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Why CFOs must balance emerging technologies with people

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Why CFOs must balance emerging technologies with people

Tim Wakeford, VP for Financial Product Strategy, EMEA at Workday 

According to a report last year from PwC, nearly a third of jobs in the financial and insurance sector could soon be rendered obsolete due to advances in automation and artificial intelligence (AI). Yet the future needn’t look bleak for the finance team, as there are very many positive effects that emerging technologies such as AI and machine learning will have on the finance function.

Indeed, it can be said that developing these technologies and making the best use of the new tools, applications and workflow processes that they will allow, means that the finance team will potentially soon have the means at its disposal to be the strategic business partner every CEO needs it to be.

Early adoption and reducing the burden

With this in mind, it is absolutely vital that the finance team becomes an early adopter of AI and automation in order to reduce the burden of repetitive manual accounting processes. Whilst PwC’s report states that 32% of jobs in the sector will be replaced by these technologies, it doesn’t have much to say about the real positives associated with them for the finance function as a whole.

However, a recent EY study, for example, claimed that 65% of finance leaders say having standardised and automated processes is a high priority, and that 67% of finance leaders equally prioritise the partnership between finance and the wider business.

Traditionally, the finance team has spent a large proportion of its time and effort on activities such as transaction processing and audit and compliance. Automation and AI promises to free up finance professionals from such repetitive work, thus allowing financial experts within a business to focus upon much higher-value tasks and strategic activities that will drive value for an organisation.

When looking at the bigger picture, this means that the finance team can shift their focus from number crunching and auditing to financial analytics and data-driven forecasting. Using AI, for instance, can help to accurately model a business’s strategic risk and resilience and to generally improve overall data-driven financial management.

The finance team has to be an early adopter of AI technologies, as the use of data is growing rapidly. Investment in and adoption of AI in order to give companies the ability to process vast quantities of data is therefore required to support this. Automation and AI needs to remove the repetitive manual tasks that the finance team has, for too long, spent most of its man-hours dealing with and help that same team to become a far more strategic, efficient and skilled element of the entire business.

Balancing emerging technologies and people

Having said all of this is not to say that companies should just ‘embrace’ AI as a whole, as there is a far more complex and complicated transition process at play. But equally, why would a business not want to take this opportunity to transform its finance function and deploy the latest cloud-based applications on a technology platform that can support constant change?

The days of customisations and endless add-ons to integrate a vendor’s technology stack seem outdated at best, and now is the time for change. CFOs should have the mind-set to be continually re-evaluating the systems they are using and ensuring that they meet the needs of the business.

CFOs need to carefully weigh up where the opportunities to automate the finance function are, in order to save resources and speed up operations.Then, once key finance processes are automated, the CFO will need to develop structured analytics and centralise data processes to prepare their teams and the company for the AI era. This always involves a very careful balancing between an organisation’s people, its technologies and the wider, longer-term strategic aims of the business as a whole.

And this is exactly where the skilled CFO can help to nurture a far more strategic and valuable finance function to ensure the best use of emerging AI technologies for their company.

CFOs must remember that the success of any technology will always depend on the capabilities of the people using it. Striking this balance between emerging technologies and an organisation’s most important asset — its people — is going to be the real key for the future of finance.

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ECB focuses on bank credit, bonds in gauging financing conditions – Lane

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ECB focuses on bank credit, bonds in gauging financing conditions - Lane 1

FRANKFURT (Reuters) – The European Central Bank primarily focuses on bank credit conditions and bond yields when assessing if financing conditions are favourable, ECB Chief Economist Philip Lane said on Monday, fleshing out key conditions for setting stimulus.

ECB President Christine Lagarde renewed a commitment to maintaining “favourable” financing conditions last week but did not detail how these conditions would be measured and sources close to the discussion said policymakers could not agree on which gauges to focus on.

“Naturally, the focus on credit conditions in the banking system on the one side and the bond markets on the other is consistent with the main methods used by central banks in steering financing conditions,” Lane said.

Policymakers will revisit the issue at their March meeting in a potentially critical seminar that could determine how the ECB spends its 1 trillion euros of remaining firepower in its Pandemic Emergency Purchase Scheme (PEPP).

But some policymakers are critical of putting too much emphasis on government bond spreads as that could reduce the incentive for good fiscal policy and may be seen as exceeding the bank’s inflation-fighting mandate.

