Is the next global financial crisis just around the corner? If so, will it be markedly different from the last crisis? And is there a possibility the contagion will come from today's emerging markets, such as China, Turkey or Argentina? While the future is uncertain and uncontrollable, you can take calculated steps as a business leader to prepare now for what may come later. Emerging Market Economies Are on the Rise The strength of emerging market economies was one of several top concerns for leaders in 2018, according to the Mercer Global Talent Trends study, and it continues to be a concern today. While Asia, Latin America and Africa steadily replace the North-Atlantic-centric economies as the world's engines of growth, the global economy is experiencing increasing impacts due to their growing strength. Ardavan Mobasheri, managing director and chief investment officer at ACIMA Private Wealth, believes the global leadership baton will have been completely passed to the faster-growing economies by 2030. He states, "By the end of the third decade of the century, the transition will likely be complete, with the anchors of global economic growth cast across the Pacific and the Southern Hemisphere." But as the world adjusts to the growing strength of emerging market economies, it must also adapt to those economies' inevitable speed bumps. "Speed Bumps" Are Starting to Form Globally Emerging market assets are now retreating in the face of increasing headwinds across their geographies, including production slowdown, rising debt, higher inflation rates and slides in currencies.1 "The contagion in emerging markets happens through different channels, and it tends to be greater in periods of monetary tightening in developed markets," Pablo Goldberg, a senior fixed-income strategist with BlackRock, tells CNBC.2 "Liquidity is an issue. Investors will sell what they can sell." Desmond Lachman, a resident fellow at the American Enterprise Institute and former deputy director for the International Monetary Fund's Policy Development and Review Department, writes that U.S. economists and policymakers are ignoring risks posed by emerging economies at their own peril. "They fail to see that years of massive Fed balance sheet expansion and zero interest rates created the easiest of borrowing conditions for the emerging markets," Lachman writes. "By so doing, they removed economic policy discipline from those economies and allowed large economic imbalances in those economies to develop, especially in their public finances." Now that more capital is flowing back into U.S. assets deemed safer than emerging market assets, the acute economic vulnerabilities built up within the emerging market economies during the years of "easy" money are being revealed. These vulnerabilities, if left unchecked, will likely continue to grow and spread globally, extending their implications even further into the years to come. Business Leaders Can Adapt — Here's How To best prepare for an uncertain financial future and avoid those vast repercussions, you'll want to first take notes on the aftermath of the last financial crisis — it can teach some strong lessons on how the global economy and financial system work. For example, according to the Mercer report, "10 Years After the Global Financial Crisis: 10 Lessons to Learn," one of the most important lessons from 2009 shows that U.S. policymakers' policies, record low policy interest rates, vast liquidity injected into the banking system and quantitative easing produced unexpected outcomes across the globe. While the monetary policies haven't been inflationary in terms of consumer prices, they have been inflationary in terms of asset prices. Now, policy rates are increasing in some economies, but the full consequences of the last crisis' aftermath on all of the world's economies are still unknown, even today. Keeping that in mind, you can take these three steps as a business leader to prepare for the next crisis: 1. Don't abandon diversification, widely known as "the only free lunch in investment." 2. Be dynamic, and be prepared to rotate out of assets currently at close-to-record highs if they become unfavorable once investors realize their valuations may not be based on strong fundamentals, such as underlying growth in profits. 3. Don't abandon active management, as conditions will inevitably change. Taking these three simple steps will allow you to stay nimble and flexible enough to adapt to any situation — even a financial crisis. As markets endure various metamorphoses, remember these lessons and keep these tips in mind to ready your organization for any crises to come. Sources: 1. Teso, Yumi and Oyamada, Aline, "Emerging Markets Retreat Amid Global Growth Concerns: EM Review," Bloomberg, February 15, 2019, https://www.bloomberg.com/news/articles/2019-02-15/emerging-market-rally-abate-as-trade-concern-returns-em-review./ 2. Osterland, Andrew, "Emerging markets, despite strengths, still get no respect," CNBC, October 1, 2018, https://www.cnbc.com/2018/10/01/emerging-markets-despite-strengths-still-get-no-respect.html. 3. Lachman, Desmond, "We ignore risks posed by emerging economies at our own peril," American Enterprise Institute, September 17, 2018, http://www.aei.org/publication/we-ignore-risks-posed-by-emerging-economies-at-our-own-peril/.
