Week in Review

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Week in Review

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Feburary 8, 2021

Myanmar Coup: What is happening and why? Myanmar hit headlines around the world last when its military seized control and the country's leader, Aung San Suu Kyi, and members of her party were detained. (BBC)

'It's a perfect storm': A shipping container crisis has upended the global food trade. Food is piling up in all the wrong places, thanks to carriers hauling empty shipping containers. (Financial Post)

Brussels, Beijing Ink Trade Deal. Strongly advocated by Germany, the agreement drew criticism from other European Union member states concerned with issues ranging from Beijing’s human rights record to cybersecurity and technology transfer. (Global Finance)

Britain to apply to join Asia-Pacific free trade bloc. Britain said it is to apply to join a massive 11-nation free-trade bloc of Asia-Pacific countries this week, not long after quitting the European Union’s single market. (EurActiv)

Britain’s economic outlook—Navigating Brexit. As news of the last-minute trade deal with the EU emerged, right-wing commentators in publications such as The Spectator embraced it with cautious optimism. Johnson’s administration will not be leaping into the dark, but the economic costs of the pandemic and Brexit, irrespective of the trade deal, will likely pave the way for a bleak decade. (Global Risk Insights)

U.K.’s Johnson threatens to suspend Northern Ireland Brexit deal. Boris Johnson threatened to suspend parts of the Brexit deal relating to Northern Ireland as a dispute escalated after the European Union’s threat to impose controls on the border in a spat over vaccine supply. (AJOT)

Thousands flee Hong Kong for UK, fearing China crackdown. Thousands of people from Hong Kong are fleeing their hometown since Beijing imposed a strict national security law on the territory last summer. (AP News)

China 'threatens war' with Philippines as US pledges support to Manila. Beijing has passed legislation calling upon its military-controlled coast guard to open fire upon "foreign" vessels and destroy "illegal" structures within the East and South China seas. (NZ Herald)

PayPal says to shut domestic payments business in India. PayPal Holdings Inc. will wind down its domestic payments business in India from April 1, the company said in a statement on Friday. (Reuters)

How long can the Biden administration stall a crisis in Taiwan? Taiwan has maintained its de facto independence and recent decades have brought a transition to democracy and rising prosperity. The U.S., meanwhile, has been able to maintain a valuable alliance while avoiding a military confrontation with another nuclear-armed superpower. The question is how long this unusual arrangement can last. (Slate)

The US is taking steps towards breaking China’s rare earths monopoly. Another rare earths company may soon be going public in the US, presenting new opportunities for private investment in the domestic critical metals industry—a sector that Washington has signaled strong interest in reviving. (Quartz)

U.S. ending support for Saudi-led offensive in Yemen. President Joe Biden announced Thursday the United States was ending support for a grinding five-year Saudi-led military offensive in Yemen that has deepened suffering in the Arabian Peninsula’s poorest country, calling the move part of restoring a U.S. emphasis on diplomacy, democracy and human rights. (AP News)

How to prepare now for your next crisis post-covid. As business leaders remain hyper-focused on navigating through the pandemic, few have sufficiently considered how to prepare for the next major crisis. There are many steps leaders can take. (Risk Management Monitor)

UAE threatens anti-money laundering crackdown as 11 banks fined. The UAE’s central bank has fined 11 banks a combined total of US$12.5mn for anti-money laundering (AML) failings, following warnings that the Middle Eastern state was looking to shed its reputation as a financial crime hotspot. (Global Trade Review)

 

 

New Articles

Credendo:

Euler Hermes:

Wells Fargo:

The Case for Zombie Companies

Chris Kuehl, Ph.D., NACM economist

No universal definition of zombie company exists. The term basically refers to a company kept alive by some form of government intervention. There are many reasons governments might support a business in this way, but the usual argument is that the business has been hammered by events beyond its control; and if supported for a while, it will recover and resume normal operations.

Some nations have supported these zombie operations for decades in order to protect jobs or for some national security reason. Right now, however, the chief motivation has been the recession and the artificial nature of this downturn. Many companies have been placed in jeopardy because they were forced to close or curtail their operations, and the expectation is that they will recover quickly once these restrictions are lifted.

What if these assumptions do not pan out? The purpose behind supporting these companies is essentially to allow the economy to resume its old patterns when the crisis is over. Now there are questions over whether that will ever be possible. Have the changes that have taken place already altered the business environment permanently and doomed these zombie companies?

There are four sectors that have borne the brunt of these changes and will be watched carefully as the lockdowns start to lift in earnest.

The most at-risk is likely retail. It was already showing distinct changes even before the pandemic. Many consumers have lost interest in the brick and mortar offering completely. Shopping malls are in distress, and there has been carnage in department stores as people flock to online alternatives. Stores have reacted in ways that seem to seal their fate as they reduce inventory and limit the number of employees. Why shop somewhere with no variety and nobody to help the customer?

Right behind retail is the restaurant business. Will people go back to eating out? It is more likely this sector survives in some way, but it may be a while before consumers resume old patterns. That will affect a business that is volatile under normal circumstances.

