhile, the minimum deposit is largely unaffordable for people who earn average wages, and without help from their family it is virtually impossible for them to get on the property ladder. Technology can transform the way we buy and sell real estate by eliminating additional costs and disorganization of our housing market, Smart contracts that can handle that aspect more efficiently.
Having a decentralized real estate platform addresses current market issues, and introduces the individual investors who can fill the void left by traditional financial institutions and inject more life into the market. This can also allow property to become a more valuable asset in itself, where each buyer is able to release equity without losing ownership, and raise money free of debt. Being able to turn equity into currency and have control over debt levels brings the choice back to the buyers, owners and investors.
The upcoming platform HiP was designed with all those benefits in mind, especially for first time buyers, who can use an inbuilt calculator to enter the price of the property they want to purchase as well as the down payment and monthly payments they can afford. HiP will then calculate the remaining amount needed to buy the property and this outstanding amount is offered out to investors. This means that the first-time buyer will own a percentage of the property whilst also being entitled to a proportional percentage of profit and capitals gains when sold. Investors on the HiP Exchange who have co-financed the property will also receive return on their percentage of the real estate equity they own.
This is a new world of opportunity for first time buyers who now have access to other financing options that were previously unattainable to them. With HiP focusing on the way we fund properties, and other innovative minds using blockchain based technology in other areas of the real estate sector, it is only a matter of time until the array of problems within the real estate markets becomes a thing of the past.
Creating a balanced and even workflow will optimise productivity for robots – in the same way as it will for human workers.
Surely robots don’t get tired, can work 24/7, are fully skilled at what they are programmed to do, and don’t have any pesky motivational issues – so their productivity must always be consistently high? Absolutely not. This is according to Neil Bentley, Non-Executive Director & Co-Founder of ActiveOps, a leading provider of digital operations management solutions.
To believe this would be to forget everything we have learned about Lean Workflow and the way production systems work. For a processor (robot or human) productivity is best measured as a ratio of output:input. How much work did we get out for the amount of time we put in? For this to make sense we generally convert time into “capacity to do work” based on some idea of how much work could be done in a given time.
So, if Person A completes 75 tasks in a day and they had capacity to complete 100 then their productivity was 75%. Similarly, if Robot B completes 500 tasks in a day and had capacity to do 1,000 then their productivity would be 50%.
As we begin to increase our investment in Robotic Process Automation (RPA) and AI: the productivity of this (potentially) cheaper processing resource will matter – if not so much now then certainly when everyone is employing RPA to do similar tasks within the same services.”
But why would Robot B only do 500 tasks? They wouldn’t dawdle because they didn’t like their boss. They wouldn’t spend hours on social media, and they would surely only be allocated tasks that they were 100% capable of processing.
Maybe Robot B could only process 500 tasks because there were only 500 available to be done. Maybe the core system was running incredibly slowly that day, or there was so much network traffic that latency was affecting cycle times. Maybe someone changed a port on a firewall and the robot needed to be reset. Or there were hundreds of exceptions and the robot had to try them multiple times before rejecting them.
It is strange (isn’t it?) that if a person’s productivity is 50% we assume idleness, a propensity to waste time on social media, or a lack of skill but if it is a robot we quickly understand that it is the workflow that is the problem,” he continued.
Data-focused technologies such as Process Forensics and some digital operations management technologies or WFO technologies that seek to improve performance by URL logging or other screen monitoring techniques are totally missing the point: people’s productivity is far more influenced by the flow of work through the system than it is by their willingness to work or their skill level.
Workforce monitoring technologies seek to intimidate people into working harder, but you can’t intimidate people into having more work available to do. Equally, fluctuating demand, bottlenecks in the workflow, variations in work complexity will all drive variations in productivity – as with people, so it is with robots,” he added.
The answer is to introduce digital operations management solutions in the back office that will be the result of a blended human/RPA strategy made up of:
The plain fact of the matter is that with humans and robotics increasingly working alongside one another in service operations a blended and balanced approach needs to be taken on the issue of productivity.
