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The Political Economy of Industrial Policy

By Kalim Siddiqui

I. Introduction

This article aims to discuss industrial policy by focusing on a number of theoretical issues, in particular in relation to manufacturing and the different rationales for industrial policy making. The paper highlights industries by looking into the importance of industrial policy to build and modernise manufacturing and focus the need for rethinking our understanding of industrial policy, especially in developing countries, also called late-developers. 

In developing countries, the agriculture sector is overburdened and huge proportions of their populations rely on the primary sector for their livelihoods and large numbers of people are trapped in low productivity and low income activities. Therefore, there is a need to diversify the economic structure and expand the industrial sector so that it can create employment and increase incomes. The current advanced economies were able to adopt specific industrial policies to build the industrial sector, which had played a very crucial role, and thus these countries were able to successfully increase the value output into their economies. I will briefly discuss the industrial policy experiences of East Asian and Latin American countries. 

Historically, the use of industrial policies by governments has proved beneficial to a number of countries. Structural transformation, technological upgrading, and innovation do not always take place autonomously, but rather require careful and consistent state intervention and support. The global financial crisis of 2008 put industrial policy back on the policy agenda of the developing countries. The issue most governments face today is not whether to have an industrial policy, but how to best design and implement an industrial policy. 

Government intervention in industrial policies has been an issue of contention as long as the economics profession has existed. Early political and developmental economists such as Rosenstein-Rodan, Hirschman, Gerschenkron, and Prebisch emphasized the importance of government intervention and the ability of a state to influence economic activity in ways that would be most beneficial to the country. In contrast, the IMF and World Bank were quietly opposed to such ideas, and during the 1980s, under their pressure, the development policy shifted towards a more market-centred approach, limiting government intervention to create a more competitive environment. Such views were fully supported by mainstream (neo-classical) economists, who claimed that it is best for manufacturing not to have an industrial policy. More recently, however, there has been increased public pressure to reduce unemployment and stimulate economic growth, and, in this context, a revived interest in industrial policy has taken place. (Siddiqui, 2018a; 2017a)

Here, my attempt is to provide a rationale for state policy intervention in the building of manufacturing. My approach is quite different from the traditional one, which was largely limited to subsidies and tariff protection. My focus will be on increased involvement, mainly in the allocation of funds for research and development, and access to cheap credits to publicly fund long-term investments and policy commitments.

II. Policy Debate

There is no agreed definition of industrial policy. However, most researchers generally defined it as including any policy that affects industry (usually interpreted as manufacturing).  (Noman and Stiglitz, 2016; Chang, 1993) Some others included ‘selective’ or ‘targeting’, namely a policy that deliberately favours defining industrial policies to enhance productivity and efficiency. It is argued that industrial policy should focus public goods e.g. on research and development, technology and infrastructure and should not involve ‘picking winners’. 

For instance, Warwick (2013: 16) defines industrial policy as “any type of intervention or government policy that attempts to improve the business environment or to alter the structure of economic activity toward sectors, technologies or tasks that are expected to offer better prospects for economic growth or societal welfare than would occur in the absence of such intervention”. Other researchers Pack and Saggi (2006: 2) consider an industrial policy to be: “any type of selective intervention of government policy that attempts to alter the structure of production towards sectors that are expected to offer better prospects for economic growth than would occur in the absence of such intervention, i.e. market equilibrium.” Here the industrial policy is aimed at altering the economic activity and structure. Another economist, Dani Rodrik (2008) suggests that infrastructure investments are very important and such investments do favour setting up industries, and training and skill programmes to attract an inflow of capital and should be part of the industrial policy. 

It seems that industrial policy is defined as an effort by the state to encourage the development and growth of manufacturing, and its design and implementation needs to take into account both a government’s capabilities and political will. Industrial policy refers to organized government involvement in guiding the economy by encouraging investment in targeted industries. Such policies serve to allocate capital across manufacturing industries by a system of taxes, subsidies, and investment incentives designed to move the economy along a specific pathway. Industrial policy was in place in most of the advanced economies during the post-war economic reconstruction of the 1950s, including the UK, Germany, France, Norway, Sweden, and Japan.

In fact, industrial policy involves more than just manufacturing, but still there is a need in the developing countries to promote manufacturing due to the following reasons: it is widely recognised that historically, the manufacturing sector has been the main source of technology driven productivity growth in advanced economies. Additionally, the increase in agricultural productivity would not have been possible without manufacturing, which provided machinery, irrigation pumps, and so on which made the ‘green revolution’ possible. (Siddiqui, 2021) More recently, rapid increases in productivity in services were made possible due to government support, like logistics, transport equipment, fast delivery system, tracking devices and mechanised warehouses. 

The development economists in their growth model, such as Rosenstein-Rodan, Nurske, Hirschman and others emphasised the need for coordinated investment between activities to promote economic activities and linkages (both forward and backward) to promote industries and particularly strong interdependence between sectors. There are also infant industry arguments, which are based on productive capabilities which could be developed overtime. Infant industries need protection for a certain period, especially when their producers are trying to catch-up with superior producers from overseas. For example, the European governments provided funds for the development of Airbus against US Boeing, which had dominance over the world’s civilian aircraft market. 

Despite the criticisms by mainstream economists regarding the need for an industrial policy, states nevertheless adopted industrial policies, for instance, the US did this throughout its history. Even today, the advanced economies will select and target a few industries known as ‘strategic industries’ and provide funds to enhance research and development and to safeguard, which they consider of national importance. (Siddiqui, 2020a) It requires government support for certain strategic industries (such as high technology), which is considered important to future domestic economic growth and expected to provide wide spread benefits (externalities) to society. The ‘strategic trade policies’ could be described as an attempt by the government to improve economic performance by promoting particular exports or discouraging particular imports, such policies have been extensively practiced by some successful today’s economies like the US, Germany, Japan, and South Korea. 

Despite the criticisms by mainstream economists regarding the need for an industrial policy, states nevertheless adopted industrial policies, for instance, the US did this throughout its history. 

The argument behind ‘strategic trade policy’ is that government can assist domestic companies in capturing profits from foreign competitors. The US has pursued industrial policies to enhance the competitiveness of domestic manufacturers and such policies involves channelling government resources into targeted industries, which it views as important for its economy. For instance, the methods used are loan guarantees, tax guarantees etc. I mean to say that the US government uses various measures to influence the economy, such as in the agriculture sector by providing research and technical assistance and dissemination of such information to farmers through agricultural extension services and investments in irrigation projects. The government in the past also supported a number of industries such as defence, aerospace, and energy. The US government also provides export subsidies to encourage exports through Export-Import Bank (Eximbank) and this support is available to any US export firms irrespective of size. 

 In order to maintain their manufacturing base and technological leadership, for instance, Japan and South Korea have taken policy measures to help, especially in high-tech and electronic industries. (Tsuru, 1993; Amsden, 1989; Johnson, 1982) For example, the Japanese government in the 1960s and 1970s assisted capital intensive industries such as shipbuilding, steel, and high-tech industries like optical fibres and semi-conductors through import protection and R&D subsidies. The government industrial policy became more explicit with the establishment of the Ministry of Economy, Trade, and Industry (METI) to assist targeted industries and support them in the allocation of foreign exchange, credits at low interest rates and R&D subsidies. As a result, Japan became technological leader in a number of key industries including the electronics and auto-industries. 

Joseph Schumpeter (1987) argued that under the conditions of free entry and allocative efficiency, there is little incentive for innovation, because monopoly rent, also known as ‘entrepreneurial profits’ will compete away. Moreover, innovation is important for economic growth and it may be damaged by an improvement in the static allocative efficiency of the economy.

Moreover, industrial policy differs from the macroeconomic policy as under the former the government targets only a subset of the economy, while the macroeconomic policy which includes tax rates, rates of interest, and levels of fiscal spending, generally does not discriminate against companies or industries, whereas industrial policy includes subsidies on R&D, taxes and cheap credits.

The ‘strategic trade policy’ favours the entry of domestic firms into global markets. The policy is that government can assist domestic companies in capturing economic profits from foreign competitors. According to it, the government policy can alter the terms of competition to favour domestic firms over foreign firms and shift profits in imperfectly competitive markets from foreign to domestic companies. The standard example is the aircraft industry, which has a high cost of introducing new aircraft and a significant learning curve in production that leads to decreasing unit production costs. It means that the aircraft industry can support only a small number of producers. This industry is also typically associated with national prestige. It is based on the notion that in some the dynamic economies of scale and the size of global markets, allow for profitable production by few firms. The strategic trade policy, Tyson (1992: 3) notes: “… demonstrate that, under conditions of increasing returns, technological externalities, and imperfect competition, free trade is not necessarily and automatically the best policy.” This policy means that government support of domestic companies to support domestic industries could help to deter foreign companies from entering the market. It is said that a successful state intervention produces insignificant gains for consumers but monopoly profits for domestic firms, hence a net national welfare gain. For example, in the US, a strategic industrial policy in the aerospace industry promoted domestic industries. 

The ‘strategic trade policy’ favours the entry of domestic firms into global markets. The policy is that government can assist domestic companies in capturing economic profits from foreign competitors.

Government interventions have a long history. During the late 18th and 19th centuries, politicians: such as Hamilton in the US and List in Germany favoured industrial policy through state intervention to promote domestic industrialisation in the face of British industrial dominance. (Siddiqui, 2020b) The German Historical School supported infant-industry argument, which suggested that new industries take time to get established because of start-up problems, and the need to insulate themselves from the competition. This argument also had support after the 1950s in Africa, East and South Asia and Latin America. Classical economists like Adam Smith and David Ricardo argued that ‘free trade’ benefits all countries, and opposed the idea that countries would benefit more if they engaged in certain forms of state support. (Siddiqui, 2018b; 2016b) However, recent trade theorists like Brander and Spencer, 1985, Krugman, 1986, and Richardson, 1993 have put forward strategic trade theories. For example, suppose the European Union (EU) subsidised their companies and protected domestic markets, they would have to ensure that their companies enter the overseas markets, while deterring US companies, thereby ensuring that the EU, not the US, received the monopoly profits. 

I find that some issues of recent policy such as the rise of the global value chain, neoliberalism, financialization, and increased US control over the global economic policy after the collapse of the Soviet Union and the end of the Cold War. During the 1980s there were wide discussions on East Asian and Chinese industrial policies. (Siddiqui, 2020c; 2016c) Prior to the 1990s debt crisis, many developing countries viewed the industrial policy as an important policy for economic diversification and to get rid of poverty and economic backwardness. Therefore, we should not ignore the differences in relative positions of countries in global geopolitics, particularly the distribution of economic power across countries. The rich and powerful countries with a larger GNP (Gross National Product) have a self-interest in supporting trade, capital liberalisation (Siddiqui, 2017b; 2017c)  and a stable monetary system, since most global companies are based in rich countries and are able to corner the bulk of the benefits. It seems that industrial policy is the one way that the late-developers, who happen to be poor as well, can challenge the global power structure. 

