Machine Learning and Financial Services

 

Smarter Humans, Smarter Machines was the core theme of our closed-door #RefinitivSocial100 UK roundtable held in September 2019, with 10 of the UK and Europe’s most influential thinkers and thought-leaders on social media in the world of FinTech.

  1. Banks have been saying for a very long time that the data they have is messy and needs to be cleaned. It doesn’t matter if it’s going into AI, or any other system.
  2. There is a disjoint between C-suite executives and data scientists. The C-suite have grabbed onto AI and think it will solve all their problems. The data scientists, on the other hand, understand that there’s a lot of work to go before you get to those high end benefits.
  3. To read more about AI and the data quality challenge, download the Refinitiv report: Smarter Humans. Smarter Machines.

Hosted by Refinitiv CEO David Craig and Ben Shepherd, Chief Strategy Officer, and moderated by Amanda West, SVP Innovation Refinitiv Labs, we held a near 2 hour-long discussion on the future of artificial intelligence and the challenge of poor data quality in financial institutions. The main question that everybody was seeking to answer was: Is poor data quality hindering the deployment of machine learning (ML) by financial services companies?

How serious is the challenge of poor data quality in deploying machine learning in financial services?

Liz Lumley (@lizlum), Director of content and Fintech ecosystem at VC Innovations, kicked off the discussion by explaining that financial organisations have faced a data quality challenge since long before AI emerged:

Banks have been saying for a very long time that the data they have is messy and needs to be cleaned. It doesn’t matter if it’s going into AI, or any other system”.

While this was accepted around the table, FinTech entrepreneur, Xavier Gomez (@xbond49), stressed that AI is putting the problem of bad data into stark relief:

“When we imply that the data might be wrong, we are of course implying that the ultimate decision you make, the automated, autonomous decision made by the AI, having gone through machine learning, could be wrong”.

FinTech and digital payments advisor, Neira Jones (@neirajones) agreed that using bad data in ML somewhat defeats the object. She added that the problem is compounded by an increasing expectation that data should be accessible and usable immediately:

Years ago, when we had huge data warehouses… you would have time to clean up your data. Companies had many people doing just that. Now, we’re in an era where we’re moving to instant. We want real time payments – and dirty data is even more of a problem”.

Amanda West, SVP of Innovation at Refinitiv pointed the way forward:

You actually have to go back to basics and adapt the data into a fit state in order to be able to apply any of the sophisticated machine learning capabilities to your business”. She added, “We’re now seeing a lot of conversations in the market about how to prep your data to make it readily consumable”.

Agreeing with this approach, Neira Jones cited a different, but equally compelling, reason for cleaning up your data:

“Accuracy is also one of the fundamental principles of GDPR, so data needs to be clean. We’ve spent a lot of years not cleaning it. Well, now we simply have to do it.”

What is the cost of bad data?

Building on Niera’s point about GDPR, Xavier Gomez highlighted the legal risks that companies face by retaining or using bad quality data:

“You need to ask yourself, ‘Has the data been lawfully acquired? Do we need anonymize it?’ Complying with your legal requirements is an additional step in your data cleansing.”

Independent corporate governance advisor, David Doughty (@daviddoughty), echoed this view, suggesting that the cost of cleaning up data remains one of the primary blockers, regardless of legal obligations:

“The reason data remained dirty for so long is that the cost of cleaning it up just wasn’t justified. That position needs to change”.

Is the challenge overblown?

Timo Dreger of InsureTech Forum (@insurtechforum) had a different take on the question. While poor data quality is certainly an issue, he said, the scale of the problem is overblown due to massive levels of hype surrounding AI in financial services.

“Lots of start-ups say they are using AI. They say “we’re a tech company, we do things differently”, but when you actually look inside, they’re doing it manually.”

Timo quoted a 2019 survey from MMC Ventures which found that nearly 40% of European AI startups don’t actually use AI.

Smarter Humans. Smarter Machines. brochure from the #RefinitivSocial100 Breakfast Roundtable.

David Doughty agreed about the hype surrounding AI, but pointed a finger of blame at the board room:

“There is a disjoint between C-suite executives and data scientists. The C-suite have grabbed onto AI and think it will solve all their problems. The data scientists, on the other hand, understand that there’s a lot of work to go before you get to those high end benefits”.

David Craig, CEO of Refinitiv, wrapped up this particular part of the discussion succinctly, saying that he understood the excitement surrounding AI, but was in agreement that hype sometimes overtakes reality:

“Cloud computing is offering a degree of agility that we’ve never seen before, if you can only harness it. But sometimes the hype [around AI] is too great and the reality takes longer to arrive. This is a reality of modern business”.

