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One year of GDPR: the impact so far and what more needs to be done

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One year of GDPR: the impact so far and what more needs to be done 1

By David Kemp, business strategist, Security Risk and Governance, Micro Focus 

On 25th May 2019, the world noted, rather than celebrated, the first anniversary of the General Data Protection Regulation (GDPR).The one-year mark is an opportune moment to reflect on whether the regulation has been effective in its ambitions and goals so far and look at how financial institutions have coped with compliance over the last year.

The laudable intentions of the regulation are largely recognised as an overall drive to provide a consistent and defining standard of data privacy, through defending against intrusion, cyber-attack and deliberate or negligent misuse of data. However, despite its positive purpose, legislators and regulators failed to foresee the enormity of the task of compliance,not only within the financial sector, but across all industries.

GDPR principles and enforcement

If we unwrapa number of key GDPR principles such as the “right to be forgotten” and “purpose limitation”, all require major investment in policy, process and technology. The regulation effectively demands that organisations have complete visibility over all data held, in any format and in any location.This involves near real time reporting and requires the ability to respond to a Subject Access Request and data breach within 72 hours. In fact, these standards mirror many national laws,including the 2018 California Consumer Privacy Act. And interestingly, the rules around immediacy and availability of data actually reflect the Dodd-Frank Act 2010 standards of derivative trade audit and verification.

From an enforcement perspective, the sanctions imposed in Europe over the last year have been generally small and infrequent – with the exception of the French regulator, the CNIL, fining Google €50m in January 2019. That said, while regulators are known to be short of “over watch” capability, even in 2019 one can expect them to find “trophy” non-compliant entities to provide an example to others. Additionally, with the UK’s Information Commissioner recently achieving jail terms for delinquent managers under the Computer Misuse Act 1990, the risk of non-compliance is now a matter of deprivation of liberty, not just fines.

Compliance: the picture so far

In practical terms, the banking industry has largely taken the regulation to heart, providing guidance on active and demonstrable consent to retail customers. Moreover, anecdotal evidence has suggested that the “privacy by design” concept is being respected when it comes to building compliance features into new products and services. To use a tangible example, a global UK-headquartered bank CDO is seeking to improve its wealth management products and services by deep analysis of Personal Data, but it has made sure that anonymisation is in place.

However,unfortunately it is currently the case that surprisingly large institutions, especially insurers, are still at an early stage of data discovery. This also includes identifying precisely where, and in what form and volume Personal Data lies across their legacy data landscape. As the stakes of non-compliance rise, it is highly prudent for financial institutions to have carried out data discovery and undertaken a gap analysis on their policy and technology – and at least have an in-flight road map for remediation.In other words, GDPR compliance should not be taken as simply another “Y2K”damp squib situation.

Looking beyond sanctions: the benefits of effective compliance

Unexpectedly, there have been some positive up-sides to GDPR compliance for the finance industry– not limited to defending against fines and reputational damage.

  • Using GDPR compliance as a catalyst for improved operational efficiency

Deletion of unwarranted Personal Data retention has caused two major UK insurers to pro-actively down-size the “dark data” they hold, representing on average in excess of 30% of all information held by corporates. As a result, the insurers have reduced back-up and data storage costs. Therefore, they have increased ROI, as well as effectively cleansed data in anticipation of moving to the cloud and digitisation.

  • Using GDPR as a bench-mark for improved due diligence arising in M&A

This can be applied both from the point of view of a subsidiary sale, as well as the data discovery necessary on a subsidiary purchase.

  • Contextual linkage of data in all formats

By ensuring compliance, organisations are able to link to data in all its forms, whether it be structured or unstructured. As a result, they have the ability to not only facilitate replies to a Subject Access Request, but also achieve greater opportunities from compliant data mining and value extraction – ultimately leading to enhanced revenues. Ironically, the long-heralded “Customer 360” view of retail client data is now a necessity, not just a“nice-to-have”.