Despite, the relevance of industrial policy, mainstream economists have neglected this area of study due to not taking into consideration crucial issues like uncertainty, macroeconomic management, and role of state, arising from the process of change. They have neglected the increasing financialization of the world economy. The uncertainty arises as firms, in their efforts to control markets, may adopt predatory pricing strategies or mergers and acquisitions to remove rivals. Firms can also reduce uncertainty by increasing control over suppliers through signing long-term contracts or through investments. A number of measures could be taken to reduce uncertainty such as infant industry protection and also guaranteeing demand. By providing government procurement to domestic companies so that they have stable demands, such as the US policy towards Boeing, Finland’s policy towards the electronic industry and the Indian government’s policy towards the software industry. The US government also initially financed computers, the internet and semi-conductors through public funding. 

The IMF (International Monetary Fund) and other international financial organisations imposed SAP (Structural Adjustment Programme), including monetarist macroeconomic policies on the developing countries, especially those which faced a BoP (balance of payment) crisis in the past decades. (Siddiqui, 2020d) The SAP had one policy for all, which included fiscal austerity, trade liberalisation, deregulation, privatisation, and increasing exports. However, when the advanced economies experienced the 2008 global financial crisis, they ignored ‘free market’ mechanisms which preached by them to developing countries, and instead, the state came to rescue their economies. (Siddiqui, 2012; 2015a) Since the early 1990s, the financialization process has affected several developing countries, which could be seen via declining investments/GDP ratios, declining wages, and the growing share of the financial sector in their GDP. (Siddiqui, 2019a; 2019b) Financialization is manifested in a number of ways including an increasing reliance on external finance, increasing share of finance in the economy, and short term investment strategies. Capital liberalisation and the lack of global regulation in areas of capital flows, tax avoidance and evasion have weakened governments in developing countries. 

On world-wide trade liberalisation, following multilateral negotiations in 1995, the GATT’s (General Agreements on Trade and Tariffs) tasks and responsibilities were extended, which was then called the WTO (World Trade Organisation). The WTO demanded all member countries now only adhere to trade and capital liberalisation, but also covered new areas, namely Trade Related Intellectual Property Rights (TRIPs),Trade Related Investment Measures (TRIMs) and General Agreement in Trade in Services (GATs).Under these provisions, copy rights were protected and regulations of the foreign investments and foreign services were removed. These regulations favoured the interests of Western-based multinational companies operating in developing countries. (Siddiqui, 2018c; 2018d)

Table 1 shows that all major economies with largest GDP also have a strong manufacturing sector and the industrial policy has played a key role in building high value manufacturing in these countries (see Figure 1, also see Pie Chart 1).

I mean to say that the global power imbalances have been more visible in recent decades in the areas of industrial policy. (Siddiqui, 2020e) During the colonial period, the European powers banned setting-up high-value manufacturing, and colonies and semi-colonies were encouraged to specialise in the production of primary commodities and low-value products in the name of ‘comparative advantage’, and finally, unequal economic and trade treaties were forced on them. (Siddiqui, 2019c)

A number of studies found that trade and capital liberalisation and the removal of subsidies and other incentives had adversely affected domestic producers and they experienced closures.

Raul Prebisch, a strong proponent of import substitution policy, hoped that such policies would be able to substitute for manufactured imports and also develop technological capabilities. Some economies like Brazil witnessed rapid expansion of manufacturing and were able to increase innovations and productivity, but the country was unable to successfully substitute for foreign companies and also did not lead uninterrupted industrial growth. In the 1980s and 1990sthe constraints in the balance of payment lead to the foreign debt crisis, and most of the Latin American countries abandoned import substitution policies and adopted neoliberal economic policy. However, it did not lead to a positive impact on productivity and capabilities. A number of studies found that trade and capital liberalisation and the removal of subsidies and other incentives had adversely affected domestic producers and they experienced closures.

III. Experiences in Latin America and East Asia

For the last three decades or so, in most of the Latin American countries, the service sector is growing faster and their economies are bypassing the industrialisation process which historically happened in the advanced economies. Latin America appears to be the worst hit region since the 2008 global financial crisis. The advanced economies too have experienced a significant fall in employment in manufacturing, which is known as de-industrialisation. However, manufacturing output at constant prices has held its own comparatively well in the advanced economies since much of the discussion on deindustrialisation focuses on nominal rather than real values. Technological progress and productivity are no doubt a large part of the story behind the decline of employment in manufacturing and deindustrialisation in advanced economies. In Latin America, the political consequences of premature deindustrialisation are more subtle, but could be even more significant. In fact, premature deindustrialisation may make the democratisation process less likely and more fragile in the near future.

In the 1950s, Latin American economies were better positioned than the East Asian economies, meaning that the former had more developed industries and technologies than the latter group. However, despite, the Korean war from 1951-53, and the Japanese invasion of China and occupation of most of the East Asian countries such as South Korea, Singapore, and Taiwan, while these countries have substantial differences, they have managed to accumulate capital, expand manufacturing, industrialise and join the advanced economies of the world in a very short period. 

The mainstream economists argue that the reason for differences in performance is mainly due to the adoption of ‘Import-Substitution Industrialisation’ (ISI) by Latin American countries, while East Asia adopted ‘Export-Oriented Industrialisation’ (EOI), which resulted in divergent industrial and economic performances of these two regions. The ISI strategy aims to encourage domestic companies and protect them from foreign competition, and it requires the government to put in place a strategy to protect domestic producers through tariffs, subsidised credits, exports and R&D. The EOI targets setting up industries with a primary focus on overseas markets. This strategy relies on a greater degree of foreign markets and technological support. Both strategies aim to help BoP, spur investments, and create jobs. However, the EOI is helpful for small countries to achieve economies of scale, as this strategy has larger markets rather than just domestic markets. However, EOI needs support from advanced economies and foreign companies to access their technology, capital and markets and is hence more vulnerable to international pressures, as we have seen during the East Asian economic crisis of 1997, when in a very short period the whole region was plunged into a deep crisis. 

However, mainstream studies on East Asian economies ignore the key role played by the state through selective industrial policies in the form of protection of domestic companies, investment incentives, and export promotion. Alice Amsden (1989) found that in South Korea successful industrial transformation was mainly possible due to the selective industrial policy, which was strategically designed to build technical upgrading in export sectors including introducing performances for firms benefitted by the state support. She used the phrase, “getting prices wrong”, meaning that the government deliberately distorted market prices in areas such as long-term interest rates and foreign exchange rates to support the initial period of industrialisation. Similarly, Robert Wade (1990) emphasised that the crucial role of the state in Taiwan’s successful transformation from a poor agrarian dominated economy to a highly advanced world-leader in manufacturing. He found that the state was able to ‘guide the market’ to improve the technical capabilities of the export sector. These studies point out that the state created a complex system of incentives and discipline and a combination of both of ISI and export promotion. 

The rapid transformation of the post-war Japanese economy was also due to state intervention rather than free market policy, as mainstream economists would like us to believe. Japan’s successful industrial policy drew a great deal of attention. In Japan the Ministry of International Trade and Industry (MITI) orchestrated and directed the development of selected industries and products which it deemed necessary for Japan to compete in the international market. (Siddiqui, 2015b) The MITI only assisted the private sector in targeted industries. It generally financed no more than 50 percent of a project, leaving the rest to the private sector and market influences. The MITI is not autonomous but is overseen by various government agencies. Japan’s automobile industry served as a highly successful model where a specific industry was targeted to assume an expanded role in the world markets. As Chalmers Johnson (1982: 17) noted that state policy targeted to promote high tech manufacturing. “the issue is not of the state intervention in the economy. All states intervention in their economies for various reasons… Japan is a good example of a state in which the developmental orientation predominates.” He further said that a development state is where: the political elites are committed to breaking dependency and underdevelopment; their priority is not to enhance their own privileges and accumulate personal wealth, and they are able to build institutions to effectively translate their commitment into reality. Besides building modern manufacturing they were also able to induce their companies to redistribute their profits to society at large.  (Johnson, 1982)

In 1986, the South Korean government introduced the Industrial Development Law (IDL), which helped to implement selective industrial policy and had provisions for sectoral rationalisation programmes. Under IDL, a number of rational programmes were carried out covering a number of industries such as auto-industries, electrical and construction machinery, coal mining and textiles. (Amsden, 1989)

In South Korea, the importation of machines was controlled and the government encouraged the use of domestic machines, credits to imports were only given if this machinery was not available domestically. During the 1970s, the government prescribed for domestic firms to invest in chemical and heavy industries. For example, the ship-building industry grew from scratch and emerged to become the world’s second largest in just ten years. Private investors were encouraged to invest in the ship-building industry and the President Park Chung Hee himself took interest in the growth of this sector. The state-controlled financial institutions provided credits to ship building and other heavy industries, which had a very visible impact on private investors. In 1973, the government imposed a price ceiling when it was seen to be necessary. In addition to price control, the state also put restrictions on entry, wherever it thought there were too many firms, and the state encouraged mergers to promote efficiency. 

In South Korea, the state also saw the dependence on foreign savings to finance investments as problematic, and solutions were seen in building the exports sector without a balance of payment deficit. It was believed that the reason for chronic trade deficits could be the underdevelopment of capital and intermediate goods, and therefore, the development of heavy and capital goods industries was seen as imperative for the overall economic development of the country. To successfully set up a strong manufacturing base in the country, the macroeconomic policy was geared to suit the need of building manufacturing and high levels of investments in the economy were made, with expansionary measures if necessary. The heavy reliance on indirect taxes and consumer credits were banned so that all credits were channelled to industries. Private car ownerships were discouraged by high taxation, foreign holidays and imports of luxury goods were banned prior to 1990 and imports were restricted to high tech and machinery. As Chang (1993: 139) notes: “Despite being citizens of a major exporter of passenger cars, Korean until very recently owned far fewer passenger cars than other developing countries as a comparable income level. In 1985, there were 73.5 people per passenger car in Korea; whereas the corresponding figures in 1983 were 27.0 in Taiwan, 21.8 in Chile, 16.3 in Malaysia and 15.2 in Brazil…. Given such a clear anti-consumption bias, Korean macroeconomic policy may be more appropriately understood as investment management’ rather than as ‘aggregate demand management.”

