Connect with us

Finance

Bonus claw-backs and restrictions in action

Published

on

Jessica-Corsi-Doyle-Clayton

At the end of last year it was reported that HSBC would be deferring top executives’ bonuses for the next five years, as part of an agreement reached with the US Department of Justice following the money laundering scandal which engulfed the bank. In the insurance market, the pressure from shareholders over business performance prompted new CEO, Mark Wilson to announce that there would be no bonuses for directors and no pay rise for many of its senior managers.

Jessica-Corsi-Doyle-ClaytonHSBC and Aviva join the many companies facing pressure from shareholders, government and the public alike. It’s no longer just a boardroom matter. Businesses are facing a backlash on big bonuses and remuneration packages meaning they are no longer able to ‘reward failure’ for senior level employees.

Most recently, the European Union Council has endorsed a proposed cap on variable remuneration for those employed by financial institutions that will limit bonuses to the amount of an individual’s fixed salary – or, if approved by shareholders, twice that amount. Whether shareholders will be persuaded to do is an interesting question.

The causes of the revolt over what is seen as excessive pay have already been dissected. However, no institution aims to reward failure from the outset. A new chief executive, or chief investment officer, joins a company in possession of skills and experience which are sought after by many businesses – they have been chosen in the expectation of success, not failure.

Prospective leaders in their fields generally already have secure and well paid jobs. Persuading them to move may require attractive remuneration packages. However, what looks sensible when a company is doing well and wants a big-hitter CEO can look very different after a period of poor performance.

For such reasons, contracts for senior executives need to be drafted carefully from the outset. Once a contract is agreed, it can only be varied by consent, so organisations need to agree the right terms to begin with and be careful to avoid ones that are overly generous. Not surprisingly, it is rare indeed, usually only after intense public pressure, for a departing senior executive to accept less than their contractual entitlement.

Just taking some basic precautions may help prevent damaging coverage aimed at exposing alleged “reward for failure”.

Generally, notice periods should be set at one year or less. It is not unusual for the contract to provide for payment in lieu of notice by instalments which stop when the executive has found another role. The contract should oblige the executive to look for alternative employment and to inform the company as soon as new employment is found.

Bonuses should also be designed appropriately so they don’t provide a “heads I win, tails you lose” payout for the executive. Payment should be subject to robust company, business unit and individual performance conditions. Contracts should include the right to defer payment over a number of years so that bonuses are forfeit if company performance in the longer term is lower than expected. Companies should also consider including a right to claw back bonuses already paid if, for example, the company’s value has been misstated.

It’s also important to have a balance between fixed remuneration (salary) and variable remuneration (bonus). Paying part of the bonus in shares (perhaps with a requirement that the shares must be held for a significant period of time before they can be sold) will ensure that if company performance dips, so does the value of the bonus.

Executives reluctant to move from an existing well-paid and secure job might be persuaded by the offer of an initial longer notice period, but this should be reduced to one year (or less) after a bedding-in period. Guaranteed bonuses can still be used to lure new recruits, but should only be offered for the first year of service. As with other bonuses, payment should be deferred (meaning that part or all of the bonus is paid in tranches, normally over three years, and not all at once) and not payable if company performance proves to be less than expected.

While the cases of HSBC and Aviva were different, the message stays the same. Businesses cannot pay huge sums of money without revolt, unless it is justified by stellar performance. Nevertheless, Moss was perfectly within his rights to collect on what had been originally agreed when he took the reins. HSBC on the other hand, was required to take strong action against its senior staff to make sure they faced consequences (hitting them where it hurt).

The world of executive pay is extremely complex. On the one hand, what often seems like a reasonable amount of pay for senior executives at one time can soon look over-generous when things take a turn for the worse.

Directors should be careful not to bow down to tall orders from high-flying execs. This might cause much more than embarrassment at a later date. Contracts should be written with continuity in mind, and ensure that it meets long-term business goals – not just short-term gain.