To read more about AI and the data quality challenge, download the Refinitiv report: Smarter Humans. Smarter Machines.

Visit our website that ranks the full #RefinitivSocial100. We invite you to follow and join the conversation via #RefinitivSocial100 on social media.

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Risk management is no longer just about financial risks

Risk in business is inevitable – in fact it is essential. A business which does not take commercial risks will not grow, and a business which does not grow is doomed to decline.

Yet, by and large, people in business, as in life, are risk averse, seeking where possible to follow the path which provides the lowest perceived risk.

That is not to say that business leaders should behave recklessly, taking unnecessary risks with little regard to the consequences. Rather, they should take managed risks, and it is the job of the board to ensure that the risks are managed robustly and rigorously.

Businesses need to identify the risks that they face, think of ways in which they might reduce the impact of each risk on the operation of the business and prioritise their focus onto the risks with the highest likelihood of occurrence and the greatest impact to the business.

Strategic, or enterprise, risks are the overarching risks the business takes when it sets or modifies the direction of travel of the business.

With the advent of the internet, social media and digital marketing, the main risks businesses face are no longer purely financial – business failures are much more likely to occur because of reputational, environmental or security risks.

Boards need to satisfy themselves that the business’s risks are being addressed effectively and that they have the expertise available to identify, mitigate and manage risks which are far more important today than they were two decades ago.

As we have seen, businesses which have gained significant market share by delivering innovative products or services can have their share values decline dramatically through an ill-considered tweet (Elon Musk and Tesla) or misuse of customers’ data (Mark Zuckerberg and Facebook) – reputations which have taken years to make can be lost almost immediately, and many boards are ill-equipped to build the reputational resilience for their businesses to survive in the digital age.

Cyber-security is also now a very real threat to the livelihood of many businesses, and it is not just a technical issue. Boards are investing in new technologies such as blockchain and artificial intelligence to supplement their use of cyber-security consultants, penetration testing and ethical hacking to make their data systems more secure, but unless they also tackle their internal security processes there is still the possibility that a disgruntled employee or sub-contractor will leak sensitive data to competitors or publish it on the internet.

We have also seen the rise of state-sponsored cyber-threats which have further damaged the reputations of companies such as Facebook and Twitter, where fake accounts and targeted advertising have been used to influence voters in recent elections.

In addition to these reputational and security risks, boards are also having to contend with the external risks brought about by volatile financial markets. Brexit in Europe and the threat of US trade wars have led to wide fluctuations in world markets and currency exchange rates, which can have highly significant and often detrimental effects on global supply chains – and even if businesses are not directly affected the associated loss of consumer confidence can have wide-ranging consequences.

My experience, based on working with boards of businesses in many different sectors, is that board members are often unprepared or ill-equipped to deal with these strategic or enterprise risks, and chairs should question the make-up of their boards and the effectiveness of the way those boards deals with risk.

Boards often fear articulating risks in the mistaken belief that somehow this will guarantee that they will happen. The reverse is closer to the truth – failure to recognise risks means that the business is not ready to address them and has not put in place the measures, controls or mitigations to eliminate or minimise the effect of the risks.

Risks are also not always negative, and a business that is on top of its strategic risk governance can turn a risk into an opportunity at the expense of its competitors.

If businesses are to avoid the dramatic failures that we have seen with companies such as Carillion, House of Fraser, Patisserie Valerie and, most recently, Debenhams, then their boards need to invest in the expertise to enable them to identify, understand and manage the key risks that they face in the first half of the 21st century.

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First published in Business Reporter Future of Risk Issue

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It’s an ill wind that blows no good for the EU

 

There’s an old Chinese saying that “when the wind of change blows, some build walls whilst others build windmills” – well there’s little evidence of either in the corridors of power in the EU according to Udo Baader, founder and head of German bank, Baader Bank, speaking at the Zagreb Stock Exchange Conference in Rovinj, Croatia, today.

He reckons that 2019 might blow up a storm as the bailout chickens come home to roost.

Just when the Eurocrats in Brussels thought that the financial crisis in the EU was over it looks like that is far from being the case.

Over the last 10 years, since the financial meltdown in 2008, the EU has poured €600 billion into the money pit that is Portugal, Ireland, Greece and Spain (PIGS) plus Cyprus – €400 billion going to Greece alone in 3 bailouts – effectively taking EU taxpayer’s hard-earned cash and giving it directly to the Banks by way of the Asset Purchase Program (APP), otherwise known as Quantitative Easing (QE).

Whilst there has been a general reduction in unemployment and an increase in growth in these countries and some Banks, particularly in the US, have done very well out of this scheme, other Banks, especially those in Greece have fared less well – with some of them having over 50% of bad loans on their books, guaranteed by government bonds which are either already high risk or are about to be re-classified so in the coming weeks.

