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DEFENDING AGAINST THE RISING COST OF LITIGATION

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Simon Price

Simon Price, UK managing director of Recommind, looks at the impact of high-profile legal cases on the financial services sector and what organisations can do to defend themselves from the soaring cost of litigation.

In a post-recession world, policy makers are taking a much tougher stance with organisations that fail to prevent fundamental failings in financial controls. As governing bodies concentrate on creating more controlled markets, a series of extraordinary events – including Libor, the mis-selling of Payment Protection Insurance (PPI) and breaches of compliance sanctions – have strengthened the regulators resolve to create a viable industry that protects clients’ interests.

However, the new regulatory drive to hold financial institutions to account is causing legal costs to spiral. The mainstream litigation found within most financial institutions has been compounded by a series of cross-border investigations into allegations of malpractice. As a result, analysts at JP Morgan Cazenove have predicted that despite UK banks already setting aside £30 billion to cover legal costs and settlements over the last three years, new litigation will require another £15 billion to be spent over the next three. Reflecting this trend, Barclays more than doubled its litigation provisions for the last fiscal year and both the Royal Bank of Scotland and Lloyds Bank have set aside more than £3 billion to cover rising legal costs in 2014 alone.

Scaling investigations

Simon Price

Simon Price

Part of the challenge that financial organisations face in satisfying the regulator’s demands is the huge scale of investigations required. Often, the information that investigators are looking for won’t be contained within a single document but hidden within a sequence of events prior to certain transactions. For example, investigations into the manipulation of Libor required banks to examine the communications of traders over a period of approximately 23 years. One large bank estimated that its internal probe into Libor retrieved 100 million documents, of which 18 million were reviewed using 1,000 search terms. In addition, the investigation extended beyond millions of archived documents to faxes, emails, instant messages and audio conversations.

Being able to piece together different bit of information to gain a better understanding of what happened has become a huge eDiscovery exercise that is complicated by the size of investigations mandated. Whilst in the past, reviewing individual documents would have been outsourced to legal teams, financial institutions are starting to recognise that it is imperative to develop smarter ways of working that can help resolve high-profile legal cases within squeezed budgets.

Understanding information
Given that legal cases are won or lost on the back of the information available, it’s important that banking organisations have the ability to understand the massive volumes of data available and understand human interactions that point to potential illicit activities.

It’s no longer feasible for a single human to go through thousands of documents and find a pattern. The volume of data involved means that financial institutions need to move away from the linear process of manually assessing each individual document to understand what has happened and build a robust defense. Instead, organisations need to rely on new tools that are capable of identifying the hidden connections between people, documents, messages, timelines, conceptual topics and more. Such tools provide an entirely new way of analysing large amounts of data to discover the patterns and relationships in unstructured information flows.

Visualising connections
Increasingly, banks are relying on tools that visualise the connections between multiple sources and types of information in a single interface. By using visual interfaces to identify the hidden patterns or information hidden within large data sets, key stakeholders within legal cases can start to experiment with hypotheses, grasp the big picture at a glance and drill into the details that may otherwise have gone unnoticed. For example, it’s possible to uncover which people have been having conversations, what these discussions are about and whether it its relevant to the defense of a certain case.

Adopting this approach also means that organisations no longer have to review every piece of information. By combining powerful machine learning capabilities with graph analysis and advanced visualisation, financial organisations are able to gain much earlier insight into the data that they hold. They are also able to accurately pinpoint where information is contained and identify the most relevant documents that need to be reviewed. This prioritises the review process and allows firms to create a strong seed set using the most relevant and responsive documents, so they can then simply sample the remaining data to double-check that no crucial evidence has been missed.

Early case assessment
Ultimately, litigation costs are a challenge for financial institutions to execute on strategic plans as they put significant pressure on the capital base. As a result, organisations need to manage the cost of litigation more effectively by adopting a calculated approach to the procurement of systems and services that help them prepare for legal cases.