Migration in the business world has evolved into a complex, global exchange of human power and intellect among nations with distinct cultures and workforce needs. This ongoing balancing of human capital with economic needs continues to impact the geopolitics of the world. However, digital transformation and the Fourth Industrial Revolution are changing the role and value of migrant workforces in profound ways. From Muscles to Motherboards Machines and computers are increasingly able to perform jobs once held by low-skilled migrant workforces — with greater efficiency and lower costs, too. This worldwide development poses unprecedented challenges for migrant workers, nations and the global economy, as automation and tech continue to replace human labor in various industries, such as farming, automotives and manufacturing. A potential surge in unemployed workers with diminished earning prospects has many countries worried about widespread economic strife and political chaos. What, exactly, will the world look like when automation in the Fourth Industrial Revolution replaces the livelihoods of the 258 million international migrants who make a living by traveling to destinations that offer unskilled unemployment?1 The Promise of the Unknown Like previous industrial revolutions, the Fourth Industrial Revolution will mean different things to different people. Digital transformation has made it easy to access almost any information via the Internet, and it's given entire populations — especially migrant workers — new opportunities to receive an education and learn new skills, trades and professions. Countries once hindered by poverty and economic isolation are embracing these new opportunities. For example, India, which has a population of 1.3 billion, expects its digital transformation market to reach $710 billion by 2024.2 For migrant workers, upskilling and professional development is critical to job security. Many countries and governments have recognized the need to provide their citizens with the skills and knowledge needed to compete in the age of automation — and that starts with workers having access to these technologies to edify their value and marketability in a competitive world. However, in countries like Argentina, Brazil and the U.S., people feel strongly that their fates are up to themselves instead of their governments and that they are individually responsible for handling the sweeping changes of digital transformation.3 For some, this means migrating to nations and economies that offer better prospects than their current circumstances. A World of Evolving Needs As witnessed throughout history, migrant workers are drawn to regions where suitable jobs are available. In a world defined by automation and computer technologies, a new era of needs has emerged. In developed countries, such as Japan, South Korea, Spain, and the U.S., birth rates are declining at an extraordinary rate.4 Of particular concern in South Korea and Japan is societal aging, where the number of elderly people is increasing dramatically, while birth rates are declining — there's a lack of younger people who can care for the aging population and generate much-needed taxes through employment to fund retirement for older populations. Japan and South Korea are employing robots and automation to tend to the psychological, emotional and physical needs of elderly citizens, but these technologies are unable to provide the financial resources and domestic services these nations need to continue operating. Japan's Prime Minister, Shinzo Abe, has introduced extensive reforms, often referred to "Abenomics," which proposes to loosen long-held cultural constraints by integrating more women into the workplace at every level of influence. However, the most controversial aspect of Abenomics is the intention to open Japan up to migrant workers to alleviate internal workforce deficiencies that require uniquely human capacities — a move which many Japanese citizens consider to be a threat to their cultural identity.5 But without younger workers to stabilize the economy, Japan might not have a choice. The Fourth Industrial Revolution is changing the game, and many countries will need migrant workers to fill the gaps between the evolving roles of man and machine. For centuries, migrants have worked hard to fulfill their personal needs — which, in turn, also serves the needs of the employing countries that require their labor. In this modern economic landscape, automation and tech may force change upon job functions, but the need for human capital endures. Sources: 1. "International Migration Report," United Nations, 2017, https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/MigrationReport2017_Highlights.pdf。/ 2."India Digital Transformation Market to Reach $710 Billion by 2024: P&S Intelligence", Prescient & Strategic Intelligence, 5 de março de 2019. https://www.globenewswire.com/news-release/2019/03/05/1747720/0/en/India-Digital-Transformation-Market-to-Reach-710-Billion-by-2024-P-S-Intelligence.html。 3. Wike, Richard and Stokes, Bruce, "In Advanced and Emerging Economies Alike, Worries About Job Automation," Pew Research Center, September 13, 2018, https://www.pewglobal.org/2018/09/13/in-advanced-and-emerging-economies-alike-worries-about-job-automation/。 4. Kotecki, Peter, "10 Countries at Risk of Becoming Demographic Time Bombs," Business Insider, August 8, 2018, https://www.businessinsider.com/10-countries-at-risk-of-becoming-demographic-time-bombs-2018-8。 5. Yoshida, Reiji, "Success of 'Abenomics' hinges on immigration policy," https://www.japantimes.co.jp/news/2014/05/18/national/success-abenomics-hinges-immigration-policy/#.XJr1GK2ZOgR。
Musicians, poets and philosophers have spent entire lifetimes asking the question, "Who am I?" In the not-so-distant future, the answer to that question may be stored in our personal blockchain profiles — digital "arks" that contain the details of every decision, action and purchase we've made since the day we were born. Say goodbye to your birth certificate, credit score, passport, professional resume and medical history, and say hello to the future of blockchain: your blockchain profile. Your unique answer to the question "Who are you?" will be a chronological, hyper-detailed, immutable record that says with unprecedented certainty, "This is who I am." Blockchain will not live inside our thoughts, emotions, dreams or nightmares. It will not capture the inner dialogues people reveal in personal diaries or while talking to the bathroom mirror in the morning. Blockchain will, however, never forget when you broke your arm at the age of five (climbing a bannister), how your heart rate spiked when you first met your spouse (you dropped your drink) or that you paid extra for rush delivery of a new pair of black shoes (your cousin's wedding). Blockchain may not be the "you" robed Greek philosophers had in mind, but it will be the "you" the rest of the world sees — ideally, with your permission. Know Your Rights in a Digital World Businesses want access to your decisions. Information detailing why you choose to vacation