However, in South Korea, macroeconomic policy measures were considered less-effective to achieve the rapid building of manufacturing and upgrading of industries owing to their uncertain impact on specific sectors. The government industrial policy recognised that ‘the market mechanism’ alone could not achieve a ‘comparative advantage’ and build heavy industries. Therefore, the state identified ‘strategic industries’ i.e. the priority sector, and government supports were extended into such areas as steel, electricity, oil, gas, coal and shipbuilding. To achieve economies of scale and efficient production scale in the priority sector, the government targeted overseas markets from the beginning, in order not to incur low capacity utilisation. The government had tight control over foreign direct investment and vital conditions were negotiated with foreign companies for the transfer of technology to domestic companies. To raise productivity, provisions of subsidised credits for capacity upgrading, import substitution of inputs, and funds were also made available for R&D and skills upgrading programmes. (Amsden, 1989)

The question arises of why state intervention worked in South Korea but not in Africa, South Asia or Latin America. To answer this, we need to revisit Schumpeter (1987) who argued that to start innovation or new industries needs ‘profits far above what is necessary in order to induce the corresponding investment’ i.e. entrepreneurial profits, which makes risk-taking attractive, and what is also called ‘quasi-rents’. Then entrant barriers become necessary to provide incentives for investments in new industries. Similarly, Chang (1993: 145) argues: “In order to set-up an industry, a late-developing country has to import technology, but making the imported technology work requires a period of ‘learning’, which is often a costly activity with highly uncertain returns. Such risk means that those who are starting new industries in a late-developing country have to be provided with some form of entry barrier and the resulting rents… And this is what the states in many late-developing countries, from Germany and Japan down to Korea and others …have tried to provide through tariff protection and other forms of state-created rents like subsidies and preferential loans.”

South Korean large family-controlled businesses are often ‘Chaebols’, and have strong ties with the government. In fact, after taking over the government in a military coup in 1963, President Park Chung-Hee began a modernization drive, known as “guided capitalism.” Under it, the governments elected a few firms and provided them with cheap credits. There are now 45 conglomerates that fit the traditional definition of a Chaebols and the top 10 own more than 27% of all business assets in South Korea. (Amsden, 1989)

In 1994, Korea significantly reduced government regulations for foreign borrowings which led to a rise in foreign debts, which trebled from US$ 44 billion to US$ 120 billion in 1997in just three years. However, the World Bank in 1997 considered debt/GNP ratios under 40% as low risk cases, but Korea’s debt/GNP ratio was only 22%, while it was 70% for Mexico, 33% for Argentina, 57% for Indonesia, and 35% for Thailand. 

IV. Conclusion

Industrial policy should be seen as an important policy for a country aiming to accomplish industrialisation, which needs a long-term policy to reverse pre-mature industrial decline. The industrial policy could be to correct ‘market failure’ and to coordinate a set of state incentives such as subsidies and tariffs on imports. Therefore, state support is crucial in order to establish industries and relying alone on market forces and foreign corporations will be disastrous for the developing countries as shown by the recent experiences of the Latin American countries. 

The study has found that industrial policy is very important for the developing countries in order to diversify their economies and to build the manufacturing sector, which would ultimately raise overall productivity, incomes and employment. To achieve this, the role of the state is crucial and leaving this to the market forces alone is a grave policy mistake and does not have any evidence of success in the past. 

The past industrial policy and its outcomes in Latin America and East Asian countries have been briefly examined. In short, in Latin America, for instance, manufacturing in Brazil grew until mid-1980s and the country was able to build manufacturing in certain area, which was largely focused on domestic demands, but then the country experienced a debt crisis and under IMF pressure adopted ‘pro-market reforms’ i.e. SAP, which led to the abandoning of protections to the domestic industries. And as a result, Brazil witnessed the closure of a number of industries and deindustrialisation and afterwards, it focused more on exports of primary commodities to repay its foreign debts. 

While, in the East Asian countries the neoliberal policies were imposed during the 1997 East Asian crisis and by that time most of these countries, namely South Korea, Taiwan. Singapore and Malaysia were able to build a competitive edge in specific industries. (Siddiqui, 2016a; 2009)  In fact, from the beginning, the East Asian countries began developing their manufacturing sectors by targeting the export markets, and also began for a brief period with ‘import substitution policy’. They realised that their domestic markets were limited and thus manufacturing could not achieve economies of scale. These countries opened their industries to foreign competition, welcomed foreign investment and technologies, and also focused on exports, which was used to stimulate economic development. Manufactured products soon became the principal exports of East Asian economies in contrast to other developing countries that largely focused on exports of agricultural commodities. 

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About the Author

Dr. Kalim Siddiqui Dr. Kalim Siddiqui is an economist, specialising in International Political Economy, Development Economics, International Trade, and International Economics. His work, which combines elements of international political economy and development economics, economic policy, economic history and international trade, often challenges prevailing orthodoxy about which policies promote overall development in less developed countries. Kalim teaches international economics at the Department of Accounting, Finance and Economics, University of Huddersfield, U.K.. He has taught economics since 1989 at various universities in Norway and U.K.

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Petia Dimitrova: “Innovations give us the necessary energy to change banking”

Petia Dimitrova

Interview with Petia Dimitrova, Chief Executive Officer and Chairperson of the Management Board of Postbank.

What qualities does a bank need in order to succeed in the swirling economic and social currents of today? How can it provide the best-possible service to its customers while meeting its responsibilities to society as a whole, and still meet its commercial goals? And what has changed with the pandemic? Petia Dimitrova, CEO of the award-winning Postbank, has a clear vision of the formula for success.

Postbank is celebrating its 30th anniversary in business. What would you say are the successes of which the company can be proudest in that time?

We are proud of all our successes and they are all special to us, since we achieved them together with our team. We have overcome the challenges and have managed to keep the trust of our customers, partners and international shareholders. For 30 years, Postbank has proven itself as one of the most successful banks in Bulgaria, a good partner, employer and a responsible company. This allowed us to be among the leaders in all segments we operate in – we rank third in terms of loan portfolio and deposit size, we are the fourth-largest bank in Bulgaria, with a market share of over 10%, with more than 200 branches across the country, and we have won numerous awards. We achieve these results with our hard work and by striving to constantly move forward together. It would be difficult to point out the most important successes, as they are all valuable for us. The merger of DZI Bank in 2007, the integration of the Alfa Bank branch in Bulgaria in 2016, as well as the successful acquisition of Piraeus Bank Bulgaria in a record short period of four months in 2019, are part of our bank’s history we are all proud of. For this, I would like to thank all the employees of Postbank, with whom we managed to achieve this remarkable business development and with whom we have proved to be a stable and innovative bank, working for our customers. Thanks also to the shareholders for their unconditional support as they boldly stand behind our growth plans, and to our customers for their esteem and trust.

You have said that well-run companies are used to tackling challenges but only the successful ones are prepared for them. What would you say were the key challenges of 2020, and how well prepared was Postbank to meet them? 

Challenges in our sector are a part of our everyday life and, to a great extent, we banks are used to overcoming them. Certainly 2020 was different for everyone, due to the COVID-19 pandemic. We learned to be swifter in implementing innovations in order to be of help to our customers and team, to be more responsible and to support common causes. We were well prepared in Postbank, since we started the digitalisation processes years ago with the aim of providing excellent customer experience, convenience and fast solutions, which were all extremely important in the new reality. This gave us an advantage and guaranteed peace of mind for both our team and our clients, who received the desired banking products as fast as possible. We managed to offer effective solutions when they were most necessary, and via the preferred communication channel of our customers. They can currently carry out almost all the important transactions remotely – from opening an account, through applying for and utilising a loan, to issuing credit and debit cards, remotely concluding an insurance and almost completely utilising a housing loan, thanks to the online housing lending centres, which are unique in the market.

One of the greatest investments and innovations we carried out at Postbank was our digital express banking zones, which were immediately recognised as a preferred alternative. Thanks to the intuitive devices in these zones, our customers can carry out by themselves, quickly and easily, a major part of main banking transactions. Digital zones are already operational in 32 branches in 15 towns across the country, with more locations soon to be opened and upgrades to the service to come. And now we are looking forward to something really exciting, because our efforts are focused on our most important product for 2021, which will start any moment – our new, revolutionary digital wallet. I am certain this will be a new, unique and flawless experience for customers looking for the best solution for managing their personal finances. Customers will, in practice, move the bank to their mobile phone. They will be able to add all their cards in their new wallet and the diverse set of functions will provide immediate and active access to their funds, which they will effectively manage 24/7.

One of the greatest investments and innovations we carried out at Postbank was our digital express banking zones, which were immediately recognised as a preferred alternative.

Another challenge was the introduction of fintech companies in the sector, which activated a healthy competition regime that also had its positive effects. It stimulates us to build on our achievements and offer even more valuable products and services. Fintech companies can certainly be our partners, and our experience shows that collaborations between both parties are possible and beneficial to companies and customers alike.

What is important now is how we will continue forward. I believe, this year, we can expect many banks to take advantage of their strategy of simplifying their business and rationalising their portfolios. Since the big ones keep getting bigger, “too big to fail” will switch to “too little to succeed”, due to the change in the environment.

What effect would you say that the pandemic has had on the shift towards service digitalisation in the banking sector? 

The pandemic proved to be a catalyst not only for digitalisation of services in the banking sector, but also as a stimulus for customers’ financial literacy, considering that it successfully transformed attitudes that under regular circumstances would have taken years to change. It accelerated the development of the sector and helped us reach a new level in communicating with our clients. It changed their service preferences for good – they increasingly want to manage their finances through mobile apps and digital wallets, and via online banking. I would say that we banks went through an accelerated course in digitalisation, which became the standard for consumers. We rethought our business models and made them more digital, and work processes were swiftly reorganised in order to guarantee the necessary speed and convenience, not only for our customers, but for our employees as well, whom we had to protect. I believe that the digital transformation is already a mandatory condition not only in our sector, but in all businesses, if they want to be competitive, and this is the direction that we will continue following.

Our efforts are currently aimed at developing our digital channels, but we also invest in our branch network, as there will always be customers who will prefer human contact and personal attention, a consultation and a face-to-face meeting with their private banker, alongside our well-developed digital services. This is why we offered unique digital self-service zones, where customers can easily and quickly carry out a major part of the main banking transactions themselves, but can also seek help should they need it. 

You are quoted as referring to the need for bolder reforms aimed at improving customer experience. Are there any areas that you consider to have particular potential in this regard?

Our customers want an individual approach and that has not changed – they want to have access to their funds anytime, anywhere, to receive individually developed offers and to feel special. And we strive every day to provide just that. As I already mentioned, more and more of them want to manage their financial life via digital services. But, even without COVID-19, they will still seek simpler, more direct and personalised products and services, giving them more added value. While we banks update our mobile apps, websites and other interfaces to provide more functionalities, we must not forget all this, guaranteeing that customer experience remains consistent and maintained during all these changes. Speed and security are only a part of the conditions for excellent customer experience. But consumers expect consultations and flexible solutions for their financial health and well-being, as well as speed. Neither they nor our partners would settle for less. I am happy that we did not deprive our clients of the most important aspect during this crisis – personal attention. We showed that, even from a distance, these processes can have a human face and that is at the heart of good customer experience.

I believe that digital transformation is already a mandatory condition not only in our sector, but in all businesses, if they want to be competitive, and this is the direction that we will continue following.

Postbank places innovation high in its approach to maintaining its position in the commercial environment. Could you give us some examples of how innovation has helped the company in this regard?