Four out of five businesses will use chatbots by 2020, 85% of all customer interactions will be handled by them and they will generate $600bn in revenue in the same year, according to a recent Oracle survey. This week Chris Crombie, Product Manager at Engage Hub, believes now may well be the best time to start investing in chatbots.
In just under two years’ time, chatbots – conversation-mimicking computer programmes that provide your customers with an instant, personalised response – will be ubiquitous. Driven by innovation in artificial intelligence (AI) and the insatiable desire to enhance and personalise the customer experience.
Simply put, chatbots are one of the clearest concrete examples of how the “AI revolution” is impacting on the business landscape and on the day-to-day lives of millions of consumers worldwide.
Consumers happy to chat to bots
Consumer familiarity with chatbots has increased over the last decade, a result of our familiarity with things such as self-service machines in supermarkets and interactive IVR.
With the latest advances in AI technology pushing new boundaries, it’s easy to see why many are claiming that 2018 is set to be “the year of the chatbot”.
That’s because, for any company that has an interest in offering a great customer experience, the potential benefits of enhancing customer satisfaction and responding to customer’s needs in a faster and more efficient manner by using chatbots are immense.
Plus, new messaging applications such as Facebook Messenger, WhatsApp, WeChat and traditional SMS are proliferating, which means millions of new opportunities to reach customers and communicate with them using the communications channels they utilise and like the most.
Understanding innovation in AI, Machine Learning and NLP
To understand the latest chatbot innovations, it’s necessary to have an understanding of Artificial Intelligence (AI), Machine Learning and Natural Language Processing (NLP).
Artificial intelligence is the theory and development of computing technologies that can perform tasks that previously required human intelligence. Mainly relating to speech recognition, visual perception, decision-making or language translation.
As an extension of this, Machine Learning is the application of AI technologies in ways that use data to learn and improve automatically, without being given explicit instructions. While NLP is the branch of AI that helps computers understand human language as it’s spoken and written to be able to understand intent.
The computer chatbot uses AI and NLP to imitate human conversation, through voice and/or text. So, in addition to the above-mentioned text-based instant messaging systems, voice-controlled chatbots are becoming increasingly popular, both in the home and in business contexts.
Amazon Alexa, for example, has proven to be an immensely useful consumer technology over the last two years in terms of its educational benefits, teaching consumers about the ease-of-use of voice controlled tech and helping them to feel comfortable and happy using it.
Test chatbots properly, to boost business
So that’s a brief overview of the key technologies and the commonly-used acronyms behind chatbots. Yet the key thing you need to know if this: when implemented correctly, chatbots are a demonstrably fantastic way to increase engagement with your customers.
So, what’s the secret of rolling out chatbots in a way that resonates well with your customers and doesn’t risk you losing sales?
As with any new technology, rigorously test it out internally before you let your customers start to use it. This is particularly critical with chatbot applications, as the bot will start to learn from your team, which helps to ensure that it knows how to deal with a wide range of the most common customer questions, complaints and enquiries.
Thorough testing will ensure your chatbots work as efficiently as possible, giving the correct information to customers as rapidly as they demand it.
All of which means that you will gain a clear competitive advantage, future-proofing your business by improving the customer experience whilst also delivering operational excellence.
Connecting you to your customers 24/7
Businesses in all verticals, particularly finance, retail and logistics, and businesses of all sizes – from small start-ups through to global enterprise – need to be investing in the latest chatbot technologies in 2018 to stay ahead of the curve.
And in today’s market, enhancing the customer experience is all about providing a high quality ‘always on’ service to deliver the information that they need, on demand, 24/7.
New research released from financial services technology leader FIS (NYSE: FIS) found that financial institutions with the most advanced operating models are growing nearly twice as fast as the rest of the industry.
The FIS research also found that financial services executives around the world are more confident in their underlying technology and operating models in 2018. Nearly half (47%) of firms surveyed said their operations function is strong enough to support their growth plans this year, compared with 28% in 2017.