in Vietnam, eat mussels at your favorite Italian spot every Tuesday night or only use a medium-bristle toothbrush is valuable to companies that want to sell you — and people like you — airline tickets, fresh seafood and toothpaste. Every online decision you make and action you take is data that reveals part of your personality and thought processes. In recent years, businesses and policymakers have debated how much access companies should have to an individual's personal decisions — especially what they read, click on and buy online. While there are powerful forces seeking to retain control over the data individuals create when using online services, the winds are shifting, and regulatory momentum is beginning to favor the individual. In May 2018, the E.U. set forth the landmark General Data Privacy Regulation (GDPR) that firmly establishes basic legal rights regarding data privacy, ownership, control, consent and portability for all of its citizens, regardless of where they live.1 In the U.S., the HIPPA Privacy Rule establishes national standards to protect individuals' medical records and other personal health information.2 These regulations are in place to protect citizens from organizations who may seek to use personal data for purposes other than what it was collected for, or for which consent has been explicitly given — and provide instruments to exact considerable penalties on entities that violate those laws. In an era of digital transformation, it is critical that people appreciate the value of their personal data and the extent of their rights to privacy. For Sale: Sleeping Habits and Exercise Routines Personal data is now part of the supply-and-demand dynamics driving capitalistic enterprises. Consumers not only possess purchasing power but also access to the thoughts and activities that precede particular purchases. This information is invaluable to companies that use data-driven strategies to sell their products and services to targeted consumers. Before blockchain technology, it wasn't possible to have a comprehensive record that kept track of an individual's purchases and behaviors within the context of everything else happening in their lives. But now, it is possible. Today, blockchain makes it possible for people to have an immutable profile of unimaginable detail, one that begins on the day they're born and develops throughout their entire lives — recording everything from when they lost their first tooth to the names of their grandchildren. Every doctor visit, every homework question, every mouse click, every page view. Businesses, naturally, will develop innumerable ways to incentivize people to allow access to their data. With individual rights established as the legal default, consumers will hold the power in this relationship and can monetize their data by renting access to various aspects of their blockchain profiles — from their sleeping habits to exercise routines. As deeper access is granted and more data sources are connected, behaviors can be predicted with greater accuracy, increasing the value of an individual's profile. In effect, individuals will be able to self-identify as willing marketing targets who offer their comprehensive descriptive profiles for sale in an emerging digital marketplace for personal data — a development that will radically alter the business of advertising, data research and analytics. A World of 8.5 Billion "Personhoods" In 2030, the global population is expected to reach 8.5 billion. By that time, blockchains could consistently, reliably and securely organize data around the individuals who comprise the world's communities and nations. This makes person-centric societies technically possible, where citizens' actions and behaviors are digitally recorded in their "personhood" — an immutable record that serves as a single source of truth to their experiences and sensibilities. People, in essence, will regularly create real-time data that is chronologically added to their collective profile — which includes health records, educational backgrounds, professional credentials, voter registrations, driver's licenses, criminal histories, financial status and any other notable aspect of being a person. "Personhood" could become the universally accepted record to which all identity-related information can be tied. All the processes once needed to validate identity will be replaced by an individual's comprehensive blockchain profile. The commoditization of personal data will profoundly impact how people relate to businesses and each other. Will being held accountable to one's own "personhood" — and knowing that the details of our lives will forever be recorded in our blockchain profile — change how we behave? Will attempting to increase the value of one's "personhood" become an extension of trying to improve their own lives? Or vice versa? The rise of "personhood" could change our collective understanding of ownership in ways the human race hasn't witnessed since the concept of personal property rights first emerged. The Future Challenges to a Blockchain World There are always casualties to sweeping technological advancements. With the proliferation of blockchain technology and the rising value of individuals' data, societies risk becoming even more polarized along financial and class lines. Individuals with more purchasing power inherently possess data that is more valuable to businesses that sell products and services or governmental institutions that could benefit from their financial support or influence. Those without money or access to modern technologies will face profound disadvantages unless governments — especially those in growth economies — implement regulations that protect vulnerable citizens from being left behind. Growth economies must also find ways to integrate intermediaries who will fight the prospect of obsolescence as blockchain technologies become more popular. Though the future is difficult to predict, and change always creates challenges, history teaches us that where value is created, technology eventually wins. The future of blockchain presents the human race with the opportunity to understand each other, and ourselves, in unprecedented ways. By providing new insights into human behaviors, relationships and business interactions, we can learn from each other and improve conditions for everyone. Perhaps blockchain data will even convincingly demonstrate to humanity how similar we all are. In the future, the most important questions people can ask themselves is not, "Who am I as a person?" but, "Who are we as a society?" The answer to that question may create the type of civilization only dreamed of by musicians, poets and philosophers. Interested in learning more about blockchain? Check out: Mercer Digital's Blockchain 101 Overview. 1Palmer, Danny. "What Is GDPR? Everything You Need to Know About the New General Data Protection Regulations." ZDNet, https://www.zdnet.com/article/gdpr-an-executive-guide-to-what-you-need-to-know/. 2"The HIPAA Privacy Rule." Office for Civil Rights, https://www.hhs.gov/hipaa/for-professionals/privacy/index.html.