Innovations have always been a part of our development strategy, because they give us the necessary energy to change banking and implement new trends on the market. In terms of examples, I will name just a few that helped us maintain our leading positions on the market over the past challenging year and support our clients the way they expect their trusted financial partner to do. With our online housing lending centre, we used modern technologies to transfer the application and granting of housing loans in a digital environment, thus catering to consumers’ expectations to the maximum extent. Now our clients can carry out almost all the main banking transactions online – from applying for and utilising a loan, through remotely concluding an insurance to receiving credit and debit cards. We implemented the most modern and effective solution for managing communications with them, so that we could be even more helpful – one based on Salesforce, the leading cloud platform for managing customer relations. For our leadership and achievements in 2020, Postbank once again won the prestigious international award in the Best Retail Banks Category in the World Finance Banking Awards competition. This is the third award in a row for us, following the successes in 2018 and 2019. Our digital achievements were also highly esteemed by the prestigious World Finance Digital Banking Awards 2020 and we were awarded in the categories of Best Consumer Digital Banks, Bulgaria and Best Mobile Banking Apps, Bulgaria, which are important categories to us. In 2020, we also received the highest distinction of Bank of the Year, as well as the award in the Dynamic Development category of the annual bank awards of the Bank of the Year Association. All this leads us to believe we are moving fast enough and that our innovations are in the right direction.

What place do the Premium Banking centres have in the bank’s strategy for the future? 

Our Premium Banking specialist centres, which we opened at the beginning of the year for our highest segment of customers at the bank, are an extremely important part of our long-term strategy for complete renewal of our branch network. They combine high-tech design, luxury, a cosy, confidential environment and uncompromising service standards to create an exclusive customer experience. The conceptual solution of space in them develops the modern line of our existing digital high-tech offices. All the necessary details for satisfying the expectations of our clients are incorporated in the environment and fully reflect our vision for the future.

Does the innovative approach also have a place in the bank’s internal processes?

Of course. Remote access, phone- and videoconference calls became a part of the everyday home office model over the past year, and we had to find a way to keep the connection with the office alive and complete. We relied on innovations in communications with our team in order to manage our internal processes even more effectively. We are the first bank to implement and successfully use Digital Office – a mobile app for internal communication that literally brings the bank to the employee’s phone and, thanks to it, they can see all news, events and special offers in a matter of seconds, taking advantage of a new opportunity to remain connected. We were physically separated but remained together online. We also implemented one of the largest innovations in the sector, optimising 20 work processes in the Loan Administration Department, introducing Robotic Process Automation technologies, or the so-called software robots. Innovations are not the result of periodic or frequent efforts; they have to be a permanent process in the organisation. Even before the coronavirus, the need for innovations in the banking sector constantly grew. And today, creating an innovative DNA in a bank is related not only to promoting a culture of constant innovations, but also to the bank’s being able to continue operating in times of change.

Do you think it is more important to follow trends or to set them?

In our bank we have always strived to set trends, because we are not afraid of anything new or different. The skill of having an innovative attitude is of key importance for the success of any given company and I am happy that we have it. Thinking differently and creating your own innovation is a much greater advantage than having some technology or following the trends already set. The energy accumulated in 2020 can certainly be used to accelerate the banking sector’s development in numerous dimensions. The capability of managing these new processes through creating innovations that accelerate the overall process of change in banking and not following the already-set trends will set apart the institutions that will become more competitive in 2021 from the others. The world of banking was a fast-developing sector even before the pandemic, and its consequences made navigating in it even more challenging. Banks that manage to offer financial services in line with the way of life at the moment will be the successful ones. I am happy to work with a team of devoted experts who look boldly forward to new opportunities and create such for our clients.

Sustainability is very much at the forefront of business thinking these days, both in environmental and commercial terms. What does sustainability mean to you and how can it best be pursued?

Globally, consumers expect banks and financial institutions to work in a way that supports investments in the community, in social equality and ecological issues. If previously the list of expectations of customers toward their bank only included local branches, good interest rates on loans and excellent customer service, now the list is far more extensive and, other than providing an excellent digital experience, customers also find it very important for banks to demonstrate their commitment to sustainable banking, a socially responsible policy and corporate culture.

Those of us who have the attitude of sharing success and who rely on collaborating with consumers, employees, business partners and the community as a whole will create new development opportunities in a way that benefits all.

2021 will most probably be a turning point in sustainable lending, since central banks and regulatory authorities now acknowledge the severe macroeconomic consequences of unbounded climate change. We talk increasingly about green lending (green mortgages and deposits). We banks will support more companies with low, and fewer companies with high, ecological risk. An additional advantage in this aspect is the digital services with which we optimise resource use. Earlier this year, we offered our customers the unique-for-the-market metal credit card, Mastercard UNIVERSE – a product which is yet another important step in using less plastic in daily activities. Meanwhile, we will continue being active in the field of corporate social responsibility, because we believe that every business can find its personal cause and contribute to society by investing in and developing socially important projects. We recently started a project for creating a Green Outdoor Classroom, with which we joined the international climate-change-combatting initiative Priceless Planet. So in the long-term, banks cannot neglect green or sustainable practices.

What are your key approaches to ensuring stability and growth for the company? 

The main focus for us is developing the bank’s digital solutions as a part of our strategy to provide excellent customer experience for every consumer. Some of these include mobile banking, special digital zones for express banking, the EVA Postbank mobile app, offering connection to an expert from the bank in real time via the live chat function, as well as our revolutionary digital wallet. The success of the next generation of products and services will depend on our capability to improve customer experience with them. Those of us who have the attitude of sharing success and who rely on collaborating with consumers, employees, business partners and the community as a whole will create new development opportunities in a way that benefits all.

How do you know when you’re doing things right? 

We see it in our customers’ trust and our employees’ motivation as they continue offering different and innovative ideas for us to implement. Our customers expect us to be a better bank and that is the strategy we follow. Awards are also an indicator of our success. Postbank was awarded Bank of the Year precisely in the unusual and complicated 2020 and this is further evidence that we are moving in the right direction, as this success would not be possible without the efforts of our entire team. I am certain we will continue flying forward on the wings of success in the upcoming 30 years.

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Executive profile

Petia Dimitrova

Petia Dimitrova is Chief Executive Officer and Chairperson of the Management Board of Postbank. Her professional career within the organisation started in 2003 as Chief Financial Officer of the eight subsidiaries of Eurobank EFG Group in Bulgaria. She became Procurator of Postbank in 2005. Mrs Dimitrova was appointed Executive Director and Member of the Management Board of DZI Bank in 2007. Following the legal merger of DZI Bank and Postbank, she became Executive Director and Member of the Management Board of the merged bank. In 2012, Petia Dimitrova was appointed Chief Executive Officer and Chairperson of the Management Board of Postbank. In less than three years under her management, in record time, the financial institution implemented two successful deals, acquiring and integrating the Bulgarian branch of Alpha Bank first, and then Piraeus Bank Bulgaria. These were yet another step in strengthening Postbank’s position as a systemic bank on the market and enhancing its role as a trendsetter and a leader in innovation.

Five things that family businesses must do to survive hard times

family businesses

By Alfredo De Massis

The British royal family, like many family businesses, has had its share of difficulties lately. Prince Harry, previously viewed as one of the great modernising influences, has become more distant from the traditional business after marrying Meghan Markle.

Meanwhile, his father Prince Charles has been waiting many years to take over; his uncle, Prince Andrew, has been caught up in an international scandal; and to cap it all, the Queen recently lost her husband, Prince Philip, after 74 years of marriage.

The royal family may not be among the family businesses most obviously affected by the pandemic, but there are similarities when it comes to navigating difficult times. All family businesses, including the royal family, have to contend with the advantages and disadvantages of close family ties within the firm. Families can close ranks when times are hard, but it can be a struggle to oust executives with blood ties who are causing problems – or virtually impossible in the case of the Windsors.

On the other hand, family businesses are in theory better equipped to survive than most. They tend to be able to prioritise long-term goals because the owners usually intend to transfer the business to the next generation. This can be a problem if the heir is not as strong as whoever is on the “throne”, but at least short-termist investors are either non-existent or can usually be overruled.

In my co-authored research, we reflect on the the challenges to family firms triggered by the pandemic and its social and economic reverberations, drawing on our own knowledge of this field and inspired by informal conversations with some family businesses of a range of sizes during the pandemic. They trade in everything from olive oil to microwave-imaging devices to financial services to fine wines, and most are headquartered in Italy.

This has enabled us to argue for five challenges unique to family businesses across the world. These have been made worse by the pandemic, but can all be turned into opportunities. It is worth emphasising that the survival of these businesses is vital to us all – they contribute between half and 90% of the GDP of most countries, and employ the majority of people.

1. Succession

Family businesses tend to think of succession as a long process that needs to be methodically planned and executed, but it has been taking place rapidly and unexpectedly during the pandemic. At least 25% of those in charge have suddenly got sick or will leave their business earlier than expected due to the crisis.

As the family owner of a structural steel design business told me:

An increased sense of mortality after seeing the many victims of this pandemic is leading me to see succession as closer than ever and to suddenly think of it as something that is happening really quickly and in an unforeseen way.

Clearly, owners and managers need to be ready to manage such successions. In some cases, the current environment may force them to consider alternatives to a succession within the family, such as an external candidate, or selling or even closing the business. Even long-expected successions of the kind that will inevitably come to the British monarchy need to be handled carefully when the moment arrives.

2. Preserving the family feeling

We know from research that having family members working in the business engenders long-lasting personal relationships with employees, customers and suppliers. But these relationships have been disrupted by social distancing and people working from home during the pandemic.

These businesses must therefore redesign their working processes, reflecting deeply on how to preserve their distinctive social edge in a more digital environment that may be here to stay.

3. Traditions and history

It is often assumed that family businesses are forward-looking, focused on growing over generations. But the negative outlook and increasing uncertainty brought by the pandemic has led many to instead feel nostalgic for the “golden age of the past”.

Many are trying to leverage their family history and tradition, for example by emphasising longstanding values and past accomplishments to customers. They are also focusing on staying alive rather than pursuing growth.

Traditions and history
‘The footsoldiers are going to have to go.’ Prostock-studio/Shutterstock

Family businesses need to use their traditional values to orient themselves during times of uncertainty, while looking back on their history to learn how family members coped with past crises. Owners must focus on how best to do this for future competitive advantage.

4. Difficult trade-offs

Family businesses are typically motivated by more than financial wealth – in particular, the effects on family members often come into consideration. If the business is in trouble, the management is often reluctant to sack family members – a Harry and Meghan type situation might fester far longer than a falling-out between unrelated executives. Equally, the management can struggle to bring in outsiders to run the business for fear of undermining the succession plan.

Such decisions can be a huge challenge, often forcing a choice between family harmony and the future of the business. This involves trade-offs, and there will be more of these in the aftermath of the pandemic.

5. Preserving wealth

The owners of family businesses are often viewed as likely to make investments with little or no expectation of a quick return. Hence external advisers usually focus on management or governance and not financial viability.

Yet the pandemic is changing this. Families in business are focusing more on preserving their estate and wealth to survive the crisis, as I found recently when I spoke to a family business leader in financial services, for example. As a result, family offices, which are organisations usually set up by the owners of the firm to manage its assets, are becoming more important and will continue this transformation.