And it’s not just the PIGS + Cyprus that are affected, Italian Banks are also sitting on high-risk collateral and the once mighty Deutsche Bank has lost 80% of its share value over the last decade.

With the possibility of further political instability in Germany following the next round of elections coupled with the perilous situation in Greece, 2019 is likely to prove a very bumpy ride for EU finances.

UK Corporate Governance Code 2018

A new version of the UK Corporate Governance Code was published in July 2018 and takes effect from 1 January 2019.

Of the 2,600 companies listed on the London Stock Exchange, only 1,200 are listed on the Main Market and of those around 850 have a Premium Listing and are therefore required to report on how they have applied the Code – though it is recognised as a best-practice guide to Corporate Governance which sets the standards of board leadership and effectiveness, remuneration, accountability and relations with shareholders and stakeholders.

The Code, which has developed over the last 25 years since the publication of the Cadbury Report, contains broad principles and more specific provisions that Premium Listed companies are required to report on as part of their annual report and accounts. They must state how they have applied the main principles of the Code and either confirm that they have complied with the Code’s provisions or provide an explanation where they have not.

Roughly half the countries in the world which have some form of Corporate Governance regulation have adopted a code approach, similar to the UK, whilst the other half have opted for legislation. The important difference between the two approaches is that with a code, it is the shareholders who are expected to exert pressure on the directors to comply rather than the courts.

Placing the onus on shareholders to ensure that their directors follow the code is a much more flexible solution than legislation and means that the code can be regularly updated to reflect changing needs in Corporate Governance. Unfortunately, the dramatic shift in share ownership from predominately private individuals to financial institutions over the last 40 years has resulted in less pressure on directors to comply with the code rather than more.

To combat this perceived lack of interest of institutional investors in the way the businesses they are investing in are run, the UK Stewardship Code was introduced in 2010 – though this has turned out to be relatively toothless and politicians will be looking for other ways to further influence the standards of Corporate Governance in the boardrooms of the major UK companies.

Both codes are ‘owned’ by the Financial Reporting Council (FRC) which consults widely before making revisions to the codes – in the case of the latest revision to the code, consultation started in February 2017 and concluded a year later in 2018. The transparency of this process has been questioned with some commentators saying that the resultant revisions bear little resemblance to the responses submitted during the consultation.

The new shorter and sharper Code seeks to re-emphasise the relationships between companies and their shareholders and stakeholders, which are enshrined in the 2006 Companies Act, and their importance for the long-term sustainable growth of the UK economy.

The main changes to the code include:

  • a new provision to enable greater board engagement with the workforce to understand their views. The Code asks boards to describe how they have considered the interests of stakeholders (that is anyone with a legitimate interest in the company including employees, customers, suppliers and the local community) when performing their duty under Section 172 of the 2006 Companies Act;
  • a requirement for Boards to create a culture which aligns company values with strategy and to assess how they preserve value over the long-term;
  • an assurance that boards:
    • have the right mix of skills and experience;
    • encourage constructive challenge and;
    • promote diversity;
  • an emphasis on the need to refresh boards and undertake proper succession planning;
  • consideration of the appropriateness of Chairs remaining in post beyond nine years;
  • strengthening the role of the nomination committee in succession planning and establishing and maintaining a diverse board;
  • conducting regular external board evaluations – Nomination committee reports should include details of the amount of contact the external board evaluator has had with the board and individual directors;
  • an emphasis on the need for remuneration committees to take into account workforce remuneration and related policies when setting director remuneration including performance-related pay to address public concerns over excessive executive remuneration.

FRC Chairman Sir Win Bischoff said about the new code:

“Corporate governance in the UK is globally respected and is a framework trusted by investors when deciding where to allocate capital. To make sure the UK moves with the times, the new Code considers economic and social issues and will help to guide the long-term success of UK businesses.

This new Code, in its new shorter and sharper form, and with its overarching theme of trust, is paramount in promoting transparency and integrity in business for society as a whole.”

Business Secretary Greg Clark said:

“Britain has a good reputation internationally for being a dependable place to do business, based on required high standards. It is right that we keep under review and update our corporate governance code to ensure the highest standards.

“That is why I supported the FRC in deciding to update their Corporate Governance Code, and I am pleased to see the revised Code.

“These changes will drive improvements in how boardrooms engage with employees, customers and suppliers as well as shareholders, delivering better business performance and public confidence in the way businesses are run. They will help the UK remain the best place in the world to work, invest and do business.”