Vincenzo Peruggia was born on 8 October, 1881. Some thirty years later on a Monday morning in 1911, the diminutive 160-cm Italian man strapped on a white smock—to blend in with the other employees at the Louvre in Paris—and walked out carrying the Mona Lisa. He simply lifted it off the wall. For the next two years Leonardo Da Vinci’s iconic masterpiece lay stuffed in a trunk in the thief’s Paris apartment. Vincenzo eventually grew anxious and returned to Florence in his beloved homeland where he contacted an art dealer and attempted to peddle the famous painting. The police arrested him in his hotel room. What makes this story fascinating is not that it was so shockingly easy to walk away with a world renowned Renaissance-era treasure, but that Vincenzo’s crime was doomed from the very beginning. Everyone in the art world knew the origins of the Mona Lisa, the value of the Mona Lisa and the journey of the Mona Lisa to her home in the Louvre. The painting’s entire provenance was well documented and agreed upon. Introducing the stolen masterpiece back into the art world without setting off alarms everywhere was impossible. Blockchain technology offers that same level of transparency and authenticity for everything from a Persian tapestry and a toro sushi roll to a refinanced mortgage loan, or even a single lemon. Here’s how: Mutually Agreed Upon Single Source of Truth The first step to documenting data on a blockchain requires operational processes that focus on first-time accuracy. From the initial step, all parties involved in a transaction must confirm the identity, value and controlling stipulations that regulate the blockchain asset. In our story featuring Vincenzo Peruggia, for instance: This is Da Vinci’s painting, the Mona Lisa. She hangs on this particular wall in the Louvre. She is worth $800 million. No, she is not for sale. The value and circumstances have been established. If anyone attempts to steal or tamper with the Mona Lisa, the involved parties—the world, in this case—will notice. With blockchain, once the mutually agreed upon initial information is captured accurately, it becomes the single source of truth. It never needs to be verified. Once the integrity of the data related to the information asset has been established, blockchain technology prevents any nefarious actors from being able to manipulate it because everyone in the blockchain is looking at the same information, at the same time, from their respective computers, distributed throughout the world. Everyone is privy to the original confirmed and verified asset and what happens to that data moving forward. Attempting to exploit or plunder that digital asset would be like trying to steal the Mona Lisa from countless, well-protected Louvres all over the world. Intermediaries Are Not Needed Blockchain technology eliminates the need for an intermediary, or middle man. Intermediaries are commonly tasked with providing integrity to transactional processes involving parties that are not familiar with each other. Banks serve as intermediaries for financial transactions between individuals and businesses. Real estate agents act as intermediaries to navigate the paperwork of real estate sales. Even illegal intermediaries, such as illicit music downloading platforms, steal significant amounts of royalties from musicians who have their songs stolen or plagiarized online. Blockchain can eliminate the necessity and impact of all of these types of intermediaries. Take Eriko Matsuyama, a hypothetical 23-year-old art student at Tohoku University in Japan, who is attending a study abroad program in Paris. Eriko, a talented painter, spends every morning camped in front of the Mona Lisa composing elaborate watercolors, each offering a unique interpretation of Da Vinci’s muse. She even has an online store where she sells her original paintings to her fans around the world. Through blockchain technology Eriko is able to authenticate the time, date and development of each original painting, and send both the original watercolor and an exclusive digital copy to her purchasers. Should the purchaser decide to sell either the original print or the digital copy, the blockchain can serve as proof of authenticity. Perhaps, 30 years in the future, Eriko has become a famous artist whose work commands millions of dollars. Those same watercolors, and their digital copies, will hold more value because the blockchain guarantees their origin and authenticity throughout the years, regardless of how many times they’ve been bought or sold…without ever needing an intermediary to verify authenticity or assist in the process. Data Becomes Like a Physical Object The Mona Lisa is, of course, a physical object. So are Eriko’s original watercolors, which she signs by hand; but the digital copies of her paintings are digital assets. Today, digital assets can be anything from an individual’s health records to the deed for a parcel of land. Blockchain makes it possible for a data asset to exist in the digital world just like a physical object does in the real world. The data asset can exist as just one usable copy of a data file. With a blockchain there is always only one usable and protected copy—just like the unique digital rendering of an original Eriko Matsuyama painting. It can be bought and sold, but never manipulated, illegally copied or misappropriated. In the span of 30 years, the digital copy of an Eriko Matsuyama watercolor migh be bought and sold a dozen times to individuals or businesses who may want it to print it for everything from T-shirts to wallpaper. But only one digital copy will ever, and always, exist. Supply and demand determines the price of any product or service. If the quantity of a digital asset is limited, then that asset is considered scarce—and supply and demand dynamics come into play, just as in the physical world. This desirability by the market creates quantifiable value that can be applied to everything from an individual asset to a cryptocurrency. Technology is constantly driving the world forward. In the future, the digital realm will be characterized by a matrix of digital trade routes of all sizes—each protected by the blockchain, free of piracy and disinformation. If blockchain and modern technologies had been around in 1911, the Mona Lisa would have been reclaimed in less than two hours, instead of two years. Today, the iconic face of the Rennaisance has even more reasons to smile. To learn more about blockchain read Mercer Digital’s Blockchain 101 Overview.