Rather than focusing on short-term concerns, family businesses need to address these five challenges to survive and thrive for the long term. In many cases, this will involve letting go of archaic views about running the business, and rethinking how it operates. How exactly that applies to Prince Charles – if and when it is finally his time to take over – is a discussion for another day.

The article was first uploaded in The Conversation

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About the Author

Alfredo De Massis

Alfredo De Massis is a Professor of Entrepreneurship & Family Business who serves as an advisor to family enterprises and policy makers. As one of the leading family business academics globally, Alfredo has founded and/or relaunched three international centers for family business research, was named by Family Capital among the world’s 25 star professors for family business in 2015, and has been recently ranked as the top most-productive scholar in the area of family business innovation in a recent bibliometric study published on the Review of Managerial Science.

Among various editorial roles, Alfredo is Editor of the influential journal Entrepreneurship Theory & Practice in the Financial Times rank of top 50 journals, is Associate Editor of Family Business Review, and serves on the boards of public and private organizations internationally, including in Italy, China, the US, Germany, and the UK. Alfredo’s research has been cited over 10,000 times, and has advanced understanding of how family business leaders balance economic and non-economic goals in strategic decision making, including complex digital transformation decisions undertaken by family enterprises and the way they manage the trade-offs between tradition and innovation.

The Future of Instagram Marketing: Generation Z Marketers and Influencers

When it comes to the topic of who best to promote your latest ethically manufactured clothing line or sustainably sourced farm goods, look no further than those born between 1997 to 2012.

Introduction

Long before the pandemic, there has already begun a subtle shift in society and agriculture at a speed never before seen. This is no small feat achieved by emerging technology as well as the growing environmentally-cautious population. This recent trans-generational shift has brought along with it more than just a demographic change.

In the past, it was the millennial age group that brought along transformative changes in the business and production sector. Following their footsteps almost instantly so, are their offsprings who make up most of Generation Z. 

Less than a decade since the last of this range was born, we are already seeing significant changes brought about in sectors such as marketing, entertainment, and politics, to name a few.

Generation Z, raised during the height of technological advancements and the inevitable value shift, have developed minds of their own in regards to the values they stand for and their exercise in free speech as encouraged by the internet. 

It is certainly worth noting that social media has become synonymous with such a technology-driven generation, and its accessibility has thus made it far easier for Gen Z consumers to stay in tune with the advancing world. 

Their willingness to listen to opinion leaders and ultimately follow their words have fashioned an entirely new subgenre of traditional promotion: influencer marketing. Social media agencies and mobile marketers have then strived to come up with a marketing strategy fine-tuned to the delicate needs of the growing generation to reach the influential voices of the enigmatic demographic group.

While software development companies like Humanz, Grin, and Upfluence have launched influencer marketing tools with multiple filters to connect businesses with influencers from all around the world. These companies and similar others continue to better off their platforms and introduce newer and simpler solutions. Humanz, for instance, enables its users to measure influencer marketing ROI of a given campaign right on its platform.

Influencer marketing

This brand of marketing especially resonates with “Gen Zers”, who have shown to be slightly more difficult to reach using traditional media channels such as good old-fashioned television or print media. They much prefer Netflix and digi-magazines. 

It is an astounding feat in itself to connect with younger consumers, because these certain figureheads have shown to demonstrate immense buying power through the simple mention of brands in their posts or the casual affiliate links tagged in their captions. 

Influencer marketing is expected to reach a whopping $15 billion in 2022, according to Business Insider Intelligence. Some established brands like Chobani, Verizon and Alaska Airlines have prioritized working with TikTok influencers as part of their recent marketing efforts, discarding traditional mediums.

Buying behaviour rooted in value

This certain age group, in comparison with its predecessors, have demonstrated time and time again their universal empathy for the social causes going around the world. Growing up in internet culture and normalizing influencer culture has made it possible for them to spend their money on brands that align with their moral ethics. 

Generation Z are not fickle with their money,  as they have shown to be more consumer-conscious and politically interested. They advocate for more brand transparency, authenticity, and honesty. Gen Zers have also proven they are unafraid to boycott companies over unethical business practices and false advertising, all at the drop of the hat and without preamble. 

Gen Z consumers are smart and informed of their purchases, and try as best as they can to be as ethical as possible in doing so. They also take extra care in managing their finances and pay close attention to accounting trends. This can be a delicate line to thread as a brand owner, because at any slight misstep, this generation is also not afraid to call on the power of the internet’s “cancel culture”. 

But once brands do manage to authentically empathize with a customer, they will find Gen Z consumers fiercely loyal in their advocacies. While Gen Z is quick to support brands that spotlight them as individuals, their altruistic and eco-conscious views shine through too. 

Connecting with this generation means, as a brand, you are willing to be transparent in your business proceedings and staff treatment, all the while voicing practical concern over the many issues plaguing society.

Social commerce

According to a recent study, 98% of Generation Z own a smartphone and average more than 4 hours a day on any given app. However, it has also shown that their platform usage habits have slightly changed. 

This generation has seemed to move beyond millennial-favoured e-commerce into one that has fashioned itself along with the booming demographic: social commerce. This is the practice of purchasing entirely through a social media platform, like Facebook’s Marketplace or Instagram’s in-house shopping column. 

This is another thing adapted by traditional marketers to cater to their changing needs. The platform’s algorithm learns a user’s preferences, and in turn, suggests relevant recommendations. It is also recommended that don’t buy followers from ViralRace, use a different service instead.

This personalized shopping experience reduces the friction between purchase desire and checkout, making the entire buying experience more engaging as platforms continuously innovate using in-app filters, augmented reality, or live streams.

Social commerce platforms for Gen Z include Instagram, TikTok and Pinterest, to name a few. As a brand, you should bear in mind providing these customers with as much of a seamless experience as possible. Minimizing distraction and developing strategies that will reel in Gen Z is a sure way to secure a sale.

Instagram swipe-ups that take you directly to the product have been around for quite some time. However, it is their built-in shopping tab, that has managed to make real waves in the direction of social commerce. This has made brand visibility more accessible, making product promotion easier to showcase to a larger audience.

Conclusion

More than changing the healthcare model to significant leaps, the pandemic has also brought radical changes in the way consumers across age groups purchase just about anything. 

The consumer patterns have been changing along with the shifting times, and no such catalyst can be better observed than Generation Z, whose evolving buying behaviour and purchasing decisions are as good as a textbook marketing blueprint for any modern-day marketer.

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Exploring The Cost of Dirty Data in Banking

Data

By Michelle Knight

Good people with good data continue to revolutionize banking, providing customers with better payment experiences. While trustworthy data promises better all-around banking transactions, the cost of dirty data, insufficient and inaccurate information remains a substantial threat, not only to the financial institution responsible for it, at a greater macroeconomic level.

The consequences of banking’s dirty data mean a loss of 15% to 25% of revenue, according to the MIT Sloan Management Review (MIT SMR). At a national level, dirty data has contributed to $112 billion of fraudulent mortgage loans in the United States between 2005 and 2007 and class action lawsuits in 2020. Due to dirty data problems, fiscal damages become easily overshadowed by consumers and banking loss of confidence in available financial data.

So, what is dirty data in banking? Where does it come from? Why do good people end up making poor decisions with dirty data in banking?

Dirty Data Comes to the Forefront

Dirty data, inadequate data that breaks financial processes, stands out prominently when another crisis occurs. A bank finds itself in the middle of an economic meltdown or a pandemic economy.

The institution assesses the damage. Good people take steps to remediate the issue, including getting in touch with their customers to inform them of their options, respond to their queries, and sort out their assets and debts.

Then these good bankers cannot communicate well with their customers because of the bad contact information or figure out how to advise customers because they lack confidence about what the customer owes. These headaches happen to duplicate, inconsistent, and incorrect information, dirty data spread through many bank systems.

Example of Dirty Data in Banking

The global financial meltdown in 2008 provides a striking example of the cost of dirty data in banking. Sub-prime mortgage investors could purchase a loan pool based on a lender’s Microsoft Excel spreadsheets. But the lack of standardization in creating, using, and testing this spreadsheet data-led good bankers to take on unacceptable risks.

Unaware of these dirty data banking problems, bankers used the information to sell and price loans, in addition to setting aside reserves for potential loss. In sampling a data set of 1,000 loans with 150 fields, TowerGroup found missing 5-10% of critical data used to analyze credit and price loans.

Good people used this bad banking data, made poor decisions, and exacerbated customer consequences from the financial meltdown. The impact of dirty data was so huge that the United States and European governments had to intervene.

The Origin of Dirty Data in Banking

The problems of dirty data stem from banks adapting to contextual shifts and technical advancements. Before the financial crisis of 2008, regulatory oversight and auditing became less stringent. Meanwhile, advances in information technology made it easier to track and communicate financial information through spreadsheets, email, and the internet.

Despite the evolution of financial services, banks continued to handle data quality policies and procedures, as they have done. Overlapping customer information existed and stored among different banking departments –the same person may have a checking account and a mortgage, interacting with different banking departments. Banks continued to manually enter and transform data, increasing the likelihood of dirty data in any banking system.

Meanwhile, data was created and used for the same customer entities, but their information did not match the systems – their name might appear one way in one system and another way in a different one. All these factors exacerbated the cost of dirty data in banking during the financial meltdown in 2008.

The Soiling of Clean Data

The combination of regulations to address the 2008 financial crisis and increasing competition with technology companies, and consumer demand for online banking services has led banks to clean up dirty data. Banks also invested in document collection automation, reducing the chances of data entry errors at the start.

While automating data entry increases the likelihood of getting cleaner data, this clean banking data will degrade over time due to some sort of business and customer activity change. For example, take the CARES act in the United States, which mandated banks grant forbearance on federally backed mortgage loans due to the economic effects.

One bank automatically put homeowners with good credit and making regular mortgage payments, in 2020, into forbearance based on online queries about bank services related to CARES. The customers never opted for a delay in their mortgage payments.

Consequences of dirtying previously clean mortgage data meant those homeowners could not pay their monthly mortgage and could not refinance the mortgage or take out another loan at another bank, as their credit report flagged them in forbearance. Also, the bank faced a class action lawsuit for turning good clean data into bad.

Dirty Data Becomes More Expensive with Subsequent Transactions

If the costs of dirty data in banking could be handled with the bad business transaction and not impact other subsequent needs or services, banking customers would be happier. Unfortunately, the dirty data, transformed from the clean data, continues to cause problems within other business processes. Mainly, banks find it hard to locate and correct dirty data or keep clean data clean when it passes through multiple disconnected systems.

As of March 2021, a Digital Banking Report found only 8% of banks had multiple systems connected to a unified database. Only 7% have a single system that did ‘everything.’ With standard customer data entry, usage, and reporting varying between departments, banks face significant challenges with available data.

For starters, a business unit may try to fix dirty data and later find that it still exists in another business transaction, as in the mortgage forbearance confusion described above. Good banks, lenders, and payment processors get stuck with the bad data, unable to correct it for the customer.