Concern about the new Code was expressed by James Jarvis, Corporate Governance Analyst at the Institute of Directors, the Professional body that aims to improve standards of directorship:

“While the shorter and sharper nature of the code is welcome, along with the increased emphasis on the importance of a wide range of stakeholders, the IoD does have concerns over the relegation of professional development to the Guidance for Board Effectiveness. As we highlighted during the consultation period, the role of the modern director is increasingly complex and specialised, and there is an ongoing need for these individuals to take stock of their competencies. By removing reference to the professional development of directors from the Code and only mentioning it peripherally in the Guidance, the FRC risks indicating to directors that it is not important.”

At the same time as the FRC were producing the new code, they themselves were the subject of a review into their own effectiveness. This review, led by Sir John Kingman, the chairman of Legal & General Plc, which is the largest institutional investor in the UK, was set up in April 2018 by the UK government to assess the FRC’s governance, impact and powers to help ensure it is fit for the future.

The outcome of the review, which is due to be completed by the end of 2018, is aimed to make the FRC the “best in class for corporate governance and transparency, while helping it to fulfil its role of safeguarding the UK’s leading business environment.”

The FRC has two big jobs to do – in addition to being the guardians of Corporate Governance, the FRC is also the UK’s accounting and audit watchdog. Some argue that these tasks are too big to be undertaken by one body, whilst others ask if there is a conflict of interest between the roles? – the IoD has called for the creation of a new body to be responsible for promoting higher standards of Corporate Governance to leave the FRC free to concentrate on its core task of improving company audits.

Given the question marks hanging over auditors in the light of recent high-profile corporate failures such as Carillion there is an argument that Corporate Governance is the thing that the FRC does well and it is their perceived failure to improve auditing and accounting standards that needs to be addressed.

The IoD’s rationale for setting up an independent body to oversee the UK Corporate Governance and Stewardship codes is that the shaping of voluntary best practice for boards of directors and the setting and enforcement of accounting standards are very different activities

Dr Roger Barker, Head of Corporate Governance at the IOD said:

“Corporate governance has been swallowed up within a regulator that now urgently needs to focus its energies on improving the legitimacy of statutory audit. The FRC has for many years done a good job acting as the keeper of the UK’s corporate governance code, but we feel its centralised decision-making structure is not conducive to the differing regulatory approaches needed for governance and stewardship on the one hand, and statutory audit on the other. There must be a clear distinction between being robust on audit quality, while continuing to nurture the UK’s much-admired principles-based corporate governance regime”

The IoD is not the only Professional body with an interest in governance. The Institute of Chartered Secretaries and Administrators (ICSA), otherwise known as the Governance Institute – the professional body for governance has also made its views about the FRC known in its response to the Kingman Review call for evidence.

Unlike the IoD, the ICSA is firmly opposed to the suggestion that responsibility for Corporate Governance should pass from the FRC to another regulator given the expertise that has been developed by the FRC.

The ICSA’s concern with the implementation of both the UK Corporate Governance Code and the Stewardship Code is the lack of sanctioning powers open to the FRC to enforce them. This is a view shared by Labour MP Frank Field, co-author of the 60-page report into the BHS collapse by the parliamentary business, innovation and skills select committee with particular reference to Sir Philip Green who fails all but one of the section 172 tests but has not been prosecuted for failing to obey the 2006 Companies Act.

The UK Shareholders Association (UKSA) and ShareSoc have jointly asked for firmer and faster action to be taken against those who violate the integrity of reporting standards. They say that the general perception is that “in practically every financial scandal or financial crisis, the FRC seems to have taken far too long to decide and too often has concluded that nothing has gone seriously wrong”.

Partly this lack of bite for the FRC lies with its position within the regulatory hierarchy as a “Council” it has much blunter teeth than the Financial Conduct Authority (FCA), which might have more success in enforcement if it was given the powers to do so. The Companies Act has been law since 2006 but we have yet to see any meaningful prosecutions for failure to comply with section 172 and only now in 2018 is the new Code asking boards to specifically say how they comply.

With so many high-profile corporate failures being due to an inability to respond to reputational or environmental risks rather than financial ones, does it make sense for the Corporate Governance regulatory body to still have the word “Finance” in its title?

It will be interesting to see what the outcomes of the Kingman review are when the findings are reported at the end of the year.

One thing is for certain, regardless of who ‘owns’ the Corporate Governance and Stewardship Codes in the future and which political party is in power, the pressures on business leaders to improve the way they run their companies whilst avoiding scandals of corporate failures and excessive executive pay will continue to rise.