Increasingly, there is a trend for in-house counsel or forensics teams to purchase systems themselves so they can collect the relevant data and do a focused review of evidence internally. Only after this stage, do financial institutions collaborate with law firms to develop an initial case strategy and formulate a preliminary discovery and litigation plan that is essential to winning a case. This approach not only allows for the focused review of evidence in the early stage, it also enables in-house counsel to invest in building repeatable processes that make it quicker, cheaper and easier to manage growing litigation costs in the long-term by gaining control of processes and becoming more proactive with information.

Simon Price is the Managing Director of Recommind’s UK operations, based out of the London office. Mr. Price has over 15 years of experience in sales and management within the software industry, managing relationships with many of the world’s largest professional service and corporate organisations. Mr. Price is responsible for overseeing the expansion of Recommind’s London operations and the support of its growing UK and European client base. Prior to joining Recommind, Mr. Price served as a Sales Manager at Aderant Inc., a leading provider in finance and practice management solutions and previously as Sales & Marketing Manager with Chambers & Partners publishers.

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EU seeks alliance with U.S. on climate change, tech rules

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EU seeks alliance with U.S. on climate change, tech rules 1

By Sabine Siebold and Kate Abnett

BERLIN (Reuters) – Europe and the United States should join forces in the fight against climate change and agree on a new framework for the digital market, limiting the power of big tech companies, European Union chief executive Ursula von der Leyen said.

“I am sure: A shared transatlantic commitment to a net-zero emissions pathway by 2050 would make climate neutrality a new global benchmark,” the president of the European Commission said in a speech at the virtual Munich Security Conference on Friday.

“Together, we could create a digital economy rulebook that is valid worldwide: a set of rules based on our values, human rights and pluralism, inclusion and the protection of privacy.”

The EU has pledged to cut its net greenhouse gas emissions to zero by 2050, while President Joe Biden has committed the United States to become a “net zero economy” by 2050.

Scientists say the world must reach net zero emissions by 2050 to limit global temperature increases to 1.5 degrees above pre-industrial times and avert the most catastrophic impacts of climate change.

The hope is that a transatlantic alliance could help persuade large emitters who have yet to commit to this timeline – including China, which is aiming for carbon neutrality by 2060, and India.

“The United States is our natural partner for global leadership on climate change,” von der Leyen said.

She called the Jan. 6 storming of the U.S. Capitol a turning point for the discussion on the impact social media has on democracies.

“Of course, imposing democratic limits on the uncontrolled power of big tech companies alone will not stop political violence,” von der Leyen said. “But it is an important step.”

She was referring to a draft set of rules unveiled in December which aims to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for work and social interactions.

They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet Inc’s Google, which critics say have not addressed the problem.

But they also risk inflaming tensions with Washington, already irked by Brussels’ attempts to tax U.S. tech firms more.

Von der Leyen said Facebook’s decision on a news blackout on Thursday in response to a forthcoming Australian law requiring it and Google to share revenue from news underscored the importance of a global approach to dealing with tech giants.

(Additional reporting by Foo Yun Chee; editing by Robin Emmott and Nick Macfie; editing by Jonathan Oatis)

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Packaged food giants push direct online sales to gauge consumer tastes

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Packaged food giants push direct online sales to gauge consumer tastes 2

By Siddharth Cavale and Nivedita Balu

(Reuters) – Packaged food giants including Kraft Heinz, General Mills and Kellogg are pushing sales of their products to consumers directly via their own online channels, in a quest to gather more data about shoppers’ purchasing habits.

Velveeta-cheese maker Kraft Heinz saw its e-commerce sales double in 2020, now representing more than 5% of its global sales, Chief Executive Miguel Patricio said at the virtual Consumer Analyst Group of New York (CAGNY) conference this week.

The company sells Heinz baked beans and tomato soup by subscription or in bundles directly to consumers on a “Heinz To Home” website in the United Kingdom, Australia and Europe.

Sales on the site are “giving us valuable insights into consumer behavior, enabling us to quickly test and learn from innovations,” Kraft’s head of international business, Rafael de Oliveira, said at the conference.

Kraft would continue to use the site as a channel to generate strong sales in developed markets, he said.