Jessica Corsi is Partner at UK’s largest specialist employment law firm, Doyle Clayton Solicitors.

 

 

 

Finance

How payments can help streamline operations and boost customer satisfaction in the vending industry

Published

on

How payments can help streamline operations and boost customer satisfaction in the vending industry 1

By Darren Anderson, Business Development Manager, Self Service, Ingenico Enterprise Retail

The COVID-19 pandemic has had an astounding impact on the payments industry, causing cash usage to plummet as contactless and card-not-present volumes soared. Of course, this phenomenon was not unforeseen by payments professionals, who had predicted such a movement away from cash, but not at the speed the virus guidelines facilitated. In fact, due in part to the hygiene perks of contactless payment methods increasing its adoption, 50% of customers think that cash will disappear completely at some point in the future.

The unattended market was ahead of the pandemic in terms of contactless alternative payment method (APM) adoption, and it continues to upgrade its offerings to suit a wider range of industries. Nevertheless, the pain point for vending operators is that they’re often not sure exactly how these technologies work, or how to implement them. And with payments offerings constantly evolving, it’s becoming harder for vending operators to know which solution would be the best fit for their business.

As such, one easy way for vending operators to ease this load is to partner with a knowledgeable payments advisor who can not only provide the best solutions for their business, but guide them through the process and any need-to-knows. It’s also important to investigate the payments trends across the vending market, what the future might bring and what vending operators need to know about newer payments technology and the value it can bring to their unattended retail business operations.

Vending through the pandemic

Coronavirus has impacted the unattended market in various ways. In some cases, vending machine use has decreased as a result of lower footfall and closed premises. However, the nature of vending being self-service, for many it’s just been a case of upgrading systems to meet new guidelines and hygiene recommendations to start boosting their usage again. As cash usage decreased over the course of the pandemic, cards and APMs stepped in to provide a host of benefits, and as customers use and enjoy these seamless technologies, they are fast becoming the preference.

These developments have provided the opportunity for vending operators to embrace newer technologies which, although ultimately positive, can prove daunting if such retailers are not accustomed to working closely with payments. Fortunately, the vending market is in a great position to take advantage of new contactless technologies, being already low on human interaction and having 24/7 capabilities.

Darren Anderson

Darren Anderson

What’s more, the market can not only cater to consumers’ evolving needs, but it can also provide the flexibility and reliability that consumers are relying on as the world around them is changing. Many new technologies can also improve the general operations and management of vending, offering features such as easier on-the-go stock management and maintenance notification technology.

Keeping the consumer in mind

Consumers today want to enjoy the latest innovations and best-in-class customer experiences. These shoppers believe that self-service is a time-saver, and they also view cashless and contactless as faster and more seamless ways to pay – a fact which is reflected in the recent consumer demand for a wider variety of APMs. Customers now expect even more options to pay for their goods and services, from QR codes, to in-app payments and more.

Alongside the cashless trend, data-security and customer experience are two other factors driving the vending market evolution. With constantly evolving fraud developments in the online world, good security is more pertinent than ever, and has to be a central consideration to vending operators – as well as ensuring a seamless customer experience.

From a customer usage standpoint, mobile payments are becomingly increasing popular, as driven by the Gen Z market. According to our research, 63% of Gen Zers have said they would pay more for a mobile experience[1].

Trust and a good experience are also considerable factors across all customer groups, with 95% of customers claiming their loyalties lie with a company they trust[2], and 86% willing to pay more for a positive experience[3].

To appeal to ever-hungry consumers, vending operators need to provide the options they want. In the unattended market, this is relatively simple – not only do they provide a convenient and reliable method of payment for customers, but they also avoid face-to-face interaction. They can also supply a range of different products and accept a variety of payment methods to appeal to all customers, no matter their preference.