The findings are part of the annual FIS Readiness Report, which surveyed more than 1,500 C-level and senior executives across buy-side, sell-side and insurance firms. The study asked executives of those firms to assess their organization’s capabilities across six key operational pillars. Based on their scores, FIS then further analysed those organizations ranking in the top 20% of the FIS Readiness scoring system. Classified as ‘Readiness Leaders,’ the top 20% were studied to see how their investment priorities differ from their peers and how that impacts their growth.
Readiness Leaders Outperform Peers
The research found that of the six operational pillars, firms’ digital innovation strategies have the most discernible link with stronger revenue growth, followed by automation and emerging technology. However digital innovation strategy ranked just 5.5 out of 10 on FIS’ index for performance, which highlights the weakest performance scores across the industry today.
Among the findings of the FIS 2018 ‘Pursuit for Growth’ report:
Martin Boyd, Head of Institutional & Wholesale at FIS, said: “Our research shows that financial services firms can increase their abilities to accelerate their growth if they evolve their traditional operating model of data management, efficiency and risk management into one built on digital innovation, emerging technologies and advanced automation. Based upon our research, those firms that have been able to expand their focus and modernize their operating model should be well placed for success in the future.”
(Source: FIS)
PSD2 promises a radical change, opening up the strictly regulated financial industry to new players. But Djoeri Timessen, the youngest Bank Director in The Netherlands, at the helm of innovative mobile start-up bunq, wonders whether PSD2 addresses the real issues or is simply a stopgap solution.
The much-anticipated revised Payment Services Directive, or PSD2, came into effect earlier this year. It has been dubbed a game-changing regulation. The monopoly of banks on customer account information and payment services is about to disappear. Banks will no longer only be competing with banks, a prospect that looks like it will drastically change the market and maybe even level the playing field.
The problem, however, with PSD2 is that legislation is inherently always on the back foot, making it an unsuitable driver for innovation. The financial world is in the midst of a data revolution with a landscape that is shifting so rapidly, a directive like PSD2 is already outdated before it comes into effect. Legislation dictating technology means, quite literally, that books are trying to keep up with the internet. PSD2 was created in response to the first PSD and after seeing the effects of this second directive, the process will repeat itself and we'll head straight into PSD3. A few years ago, consumers still relied heavily on branches and internet banking seemed like a futuristic prospect. In 2016, mobile interactions had already grown to account for 56% of customer’s banking engagements in Europe[1]. Nobody can beat the speed of technology.
Of course, legislation can and does bring about positive change in our industry. It wouldn’t have been possible for some of the challenger banks to obtain a financial license to operate without the EU’s progressive regulators. Start-ups would have never been able to expand across the EU in such a rapid pace if it weren’t for the European Economic Area (EEA) passport which allows them to offer financial products and services in another EU member state without needing authorisation in each individual country.
“Banking is necessary, banks are not”
In similar fashion, PSD2 accelerates disruption in a protected market. The ability to engage directly with consumers will no longer be just the advantage of banks but shared with corporates, technology firms, FinTechs, and even retailers. PSD2 is yet another step in the Open Banking revolution, providing new players with an opportunity to plug into traditional institutions and build new services for consumers. As Bill Gates once famously said in the mid-90s: “Banking is necessary; banks are not”.
In turn, this forces bank incumbents to rethink their service offering to stay relevant to a consumer that’s asking for financial services that are faster, personalised, seamless and easily accessible. A highly customer-centric strategy is no longer a unique selling point, it has become a necessity - mostly because of the new directive forcing banks to catch up.
On paper, legislation seems to be working. Yet in reality, it’s still only a stopgap at work. Initiatives like PSD2 force a closed off system to become more open, but they don’t address the root cause: the payments industry is still monopolised by bank incumbents that don’t allow any room for competition. It’s the same pattern we saw after the financial crisis: increased supervision and strict legislation were useful to halt the crisis at the time, but the cause was never addressed.