The 2018 UK Corporate Governance Code can be downloaded here

 

How to become a Non-Executive Director – London 23 October 2018

Find out how you can obtain a Non-Executive Director position by booking a place on this interactive 1-day course.

non-executive director“A well structured and presented introduction to the responsibilities, challenges and attributes required of being a NED. It was thought-provoking. I have referred back to my copious comments in the comprehensive slide hand outs many times already”

Simon C Jones, Interim Transformation Leader and Hidden Value Discoverer

The How to become a Non-Executive Director course helps you to plan and prepare for your first NED position. It instils a real sense of what is expected of NEDs, and how you can meet the challenge.

This one-day interactive course is aimed at aspiring NEDs and covers essential knowledge about roles, responsibilities, strategy and corporate governance that are key foundations for a Non-Executive board role. It also considers up to date thinking on corporate governance and the responsibilities of owners, the board and employees.

This is followed by practical sessions on identifying NED opportunities, the process of obtaining a first appointment and performing due diligence before any position is accepted. There is emphasis on the importance of presenting your experiences with clarity and relevance.

This course identifies the various ways and circumstances in which non-executive directors can make an effective contribution to a board’s work. It also examines methods for their selection and reviews their motivation, induction and reward.

Who should attend?
Individuals who are currently a non-executive director; those seeking appointment as a non-executive director and those looking to appoint a non-executive director.

What to expect?

  • Clarifies how and why non-executive directors can strengthen a board
  • Provides practical guidance on how best to secure an appointment as a non-executive director

Course objectives
Participation on this course will provide you with the knowledge to:

  • Clarify the board’s role, purpose and key tasks
  • Appreciate the contributions that non-executive directors can make to the board in different types of company and situations
  • Recognise the qualities and experience needed to fulfil a non-executive director appointment
  • Appreciate appropriate methods for finding, selecting, appointing and rewarding non-executive directors
  • Understand the preparation required to interview for or be interviewed for the post of non-executive director

Course Leader: David Doughty CDir FIoD

David Doughty - Chartered DirectorThe course is delivered by David Doughty, a Chartered Director and highly experienced Non-Executive, Chief Executive, Chair, Entrepreneur and Business Mentor. David has extensive executive and non-executive experience in small and medium enterprises in private and public sectors. He is also a board level consultant to multi-national organisations and a Chartered Director Ambassador for the Institute of Directors. See his LinkedIn profile here: (https://uk.linkedin.com/in/daviddoughty)

Key Details
Duration: 1 day
Location:

Institute of Directors
116 Pall Mall
London
SW1Y 5ED 

Price
£330.00 (ex VAT)

Payment with Booking Price

£300.00 (ex VAT)

Partner Price*
£280.00 (ex VAT)

Book Now
To see course dates and to book your place now follow this link:

Course Registration
The fee includes lunch, refreshments and a copy of the course handbook

Attendance counts as 6 CPD hours of structured learning


*Discounts on Excellencia course fees are available for:

 

How to become a Non-Executive Director – Birmingham 26 June 2018

Find out how you can obtain a Non-Executive Director position by booking a place on this interactive 1-day course.

non-executive director“As an introduction to the world of NED’s this course is well structured to give an honest and practical insight in to how to identify and prepare for a move in this direction. Money well spent!”

John Cooper, Vice President, North West Europe at Weber-Stephen Products LLC United Kingdom

The How to become a Non-Executive Director course helps you to plan and prepare for your first NED position. It instills a real sense of what is expected of NEDs, and how you can meet the challenge.

This one-day interactive course is aimed at aspiring NEDs and covers essential knowledge about roles, responsibilities, strategy and corporate governance that are key foundations for a Non-Executive board role. It also considers up to date thinking on corporate governance and the responsibilities of owners, the board and employees.

This is followed by practical sessions on identifying NED opportunities, the process of obtaining a first appointment and performing due diligence before any position is accepted. There is emphasis on the importance of presenting your experiences with clarity and relevance.

This course identifies the various ways and circumstances in which non-executive directors can make an effective contribution to a board’s work. It also examines methods for their selection and reviews their motivation, induction and reward.

Who should attend?
Individuals who are currently a non-executive director; those seeking appointment as a non-executive director and those looking to appoint a non-executive director.

What to expect?