The meteoric rise of cryptocurrencies such as Bitcoin thrust blockchain to the forefront of the daily news in late 2017, and its subsequent epic fall cast a new pall over a technology that was just beginning to overcome its early reputation as a perfect vehicle for swindlers, drug dealers and traffickers. While awareness of blockchain has increased markedly over the last few years, most organizations and people are still unable to grasp what this new technology will really mean to their businesses and lives. Today, blockchain technology is about where the Internet was in the early 1990s. It’s an exciting and important technology, but one that is still in its fledgling stage. The truth is, similar to how people were trying to figure out the Internet in the early 1990s, no one really knows exactly how it will revolutionize economies and cultures. But we do know—much like the Internet in the early 1990s—that blockchain is going to be a game changer. Blockchain: The Efficiency Revolution Blockchain will profoundly impact the intersection of business and individuals by unleashing a new era of connectivity and efficiency. Because blockchain is secure, streamlined and can be both transparent and anonymous simultaneously, the technology will revolutionize operational processes by eliminating costly intermediaries. Suppose, for example, a VP of engineering in Beijing, China is being relocated—along with his wife and two daughters—to a new long-term position based in Perth, Australia. Historically, just finding and securing housing across borders has involved an overwhelming amount of paperwork, people and processes. Local real estate protocols are fraught with legacy registry systems, sprawling bureaucratic channels and intermediaries including brokers, title agents, title attorneys, notaries, escrow agents, land registry officials and bankers in both countries. These processes are bloated, expensive and susceptible to fraud. The streamlined transparency and security provided by blockchain technology will eradicate many of those wasteful and vulnerable practices. Blockchain enhances efficiency not by collecting data, but by securely connecting data across a decentralized network of participating computers called nodes. Nodes store the blockchain’s data, follow the rules of the blockchain’s specific protocols and communicate with other nodes, which can be located anywhere. Each follows the same rules and maintains an identical copy of the network’s immutable data set. New information is added only when the nodes agree, and the change is distributed simultaneously to each node. To alter it, would-be hackers would not have to simply hack one node, but all (or most) of the individually protected nodes distributed throughout the world. By ensuring the data is simultaneously tied together and yet independent, anonymous and secure, blockchain ensures the integrity of the data network. This allows all participating parties to know that the shared data is valid, and no intermediaries are needed to confirm that a home buyer has enough money, or if the house has water damage, or if the title deed has been signed, notarized and delivered. Blockchain In Growth Economies Blockchain is gaining traction and disrupting growth economies at an increasing rate. Not only is it being touted as a possible solution to endemic and institutionalized corruption, but it is also gaining acceptance in important industries, especially financial services, healthcare and government. Financial Services Blockchain first gained traction in growth economies as the technology behind Bitcoin, the first digital currency. However, experts soon recognized that blockchain’s transparency and security features could significantly change the financial services industry—much as the Internet changed the media and entertainment industries 20 years ago. Banking institutions across the globe are adopting blockchain and advanced distributed ledger technologies for a wide range of functions, including trade settlements, payment processing and cross-border transactions. In fact, India recently launched India Trade Connect, a trade finance strategy that uses blockchain platforms to empower an unprecedented collaboration between IT juggernaut InfoSys and seven of the nation’s biggest banks.1 Modern blockchain technologies allow these financial entities to streamline trade finance systems and oversee international supply chain transactions at every step of the operation. Healthcare The global healthcare industry manages vast amounts of clinical and administrative data, from the pharmaceutical supply chain to patient medical records to claims management. The introduction of smart medical devices including everything from personal fitness trackers to connected surgical suites, is introducing an entirely new ecosystem of information to mine. The pool of data collected from healthcare-related devices is growing exponentially. Accurate, accessible data is critical to improving clinical outcomes and reducing waste, and blockchain’s immutability and ability to connect currently siloed information and serve as the “single source of truth” are key enablers. In South Korea, the healthcare industry has been very proactive in implementing blockchain to centralize patient information and marginalize the prevalence of counterfeit drugs through transparent supply chain management. Blockchain records of patients’ medical histories provide Korean hospitals and caregivers with a single, accurate record of a patient’s treatments, procedures and pharmaceutical needs.2 Government Governments in growth economies around the world are using blockchains for everything from property records and voting registries to driver’s licenses and financial histories. Its ability to provide a chronological and immutable digital record makes it ideal for transactions that impact populations and economies—from single individuals to entire industries. Blockchain increasingly allows governments in Africa to better organize records and services through improved identity management systems—which legitimizes processes key to successful societies, from collecting taxes to counting votes.3 For many growing