The third area to watch will be travel and tourism. This will place a variety of sectors at risk, including air travel, lodging and entertainment. Will people resume their old habits to the point these businesses can survive and prosper. These sectors cannot hold inventory. Once a flight takes off, it is too late to sell seats; and once the day is past, a hotel cannot book more rooms for that day. These are sectors that need a steady stream of consumers.

Finally, there are businesses that serve these sectors. What happens to the construction company that builds offices and retail outlets and restaurants? What happens to the manufacturer that makes airplanes and equipment used by the restaurants and hotels and resorts? They either adapt or they face extinction. How long are these companies going to be supported by the government? When will the decision to pull the plug be made?

 

 

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June 18
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Global Business Leaders Support ESG Convergence
by Committing to Stakeholder Capitalism Metrics

 

A growing coalition of 61 CEOs from some of the world’s largest firms announced their commitment to stakeholder capitalism metrics, a set of environmental, social and governance (ESG) metrics and disclosures released by the World Economic Forum and its International Business Council (IBC) in September 2020.

The metrics, drawn from existing voluntary standards, offer a core set of 21 universal, comparable disclosures focused on people, planet, prosperity and principles of governance that are considered most critical for business, society and the planet, and that companies can report on regardless of industry or region.

These leaders and their organizations have committed to:

  • Reflect the core metrics in their reporting to investors and other stakeholders by reporting on the metrics most relevant to their business or briefly explaining why a different approach is more appropriate.
  • Publicly support this work and encourage their business partners to do so.
  • Promote the further convergence of existing ESG standards, frameworks and principles to support progress toward a globally accepted solution for non-financial reporting on common ESG metrics.

In making these commitments, business leaders are signaling that ESG factors are increasingly critical to

The World Economic Forum, in collaboration with Bank of America, Deloitte, EY, KPMG and PwC, curated the set of 21 core and 34 expanded metrics over the past two years with the support of over 140 stakeholders.

The metrics include non-financial disclosures centered around the four pillars: people, planet, prosperity and principles of governance. Intentionally built on existing standards, the pillars include metrics such as greenhouse gas emissions, pay equality and board diversity, among others.

By adopting and reporting on these metrics and disclosures, the business community will continue to catalyse greater cooperation and alignment among existing standards and encourage progress on the development of a systemic, globally accepted set of common standards for reporting on sustainability performance.

 

Election Guide

Islamic Republic of Iran, President, June 18

Armenia, Armenian National Assembly, June 20

C-Suite Sees Route to Growth Through M&A and Investment

 

Company executives are looking toward mergers and acquisitions (M&A) as well as investment strategies to secure growth for their businesses post-pandemic, according to the 23rd edition of the EY Global Capital Confidence Barometer (CCB23).

Despite a collapse in M&A in the first half of 2020, deal making reached the highest transactions value on record in the second half of the year. Global M&A value reached US$2.32t in H2 2020 and transactions’ activity rebounded by 123% between H1 and H2.

Heightened M&A activity looks set to continue with nearly half of the business leaders planning to acquire assets in the next 12 months, beating the 11-year average, according to the CCB23. In addition, nearly two-thirds of the executives plan to acquire cross-border targets, as they look to enhance capabilities and products needed for growth. Financial services, telecommunications, technology, automotive and life sciences top the list of the most acquisitive sectors.

More than a quarter indicated they are looking to M&A to build resilience in their companies’ operations and navigate emerging concerns about tariffs and trade flows. In addition, a quarter are looking to acquire the technology, talent, new production capabilities or innovative startups to secure growth.

In the post-pandemic M&A landscape, the resilience of assets emerges as a key focus for many responding executives (19%), as does the target’s digital and technology strategy (18%); and whether or not acquirers stand to gain market share through consolidation (15%.)

Pressure for assets is expected to remain intense, with four-fifths of respondents (80%) anticipating greater competition of which more than two-thirds (67%) expect it to come from private capital.

The executives are focusing on markets outside their region. Europe has emerged as a focal point for most businesses, with the majority of respondents from North America, Asia-Pacific and the Middle East and Africa citing it as their organization’s main focus for M&A outside their region in the next 12 months.

Individual markets continue to present opportunities for dealmakers with Germany ranking as the primary destination for global deal making in 2021 for the first time. Ranked from second to fourth, the U.S., the U.K. and France continue to showcase strong foundations, while India at fifth re-enters the list of top five destinations for M&A for the first time in five years.

Looking at investment plans, mitigating the long-term impact of the pandemic-induced economic slowdown remains the biggest strategic priority for executives (22%). As a direct result of the pandemic, almost two thirds (63%) of respondents plan to increase investment in technology and digital capabilities, while 57% will boost investment in customer engagement.

 

 


FCIB Webinar - How to Reduce Supplier and Buyer Friction - February 9, 2021

 

 Week in Review Editorial Team:

Diana Mota, Associate Editor and David Anderson, Member Relations