  • Applying GDPR standards to other perennial internal security corporate issues

Cleansing data for internal issues regarding security provides organisations with greater visibility, clarity and prospect of advance warning – made possible by using Identity Access Management and encryption technology.

Over the last year the implementation of the GDPR has been a Pandora’s Box of yet more financial institution compliance requirement. But somewhat paradoxically, for the canny it has represented a real opportunity for business advancement.

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 2

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas energy firms began to prepare for restarting oil and gas fields shuttered by freezing weather.

Brent crude futures were down $1.16, or 1.8%, to $62.77 per barrel, by 1150 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.42, or 2.4%, to $59.10 a barrel.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, according to analysts.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

However, firms in the region on Friday were expected to prepare for production restarts as electric power and water services slowly resume, sources said.

“The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger,” said Vandana Hari, energy analyst at Vanda Insights.

Oil fell despite a surprise fall in U.S. crude stockpiles in the week to Feb. 12, before the freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.

While the thawing relations could raise the prospect of reversing sanctions imposed by the previous U.S. administration, analysts did not expect Iranian oil sanctions to be lifted anytime soon.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” StoneX analyst Kevin Solomon said.

(Additional reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by Jason Neely)

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies 3

By Douglas Busvine and Christoph Steitz

BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers with a stark choice: pay up, stock up or risk getting stuck on the sidelines as chipmakers focus on more lucrative business elsewhere.

Car manufacturers including Volkswagen, Ford and General Motors have cut output as the chip market was swept clean by makers of consumer electronics such as smartphones – the chip industry’s preferred customers because they buy more advanced, higher-margin chips.

The semiconductor shortage – over $800 worth of silicon is packed into a modern electric vehicle – has exposed the disconnect between an auto industry spoilt by decades of just-in-time deliveries and an electronics industry supply chain it can no longer bend to its will.

“The car sector has been used to the fact that the whole supply chain is centred around cars,” said McKinsey partner Ondrej Burkacky. “What has been overlooked is that semiconductor makers actually do have an alternative.”

Automakers are responding to the shortage by lobbying governments to subsidize the construction of more chip-making capacity.

In Germany, Volkswagen has pointed the finger at suppliers, saying it gave them timely warning last April – when much global car production was idled due to the coronavirus pandemic – that it expected demand to recover strongly in the second half of the year.

That complaint by the world’s No.2 volume carmaker cuts little ice with chipmakers, who say the auto industry is both quick to cancel orders in a slump and to demand investment in new production in a recovery.

“Last year we had to furlough staff and bear the cost of carrying idle capacity,” said a source at one European semiconductor maker, who spoke on condition of anonymity.

“If the carmakers are asking us to invest in new capacity, can they please tell us who will pay for that idle capacity in the next downturn?”

LOW-TECH CUSTOMER

The auto industry spends around $40 billion a year on chips – about a tenth of the global market. By comparison, Apple spends more on chips just to make its iPhones, Mirabaud tech analyst Neil Campling reckons.

Moreover, the chips used in cars tend to be basic products such as micro controllers made under contract at older foundries – hardly the leading-edge production technology in which chipmakers would be willing to invest.

“The suppliers are saying: ‘If we continue to produce this stuff there is nowhere else for it to go. Sony isn’t going to use it for a Playstation 5 or Apple for its next iPhone’,” said Asif Anwar at Strategy Analytics.

Chipmakers were surprised by the panicked reaction of the German car industry, which persuaded Economy Minister Peter Altmaier to write a letter in January to his counterpart in Taiwan to ask its semiconductor makers to supply more chips.

No extra supplies were forthcoming, with one German industry source joking that the Americans stood a better chance of getting more chips from Taiwan because they could at least park an aircraft carrier off the coast – referring to the ability of the United States to project power in Asia.

Closer to home, a source at another European chipmaker expressed disbelief at the poor understanding at one carmaker of how it operates.

“We got a call from one auto maker that was desperate for supply. They said: Why don’t you run a night shift to increase production?” this person said.

“What they didn’t understand is that we have been running a night shift since the beginning.”