nations, blockchain may soon offer the potential to leapfrog from antiquated and bloated operational processes, fraught with malfeasance, to streamlined, incorruptible systems that attract international investment and encourage entrepreneurship. Blockchain is gaining rapid acceptance with businesses and policymakers in part because the continent doesn’t have deeply entrenched incumbents or legacy systems that might resist this new technology in an effort to maintain their influence. Blockchain: The Unknowns When the Internet gained acceptance in the early 1990s we knew that the ways human beings communicated and interacted with information was about to experience extraordinary changes. We didn’t know, however, that it would lead to the rise of other revolutionary forces such as Google, peer-to-peer file sharing platforms like Napster, ubiquitous smartphone devices such as the iPhone, or the invention of social media channels like Twitter, Instagram and Facebook. All cultural disruptors that continue to shape the world in significant ways, from unhealthy personal digital addictions to the influence of government-sponsored disinformation campaigns. Blockchain promises similar benefits and risks. The impact it will have on growth economies, international commerce and human culture cannot be fully assessed or appreciated at this point. But its potential is real and pervasive in every region of the world. Businesses, CEOs and governments should adopt strategies that don’t necessarily mandate a call to action, but a call to awareness—an earnest effort to gain a sophisticated understanding of the technology and how it can create positive changes, or negative consequences, in a world that is still figuring out how the Internet of the 1990s has transformed the human condition. To learn more about blockchain read Mercer Digital’s Blockchain 101 Overview. 1Infosys Finacle Pioneers Blockchain-based Trade Network in India in Consortium with Seven Leading Banks: Infosys Limited - https://www.infosys.com/newsroom/press-releases/Pages/pioneers-blockchain-based-trade-network.aspx 2Will Blockchain Transform Healthcare in South Korea: https://techwireasia.com/2018/06/will-blockchain-transform 3Why Africa’s Emerging Blockchain Movement Is Growing So: https://media.consensys.net/blockchain-month-in-africa-920945771100
Kenya’s vaunted Silicon Savannah continues to advance the prominence of e-commerce and online shopping throughout the continent of Africa. Online retailer Jumia, headquartered in Nairobi, grossed $597 million in 2017, expanding its reach from four countries to 14. Now, as Africa’s startup epicenter seeks to attract more international investors, tech-savvy entrepreneurs and local suppliers, it is catalyzing a profound shift in consumer behavior across Africa. Leapfrogging the Retail Divide Megacompanies like Amazon and Alibaba have changed the core of retail shopping in western and eastern markets, but the continent of Africa has yet to witness the ascendance of tech gurus like Jeff Bezos or Jack Ma. For Africa, that’s just fine. A new generation of young tech pioneers is driving digital transformation throughout the continent, and changing the way consumers not only purchase products, but organize their lives. For decades, markets in Africa have been incredibly challenging places to shop. Online shopping and digital banking, however, are enabling African retailers and consumers to leapfrog from shopping experiences defined by antiquated infrastructure, unreliable banking mechanisms and poor distribution processes, to streamlined e-commerce experiences. The impact of improved online connectivity (Kenya ranks among the world’s fastest internet speeds) and M-Pesa, the mobile banking platform that streamlines financial transactions and microfinancing, are leading a revolution in consumer expectations throughout Africa. This elevation of consumerism, will not be spread evenly throughout the continent. The Incomparable Future of Africa Investors are learning that digital transformation in Africa will not evolve in the same ways as in western and eastern cultures. Human intuition posits that economic priorities and trends in one area of the world can serve as precedence for other areas of the world. But this ilk of thinking is misguided with respect to the circumstances in Africa. The explosion of the middle class in places like China will not be reflective of increasing wages across Africa. Multinational corporations must be mindful that different cultures espouse different values, and those values guide how populations perceive, save and spend money. The African continent, and its 1.2. billion people, live in very different nations and cultures. Investors and financial prognosticators cannot approach Africa with the same strategies and expectations as they do other large populations, such as India’s 1.32 billion people or China’s 1.38 billion people. Africa’s spectrum of governments, cultures and economic scenarios span a vast array of unique obstacles and opportunities. Africa’s rising middle class isn’t as intent on purchasing products that symbolize societal status or seeking individual attention. Instead, Africa’s consumers are proving to be more conservative, and are reallocating extra income to savings or family networks in areas with less economic viability. Africa, Technology & Time One of the top-selling items on Jumia is disposable diapers, which provides a glimpse into how consumers in Africa are prioritizing their financial resources. The obsolescence of traditional cloth diapers for more expensive disposable diapers indicates that convenience and time management are leading drivers of purchases in an evolving continent. Though luxury items such as cosmetics have failed to gain traction, e-commerce is changing consumer behavior when it comes to providing the most valuable resource in anyone’s life: time. It all begins with access to the internet. Eighty-five percent of Kenya’s population is online. As the country’s hubs in Nairobi and Mombasa continue to attract innovative companies and ambitious entrepreneurs, the businesses arising from the Silicon Savannah such as Twiga—which connects