Conflict between opening up and risks
The problems become clear when we look at how banks are tackling the thorny issue of open banking and APIs, the new directive’s main enablers. Banks have to comply with providing TTPs (third-party providers) access to their customers’ accounts, yet there is an inherent conflict between opening up the system to these smaller parties and the risks they might pose. We only have to look at the Facebook and Cambridge Analytica scandal a few months ago to see how third parties might handle user data and privacy poorly. API standards initiated by legislation appear to be a solution, but are those the most user-friendly and safe? Again, technology will evolve more rapidly than the legislation dictating it.
The opening up of banking data, new technology and changing consumer preferences will all contribute to a more open banking ecosystem. But the only thing that will ever drive innovation in this industry is healthy competition in an equal playing field. In every ‘traditional’ market, disruptors are responsible for seismic shifts: Netflix has kept the TV industry on its toes, Uber revolutionised the transportation business and Amazon set a whole new standard for retail. No matter how many band-aid solutions like PSD2 are put into effect, if the banking landscape itself, beyond the realm of payments and account info, doesn’t make room for new agile players, the real problem isn’t addressed. We need a mindset change from traditional financial institutions, one in which the consumer is put first. The new players are already riding that wave, now it’s time for the rest to follow suit. One thing is for sure: it will be an interesting ride.
[1] https://www.cbinsights.com/research/challenger-bank-strategy/
The greatest problem that is holding back innovation within the renewable energy sectors is access to project capital. To explain the ins and outs of project funding and financial backing, this month Finance Monthly hears from David Hullah, Finance Director at Allied Consultants, an international firm that specialises in strategic
financing.
Below David talks Finance Monthly through the complexities of project development, from financial matters to risk management.
Typically, within every major capital project or large asset acquisition, there are three principle risks; financing, commercial/market, and operational.
The project/asset financier takes the financing risk and is remunerated accordingly; likewise, the project sponsor/asset purchaser takes the commercial risk of there being a market for the output of the investment. However, what has caused issues and in many cases transactions to flounder, has been the debate on who should take the operational risk of any new project or asset acquisition. Allied Holdings and Investments Ltd have been working on this issue for the past 10 years and have solved it, with their due-diligence process which provides a funded solution- they call it Maintained Availability.
The Challenges for the Project Developer
The challenge for a project developer is in providing additional financial support, when their technology has limited or no track record. In most cases, if not all, this has not been possible and has led the project to fail to proceed.
The Challenges for the Investor
With over 1,800 investment funds, worldwide, there is no shortage of investment only a shortage of bankable projects; but what makes a bankable project? The bottom line is providing an investor with a robust mechanism that protects the projects’ ability to repay its debt and operational costs if the projects revenues fall below the projects breakeven point. Above this line, known downtime caused by scheduled maintenance can be built into the projects cashflows but what would happen if something unexpected caused by a non- physical damage event caused the revenues to fall below breakeven?
Allied Holdings and Investments Limited (“Allied”) in conjunction with Fidelis Underwriting Limited have developed a mechanism of due-diligence that is designed to assist in the financing of renewable technologies and is structured to provide extra financial support to a project where the technology does not have a relevant track record, and/or the project company does not have sufficient financial strength to provide security for finance.
The use of M.A allows funders to move further along the project risk curve, thereby increasing equity returns through increased dividends or enhanced asset values at exit.
Guaranteeing the consequences of the unexpected.
Understanding the process of availability in a business model is critical when it comes to assessing risk. Process availability is identified by known maintenance regimes and plant closures and this availability is used to calculate the projects minimum level of revenues that can repay the debt and cover operational expenses – Breakeven.
These events can be calculated where the technology has a proven track record, enforced by other risk mitigation procedures, but what if the technology is unproven with limited or no track record, and how can these technologies compete and bring their benefits to market? The Solution is Allied’s Maintained Availability.
What is Maintained Availability™
Maintained Availability provides an opportunity for a third party to ‘guarantee’ this operational risk.