NO QUICK FIX

While Infineon, the leading supplier of chips to the global auto industry, and Robert Bosch, the top ‘Tier 1’ parts supplier, both plan to commission new chip plants this year, there is little chance of supply shortages easing soon.

Specialist chipmakers like Infineon outsource some production of automotive chips to contract manufacturers led by Taiwan Semiconductor Manufacturing Co Ltd (TSMC), but the Asian foundries are currently prioritising high-end electronics makers as they come up against capacity constraints.

Over the longer term, the relationship between chip makers and the car industry will become closer as electric vehicles are more widely adopted and features such as assisted and autonomous driving develop, requiring more advanced chips.

But, in the short term, there is no quick fix for the lack of chip supply: IHS Markit estimates that the time it takes to deliver a microcontroller has doubled to 26 weeks and shortages will only bottom out in March.

That puts the production of 1 million light vehicles at risk in the first quarter, says IHS Markit. European chip industry executives and analysts agree that supply will not catch up with demand until later in the year.

Chip shortages are having a “snowball effect” as auto makers idle some capacity to prioritize building profitable models, said Anwar at Strategy Analytics, who forecasts a drop in car production in Europe and North America of 5%-10% in 2021.

The head of Franco-Italian chipmaker STMicroelectronics, Jean-Marc Chery, forecasts capacity constraints will affect carmakers until mid-year.

“Up to the end of the second quarter, the industry will have to manage at the lean inventory level,” Chery told a recent Goldman Sachs conference.

(Douglas Busvine from Berlin and Christoph Steitz from Frankfurt; Additional reporting by Mathieu Rosemain and Gilles Gillaume in Paris; Editing by Susan Fenton)

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Aussie and sterling hit multi-year highs on recovery bets

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Aussie and sterling hit multi-year highs on recovery bets 4

By Tommy Wilkes

LONDON (Reuters) – The Australian dollar rose to near a three-year high and the British pound scaled $1.40 for the first time since 2018 on optimism about economic rebounds in the two countries and after the U.S. dollar was knocked by disappointing jobs data.

The U.S. currency had been rising in recent days as a jump in Treasury yields on the back of the so-called reflation trade drew investors. But an unexpected increase in U.S. weekly jobless claims soured the economic outlook and sent the dollar lower overnight.

On Friday it traded down 0.3% against a basket of currencies, with the dollar index at 90.309.

The Aussie rose 0.8% to $0.784, its highest since March 2018. The currency, which is closely linked to commodity prices and the outlook for global growth, has been helped by a recent rally in commodity prices.

The New Zealand dollar also gained, and was not far off a more than two-year high, while the Canadian dollar rose too.

Sterling rose to $1.4009 on Friday, an almost three-year high amid Britain’s aggressive vaccination programme.

Given the size of Britain’s vital services sector, analysts say the faster it can reopen the economy, the better for the currency. Sterling was also helped by better-than-expected purchasing managers index flash survey data for February.

The U.S. dollar has been weighed down by a string of soft labour data, even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

Despite the recent rise in U.S. yields, many analysts think they won’t climb too much higher, limiting the benefit for the dollar.

“Our view remains that the Fed will hold the line and remain very cautious about tapering asset purchases. We think it will keep communicating that tightening is very far off, which should dampen pro-dollar sentiment,” said UBS Global Wealth Management strategist Gaétan Peroux and analyst Tilmann Kolb.

ING analysts said “the rise in rates will be self-regulating, meaning the dollar need not correct too much higher”.

They see the greenback index trading down to the 90.10 to 91.05 range.

U.S. dollar

Aussie and sterling hit multi-year highs on recovery bets 5

The euro rose 0.4% to $1.2134. The single currency showed little reaction to purchasing manager index data, which showed a slowdown in business activity in February. However, factories had their busiest month in three years, buoying sentiment.

The dollar bought 105.39 yen, down 0.3% and a continued retreat from the five-month high of 106.225 reached Wednesday.

(Editing by Hugh Lawson and Pravin Char)

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