Using payments to drive revenue

Driving revenue is a two-pronged approach – you need to appeal to customers to keep them coming, and streamline operations to reduce overheads. In order to meet both parties’ expectations, it’s important to respond well to new vending challenges, taking note of the solutions that enable merchants to provide their customers with the payment methods they prefer.

Payments are complicated, so there’s no need to worry if you’re not hugely familiar with the offering out there, or unsure where to start – that’s where a payment service provider (PSP) can assist. With the expertise that a PSP brings, along with the technological solutions they offer, vending operators can improve customer journeys in all unattended environments.

Such technological solutions are flexible and can cater to specific business needs, while providing easy, quick, and secure payment methods that protect both the business and the customer’s personal data. They can also improve operational efficiency, increasing business performance with features such as real-time reporting and smart transaction management, to provide a best-in-class customer experience.

With smart devices, a secure gateway and advanced acquiring capabilities, PSPs can help vending operators design a flexible vending solution tailored to their individual and specific needs. To find out more about unattended retail and how your company can benefit from Ingenico’s unique expert knowledge, get in contact with Ingenico Enterprise Retail today at www.ingenico.com/smartselfvending.

Continue Reading

Finance

ISO 20022 migration: full speed ahead despite recent delays, says new Deutsche Bank paper

Published

on

ISO 20022 migration: full speed ahead despite recent delays, says new Deutsche Bank paper 2

Today, Deutsche Bank has released the third installment in its “Guide to ISO 20022 migration series, which offers a comprehensive update on the industry shift to the de facto global standard for financial messaging: ISO 20022. This paper comes at a critical time for the ISO 20022 migration, with a number of changes to existing timelines and strategies from SWIFT and the world’s major market infrastructures having been announced this year.

The paper explores the latest developments, including SWIFT’s year-long postponement of the migration in the correspondent banking space. The decision meets industry calls for a delay and also provides ample time to build the new central Transaction Management Platform (TMP) – a core feature of SWIFT’s new strategy that will allow the industry to move away from point-to-point messaging and towards central transaction processing.

It also details the wave of action that has been seen by market infrastructures around the world – with many, including the ECB, EBA CLEARING and the Bank of England, announcing revised migration approaches.

“Now more than ever, with shifting timelines and strained resources, it is vital that banks and corporates alike do not view the ISO 20022 migration as just another project that can be put on the back burner,” says Christian Westerhaus, Head of Cash Products, Cash Management, Deutsche Bank. “The delays in the correspondent banking space, and across several market infrastructures, should not be seen as an opportunity for banks to take their foot off the pedal. The journey to ISO 20022 is still moving ahead at speed – and internal projects need to reflect this.”

The Guide also highlights the implementation issues on the migration journey ahead – most notably surrounding interoperability between market infrastructures, usage guidelines and messaging formats. This is achieved through a series of deep dives, case studies, and points of attention drawn from Deutsche Bank’s internal analysis.

 “As this year has proved, nothing is set in stone, “says Paula Roels, Head of Market Infrastructure & Industry Initiatives, Deutsche Bank. “The ISO 20022 migration involves a lot of moving parts and keeping abreast of the latest developments is critical for banks and corporates alike. As the deadlines near, and the ISO 20022 story develops, this series of guides will continue to highlight key points for consideration over the coming years.”

Continue Reading

Finance

The Psychology Behind a Strong Security Culture in the Financial Sector

Published

on

The Psychology Behind a Strong Security Culture in the Financial Sector 3

By Javvad Malik, Security Awareness Advocate at KnowBe4

Banks and financial industries are quite literally where the money is, positioning them as prominent targets for cybercriminals worldwide. Unfortunately, regardless of investments made in the latest technologies, the Achilles heel of these institutions is their employees. Often times, a human blunder is found to be a contributing factor of a security breach, if not the direct source. Indeed, in the 2020 Verizon Data Breach Investigations Report, miscellaneous errors were found vying closely with web application attacks for the top cause of breaches affecting the financial and insurance sector. A secretary may forward an email to the wrong recipient or a system administrator may misconfigure firewall settings. Perhaps, a user clicks on a malicious link. Whatever the case, the outcome is equally dire.