Facility procedure
Project delivery
The EPC contractor will have to provide the minimum availability that is proposed by TWI availability, or better.
TWI will ensure that the commissioning process is rigorous and that any problems diagnosed are rectified prior to final hand-over. The commissioning process will include a requirement for the plant to run for an agreed period at or above the minimum limit, set by TWI, before it is formally signed off and hand-over is agreed.
TWI, as part of the due process, will have provided an operations and maintenance schedule which will be monitored by their own bespoke software “RISKWISE”, which will be used for ongoing monitoring of the project. If there is an unexpected event which reduces process availability below the breakeven level, M.A will provide sufficient funds to ensure annual debt service and operating cost obligations are met for a period of up to 10 years.
Maintained Availability does not become effective until the plant is handed over and thereby already achieving the agreed minimum limit or better.
What M.A does not do
Advantages of M.A to a funder
What makes M.A different from other products on the market?
Other products are annually renewable, which can put the project at risk at the end of each year. A renewable policy can be changed, have a premium increase or even be cancelled. This type of policy is a concern for investors because of its lack of certainty.
M.A is a contract that provides an agreed sum of money in support of the projects’ net revenues for a period of ten years that can only be cancelled by the project owners with agreement of the investors. The money acts as a form of credit enhancement that can be drawn upon when the revenues are unable to fully support the debt. It is then repaid when the projects’ revenues recover. Historically, it has been shown, that if the process is to under-perform it will be in the early years of the project with full availability potential being attained by Year 5. M.A is there to protect the investors should this happen.
Allied’s due-diligence will look to mitigate such events in two stages:
The due-diligence process
When first approached by a potential client, Allied will undertake a vigorous desktop review of the project. Should the project be accepted, and after consultation with the client, Allied will commence two detailed due-diligence reports with their independent consultant partners. Should the client have already engaged the services of a consultant, then that consultant can be used. However, for purposes of underwriting the technology process, Allied’s independent technology consultant TWI must be engaged, and the two reports must be made available to Allied if they are subsequently engaged to source funding.
The Technology Process
Firstly, through a series of process due-diligence measures that looks at the plant from design, to manufacture, the installation capabilities of the proposed EPC contractor and the operations and maintenance procedures proposed by the O&M contractor; and
Secondly, an additional and complimentary process security to that already installed by the technology provider, is provided through TWI’s integrated RiskWISE® interrogation software that provides additional risk based protection to the funders, and ensures that the process is optimised at all times.
Whilst each M.A contract of insurance is project-specific, Allied believes that their due-diligence process is also important for technology suppliers and innovators to consider as a standalone pre-qualification towards commercialisation.
Technology manufacturers will benefit from having an M.A approval and being able offer their buyers a technology that has the M.A stamp of acceptance. This would provide the project developers with all the added financial benefits described.
For companies developing innovative technologies having M.A due-diligence involved from the design stage can help evolve the technology from design to becoming fully commercialised with the benefits of M.A support.
Who Are TWI
TWI Ltd, are one of the world's foremost independent research and technology organisations. Based at Great Abington near Cambridge since 1946. TWI is a non-profit distributing, membership-based company of which Allied are industrial members. Its Members total around 3,500 from 60 countries around the world – including the likes of Boeing, Thales, ABB, Honda, Mercedes, BMW, US Army, US Navy, Royal Military College of Science, Rolls Royce, BP, Kuwait Oil Co, Shell, etc.
What is RISKWISE™, what does it do and how?
RISKWISE™ is risk-based inspection/maintenance (RBI) planning software that has become accepted by legislative bodies as a means of risk management consistent with safety requirements. It has been driven by regulators as well as the economic needs of plant operators/owners. The application of RBI software minimises the risk of failures or forced outages. It also enables intervals between inspection/maintenance to be optimised (often extended) and inspection/overhaul resources to be risk focused during outages. The overall economic benefit to operators is to reduce plant downtime. Guidelines and standards for RBI have been produced by ASME (American Society of Mechanical Engineers) and other bodies over recent years. RISKWISE™ is fully compliant with current RBI standards.