The company also counts sales of its products through marketplaces such as on Amazon.com and Walmart.com as part of its e-commerce sales.

U.S. shoppers spent on average $1,271 buying groceries online last year, 45% more than they did in 2019 as the pandemic spurred shopping online, according to market research firm Earnest Research. In contrast, the average dollars spent in stores rose only about 7% to $3,849.

PepsiCo sells products including Doritos, Quaker oats and Gatorade directly to consumers through two websites, pantryshop.com and snacks.com, both launched in 2020.

Chief Financial Officer Hugh Johnston said that more than 45% of the company’s capital investments over the next few years would be dedicated toward manufacturing capacity, automation, and a “ramping up of investments in our e-commerce channel.”

As major online retailers including Amazon.com and Walmart.com continue to gather valuable data on shoppers, many packaged food manufacturers are keen to gather their own data on shoppers, too.

“COVID (has) simply accelerated our digital growth and has provided us with yet another source of data and insight,” Monica McGurk, chief growth officer at breakfast cereal maker Kellogg Co., told the conference.

Kellogg, producer of Corn Flakes as well as Pringles chips, said on Wednesday it had launched a direct-to-consumer website focused on digestive wellness. The group plans to sell its new Mwell Microbiome Powder for gut health via the site to gather data on customer interest before it launches the product more widely.

E-commerce sales have doubled in the past year and now represent about 8.5% of the group’s $13.77 billion in annual sales, Kellogg said.

Pillsbury dough-maker General Mills also sees the benefits of tracking consumer habits more closely.

“We’re aggressively investing in data and analytics. We are gathering unparalleled insights from the first-party data we collect through our brand websites,” General Mills’ Chief Executive Jeffrey Harmening said at the conference.

On its Bettycrocker.com website, General Mills provides hundreds of recipes using Betty Crocker cake mixes and frosting. The site leads people to the closest store or an online retailer where they can purchase the products, thereby generating data for General Mills on what a particular customer from a certain zip code is buying. The company does not sell the food products directly on its website.

Consumers, however, may have to shell out more if they shop directly from brand websites.

Prices on the two PepsiCo sites, for example, were generally higher than those on Walmart.com or Amazon.com, Reuters checks show. On Walmart.com, for example, a 10 oz pack of Doritos Nacho Cheese was on sale for $2.50 compared to $4.29 on Pepsico’s website.

Kraft Heinz offers tins of soup, beans, pasta and baby food bundled into packs ranging from six to 25 items and costing between 10 and 20 pounds ($14.01-$28.03) on its UK website. It told Reuters the relatively higher prices of items and bundling of packs than on some other online marketplaces was to be able to eke out a margin after including delivery costs.

“Longer term, we see real value in this channel to be an insight and data channel for us,” Jean-Philippe Nier, head of e-commerce for Kraft Heinz’s business in the UK and Ireland, told Reuters. People are more prepared to order directly from manufacturers than they were before. The time is now.”

Graphic: Direct online sales to cross $20 billion in 2021 – https://graphics.reuters.com/PACKAGEDFOODS-ECOMMERCE/rlgpdexngvo/chart.png

($1 = 0.7137 pounds)

(Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; Editing by Vanessa O’Connell and Susan Fenton)

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy

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Siemens Healthineers gains EU nod for $16.4 billion Varian buy 3

BRUSSELS (Reuters) – EU antitrust regulators on Friday cleared with conditions Siemens Healthineers’ $16.4 billion acquisition of U.S. peer Varian, paving the way for the German health group to become a world leader in cancer care therapy.

The European Commission said Siemens Healthineers pledged to ensure that its medical imaging and radiotherapy equipment will work with rivals in return for its approval, confirming a Reuters story. The pledge is valid for 10 years.

“High quality medical imaging and radiotherapy solutions are crucial to diagnose and treat cancer. The efficiency and safety of treatment relies on the ability of these products to work together,” European Competition Commissioner Margrethe Vestager said in a statement.

Varian is the leader in radiation therapy with a market share of more than 50%. The deal received the U.S. antitrust green light in October last year.

 

(Reporting by Foo Yun Chee)

 

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