  • Clarifies how and why non-executive directors can strengthen a board
  • Provides practical guidance on how best to secure an appointment as a non-executive director

Course objectives
Participation on this course will provide you with the knowledge to:

  • Clarify the board’s role, purpose and key tasks
  • Appreciate the contributions that non-executive directors can make to the board in different types of company and situations
  • Recognise the qualities and experience needed to fulfil a non-executive director appointment
  • Appreciate appropriate methods for finding, selecting, appointing and rewarding non-executive directors
  • Understand the preparation required to interview for or be interviewed for the post of non-executive director

Course Leader: David Doughty CDir FIoD

David Doughty - Chartered DirectorThe course is delivered by David Doughty, a Chartered Director and highly experienced Non-Executive, Chief Executive, Chair, Entrepreneur and Business Mentor. David has extensive executive and non-executive experience in small and medium enterprises in private and public sectors. He is also a board level consultant to multi-national organisations and a Chartered Director Ambassador for the Institute of Directors. See his LinkedIn profile here: (http://uk.linkedin.com/in/daviddoughty)

Key Details
Duration: 1 day
Location:

Cornwall Buildings
45 Newhall Street
Birmingham
B3 3QR

Price

£330.00 (ex VAT)
Payment with Booking Price
£300.00 (ex VAT)

NEDworks Tier1 Member Price
£280.00 (ex VAT)

Book Now
To see course dates and to book your place now follow this link:
Course Registration
The fee includes lunch, refreshments and a copy of the course handbook

Attendance counts as 6 CPD hours of structured learning


Is it time for Charity Chief Executives to get on Board?

 

The Insolvency Service is understood to have given all eight former Kids Company charity directors and founder and former chief executive Camila Batmanghelidjh a deadline of December 20 to agree to a voluntary ban on holding company directorships or face being disqualified for periods of between two-and-a-half and six years..

Despite not being a registered company director or charity trustee, Camila Batmanghelidjh is considered to have been a ‘de facto’ director of the company by the Insolvency Service.

The vast majority of charity boards are composed entirely of non-executive trustees registered with the Charity Commission, who may also be company directors registered at Companies House, with the Chief Executive attending and taking part in the board decision making process and yet not being formally registered as a director or trustee.

A number of charity Chief Executives I have spoken with say that they are happy with this arrangement in the belief that they cannot be held personally liable for any decisions made by the board which may lead to prosecution – however, as we have seen with Kids Company, this is an unfounded belief.

The test for whether or not someone is acting as a director, either ‘de facto’, someone who holds themselves out to be a director, by, for example, having the title Chief Executive or CEO, or ‘shadow’, in the case of someone who is for all intents and purposes a member of the board, is not that they are registered as a director but is to do with their attendance at and contribution to board meetings.

I believe that it is time for more Charity Chief Executives to consider their positions and if they are acting as directors or trustees then they should seek formal recognition by obtaining permission from the Charity Commission to be registered Company Directors and or Charity Trustees, to gain the protection of the Companies and Charity Acts, and to become fully fledged members of a unitary board.

Charity trustees also need to heed the lessons of Kids Company – Alan Yentob faces being disqualified from running or controlling companies for five years including his ‘I Am Curious Productions’, the company he set up last year after having been forced to quit the BBC creative director in December 2015 by his colleagues who accused him of attempting to interfere in the broadcaster’s coverage of the Kids Company scandal.

There seems to be a widely held misconception amongst Charity trustees that their duties, liabilities and responsibilities are a somewhat watered down version of those for an equivalent private sector director and clearly this is not the case.

Trustees need to ensure that they are fully aware of what they are letting themselves in for before they accept appointments to a Charity Board.

How to become a Non-Executive Director – Bristol 21 November 2017

Are you thinking of becoming a Non-Executive Director as part of a Portfolio Career or to develop your boardroom skills prior to taking up an executive director role?

 

directors duties roles responsibilitiesJoin us on Tuesday, November 21 2017 to find out how you can become a Non-Executive Director

“Unlike many courses I have attended in the past, How to become a Non-Executive Director went beyond just the technical aspects of being a ‘Non-Exec’, and reflected on the differences in the approach required compared to being an Exec Director.
It allows you to make a fully informed decision on whether a Non Exec role is right for you, and if it is, how to go about finding opportunities.
An invaluable day of learning!”

Alastair Lewis Director at Smaointe Ltd

The How to become a Non-Executive Director course helps you to plan and prepare for your first NED position. It instils a real sense of what is expected of NEDs, and how you can meet the challenge.

This one-day interactive course is aimed at aspiring NEDs and covers essential knowledge about roles, responsibilities, strategy and corporate governance that are key foundations for a Non-Executive board role. It also considers up to date thinking on corporate governance and the responsibilities of owners, the board and employees.

This is followed by practical sessions on identifying NED opportunities, the process of obtaining a first appointment and performing due diligence before any position is accepted. There is emphasis on the importance of presenting your experiences with clarity and relevance.

This course identifies the various ways and circumstances in which non-executive directors can make an effective contribution to a board’s work. It also examines methods for their selection and reviews their motivation, induction and reward.