Having grown acutely aware of the role that people play in cybersecurity, business leaders are scrambling to establish a strong security culture within their own organisations. In fact, for many leaders across the globe, realising a strong security culture is of increasing importance, not solely for fear of a breach, but as fundamental to the overall success of their organisations – be it to create customer trust or enhance brand value. Yet, the term lacks a universal definition, and its interpretation varies depending on the individual. In one survey of 1,161 IT decision makers, 758 unique definitions were offered, falling into five distinct categories. While all important, these categories taken apart only feature one aspect of the wider notion of security culture.

With an incomplete understanding of the term, many organisations find themselves inadvertently overconfident in their actual capabilities to fend off cyberthreats. This speaks to the importance of building a single, clear and common definition from which organisations can learn from one another, benchmark their standing and construct a comprehensive security programme.

Defining Security Culture: The Seven Dimensions

In an effort to measure security culture through an objective, scientific method, the term can be broken down into seven key dimensions:

  • Attitudes: Formed over time and through experiences, attitudes are learned opinions reflecting the preferences an individual has in favour or against security protocols and issues.
  • Behaviours: The physical actions and decisions that employees make which impact the security of an organisation.
  • Cognition: The understanding, knowledge and awareness of security threats and issues.
  • Communication: Channels adopted to share relevant security-related information in a timely manner, while encouraging and supporting employees as they tackle security issues.
  • Compliance: Written security policies and the extent that employees adhere to them.
  • Norms: Unwritten rules of conduct in an organisation.
  • Responsibilities: The extent to which employees recognise their role in sustaining or endangering their company’s security.

All of these dimensions are inextricably interlinked; should one falter so too would the others.

The Bearing of Banks and Financial Institutions

Collecting data from over 120,000 employees in 1,107 organisations across 24 countries, KnowBe4’s ‘Security Culture Report 2020’ found that the banking and financial sectors were among the best performers on the security culture front, with a score of 76 out of a 100. This comes as no surprise seeing as they manage highly confidential data and have thus adopted a long tradition of risk management as well as extensive regulatory oversight.

Indeed, the security culture posture is reflected in the sector’s well-oiled communication channels. As cyberthreats constantly and rapidly evolve, it is crucial that effective communication processes are implemented. This allows employees to receive accurate and relevant information with ease; having an impact on the organisation’s ability to prevent as well as respond to a security breach. In IBM’s 2020 Cost of a Data Breach study, the average reported response time to detect a data breach is 207 days with an additional 73 days to resolve the situation. This is in comparison to the financial industry’s 177 and 56 days.

Moreover, with better communication follows better attitude – both banking and financial services scored 80 and 79 in this department, respectively. Good communication is integral to facilitating collaboration between departments and offering a reminder that security is not achieved solely within the IT department; rather, it is a team effort. It is also a means of boosting morale and inspiring greater employee engagement. As earlier mentioned, attitudes are evaluations, or learned opinions. Therefore, by keeping employees informed as well as motivated, they are more likely to view security best practices favourably, adopting them voluntarily.

Predictably, the industry ticks the box on compliance as well. The hefty fines issued by the Information Commissioner’s Office (ICO) in the past year alone, including Capital One’s $80 million penalty, probably play a part in keeping financial institutions on their toes.

Nevertheless, there continues to be room for improvement. As it stands, the overall score of 76 is within the ‘moderate’ classification, falling a long way short of the desired 90-100 range. So, what needs fixing?

Towards Achieving Excellence

There is often the misconception that banks and financial institutions are well-versed in security-related information due to their extensive exposure to the cyber domain. However, as the cognition score demonstrates, this is not the case – dawdling in the low 70s. This illustrates an urgent need for improved security awareness programmes within the sector. More importantly, employees should be trained to understand how this knowledge is applied. This can be achieved through practical exercises such as simulated phishing, for example. In addition, training should be tailored to the learning styles as well as the needs of each individual. In other words, a bank clerk would need a completely different curriculum to IT staff working on the backend of servers.

