Here’s our latest selection of recent news stories of interest to the treasury community:
Some 71% of corporates are anticipating revenue-critical supply chain disruptions in the coming year, according to the latest HSBC Navigator: Voice of Business report. Issued on 24 November, the annual evaluation of mood music from the global business community found that almost three-quarters of firms (73%) are foreseeing delays in the movement of goods and services in 2022, with 58% bracing themselves for greater difficulty in international trade as a result.
To prepare for those headwinds, HSBC said in a statement: “It seems businesses are investing more in their supply chains, thinking past what they clearly see as temporary issues and into the long term. Leading businesses are taking extra care in determining who they can rely on and judging future partners on sustainability metrics – for instance, 92% evaluate diversity of workforce as part of their due diligence. Further investment is on the agenda for new technology and digital tools, too, with a third of corporate leaders globally focusing funds in that area.”
Compiled from a survey of 7,300 business leaders in 14 markets, the report also found that 90% of respondents are confident about a return to growth, with many of them committed to a strategic push for greater internationalisation. Corporates in the emerging markets of Mexico, Egypt and India are particularly bullish.
However, HSBC noted, that confidence is far from unqualified: “Almost nine in 10 businesses (87%) expect to experience a lasting impact from COVID-19, with nearly 40% indicating a resurgence of the virus as the main threat to their growth – a sentiment felt most strongly across Asia-Pacific markets, such as Singapore, mainland China and Malaysia. This is maybe why these markets also told us they were focused on employee wellbeing. They have seen the positive outcomes of a supportive working environment and they will build on that to help their colleagues and therefore their business weather storms.”
Find HSBC Navigator’s full country-by-country breakdowns here.
Aiming to resolve a global financing gap of $1.7 trillion, the International Chamber of Commerce (ICC) has issued a comprehensive report setting out how the world’s trade finance system should be digitised. Published on 18 November in partnership with McKinsey & Co and Fung Business Intelligence, Reconceiving the Global Trade Finance Ecosystem presents corporates and other stakeholders with an ambitious road map for replacing outmoded physical and paper-based methods with innovative software platforms.
In an accompanying statement, the ICC noted: “Today’s trade finance system is characterised by a complex web of decades-old manual processes, and more recent, isolated ‘digital islands’ – closed systems of trading partners formed to address specific pain points.” As such, the road map for change is built around three driving forces:
1. Digital trade enablers – a series of initiatives designed to enable digitisation of trade finance and global trade at large;
2. New industry standards – certification tools that will pave the way for trade finance digitisation in specific areas; and
3. Best practices for trade finance interoperability – high-quality measures for harmonising approaches to trade finance digitisation in large geographical areas.
The ICC points out that governance of the digitisation effort could be provided by either a single, global industry entity, or a consortium.
Victor Fung – co-chair of the ICC’s advisory group on trade finance – said: “With global trade under enormous strain, there is an urgent need to overhaul and modernise financial systems that support the lifeblood of the world economy. Buyers and suppliers would like to see more liquidity, lower costs, less transaction complexity and greater availability to credit markets. The entire trade ecosystem has to become far more efficient and benefit from digital innovation.”
McKinsey global managing partner Bob Sternfels added: “We are proposing real-world solutions, many of which already exist in some form… This will be a complex project. But its benefits would be both wide and deep, with the prize being a global economy that is more sustainable and inclusive.”
Workforce relations are playing a larger role in determining the environmental, social and governance (ESG) values that Fitch applies to bond issuers, the organisation has announced. In a 17 November statement, the rating agency explained that investors and analysts are pushing for more consistent, quantitative data that will enable them to gauge the materiality of risks that labour issues are posing to issuers. To address that need, Fitch pointed out, its ESG Relevance Score (ESG.RS) factors in two different sets of workforce-focused criteria:
1. Labour Relations and Practices Encompassing themes such as pay and benefits, recruitment and retention, collective bargaining and supply chain labour; and
2. Employee Wellbeing Including health and safety and employee engagement.
Fitch said that, within its rated universe, issuers facing strikes, breakdowns in employer-union talks, health and safety incidents and allegations of discrimination are more likely to receive elevated ESG.RSs in labour categories – results that would typically raise red flags to investors. For example, it noted, strikes and union issues could be judged as particularly material for public-sector entities in key services, such as healthcare and transportation. Furthermore, the rating agency stressed: “In addition to financial impacts such as lower profitability or fines, changing attitudes among consumers can contribute to reputational damage in such areas as workplace discrimination and poor working conditions.”
It added: “Diversity, equity and inclusion is emerging as a priority topic for investors, with some of the world’s largest asset managers reporting increased engagement with portfolio companies in this area. Gender representation on corporate boards and in senior management is also a focus of financial regulators and stock exchanges that have introduced disclosure requirements or quotas on large or listed companies regarding the number of women in senior positions. Corporates are also increasingly incorporating labour into sustainability bond proceeds or sustainability-linked bond performance targets.”
Readers may recall that, in last month’s ‘In case you missed it’, global insurer Allianz cited the growth of double extortion as a key factor behind an emerging ‘ransomware pandemic’. Now, we have a clearer idea of just how significant that factor has become. In a new report, cybersecurity firm Group-IB reveals that between the periods H2 2019 to H1 2020 and H2 2020 to H1 2021, double extortion attacks on corporates grew by an astonishing 935%.
In a double extortion hack, a ransomware attacker will not only corrupt a company’s data, but threaten to leak choice details online in order to extract financial payments. In Group-IB’s analysis, the dramatic surge in this practice stems from an “unholy alliance” between ransomware makers and initial access brokers – the latter of whom are operating on the dark web and presenting themselves as malicious twins of legitimate software providers.
Group-IB has calculated that the overall size of the initial access market has grown from $1,610,000 in the H2 2018 to H1 2019 period to $7,165,000 in H2 2020 to H1 2021. Its report also shows that between the two most recent reporting periods, the number of data-leak sites has doubled to 28 – and the number of corporates that have had their data posted on such sites has grown from 229 to 2,371.
However, the firm is not about to let business cyber failings off the hook – noting in the report: “Poor corporate cyber-risk management combined with the fact that tools for conducting attacks against corporate networks are widely available both contributed to a record-breaking rise in the number of initial access brokers.”
Download the full report here.
The International Organization of Securities Commissions (IOSCO) is asking stakeholders for feedback on a revised version of its Principles for the Regulation and Supervision of Commodity Derivatives Markets. Published in 2011, the original Principles answered a G20 request for regulators to work together on enhancing market supervision, in light of persistent volatility around – and price pressure on – key commodities.
In a statement, IOSCO said that while those Principles reflected the characteristics of the markets of the time, the context has continued to evolve over the past decade. New trends arising from such factors as regulatory reforms, the growing reliance on electronic trading and data, emerging new technologies and unexpected disruptions beyond market dynamics have influenced how commodity derivatives markets and price formation have evolved.
As such, IOSCO noted: “The revised Principles seek to ensure that commodity derivatives markets continue to facilitate price discovery and hedging, while remaining free from manipulation and abusive practices.”
IOSCO has asked stakeholders to provide their thoughts on the following three questions:
1. Do you think the revised Principles reflect appropriately the changes, trends and activities in the commodity derivatives markets over the past decade since the publication of the original Principles in 2011?
2. Are there any areas that are missing, and/or merit IOSCO consideration?
3. Do the Principles continue to serve as a sound framework for the regulation of the commodity derivatives markets?
Responses must reach IOSCO on or before 17 January 2022. Find the full consultation report, including the revised Principles, here.