Who should attend?
Individuals who are currently a non-executive director; those seeking appointment as a non-executive director and those looking to appoint a non-executive director.

What to expect?

  • Clarifies how and why non-executive directors can strengthen a board
  • Provides practical guidance on how best to secure an appointment as a non-executive director

Course objectives
Participation on this course will provide you with the knowledge to:

  • Clarify the board’s role, purpose and key tasks
  • Appreciate the contributions that non-executive directors can make to the board in different types of company and situations
  • Recognise the qualities and experience needed to fulfil a non-executive director appointment
  • Appreciate appropriate methods for finding, selecting, appointing and rewarding non-executive directors
  • Understand the preparation required to interview for or be interviewed for the post of non-executive director

Course Leader: David Doughty CDir FIoD

David Doughty - Chartered DirectorThe course is delivered by David Doughty, a Chartered Director and highly experienced Non-Executive, Chief Executive, Chair, Entrepreneur and Business Mentor. David has extensive executive and non-executive experience in small and medium enterprises in private and public sectors. He is also a board level consultant to multi-national organisations and a Chartered Director Ambassador for the Institute of Directors. See his LinkedIn profile here: (https://uk.linkedin.com/in/daviddoughty)

Key Details
Duration: 1 day
Location:

Orchard Street Business Centre
14 Orchard Street
Bristol BS1 5EH

Price:

£330.00 (ex VAT)

Payment with Booking Price
£300.00 (ex VAT)

Partner Discount Price*
£280.00 (ex VAT)

Book Now

To see course dates and to book your place now follow this link:
Course Registration
The fee includes lunch, refreshments and a copy of the course handbook

Attendance counts as 6 CPD hours of structured learning


 

*Discounts on Excellencia course fees are available for:

 

Emerging markets: can you mitigate Know Your Customer (KYC) risk?

 

Emerging market opportunities bring with them a new level of KYC risk – it is important that financial institutions identify and understand the associated due diligence challenges.

Businesses are expanding their reach and exploring opportunities in new territories as never before. That is not surprising, when you consider that 70% of world growth is expected to come from emerging markets by 2025.

Populations are rising and the ratio of those working to retirement means a growing customer base, especially for high-tech products and services.

In China, the bond market is predicted to double in size from the current US$9 trillion over the next five years. That will make it bigger than Japan’s and second only to the United States.

On-boarding challenge

But all these opportunities come with a new level of risk and fresh set of challenges.

Language barriers, depth and breadth of information and operational efficiency can make it harder to on-board counter-parties (customers).

And without conducting enhanced due diligence (EDD), reputations and revenues could be at risk should companies, unknowingly (or knowingly) conduct business with individuals or entities engaged in criminal activities.

What parts of the KYC compliance program should be a priority?

I would prioritize reliable data, i.e. ‘golden sources’ of accurate verified data.

Screening utilities can also reduce the KYC compliance burden without negatively impacting the client on-boarding experience.

I think the automation of due diligence processes to reduce the burden of manual processing and duplication without compromising on compliance or risk is also key.

How does EDD reporting provide depth for better understanding customers?

The greatest risks in KYC and AML compliance come from high-risk or high-net worth customers and large transactions.

That is why it is appropriate to use EDD for those customers and transactions to provide greater detail and depth than would be the case with customer due diligence (CDD).

Regulators also require a higher degree of evidence that EDD has been undertaken and the collection of more detailed information, all of which has to be documented in detail.

In order to provide the required assurance, both internally and externally, EDD is likely to prove much more of a burden on the organization in terms of cost, time and effort.

This is particularly true in emerging markets where the costs of undertaking due diligence to the necessary level of detail is likely to be significantly greater than in advanced markets.

It is therefore vital to ensure that the segmentation of new and existing clients into CDD and EDD compliance regimes is robust and reliable.

The segmentation also needs to be regularly monitored to ensure that changes in customer profiles adequately reflect the level of risk assigned to the customer.

When identifying an EDD vendor, what criteria are most important?

Reputation is probably the most important criteria because you are outsourcing an important element of your compliance risk management to a third party.

How reliable are their processes and procedures in ensuring the accuracy of the identity information that they obtain on your behalf?

Are you seeking a global solution or are you adopting a country by country model? The answer determines the importance of a global footprint in making your decision.

A lot will also depend on the likely number of customers requiring EDD and future growth in those numbers when assessing the capability and capacity of the third party vendor.

Emerging markets webinar: can you mitigate KYC risk?

For further insight into KYC risk mitigation within emerging markets, watch the recording of the Thomson Reuters webinar recorded on 19 September where I was joined by:

James Swenson, Global Head of Proposition for Risk Managed Services

Pete Sweeney, Asia Editor Reuters Breakingviews

Emerging Markets Webinar

The new Charity Governance Code – does it go far enough?