“The ECB routinely looks at a wide range of measures … with a prominent focus on the conditions facing customers who depend on bank-intermediated credit, as well as the conditions facing sectors which seek to obtain funding in bond markets,” he added.

Lane added that any premature steepening of the yield curve would work against the ECB’s efforts to counter the shock of the pandemic.

In a speech consistent with Lagarde’s policy statement, Lane repeated that the ECB will not necessarily spend all of its remaining bond purchase firepower while reserving the right to increase spending, if market conditions worsen.

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lane said.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Catherine Evans)

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Boohoo and ASOS feast on remnants of UK high street brands

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Boohoo and ASOS feast on remnants of UK high street brands 2

By James Davey

LONDON (Reuters) – Britain’s biggest online fashion retailers Boohoo and ASOS have swooped on collapsed Debenhams and Arcadia as the COVID-19 pandemic turbocharges the industry’s shift to digital, threatening tens of thousands of jobs.

While the internet has been reshaping the British retail landscape and the clothing sector for more than a decade, multiple lockdowns to stem the spread of the coronavirus have accelerated the move to home shopping.

Established in 2000 and 2006 respectively ASOS and Boohoo are Britain’s biggest e-commerce success stories, ideally placed to tap into a generation of consumers who increasingly shop on mobile phones and communicate via social media.

ASOS quadrupled profit in its 2019-20 financial year and Boohoo posted a 51% jump in first-half profit despite negative publicity over its supply chain. Their stock market capitalisations have grown to 4.8 billion pounds ($6.6 billion) and 4.2 billion pounds respectively.

By contrast, Debenhams and Philip Green’s Arcadia – the stores of which have been a fixture on Britain’s shopping streets for decades – both collapsed into administration last year, putting 25,000 jobs at risk.

Boohoo on Monday said it had acquired the 243-year-old Debenhams brand and other business assets, including all its in-house brands and websites, for 55 million pounds.

But the deal with Debenhams’ administrators, FRP Advisory, does not include any of the chain’s 124 stores or safeguard jobs.

Debenhams has been in administration since April and last month FRP said it was starting a liquidation process, putting 12,000 jobs at risk.

Debenhams’ stores are closed because of lockdowns, but once able to reopen FRP will conduct a stock liquidation before closing the sites permanently, the administrators said.

“The acquisition of the Debenhams brand is an important development for the group as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail,” said Boohoo Chief Executive John Lyttle, adding that the deal will enable it to grow into new categories including beauty, sport and homewares.

Shares in Boohoo were up 4.4% at 1037 GMT.

‘COMPELLING OPPORTUNITY’

ASOS, meanwhile, announced that it was in exclusive talks with the administrators of Green’s fallen Arcadia group over the acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands.

Arcadia collapsed into administration in November, putting more than 13,000 jobs at risk.

“The board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its (the company’s) customer base,” ASOS said, adding that any deal would be funded from cash reserves.

Sky News on Saturday reported that ASOS could pay more than 250 million pounds for the Topshop brand.

Next pulled out of the contest on Thursday, saying it did not want to overpay.

Shares in ASOS were up 5.2%, extending year-on-year gains to 58%.

Given the likelihood of huge job losses, shopworkers union Usdaw called for urgent action from the UK government to “save our high streets”, noting that there were 20,000 store closures and 180,000 retail job losses last year.

(Reporting by James Davey; Additional reporting by Paul Sandle; Editing by Kate Holton and David Goodman)

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European lenders exit Amazon oil trade after scrutiny by campaigners

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European lenders exit Amazon oil trade after scrutiny by campaigners 3

By Brenna Hughes Neghaiwi, Matthew Green and Simon Jessop

ZURICH/LONDON (Reuters) – Credit Suisse, Dutch lender ING and France’s BNP Paribas have decided to stop financing trade in crude oil from Ecuador, the banks said on Monday, after pressure from campaigners aiming to protect the Amazon rainforest.

The role of European lenders in backing the trade came under scrutiny in August, when a report by advocacy groups Stand.earth and Amazon Watch named six European banks as major financiers of Ecuadorean oil exports to U.S. refineries.

Indigenous leaders battling to prevent further oil exploration in their territory said the banks’ role had made them complicit in oil spills, violations of land rights and the destruction of rainforest by Ecuador’s oil industry.