Costs of Dirty Data Is Too High

Without adequate data quality cleaning processes, and testing, the available banking data today risks problems as dirty data tomorrow. Like a mortgage financial meltdown or a pandemic, one major crisis uncovers dirty data in banking with the worst timing.

Good people end up with little trust in their banking data and little they can do to fix it in a crisis. Good data keeps the banking business, from end-to-end, flowing smoother.

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About The Author

Michelle Knight

Michelle Knight has a Master of Library and Information Science and software testing experience at two banks. She writes about data quality and management. Her works have been cited by multiple publications, including the  Corporate Compliance Insights, the CDA Institute, and AIMS, a division of the Food and Agriculture Organization of the United Nations (FAO).

Litigation Finance: What It Is and How It Works

Litigation

The world of litigation finance garnered massive media attention in 2016 when PayPal co-founder and Facebook investor Peter Thiel was revealed to have funded Terry Bollea’s, a.k.a. Hulk Hogan, a lawsuit against now-bankrupt Gawker Media. This added controversy towards the already questionable reputation of litigation funding and the professionals in this industry was appalled by the representation. This article will shed light on what litigation finance is, its pros and cons, how it works, and whether it is a tool for exploitation or support.

Litigation finance, which is appropriately called third-party funding, is the process of providing monetary aid for a plaintiff’s legal fees. This need arises when the claimant does not have the financial capacity to shoulder the costs of the legal action taken. It entails pre-settlement as well as post-settlement funding – where living expenses are covered while waiting for the recovery.

Oftentimes, claimants have irrefutable cases. However, due to delaying tactics and courtroom bullying, they may back out too soon or agree with very little settlement money. 

This is especially rampant in particular cases where the plaintiff suffers from medical issues. Further delay in treatment can cause more problems and so they tend to resolve the case prematurely. 

When a claimant submits their case to a litigation finance investor, the matter is reviewed and investigated. Once it is accepted, the funders usually charge a flat fee in exchange for their service and grant non-recourse cash advances where they will only receive their payment once the case has been won.

In some cases, the law firm takes the money directly from investors. When this takes place, the attorneys bill the plaintiff for a much lower cost. They also receive a portion of the awarded damages. It is handled by a Mass tort lawyer who can help seek financial compensation for all of whom a negligent party has harmed.

Origins of litigation funding

Back in medieval England, feudal lords, as well as other affluent individuals, used third-party funding for their political gains and personal squabbles. They encouraged and financially assisted legal action that was in opposition to their rivals and enemies. For this reason, litigation finance was prohibited for a long period.

It was only in the late 1900s that litigation finance was brought back. One of the earliest records of its decriminalization is in Great Britain. The establishment of the 1967 Criminal Law Act paved the way for the legalization of both Maintenance – third parties not included in a lawsuit and Champerty – Maintenance with the addition of monetary gains.

During the 1990s, Australia followed suit and classified Champerty and Maintenance as no longer crimes. In 1993, South Wales’ Maintenance, Champerty, and Barratry Abolition Act was also passed.

Currently, litigation funding has been decriminalized in Singapore, Hongkong, and the United States.

Consumer litigation

There are two kinds of litigation funding. The first one is consumer litigation and the other is commercial.

Consumer litigation, as its name suggests, is primarily focused on the rights of individual consumers. The funding for this ranges from $500 – $10,000, which is to a great extent lower compared to the second type of legal financing.

It involves violations of consumer rights such as false advertising, inaccurate service description on privacy policy and terms of use, misrepresentation via product packages, and misleading website statements.

It also includes protection from dubious dealings with merchants, debt collectors, and lenders who have undertaken fraudulent collection, rendered improper judgment, and accumulated debt payments that weren’t owed.

Another case that consumer litigation includes is personal injury, which is expansive in nature.

Medical malpractice is a common instance and it is where the clinician delivers negligent or improper treatment. This includes premature discharge, disregard for patient history, misdiagnosis or failure to diagnose, unneeded surgeries, low-quality aftercare, wrong dosage or medication, and surgical errors.

It also involves product liability wherein a person sustains wounds from merchandise that has no indication or label of being potentially hazardous. Examples involve lack of safeguard for machineries such as industrial equipment, snowblowers, and lawnmowers, poor designs for cookware, flawed medical devices that only lead to more injuries and even death, insufficient warnings for harmful materials, and inadequate instructions for storage and assembly that caused the injury.

Additionally, it covers premise lawsuits where the property owner is held responsible for physical harm and damages caused to an occupant and/or his or her belongings. Say, for example, delayed furnace repair that later caused small fires or a recent bathroom renovation that only led to slip and fall accidents.

One other typical case under personal injury is wrongful death due to another person’s irresponsible behavior. For instance, if a tutor suffers from a work-related incident such as an unsafe environment that brought about fires, explosions, etc., and was deceased, the plaintiff can demand compensation for the untimely passing of their family member.

Automotive vehicle mishaps such as a car accident and a motorcycle crash are also categorized under personal injury. In such occurrences, the claimants need police reports, insurance documentation, as well as medical records.

Furthermore, character assassination in the form of libel and defamation are also common instances that belong to personal injury. Claimants need to prove two things: that a false accusation was made and that it has resulted in financial problems.

In this day and age, one kind of defamation of character that is rampant is cybercrime which is perpetrated through the use of technology. Some people go the extra mile and visit the dark web just to seek out the services of hackers to dig up sensitive information with the intention of harming another person’s reputation.

This includes sensitive images of plaintiffs nude or in their lingerie, enjoying the company of a married individual, etc. 

Assault, threats, emotional distress, and even pranks are also types of personal injury. Aside from seeking redress, said cases also have an added criminal case aspect against the defendant.

And then there is also the case of cyber-physical attacks where a person gains access and control over pipeline valves, water pumps, transportation, and other systems and therefore causes damage to property or bodily injury to a person.

Commercial litigation

While consumer litigation involves particular persons, commercial litigation, on the other hand, pertains to lawsuits against businesses. This can be individuals filing a mass tort claim versus businesses or corporations at war with each other.

The funding for this can amount to millions of dollars. It can also become incredibly complex and disputes of this kind are known to be quite expensive. 

For many, it may even take years to resolve. Here are the common types of commercial litigation cases.

  • Class actions
  • Business torts
  • Civil RICO claims
  • Breach of contract
  • Shareholder disputes
  • Business dissolutions
  • Antitrust and trade actions
  • Breach of fiduciary duty allegations

Small businesses, mid-scale companies, enterprises, Fortune 500 companies, as well as major universities are assisted through this form of litigation finance.

The funding received can be used for business capital, personal expenses, and legal costs such as court fees, consultants, witness preparation, depositions, motions, trials, appeals, interrogatories, investigations, attorney fees, conferences, and research.

The majority of lawsuits filed under this type of litigation funding are patent infringement issues.  It was also reported that for single matter deals, there was an average of $4.5 million. 

Because of its potential for a higher return on investment, most funders prefer to support commercial litigation cases.

Benefits & drawbacks of litigation finance

Just like any other tool, litigation finance can be used for different, and sometimes deviant purposes. In this section, we’ll explore its strengths and weaknesses.

As shown in its definition, the purpose of litigation finance is to aid individuals and companies to acquire justice. Since the legal process can be time-consuming and costly, it is extremely beneficial to receive this form of assistance.

Claimants no longer need to drain their personal resources and self-finance their case. Similarly, businesses will avoid utilizing their own capital for legal fees and invest their money in day-to-day operations. This guarantees that the plaintiffs will not agree on low or unfair settlements.

The presence of legal funding in a case is also a warning for defendants who are looking to drag out the lawsuit just to drain the claimants’ resources. It also levels out the playing field if the plaintiff is going against a more affluent contender. This not only diminishes the possibility of intimidation but also relieves a great deal of stress from the claimant’s side.

Moreover, legal funding is also a better option compared to loans. While the latter is indifferent to the results, in litigation finance, if the plaintiff loses, they won’t have to pay the investors. Moreover, litigation companies do not conduct credit checks on their claimants. Needless to say, in the perspective of the funders, they engage in high-risk yet high reward ventures. 

The reality of litigation finance is that most investors will only lend a hand to those who have a recovery that is worthy enough, a good chance of winning, and a case that could be won at a decent period. If a claimant does not fit these prerequisites, there’s no guarantee that they will receive funding.

In terms of being worthiness, a ratio of 10:1 is what investors are looking for. The recovery that would be awarded to the plaintiff should be 10 times what the funders are putting in. Evidently, this amount may be too high to sue for. However, if the claimant refuses to aim for it, investors might not even bother.

The damages must also have tangible value, like lost wages. Meanwhile, if it’s leaning more to a speculative value such as possible profit from an establishment, it is less likely to receive funding from investors.

As for the amount of time spent on a case, funders’ preference goes to lawsuits that will only take months to settle. This is because they want a quick return on their investments. 

On a positive note, if a plaintiff does secure legal funding for his or her case, this means that he or she has a strong chance of winning. Litigation companies conduct their own due diligence and investigation to ensure they are making the right investment. Therefore, if they accept it, it only means that they are confident in the result of the lawsuit.

There are also some concerns of prolongation and increased complexity in cases. Given that the lawsuit no longer solely involves the claimant and the accused, investors interject and set out expectations, which some attorneys may not be comfortable with.

To solve this, the legal practitioner involved in the case must be informed early on or the plaintiff must specifically select a lawyer who agrees with this kind of arrangement. The attorney must also be well-respected and support this kind of setting.

Another possible issue is that more lawsuits are going to be filed because investors want to add to their portfolio. Some may even invest in losing cases that they can afford just to do this. Although this would mean that more people would receive help, it can also put needless strain on the judicial system.

The Bollea vs Gawker Media case has also reflected the fears of the legal system and other sectors. Antagonists of litigation finance argue that this was a real-life example of how funding can be used to silence the media, which is an exercised abuse of power.

How to receive litigation funding

The process of litigation funding has since been made convenient for individuals needing financial assistance for their lawsuits. Nowadays, they can get started through online forms embedded in websites and over-the-phone registration.

Subsequently, documents and other necessary information will also be requested from the plaintiff. A review will take place once all of the requirements have been submitted.

The investors will then get in touch with the claimant’s attorney to learn about the details of the case such as the estimated length of the lawsuit and the rate of success. And once these have been evaluated, an offer will be presented. The plaintiff has the option to receive monthly funds or to take a lump sum.

Documents containing the agreement of advance payment with an additional fee once the lawsuit has been won will also need to be signed. After this money will be given that can be utilized for rental fees, daily expenses, medical bills, and legal fees.

Litigation finance & media exposure

Despite its remarkable benefits for both plaintiffs and companies, litigation finance has been notoriously described as a threat to the legal system because of its potential for abuse. Notably, legal funding has also been shown in a good light in some instances that will be covered in this section.

Circling back to the subject of Hulk Hogan getting funded by tech billionaire Peter Thiel in 2016, legal funding was used to support a personal vendetta. The PayPal co-founder has long held a grudge towards Gawker Media.