In a move to bring charity governance in-line with the recommendations of the UK Corporate Governance Code, the best practice guide for the UK’s listed companies, the new Charity Governance Code is advocating external reviews for larger charities every three years, more openness and limits on how long trustees may serve.

CharityGovernanceCode

The new Charity Governance Code, which replaces the previous Code of Good Governance, outlines the high standards of governance that all charities and their trustees in England and Wales should aspire to.

“The code for the first time sets out clear aspirations for a charity board to meet. This code is a great stepping off point to help charities navigate the changes” Rosie Chapman, chair of the Charity Governance Code steering group

The Charity Commission is encouraging registered charities to use the code to tackle the governance challenges that the sector has faced over the last two years, most notably in the case of the failure of Kids Company.

“There is a clear consensus within the sector that we must focus more on governance. With this in mind, I envisage that we will soon see a commitment to following the Charity Governance Code become a requirement from many funders. Taking action now is a way of getting ahead of the game” Sir Stuart Etherington, chief executive of NCVO

The new code comes in two versions which share common principles and outcomes: one set of recommended practice applies to smaller charities and another to larger organisations – there is no single definition of what constitutes a small charity, the Small Charities Coalition defines small charities as those with an income under £1m, NCVO, on the other hand, define small as being income under £100,000, and that represents 80% of all registered charities.

The Charity Commission are keen to emphasise that good governance is not about ticking boxes, it is about attitudes and culture and putting the charity’s values into practice. How trustees make decisions and how well they understand what is going on are key to avoiding the pitfalls that have been highlighted in the negative press the sector has received over the last two years.

“The bottom line is, good governance is no longer an optional extra. It’s essential to charities’ effectiveness and probably their survival too. Charities need to be able to demonstrate that they take it seriously, allowing it to change the way they operate”

Charity trustees need to be less conservative, better informed and more supportive of their executives in order that their charities can realise their potential and maximise the difference they make by using good governance to develop and maintain their vision, mission, values and strategy to deliver their charitable objects.

As with the UK Corporate Governance Code and its principle of ‘comply or explain’, which is ultimately the responsibility of the shareholders, or owners, to enforce, the Charity Governance Code works on the principle of ‘apply or explain’ – the question is who is responsible for its enforcement? In most charities the closest thing to an owner is the member of the charity who is most likely to also be a trustee and therefore not the best people to be holding themselves to account. In practice the expectation is that funders will be expected to ensure that the charities they fund are well governed.

The code is built on the ‘foundation principle’ that all trustees should understand their legal duties, liabilities and responsibilities and should be committed to good governance. In practice it is not always the case that trustees take the time to fully understand their roles – something that the Charity Commission will continue to focus their efforts to try to improve.

The code then develops seven principles:

1.   leadership;

2.   integrity;

3.   decision-making;

4.   risk and control;

5.   board effectiveness;

6.   diversity;

7.   openness and accountability;

The key recommendations of the code include:

  • More oversight when dealing with subsidiary companies; registers of interests and third parties such as fundraising agencies or commercial ventures.
  • Where a charity uses third party suppliers or services – for example for fundraising, or data management, boards must ensure the work is in the charity’s interests and must regularly review agreements.
  • An expectation that the board will review its own performance and that of individual trustees, including the chair, every year, with an external evaluation for larger organisations every three years.
  • Boards should regularly review the sustainability of income sources and business models and their impact on achieving charitable purposes
  • Boards should regularly check charities’ key policies and procedures to ensure make sure that they still support, and are adequate for, the delivery of their aims, including key areas such as fundraising and data protection
  • No trustee should serve more than nine years without good reason.
  • Boards thinking carefully about diversity, how they recruit a range of skills and experience, and how they make trusteeship a more attractive proposition.
  • Boards should operate with the presumption of openness.
  • Stronger emphasis on the role of the chair and vice chair in supporting and achieving good governance.

The publication of the new code comes at a very critical time for the charity sector where high profile catastrophic collapses, data misuse and donor fatigue have all contributed to the need to focus on governance improvement.

Whilst the implementation of the code will undoubtedly lead to better levels of trustee understanding and engagement in the basics of good governance, will it address fundamental issues such as an evaluation of the public benefit achieved by a charity, known as the impact statement?

Charity trustees should also be encouraged to consider the risks involved in being too conservative and not taking strategic opportunities, particularly mergers or acquisitions with charities with similar objects.

The main test of the code will come from the cultural change required to move trustees from being dedicated volunteers but amateur board members to becoming much more professional in discharging their duties.

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