Example of Maintained Availability working in practice
It is assumed that the design availability is 100%, and the agreed minimum availability by TWI was set at 80% with a breakeven percentage calculated at 66%, then our solution would involve Maintained Availability™ taking a mezzanine slice of risk from 66% to an agreed lower limit.
This means that the project sponsor takes a first loss above 66% and the M.A take the risk that the plant meets availability of between 66% and the lower limit (this being the percentage level of the design availability below which the plant is considered uneconomic).
Speeding up the funding process – connecting vetted projects with the right investment partner.
Allied are currently looking at the creation of an online project finance platform. The platform will match the requirements of Allied’s clients including those after Allied’s due-diligence process who have Maintained Availability. The platform will speed up connecting clients with the right capital, and investors with access to mid-market projects which can offer with attractive returns which currently would be rejected or considered not worth assessing if they have limited track record.
About Allied
Allied Holdings and Consultants Ltd are a team of experts, based in the UK and the US with representative offices in Asia and the Middle East. We have represented, developed, leased and funded technology. Our clients benefit from the direct involvement and attention of our team with their extensive knowledge in providing professional advice and assistance in strategic financing and are commitment to building long term relationships. Additional information can be found at www.AlliedConsultants.co.uk
“Members of the Allied team, have worked for over 10 years to bring this product to the market. When it was first conceived we believed then, that this product had a place in the market, to support innovation and promote technologies that can make a difference to the environment. Today 10 years later, the importance to support innovative technologies and the renewable energy markets are even greater.” - Roger Willmott, Business Development Director.
About Fidelis Insurance
Fidelis Insurance Holdings Limited is a privately-owned Bermuda-based holding company, which, through its wholly-owned subsidiaries, is a global provider of bespoke and specialty insurance and reinsurance products. Fidelis’ Bermudian platform focuses on catastrophe reinsurance, whereas Fidelis Underwriting Limited - the group’s London platform - focuses on the design and execution of large bespoke deals in areas such as: Aviation Finance, Forestry, Mortgage Indemnity, Political Risks, Structured Credit, Title and Surety, and in more traditional specialty, catastrophe reinsurance, and niche products via its MGA platform, Pine Walk. Fidelis is rated A- (Excellent) by A.M. Best Company, Inc. Additional information regarding Fidelis may be found at www.fidelisinsurance.com.
“Designing and delivering new innovative bespoke insurance products is a cornerstone of Fidelis’ business model. As such we are very excited about the launch of this insurance product within the Maintained Availability process –assisting the development of sustainable and green energy.” - Richard Coulson, FUL Chief Underwriting Officer.
David Hullah
Finance Director at Allied Consultants
Telephone: +44 (0) 203 195 3949 | Mobile: +44 (0) 7772 794320
Website: www.AlliedConsultants.co.uk; www.MaintainedAvailability.com
Email: enquiries@alliedconsultants.co.uk
Below Jonathan Bennun, product strategist at OneLogin and ex-hacker discusses the current IT sphere, cyber security progress and the open vulnerabilities of today’s tech.
As a hacker, I found vulnerabilities like easy-to-guess passwords made my work much easier. If that attack vector didn't pan out, I could usually get around the authentication flow, or gain basic privileges and escalate them for admin access. We must accept that these vulnerabilities – imperfect authentication and passwords - are not going away anytime soon, and businesses must take steps to strengthen their security posture with this in mind.
A key challenge in eliminating passwords is that too many SaaS providers still don’t offer token-based sign-in such as with SAML or OpenID Connect. On top of that, many enterprises still have dozens - if not hundreds - of legacy applications that require passwords. It will take some enterprises a long while to migrate off these legacy apps which use application-specific passwords, and do not support requirements such as password complexity or password expiration.