local farmers to stores in more urban settings—are changing everything from supply chains and distribution to the transparency of operations. In fact, technologies such as blockchain could significantly reduce corruption throughout Africa, saving tech startup entrepreneurs time (not months, but years) navigating costly bureaucracies and political quagmires when establishing their businesses. Though the continent of Africa is full of rich and disparate cultures and countries, Kenya and the Silicon Savannah have proven to the international investment community that positive changes transcend borders and barriers. Kenya’s tech hubs are incubators for ideas and businesses that will transform not only Africa, but the world. After all, there was a moment when Amazon and Alibaba were small startups with big dreams. All they needed was a place to call home and time to grow. For African entrepreneurs that home is the Silicon Savannah… and the time is now. 1 Meet the Startup Building a Market From Scratch To Become Africa's Alibaba Matina Stevis-Gridneff https://www.wsj.com/articles/with-c-o-d-and-goat-promotions-jumia-aims-to-be-africas-alibaba-1527073200?mod=e2tw 2 Kenya's Mobile Internet Beats the United States For Speed Lily Kuo https://qz.com/1001477/kenya-has-faster-mobile-internet-speeds-than-the-united-states/ 3 3 Things Multinationals Don't Understand About Africa's Middle Class William Attwell https://hbr.org/2017/08/3-things-multinationals-dont-understand-about-africas-middle-class 4 Africa Internet Users, 2018 Population and Facebook Statistics https://www.internetworldstats.com/stats1.html
Cybercrime is not only rampant in South Africa, but could soon pose a significant threat to every economy, business, and person in the world. For example, the data breach at South African insurer, Liberty, in June this year, demonstrates how vulnerable companies are to cybercrimes. Liberty admitted hackers infiltrated its IT system and stole customer data. The hackers threatened to reveal the data if a ransom was not paid. In another breach targeting the government, 934,000 personal records were made public online. Cybercriminals focus their efforts on a common vulnerability found in security systems: people. In a report on cybercrime and cybersecurity trends in Africa, cybersecurity provider Symantec reported that one in every 214 emails sent in South Africa was a spear phishing attack, which is the fraudulent practice of sending emails purporting to be from a known or trusted sender. In South Africa, one in three cybercrime attacks sought access to businesses by deceiving people. The rise of flexible workforces is directly linked to the proliferation of cybercrimes. A new era of employees who use their own computers and devices for both their personal and professional lives has provided cybercriminals unprecedented opportunities to breach systems. A new era of Bring Your Own Device (BYOD) places businesses at risk as flexible workforces are not subject to the same security protocols as other employees, which means in some cases, those workers—and their technologies—can bypass firewalls, password protections, and other security measures. Simply opening up a nefarious email can provide hackers access to a company’s infrastructure. Many businesses have inadequate IT security policies in place, especially ones that account for human fallibility, and employees who view security measures as a barrier instead of an enabler for business. With employees at the heart of these vulnerabilities, HR professionals must play a greater role in combating cybercrimes by following these steps: Keep abreast of security policies HR professionals, in South Africa, should fully understand the Protection of Personal Information Act (PoPIA). This act legally requires local businesses to ensure that all client, supplier and employee information is stored, processed and destroyed in a manner that upholds the privacy and protection of personal data. This includes protecting sensitive employee data from falling into the wrong hands. Most markets have similar security policies and protocols. Regardless of where in the world you are based, it’s important to familiarize yourself with them. Address the potential risks posed by employees The 2017 IBM X-Force Threat Intelligence Index revealed that 60% of cyber-attacks are the result of internal activities. HR professionals must educate employees about the risks of cybercrimes and implement policies and procedures for employees who do not adhere to the rules. Define the rules when working from home The continued rise of the BYOD era is inevitable. The 2018 Mercer Global Talent Trends report noted that 82% of executives say that flexible workforces are essential to their core business operations. HR professionals need to ensure that the right policies are in place to enable this trend to evolve within a South African context. Employees should understand the need to keep their security software up to date at all times—including when working from home. Over the next five years, cybercrimes are projected to cost businesses US$8 trillion. Businesses that fail to address the severity and inevitability of cyber attacks are not fulfilling their professional—and now legal—obligations to their employees and customers. By embedding policies and rules to manage the era of BYOD and educating employees about the sophisticated tactics criminals use in the digital age, HR professionals can play an integral role in limiting exposure to risk and costly security breaches. 1 https://www.libertyholdings.co.za/investor/Documents/20180802-media-release.pdf 2 https://www.fin24.com/Companies/Financial-Services/liberty-falls-victim-to-hackers-20180617 3 https://www.troyhunt.com/questions-about-the-massive-south-african-master-deeds-data-breach-answered/ 4 https://www.symantec.com/content/dam/symantec/docs/reports/cyber-security-trends-report-africa-interactive-en.pdf 5 https://www.leadersinsecurity.org/component/phocadownload/category/11-2017-cybersecurity-publications.html?download=185:2017-cybersecurity-publications 6 https://www.mercer.com/our-thinking/career/global-talent-hr-trends.html