“The banks’ commitment is a milestone,” Marlon Vargas, president of the Confederation of Indigenous Nationalities of the Ecuadorian Amazon, told Reuters. “The banks should finance other forms of economic development, but not oil extraction.”

The August report had named the three banks alongside France’s Natixis, Switzerland’s UBS and Dutch bank Rabobank as the main backers of the shipment of about $10 billion of Ecuadorean oil to the United States over the past decade.

Campaigners had accused the banks of using double standards for making climate change pledges while backing trade in oil from Ecuador, where the industry plans to drill hundreds of wells in the Yasuni National Park, a UNESCO World Heritage site.

The Amazon plays a vital role in regulating the Earth’s climate by absorbing carbon dioxide, one of the main greenhouse gases responsible for global warming.

ING said it shared many of the concerns in the report over protecting the Amazon and had decided to review its exposure to oil and gas exports from Ecuador.

‘ENGAGEMENT ONGOING’

“Our research and resulting engagements are ongoing,” the bank said. “In the meantime, we have decided not to engage in any new contracts for the financing of oil and gas trade flows from the Ecuadorian Amazon.”

Credit Suisse said it had decided to phase out financing for oil exports from the Ecuadorean and Peruvian Amazon after completing existing commitments.

“Credit Suisse reviews and updates its sector-specific policies on a regular basis,” the bank said.

BNP Paribas said it had decided in December to exclude oil exports from Ecuador’s Esmeraldas region – home to Ecuador’s export terminal for oil from its Amazon region.

“BNP Paribas is committed to the continuous improvement of its sustainability strategy,” the bank said.

Rabobank said in August that it had stopped financing Ecuadorean crude cargoes earlier in 2020.

UBS, for now, has stopped short of committing to end its financing of Ecuadorean crude oil cargoes. The bank said it maintained dialogue with advocacy groups and was committed to the highest environmental and social standards.

“As such we have declined transactions where the origin of oil is verifiably associated with breaches of our standards, such as indigenous peoples’ land rights or UNESCO World Heritage Sites,” the bank said.

Natixis, meanwhile, financed cargoes of 5.5 million barrels of oil from the Ecuadorean Amazon from July to December – more than double the volume it backed in the first half of the year, according to an analysis of U.S. customs data by Stand.earth and Amazon Watch.

Natixis said that it continued to “proactively” screen transactions for potential environmental or social risks and understood that financing Ecuador’s oil exports could encourage plans by the industry to expand into the Yasuni National Park.

“Given this situation, Natixis has declined to finance any new clients involved in oil exports from Ecuador since mid-2020 and has reduced the number of existing clients it works with in this area,” a Natixis spokesperson said.

‘GROWING SCRUTINY’

Ecuador’s oil industry says that taking care of the environment and maintaining a harmonious relationship with people living in its operational areas is a priority. State-owned oil company Petroecuador did not respond to a request for comment.

With oil output of about 0.5 million barrels per day, or 0.5% of global volumes, according to BP’s statistical review, Ecuador ranks as a mid-sized producer. Much of its oil is used to pay the country’s debts to China.

The move by the banks could complicate the export of oil from Ecuador because trading companies that were using their services will have to find other banks to back their transactions. Swiss trading house Gunvor, identified in the report as one of the firms trading Ecuadorean crude, declined to comment.

“Any banks involved in this trade will face growing scrutiny, unless Ecuador’s government puts a moratorium on new drilling and addresses the environmental damage and rights violations caused by existing production,” said Tzeporah Berman, international programmes director at Stand.earth.

“Ecuador is going to need support to get out from under crushing debt, but new drilling in primary forests without consent from indigenous peoples is not the solution.”

With asset managers under pressure to rebalance their portfolios to help to slow climate change, tropical deforestation and the loss of biodiversity, the stance of emerging market governments on such issues is facing growing scrutiny.

“We have to position as investors with countries that are taking an active approach to governing and environmental concerns, and obviously some countries are better placed to do that than others,” said Carlos de Sousa, an emerging market debt portfolio manager at Vontobel Asset Management, which has exposure to Ecuador’s sovereign bonds.

(Reporting by Matthew Green and Simon Jessop in LONDON and Brenna Hughes Neghaiwi in ZURICH; additional reporting by Alexandra Valencia in QUITO and Dmitry Zhdannikov and Tom Arnold in LONDON; Editing by Rachel Armstrong, David Gregorio and David Goodman)

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