In addition, passwords make for only a small part of a strong security posture. Security is only as strong as its weakest link, and on some systems, passwords may be a good attack vector. Real-world attackers are more likely to use alternate attack vectors to get around passwords. Some common ones are:
Being a true password champion means applying password best practices while having a modern approach to access management that is more holistic than a password management tool or a password education campaign.
Here’s what businesses are doing wrong and how they can fix it. To illustrate, let’s use the classic security triangle: People, Process, and Technology.
People
Enterprises invest in education like training for compliance reasons, but often overlook enabling people with self-service for password reset and self-registration of MFA. In addition, companies combat shadow IT, but don’t offer an alternative such as faster onboarding of business apps. For example, your employees need to use LinkedIn and Twitter for business, so provide them with a safe way to manage passwords for those personal apps.
Process
Think marathon, not sprint. Some SaaS providers still don’t offer token-based sign-in such as SAML-enabled login. Enterprises need to gradually consolidate passwords, ideally to a single set of corporate credentials for apps, networks, and devices. Similarly, access management should be unified and holistic across the entire organization with user information and privileges.
Technology
Password best practices are not hard to follow and apply, and they are an important part of your security practice. Having said that, don't stop there, and don't look for a silver bullet. Look for a platform, not a tool, for the wide variety of use cases and for supporting complete authentication and access management scenarios across the enterprise. For example, a single platform can make it much easier to provide password reset self-service to your entire user base.
In summary, being a true password champion goes well beyond password best practices. Enterprises that fail to deploy today’s front-line access management solutions across their orgs - enabling people, planning for a continuous effort, and seeking a full platform solution - are at serious risk and will lose out.
Worldwide spending on blockchain is set to top $2 billion in 2018, according to the International Data Corporation.
Stacey Soohoo, research manager, customer insights and analysis at IDC, said: “The year 2018 will be a crucial stage for enterprises as they make a huge leap from proof-of-concept projects to full blockchain deployments.”
There is, clearly, a lot of time, money and effort being spent in tapping into the potential of this technology. But, how can we expect to see the benefit of all of this? How far will blockchain go in terms of changing the way we do business?
Finance
Having originally been met with some scepticism in the banking sector – probably due to its disruptive nature and the presence of scams targeted at early adopters – blockchain is increasingly being harnessed by financial institutions to change the way they do business.
Perhaps most obviously, this can help to add speed and security to the process of transferring money, something that everyone from a holiday-bound consumer to a novice investor dabbling with a forex demo account through to a FTSE100 CEO can appreciate.
Yet, as the FT notes, the process of clearing and settlement, the verification of a customer’s identity and the raising of syndicated loans can all be made more efficient with blockchain.
Traceability
Yet, to focus solely on banking and payments would be to ignore the broader scope of the benefits of blockchain.
In industries where ‘traceability’ is crucial, this provides a clear, immutable record of a financial transaction. Examples of where this is necessary include the charity sector – where organisations need to prove that donations ended up at the intended target and, perhaps most pertinently in a business context, for diamonds.
For diamond companies, being able to create and manage a record for customers and clients will enable them to be clear that their product in genuine and sourced responsibly – two things that will help reputable firms to stand out from companies engaged in practices that have threatened to tarnish the sector.
Privacy
While speed, security and a transparency are clearly important, so too is privacy, especially in sectors such as healthcare where it’s vital to protect patients’ data and, typically, there are issues with out of date security software and records systems.
While the US’ private healthcare system has already embraced blockchain, the NHS could benefit too. As Tech UK notes, tracking medical test results in real time, sharing data between medical teams in different locations for research purposes, speeding up compliance paperwork processes and handling documentation for short-term staff could all be done quickly and – crucially – with the required level of privacy. This doesn’t just benefit the NHS but also a number of science and healthcare companies that rely on the NHS for work as third parties.
In some respects, blockchain’s real power is not necessarily that it changes what can be done as a business. Rather, it enhances the way in which companies operate in the digital age, allowing to carry out the processes and practices that they have developed in recent years and allows them to be done quicker, safer and cheaper.