By building on cognition, financial institutions can instigate a sense of responsibility among employees as they begin to recognise the impact that their behaviour might have on the company. In cybersecurity, success is achieved when breaches are avoided. In a way, this negative result removes the incentive that typically keeps employees engaged with an outcome. Training methods need to take this into consideration.

Then there are norms and behaviours, found to have strong correlations with one another. Norms are the compass from which individuals refer to when making decisions and negotiating everyday activities. The key is recognising that norms have two facets, one social and the other personal. The former is informed by social interactions, while the latter is grounded in the individual’s values. For instance, an accountant may connect to the VPN when working outside of the office to avoid disciplinary measures, as opposed to believing it is the right thing to do. Organisations should aim to internalise norms to generate consistent adherence to best practices irrespective of any immediate external pressures. When these norms improve, behavioural changes will reform in tandem.

Building a robust security culture is no easy task. However, the unrelenting efforts of cybercriminals to infiltrate our systems obliges us to press on. While financial institutions are leading the way for other industries, much still needs to be done. Fortunately, every step counts -every improvement made in one dimension has a domino effect in others.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

Death of the workplace friendship: study shows how remote working is eroding our meaningful connections with colleagues 4 Death of the workplace friendship: study shows how remote working is eroding our meaningful connections with colleagues 5
Business12 hours ago

Death of the workplace friendship: study shows how remote working is eroding our meaningful connections with colleagues

Employee experience platform Perkbox’s research on 1,296 employees and 300 business leaders reveal 65% think the ‘new way of working’...

Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry 6 Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry 7
Business14 hours ago

Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry

Almost half (45%) of Britain’s banking/financial services workforce think their employer could do more when it comes to diversity, according to a...

American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK 8 American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK 9
Business14 hours ago

American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK

The co-branded Cards offer flexible benefits and payment optionality by allowing small businesses to decide between earning rewards or adjusting...

Go Global To Expand Your Revenue Stream 10 Go Global To Expand Your Revenue Stream 11
Business14 hours ago

Go Global To Expand Your Revenue Stream

By Christian Spaltenstein, Managing Director, AFEX Americas Banking and financial operations have evolved immensely in the past few years. Innovation...

Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild 12 Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild 13
Banking14 hours ago

Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild

23% of UK’s top performing businesses have been supported by local enterprise partnerships and growth hubs Similarly, 30% of Britain’s...

What Does the FinCEN File Leak Tell Us? 14 What Does the FinCEN File Leak Tell Us? 15
Top Stories15 hours ago

What Does the FinCEN File Leak Tell Us?

By Ted Sausen, Subject Matter Expert, NICE Actimize On September 20, 2020, just four days after the Financial Crimes Enforcement...

gbaf1news gbaf1news
Investing15 hours ago

Investment Roundtable: Live with Jim Bianco

With Q4’s macro picture still looking grim amid the return of exponential coronavirus waves in Europe and the U.S. and...

Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election 16 Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election 17
Investing17 hours ago

Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election

By Rupert Thompson, Chief Investment Officer at Kingswood Equity markets had another choppy week, falling for most of it before...

October furlough changes – what you need to know 18 October furlough changes – what you need to know 19
Business17 hours ago

October furlough changes – what you need to know

By Alan Price, employment law expert and CEO of BrightHR The Job Retention Scheme is coming to an end on...

Do we really need banks? Yes, but digital transformation industry-wide is vital 20 Do we really need banks? Yes, but digital transformation industry-wide is vital 21
Banking17 hours ago

Do we really need banks? Yes, but digital transformation industry-wide is vital

By Charley Cooper is Managing Director at enterprise blockchain firm, R3 The Coronavirus crisis has taught us that we are...

Newsletters with Secrets & Analysis. Subscribe Now