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IN PLANNING FOR TODAY, DON’T LOSE SIGHT OF TOMORROW – AVOIDING SHORT-TERMISM

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Esa Tihila, CEO of Basware

Traditionally, companies have had a long-term view with five-year and three-year business plans. Accounting practices are focused on three-month quarterly periods and decisions are made based on historic data and trends. However, the current pace of change has brought with it aggressive competition and technology innovation which have enabled UK organisations to take a much more short-term view of their businesses. This comes with benefits like agility; the capacity to embrace opportunities quickly or change plans at short notice, financial gains and seizing a gap in the market.

Nevertheless, it brings challenges too. Short-termism seems to be increasingly linked to financial markets. It affects stock prices and causes fluctuation in the market, which impacts confidence and causes share price volatility. It’s a self-perpetuating cycle that some have started referring to as ‘Quarterly Capitalism’.

Falling commodity prices are the most recent indicator of concern for the global economy. The drop has caused interest rates to remain low and therefore gives companies little reason to invest. This is always the case when there are far greater returns to be made from backing the stock market, but it’s not just stock and bond markets where short-termism affects how the system operates. We’re seeing it in micro financial systems, such as the cashflow of businesses, the credit agreements that they negotiate with their buyers and suppliers and their approach to making payments for goods and services.

Confidence and cashflow

Cashflow is the make or break of almost every business on the planet. Even the most cash-rich out there have a strong eye on it…and for good reason. Opportunities to affect cashflow are highly prized and companies can take advantage of tools such as early payment discounts or innovative lending solutions to ease cash flow and support investment.

But the confidence needed to do this, in part, stems from how robust the network of buyers and suppliers is. Visibility of what’s going on inside businesses is critical to understanding how cashflow will pan out over the coming weeks and months.

With all of this in place, it’s possible to create – and even increase – trust and transparency amongst a network of buyers and suppliers. Then, regardless of what happens in the market, businesses can be confident that they have the financial stability to be able to handle short-term actions and reactions, but the structure and visibility to plan for tomorrow.

Achieving certainty

Uncertainty is a significant contributor to low confidence. Psychologically speaking, if you don’t know or understand what’s in front of you, it’s very hard to commit to it. If a tendency for short term approaches stems from a lack of confidence, the solution must be to boost ‘certainty’.

How to achieve certainty? In the specific instance of business commerce, having visibility of all financial processes is a huge first step. See what’s going on, analyse the impact of it and make decisions appropriately. When this is backed up by reliable financing tools that can assist in balancing and stabilising cashflow at times of uncertainty, can provide businesses with confidence in their ability to achieve financial success.

Once businesses have confidence and can stabilise their financial situation, they can start to invest in their own processes. Meaning they can become more flexible and agile in dealing with commercial transactions, and in turn get a healthy return from working your capital within the supply chain. For instance, by securing more early payment discounts by looking at future cashflow and identifying capital that can be parted with before the scheduled payment date. The benefit is that while organisations are parting with cash, they retain more working capital in the long run.

Every business that can reel in control of its own processes, costs and decision making can find the financial supply chain is an area of opportunity. A strong cashflow is not just a sign of stability, but also the bedrock for capitalising on these opportunities. There are some short-term gains out there that shouldn’t be ignored – they allow for agility and investment. But they should not be taken outside of the longer term picture. Forecasting more than a month or two down the line can nail down the financial security of UK businesses for years to come.

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Sunak to raise business tax to pay for COVID-19 support – The Sunday Times

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Sunak to raise business tax to pay for COVID-19 support - The Sunday Times 1

(Reuters) – British finance minister Rishi Sunak is set to increase a tax on business to pay for an extension to COVID-19 support schemes in the budget next month, The Sunday Times reported https://bit.ly/3ujaBcU.

Sunak, in his speech on March 3, will announce he is increasing corporation tax from 19 pence in the pound and will outline a pathway where it rises to 23 pence in the pound by the time of the next general election, the report said. The move will raise an expected 12 billion pounds ($16.8 billion) a year, the report added.

According to the report, at least 1 pence is set to be added to the bill for business from this autumn, at a cost to business of 3 billion pounds, with further rises in subsequent years.

Allies of Sunak clarified he would not increase corporation tax higher than 23%.

These measures will be helpful in paying for an extension to the furlough scheme, VAT cuts and business support loans until at least August.

Unlike the 2010 Conservative-led government, which pursued spending cuts to rebalance the economy after the global financial crisis, Sunak is expected to defer most of the toughest decisions about how to pay for that support in his budget speech.

“The corporation tax hike will be higher than expected and the extension of the support schemes will be longer than most people expect,” the newspaper quoted a source as saying.

Insiders indicated the stamp duty holiday on property purchases would also be extended in line with the other coronavirus support measures, the report said.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

($1 = 0.7136 pounds)

 

(Reporting by Vishal Vivek in Bengaluru; Editing by Lincoln Feast.)

 

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Foxconn chairman says expects “limited impact” from chip shortage on clients

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Foxconn chairman says expects "limited impact" from chip shortage on clients 2

TAIPEI (Reuters) – The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.

“Since most of the customers we serve are large customers, they all have proper precautionary planning,” said Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd

“Therefore, the impact on these large customers is there, but limited,” he told reporters.

Liu said he expected the company to do well in the first half of 2021, “especially as the pandemic is easing and demand is still being sustained.”

The global spread of COVID-19 has increased demand for laptops, gaming consoles, and other electronics. This caused chip manufacturers to reallocate capacity away from the automotive sector, which was expecting a steep downturn.

Now, car manufacturers such as Volkswagen AG, General Motors Co and Ford Motor Co have cut output as chip capacity has shrunk.

Counterpoint Research says the shortage has extended to the smartphone sector, with application processors, display driver chips, and power management chips all facing a crunch.

However, the research firm predicts Apple will face a minimal impact, due to its large size and its suppliers’ tendency to prioritise it. Apple is Foxconn’s largest customer.

Foxconn is looking at other areas for growth, including in electric vehicles (EVs), and Liu said their EV development platform MIH now had 736 partner companies participating.

He expected it would have two or three models to show by the fourth quarter, though did not expect EVs to make an obvious contribution to company earnings until 2023.

Liu also said the company was still looking for semiconductor fab purchase opportunities in Southeast Asia after not winning a bid to take over a stake in Malaysia-based 8-inch foundry house Silterra.

(Reporting by Ben Blanchard and Jeanny Kao; Writing by Josh Horwitz; Editing by William Mallard and Ana Nicolaci da Costa)

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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 3

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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