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Similarities in the Global trends of 2008 and 2021 (Insights by Nawaz Ali)

In a recent conversation questionnaire with Nawaz Ali, the Head of Insights at Western Union Business Solutions, we could draw few business insights which gave us a better plan for the year ahead.  Topics like Global trades in 2018 and the global trends now, what are the changes visible, what are the new challenges, etc. were discussed.

As we all know 2020 had been a wild year for the global trade sector and with many scenarios forced up to compare this crisis for that which took place in 2008. To which Nawaz Ali commented, “Though both crises were global in nature and had far reaching impacts worldwide, it is important to note that the dynamics of today’s global trade have shifted in the past 12 years. Today, faster digital transformation can help enable the global services trade to counterbalance some of the impact of the protectionist policies, which we typically witness in times of crisis, on the global goods trade. Even so, the recovery of global trade could still be very gradual as these more protectionist behaviors could also keep trade activity near to its lowest level over the past 10 years. Unlike in 2008, this time both global supply and demand factors are at play, so the effects could last longer. Furthermore, this time around the crisis is broad and impacting all sectors whereas in 2008, the crisis was more concentrated in the banking sector.” He also said that the recent vaccine developments had been a crucial turning point and that they had seen a positive impact from it. He said, “If you look towards the recent spike in commodity prices. However, global demand could still remain distressed in 2021 due to corporate insolvency risks and weaker purchasing power of consumers.” In comparison with 2008, the global interest rates had been cut to new historic lows by the central banks and that would underpin both the investment and the support for the recovery.

It is common that, when a crisis hit, the investors rush to safe haven currencies to ease their losses. To comment on this, he said that the Geopolitical difference between now and 2008 were at stark. “Today, the first signs of a capital rotation into risk-prone assets are emerging. With the US-Sino trade war, domestic mismanagement of COVID-19 in the US, and rising global geopolitical tensions, now could be the beginning of a major multi‑year global FX regime change as investors start to look for alternatives for the greenback. Despite the fact investors have failed to find a credible substitute for the dollar since 2010, in this volatile environment it is critical that businesses ensure they understand their FX exposure and have plans in place for every potential scenario.  There is a misconnection between stock markets and the economy.” He conveyed that the investors remaining optimistic about the economy on the horizon has surely helped but at the same time the reality is not the same. He believed that if the long term economic damage rose, this optimism was more likely to fade and weigh on risk‑friendly currencies, including Sterling, and boost safe-havens like the Japanese Yen and Swiss Franc.

“Many other seismic geopolitical issues that should be taken into account when planning for 2021, which will have significant impacts on currency markets, such as Brexit, US-UK trade negotiations and regime change following the US election result, a Joe Biden presidency could have a material impact on the global trade environment.” said when asked about the other pavilion events apart from the Corona virus pandemic which will be taking place in 2021.

To summarize, no matter the business goals, the understanding of their FX risk and exposure should be a part of every business strategy to pivot the speed of success.


LexisNexis risk solutions study reveals sharp rise of financial crime compliance costs

Decision makers inside banks, investment firms, asset managers and insurance firms identify the drivers impacting financial crime compliance. LexisNexis® Risk Solutions revealed that the results of its annual True Cost of Financial Crime Compliance Study for the U.S. and Canada. The total projected cost of financial crime compliance for the region is approximately $49.9 billion. The survey illustrates the sharp increase in financial crime compliance costs.

The study projects the average annual cost of financial crime compliance for U.S. financial institutions with $10 billion. Pandemic Continues to Spur Growth. The pandemic continues to negatively impact compliance operations. Sixty eight percent of U.S. respondents report longer times required to complete due diligence. Fifty five percent of U.S. respondents report reduced productivity compared.

More U.S. financial institutions now rank real estate and hospitality as top money laundering risk segments. Crime involving digital payments, trade-based money laundering and money mule schemes are on the rise. Digital currency is a growing problem for Canadian firms. Crimes involving digital payments have the greatest impact on compliance costs. Cryptocurrency crimes have the greatest impact on compliance costs for Canadian firms. The survey results demonstrate that financial institutions are battling a broader set of issues.

Survey respondents indicate that a lack of current and extensive data tops the list of Know Your Customer (KYC). Leslie Bailey, vice president of financial crime compliance strategy for LexisNexis Risk Solutions stated that the study shows clear linkages between the pandemic, digital crime and increasing regulations. Hence, financial institutions need to prepare for expanded compliance obligations and risks from emerging financial crime. Bailey added that digital transformation is a game-changer for financial crime compliance operations.

This will require a sophisticated approach that incorporates insight into digital behaviors. This study surveyed 145 decision-makers in the U.S. and Canada. Responses were collected in June 2019, August 2020 and June 2021. Organizations such as banks, investment firms, asset management firms and insurance firms. The total annual cost of compliance across firms was calculated using survey data. The spend amount was generated by multiplying the average percent allocated to financial crime costs.

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COP26 delegates agree on need to deliver on $100 BLN climate finance pledge

Delegates heading to the COP26 U.N. climate summit in Glasgow. These delegates agreed that they must deliver on the $100 billion per year pledge. COP26 president Alok Sharma said that, it is to help most vulnerable nations for tackling the climate change.

After many days of meetings at the pre-COP26 climate event, which happened in Italy, Sharma said that there was a consensus to do more. Which is to keep the 1.5 degrees Celsius target within reach, adding more needed to be done collectively in terms of national climate plans.

The COP26 conference in Glasgow aims to secure more ambitious climate action. This is from nearly 200 countries, those all that have signed the 2015 Paris Agreement for limiting the global warming, well below 2.0 degrees Celsius. And to 1.5 degrees, above pre-industrial levels.

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City’s exposure to Evergrande is very minimal-Hong Kong finance Chief

Hong Kong’s exposure to debt-laden developer China Evergrande Group is very minimal at 0.05%. This is of banking assets, South China Morning Post reported, citing the city’s finance minister. Financial Secretary Paul Chan told the newspaper that it is very minimal and won’t cause them any systemic risks. He added that he had arrived at the conclusion after a recent audit of the local banking sector’s exposure to the company.

Chan also said that the Hong Kong’s stock market was inevitably subject to some volatility. This is amidst a recent mainland crackdown on some industries. But still he believed any setback would be temporary. With liabilities of $305 billion, Evergrande has sparked concerns its cash crunch could spread through China’s financial system. This may reverberate globally and that is a worry that has eased with the Chinese central bank’s vow, to protect homebuyers’ interests. Evergrande has missed two bond interest payments. Bondholders have said this and its offshore debt, amounting to about $20 billion, trades at distressed levels.

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