It started with an article that publicly outed Thiel’s sexuality. Then, this was followed by a series of posts that were negatively focused on him as well. Peter Thiel has been very vocal about his dislike for this institution. He even compared them to a terrorist in one of his interviews.

He found an ally in wrestling star Terry Bollea whose sex tape and video of a racial slur was published on the gossip blog’s website. The dispute dragged on for four years and ended with a compensation of $110 million.

Meanwhile, in 2021 litigation finance helped curb years of injustice towards 39 sub-postmasters in England. They were absolved from being accused of false accounting. It was later found out that the issue was because of a faulty IT system, Horizon.

In this scenario, litigation finance helped acquit innocent former employees who were not only fired from their jobs but were disgraced and had to endure shame together with their families. There are still more open cases in relation to this event, a total of 550 including the ones who were exonerated, as of May 2021.

In this Post Office civil case, the sub-postmasters were able to keep and divide amongst themselves $16 million or £12 million. The settlement fee was a total of or $81 million or £58 million and the remaining amount was kept by the funder – Therium. 

The growing industry of lawsuit funding

Legal funding is mostly an unknown subject for most people. In the United States, it has only recently bloomed since its prevalence was mainly popular in the United Kingdom and Australia.

However, the New York Times reports that the pandemic will only scale this industry further. Due to the blown-up number of COVID-19 cases, it is anticipated that lawsuits filed will also skyrocket.

In the United States alone, The Westfleet Insider: 2020 Litigation Finance Market Report states that a total of $11.3 billion were granted for legal funding investments, specifically allocated for commercial litigation.

As a whole, the litigation funding market has an expected growth of $22,373 million by 2027.

In fact, many fresh businesses are looking to get into this craft. It was reported that in 2019, a startup litigation funding company was able to rack up $100 million from investors. The business was led by two Harvard dropouts.

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About the Author

Christian Cabaluna is a finance blogger at awesomex with 5+ years of first-hand experience. When he is not writing in her favorite coffee shop, Christian spends most of his time reading, cooking, watching sitcoms, visiting beaches, and catching beautiful sunsets.

Why the Financial Services Sector Will Need to Embrace ESG

After the 2020 global pandemic, ESG investing has slowly started taking over the financial landscape. Even those who claimed it was just a passing fad are no longer convinced — it seems that it’s here to stay, after all. Now, the pressure is on the financial services sector: will it have to accept the new state of things? To answer that question, we need to take a closer look at ESG and its importance.

What Is ESG?

If you’ve taken even a remote interest in finance, you’ve surely heard of the acronym ESG. In the last few years, everyone’s been talking about it and its impact on businesses and the economy. ESG advocates have become particularly vocal after the COVID-19 pandemic started, claiming that the only way to avoid future economic disasters is to embrace it.

So, what exactly is ESG, and why has it stirred up so many conversations? Well, in short, ESG stands for Environmental, Social, and Governance, and it encourages responsible, conscientious investing. In other words, this movement invites investors to reexamine the companies they are supporting and hold them to a higher standard.

Now, that may still be a little vague, so let us clarify. A company that follows ESG standards has to implement certain practices that support environmental protection, social justice movements, and ethical operations. It’s not enough for a business to claim it does care about these things — it’s the actions that count. And by investing in companies that hold themselves accountable, investors show an example to other businesses, too, thus promoting ESG.

Why the Time to Embrace ESG Has Come

Obviously, ESG is a great movement with a noble goal, but how come everyone’s talking about it now? The answer is simple — the world has never been more eager for change than now. With that in mind, let’s take a closer look at why ESG might be just that change we need.

COVID-19 Has Reshaped Our Economy

Looking back on the past few years, it’s easy to see a distinction between the time before COVID-19 and the time after it. The global pandemic of 2020 has entirely changed the world we live in, in many ways that we’re not yet fully aware of. But nothing has been quite as impacted as our global economy, as well as how we perceive it.

A few years ago, it was easy to view the economy as something separate, something that was related to other aspects of human existence, but only loosely. But now, after a time of great uncertainty and change, it’s become clear that only a healthy society can support a healthy economy, and vice versa. The relationship between the two is far more intricate than it may seem at first glance.

So, what if another global disaster happens? Will our economy survive it? That, of course, depends on how well we prepare for such a scenario. And embracing ESG practices seems like an excellent way to do just that. 

The idea is simple — if businesses work for the society and environment, global crises will be easier to get through or avert. At the same time, people will be able and more willing to spend money on their products and services. That way, we get a sustainable, resilient system in which different parts stick together and support each other. And such a system is bound to last longer!

Financial Sector Can No Longer Ignore ESG Demands

The financial services sector isn’t famous for its humanitarian and environmental concerns. If anything, its primary goal has always been profit, which shouldn’t be particularly surprising given its name. However, with the rise of ESG, it seems that only maximizing profit will no longer be acceptable. The world has spoken, and it wants sustainability and social equality.

A few years ago, the financial services sector could ignore the voices that demanded change. But now, that’s no longer possible — ESG has already rooted itself too deeply in the financial landscape. In fact, now it’s more profitable for this sector to show interest and care for environmental and social issues. And as ESG keeps spreading its influence, it will become virtually unavoidable.

So, like it or not, the financial sector needs to adjust to these new demands. After all, evidence shows that ESG isn’t just a passing fad — it’s here to stay.

ESG Isn’t Going Anywhere

Movements come and go, trends change all the time, and something that was popular yesterday might not be today. Even in a serious field such as economy and finance, fads do exist. So, could ESG be one too? Is it just a movement that will be around for a year or two and then disappear into oblivion?

Of course, no one can answer that with full certainty. However, even though the global pandemic exacerbated social and environmental issues ESG is trying to solve, they already existed before. And they certainly won’t disappear after the pandemic, either. So, it’s safe to say that we’ll need ESG for a long time.

But that doesn’t mean ESG won’t change or evolve into something different. Five years from now, its name might change, and its mission might expand to incorporate some new demands. That will still be ESG, though — but a new, improved version.

Thus, embracing ESG isn’t embracing a fad. It’s accepting a new era in economy and finance, which will hopefully bring about change.

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A good time for change: IT transformation and the digital revolution for financial services

James McNicol & Andrew Oliver

By James McNicol & Andrew Oliver, Managing Directors at ea Change

James McNicol and Andrew Oliver, new Managing Directors of business change & IT transformation solutions business ea Change, explain why they pursued a management buy-out in 2021.

Over the last year banks in the UK have had to deal with the pandemic on top of the various other challenges they were already facing; including Brexit, regulatory reform, low-interest rates, and high capital requirements. As with all new challenges, banks need strategy and delivery teams to support them in adapting, and this is where we come in.

COVID-19 provided a digital revolution. 

We have seen a particular uptake in automation, perhaps unsurprising given new working models, creating cost savings whilst also improving customers’ digital experiences. The use of automation tools has revolutionised the way businesses relate to their customers, with face-to-face interactions decreasing further. AI has also further provided the opportunity to tailor product targeting to match the needs of the customer.

The pandemic has also accelerated investment in automation, which allows for increased efficiency, greater capital returns and increased working capacity of the organisation, providing them with the tools to navigate the challenges of economic recovery. 

Remote working is here to stay.

Before the pandemic, the idea of remote working and remote jobs was around but not seen as a feasible option. However the pandemic changed that, with tens of millions of people transitioning to working from home, essentially overnight, in a wide range of industries. Unlike previous challenges, businesses have had to respond to the pandemic with a business and human approach. A mindset shift is expected to be part of the financial services sector in the long-term post-pandemic, as is evident in Nationwide Building Society advising that 13,000 office staff can work from home post-pandemic.

This also provides an opportunity to now source the best people with the right skills from anywhere and projects can be delivered across the country. Previous business and delivery models have been overhauled and a nimble approach is proving fruitful.

The post-pandemic era could also further elevate women in the workforce. When Jayne-Anne Gadhia published her 2016 review on women in financial services, she found they represented only 14% of executive committee members. Harriett Baldwin, (the Minister at the time of the 2016 report), remarked upon the Charter’s launch that too little had changed during her 30 years in banking. And, while attitudes are shifting, women still receive 28% less pay than men and account for only 17% of those approved by the FCA – generally speaking, the most senior people in financial services.

Although many businesses have previously created high-profile initiatives to get more women in senior roles, we see the pandemic as a real opportunity to readdress this imbalance and provide more opportunities to close the gender pay gap.

Companies will also have to make decisions about what the role of the office is and what the office brings to the organisation? What is the company culture in a post-pandemic world? Do you need to reskill your current employees to be able to work in a more agile way?

The pandemic has also highlighted employee wellbeing and created a growing expectation that companies need to support their employee’s emotional well-being. We see the nature of corporate culture evolving to be more focused on ensuring their employees are happy and healthy and investing more in mental health rather than just the skills employees provide.

Financial Services 

As the latest UK economic data shows the UK is bouncing back faster than anticipated because of the steps they took in the last lockdown, ensuring their companies are more resilient for this one. There are many positive signs, such as mortgage approvals remaining high despite the pandemic.

Another positive for the banks is they have managed to keep their capital buffers despite being encouraged by The Prudential Regulation Authority to use the buffers. Although this may change when the government scheme for lending ends and customers must start paying back the loans.

The pandemic has provided an opportunity to align the bank’s resources through restructuring and adapt and accelerate their pace of change, and with that we have provided the right people to support them in keeping their foot on the pedal at the accelerated pace. There is still a long way to go, Infrastructure and Operations leaders continue to face a variety of challenges, including operational continuity, core modernisation, and optimal infrastructure.

The pandemic has not only accelerated the pace of change but also driven a higher tolerance of risk, which will need to be evaluated and assessed whilst also delivering a seamless digital employee experience.

We also expect to see more transformation from regulators and regulatory uncertainty may require corporate adaptability to manage this complexity, as regulation may continue to shift for the next two years so a dynamic plan will be most effective in dealing with this. 

Now is the time for change 

This year is an opportunity to transform your thinking, so see this year as an opportunity, not a challenge. Throughout 2021, we see the marketplace continue to open back up and businesses should ensure they have the capacity and flexibility ready to meet these new opportunities. For example, we have been preparing to provide a mixture of Statement of Work, Permanent, and Interim, and are flexible in supporting our clients’ needs.

Now is also a fantastic time for businesses to begin looking toward the future, hiring the latest wave of promising recruits to bolster services and turn pandemic-inspired change into the new normal. We offer a program called ea Futures to the latest, brightest graduates from universities, employing them on a full-time basis. They become part of the ea family and get deployed on-site with a client for 12- or 24-month as a project analyst working for us and solving the zero headcount issues for the client.

We have also leveraged technology in the pandemic to support our clients with streamlining onboarding by implementing new technology solutions, which have reduced time to hire by 70%, showcasing both the skills of the candidate and their personality using video interviews and providing precious time back to our clients.

FinTech is booming and the traditional banking sector needs to keep pace. 

With their ability to adapt and the infrastructure to be a digital business, Fintech has excelled over the past year, with 2021 looking to be another record-breaking year in terms of investment and onboarding new customers. 

Although FinTech may have started as a prepaid card service with an app they have grown to be much more, with the likes of Monzo and Starling bank as prime examples. Banks need to review areas they can compete with the fintech’s and if they cannot compete for a variety of reasons, they need to ensure their traditional banking approach provides an exceptional customer experience. This can be achieved by creating agile business change streams that focus on reducing the legacy platforms and migrating the most essential functionality first to new platforms. This approach of decoupling and developing a continuous modernisation strategy provides the ability for the banks to become more agile, at the same time as keeping disruption and costs to a minimum. This process can also provide opportunities for the banks to create new partnerships with third parties, which can enable them to build better tailored digital customer journeys.  

Why a buy-out now?

Our approach was that, if we could survive the perfect storm and still be profitable after the three biggest things to impact our industry, what could we do in a good market?

The pandemic provided a unique opportunity to re-evaluate our systems, team, and processes and allowed us to make changes and enhance the business.

We were fortunate that this was a friendly process, and we were able to retain our founders Steve Robson and Jon Murphy as non-executive chairman and non-executive director, marrying the potential for new change with the experience that has seen us this far.

We have a great team and that is one of the biggest reasons for us to have confidence the business will continue to grow. Over the last couple of years, we have had the chance to shape and restructure the team, putting in processes that have accelerated the team’s ability to focus on the important things within the business. The team we have is hardworking, dedicated, and committed to making sure our clients’ and associates’ expectations are exceeded.

About ea Change 

We focus on business change and I.T. transformation. Clients come to us with a problem, and we provide a solution.

We offer a range of bespoke services including standard recruitment services – which could be permanent hire placements, executive search, or contractors in more short-term roles.

We manage larger statement of work, where we deploy teams and project manage those teams to ensure they do what is required to meet deliverables as set out by the client.

ea Change also provides Testing as a Service, where via a Statement of Work we run clients’ testing projects. 

We additionally offer a program called ea Futures where we get the brightest graduates from universities and employ them on a full-time basis with a client for 12- or 24-months. At the end, we offer the client the opportunity to take these highly trained young people on permanently, as a way of easily augmenting their in-house change management teams.

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Top 6 Methods To Make Cannabis Industry More Sustainable

The path to industrial growth is environmental sustainability. Not only can it help the business grow, but it might also positively impact the entire economy in the long run. One of the industries where sustainability has become imperative is the cannabis sector. Many natural resources are being used to satisfy the high need for sustainable quality-driven cannabis goods as the industry continues to grow exponentially. It is necessary to reduce the usage of natural resources to build a more sustainable and efficient cannabis industry.

Are you wondering how the cannabis industry can become more sustainable? Which eco-friendly practices are the manufacturers adopting? The legalization of weed has led many enthusiasts to scratch their heads over these questions. Read further to know more about ways to make the cannabis market more environment-friendly.

How to make the cannabis industry more sustainable?

Given global warming and the climate crisis that the earth is facing, it is becoming imperative for every industry globally to take action and adopt sustainability initiatives. This applies to the cannabis sector as well. Here are six different ways to make the industry more environmentally friendly and sustainable:

1. Using sustainable transportation:

Transportation relies on fossil energy and other commodities and poses a challenge to the long-term viability of cannabis businesses. Finding appropriate, cost-effective, and environmentally sustainable methods to transport cannabis can help reduce the environmental challenge many cannabis companies face.

One of the many approaches to make the cannabis sector more competitive is to focus on logistics. Energy-efficient automobiles that use fewer carbon fuels or electricity may contribute to reducing transportation’s environmental effects. Providing pharmacies with locally cultivated cannabis would also help to reduce the environmental impact. 

A majority of cannabis companies also are now offering quick delivery of their products. You can get any product such as zong bong at cheap rates within a short span of their time through the sustainable logistics process. 

2. Resorting to regenerative farming:

Regenerative agriculture is a systematic solution to cultivating all types of crops, especially cannabis. To create a more promising agricultural environment, many people adopt this method that boosts sustainability, nurtures ecosystems, strengthens watersheds, and enhances ecological services.

In the case of cannabis, regenerative breeding entails seed-to-seed planting, in which the grower is responsible for the whole life cycle of the crop. Regenerative cultivation benefits cannabis in multiple ways: it not only boosts the farm’s biodiversity but also reduces the need for possibly dangerous substances like manure and pesticides. 

3. Conserving water usage:

Unlike other plants, cannabis requires a massive quantity of water to grow. One plant uses up to six gallons of water a day. Cannabis farmers are looking for innovative ways to reduce their water consumption and save more water over time. Several manufacturers are also becoming imaginative and introducing new approaches such as reusing wastewater after one cycle of farm irrigation.

Closed-circuit desalination (CCD) and reverse osmosis (RO) technologies can recycle 75 percent to 97 percent of the water consumed in the growth process, enabling recycling and ensuring safe water can be used again.

4. Reducing energy consumption:

Along with water, cannabis plants also require a lot of energy. According to a survey, the average energy use of legal cannabis production in the United States is expected to be 1.1 million megawatt-hours (MWh), which is enough to fuel 92,500 households for a year.

Most of the electricity is utilized by in-house heating bulbs and lamps. Indoor grow lights are very powerful but also use a lot of energy. LED lighting is a perfect alternative for these heavy-duty lamps because it emits little heat, which means it uses less energy and needs less upkeep. Cannabis grown with LED technology has a more evenly distributed vaporization intensity, requiring less fertilizer. Most importantly, LED lights last longer and use 60-70 percent less energy than traditional indoor farming lights. To summarize, a marginally higher expenditure will result in a significant return – for both you and the environment.

5. Developing a better waste management system:

After the hemp plant is all utilized and cleared, there is always some residue left. In particular, the United States alone produces over 150 million tons of cannabis waste per year. Plant roots, leaves, cannabis wrapping products, and other items fall under this category. Companies such as GAIACA Waste Revitalization are trying to find a workaround by fertilizing cannabis plant residue directly.

Cannabis businesses must use better waste management processes, such as Compliant Weed Recycling Programs, to encourage a more healthy sector overall.

6. Using hemp residue in construction:

Hempcrete is a concrete-like substance created from the harvested cannabis crops. Rather than throwing away discarded cannabis plants, they may be utilized to make a super-durable architecture substance that might be the future of environmentally friendly constructions. Hempcrete is also “carbon negative,” which eliminates more carbon from the environment than it creates.

Some cannabis producers and manufacturers have started to move to more ecologically friendly techniques and lead by example.

In conclusion

The entire world is moving toward sustainability to protect the environment from further damage. To make a significant impact in the cannabis sector, the companies can adopt these six ways to increase sustainability. It will yield far better results than traditional exhaustive farming. As more and more people resort to sustainable agriculture, the cannabis industry will surely be greener in the future.

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Top 5 Industries to Invest in Right Now

Despite popular belief, 2020 turned out to be a pretty decent year for investors. It may not have been entirely smooth sailing, but the S&P 500 when up 16% in the previous 365-day calendar period. For the uninformed, that is an index that displays the stock market’s performance by posting the returns/risks of the 500 large-cap US companies. Investors use it as a meter to gauge the overall market. It dropped 30% in March of last year, but quickly rallied from these lows and slowly went up until December.

Now, financial experts are predicting another challenging year for investors, as the global pandemic will surely last throughout 2021. All forecasts are contingent on how global economies will bounce back from the ongoing crisis. Those in the know suggest focusing on long-haul investment strategies instead of gambling on what should happen in the short term. Most investors are also looking to take advantage of rebounding industries, like air travel and hospitality, and those surging on account of the pandemic, such as cloud computing.

Nevertheless, before buying any stocks, everyone should build up an emergency fund and be wary when betting on trends. Traditionally cyclical economic businesses remain the most stable investment options. However, with that in mind, here are five sectors that unquestionably are worth considering as we exit the pandemic.

Healthcare

Given what transpired in 2020, buying stocks of companies that operate in the healthcare sphere seems like a no-brainer. Particularly those that offer digital health products, which were nothing more than mere novelties before the events of 2020 occurred. The term digital health encompasses categories like telehealth, personalized medicine, wearable devices, and health information technology. Products in this category can range from mobile apps to digital tools that accurately diagnose diseases from home. When it comes to the latter, the FDA has provided approval from many such devices, and it is currently exploring the capabilities of others. According to a report published by Facts and Factors, the global digital health market should reach $220 billion by 2026.

Online Gambling

Betting on sports and games of chance over the internet has been around since the mid-1990s. While this industry has maintained an upwards trajectory, its expansion rate significantly swelled after the invention of the smartphone and once internet mobile use became widely adopted. Now, projections put this sector on course to bring $158 billion in annual revenues by 2028. One of the reasons this will likely happen is that governments are now loosening their stances regarding gambling regulation because they need new tax revenues. These moves have caused the top online casino platforms in the USA to grow substantially. Games like aktualne bonusy bez depozytu have been steadily growing the past few years.

Artificial Intelligence

AI-powered products have been the emerging industry of this past decade. This technology has already spread into business operations and society, and such a tendency will not stop soon as this sector continues to branch off into other industries. Self-driving cars are now a thing, with more than 1,400 of these sort of vehicles currently roaming US roads, and AI-assistants have become standard items in many homes. Despite last year’s economic downturn, 27% of AI investors reported that they increased their investments in this sector in 2020. Projections are now that the global artificial intelligence market should hit $266 billion by 2027.

Data Analytics

Data analytics software scours vast sets of raw information, searching for hidden patterns and correlations. Such technology analyzes massive data to produce answers that can improve companies’ business practices. The results attained from these algorithms can lead to more informed decision-making, cost reduction, tailoring services and goods based on customer feedback, and more. The global leaders in this field are IBM, Microsoft, Oracle, Tableau Software, Amazon Web Services, SiSense, Zoho Corp, Looker Data Sciences, Dell, and Mu Sigma. Per recent market research, this sphere will keep growing at an annual rate of 26% in the next six years.

Construction Equipment

Though not glamorous, the construction equipment industry has traditionally maintained, marking slow but steady growth throughout past decades. That should continue in this one due to governments commissioning massive stimulus plans, which will most certainly help this sector, particularly in countries like the US. Construction should massively pick up in 2021, with interest substantially rising for heavy construction equipment rentals. Even without this spike, this sphere is a safe bet for continuous growth. Estimates say that it should keep swelling at an annual pace of 4.7% until 2025. The stabilization of the Chinese and Indian markets is of massive interest to this industry, as they hold the largest potential for growth. You can also go now to check more about Shell Construction in South Florida. 

Final Thought

Investing is never a sure thing. Emerging markets are alluring but are also very volatile. It is of paramount importance that everyone does their research to ensure that the industry they are pouring money into has staying power. Established fields aren’t as exciting, but they contribute to more sleep at night.

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About the Author

Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OnlineUnitedStatesCasinos.com. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.

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