The sophistication and ability of cyber-criminals to successfully penetrate IT infrastructures is growing at a rapid pace. The Middle East’s financial institutions are increasingly being targeted and are not ready for the tidal wave of threats. There is cause for concern among Gulf Corporation Council (GCC) executives. Cybersecurity is critical. You’re either ready, or you’re not. The alarm has been sounding for quite some time. It is no longer a question of if your organization may be subject to the risks of cyber-threats, but when. The paradigm has shifted, and the harsh realities of cybersecurity are no longer an emerging risk, they have emerged and are a business imperative. Things are only heading in one direction and, left undiagnosed and untreated; the prognosis is alarming. The assets and wealth of financial institutions in the Gulf Corporation Council (GCC) have been identified as prime targets for cyber-criminals. While this is a global issue, the Middle East’s response to combat the threat lags behind the rest of the world. While asset managers in the GCC seek to grow assets under management, they are failing to attract assets from sophisticated and discerning institutional investors who have already woken to the seriousness of the cyber-threat. GCC institutional investors and investment managers need to protect themselves and their investors from the fallout of financial losses, confidential data compromise, unlimited reputational damage and disruption associated with successful cyber-attacks. The statistics are not comforting. In a recent Marsh & McLennan Companies and Firefly survey of European institutions, 23% of respondents acknowledged they had been a victim of a successful cyber-attack in the last 12 months. Nearly two-thirds of survey respondents said cyber-risk is among their organization's top five risk management priorities; only 45% of respondents said they formally estimate the financial impact of a potential cyber event as part of risk management. 2017 was the most damaging year for cybersecurity; Wanna Cry ransomware and NotPetya’s “wiper” malware permanently changed the global cyber-landscape. NotPetya is said to be responsible for US$1 billion in economic losses. If not sufficiently alarming, August 2017 saw the loss of 150 million consumer credit customers’ personal records and wiped US$5 billion off market cap. Whichever way you look at it, the prognosis is worrying. Cyber-incidents, once considered extraordinary, have rapidly become commonplace. The cost of cyber-crime to businesses over the next five years is expected to be US$8 trillion. In a world with 7.6 billion people, there were an estimated 8.4 billion internet-enabled devices in 2017. The figure is projected to grow to 20.4 billion by 2020. The world is experiencing the rise of cyber-dependency due to increasing digital interconnection of people, things and organizations. Greater cyber-dependency and the exponential rise in cyber-crime are inextricably linked. In response, the World Economic Forum’s Global Risks Report 2018 upgraded the risk of cyberattacks and data fraud or theft to top five risks by likelihood. In 2017, cyber was not even a standalone risk in The Global Risk landscape rankings. Ernst & Young suggest cyber-risk has evolved as a standalone critical risk category to be viewed not only as a technology issue but as a pervasive business and operational risk with the potential for significant impact on assets, revenues, reputation, confidentiality, and profitability. In an effort to bring greater investor and consumer protections, while increasing the cyber-standard expected of organizations, a new wave of sweeping regulation is emerging. The General Data Protection Regulation (“GDPR”) will be introduced in 2018 and imposes far-reaching obligations surrounding cyber-breach disclosure. Commentators suggest GDPR will “change the world as we know it” and, while GDPR is EU legislation, other leading global financial centres are rapidly adopting similar, sweeping cyber-laws. GDPR breaches and non-compliance are expected to result in billions of dollars of fines annually. Governments, regulators, supervisory boards, media, and consumers will scrutinize executives’ responses to newly disclosed cyber-incidents which have previously remained below the surface. Financial Institutions in the GCC should not wait for regional regulators to impose similar requirements. Consider these five steps to managing inevitable cyber-threats: 1. Embed C-Suite Accountability The stakes have changed for the C-Suite: cybersecurity has firmly taken its place on the corporate risk register and cyber-accountability rests with the Board. While the concepts of cybersecurity may be foreign for many executives and board members, protecting your organization against risk is not. Experienced executives understand their limitations and leverage resources to fill the gaps. Setting the tone from the top, Boards should implement formal data and cybersecurity policies with appropriate governance and cybersecurity awareness processes. 2. Understand the Threat Undertake an expert assessment to understand the scope of the threat and your organization’s vulnerabilities. Understand the volume and criticality of unpatched software vulnerabilities within your organization’s IT environment. 3. Implement the Change Strengthen your IT infrastructure by comprehensively tackling the vulnerabilities identified in the threat assessment. Further mitigate the risks of penetration by reducing your organization’s attack surface. 4. Educate your People The role of human error in successful cyber-attacks should not be underestimated. Human behaviour lies at the core of security strategy. Creative and ongoing employee cyber-awareness and training programs should be implemented. 5. Monitor your Infrastructure Establish a framework for continuous IT network monitoring, including responsibility for identifying and applying critical software patches, and escalation to the C-Suite. Re-assess the IT environment and emerging threats regularly to ensure ongoing appropriateness versus the changing landscape. Failure to take the reality of cyber-threats seriously is reckless. By embedding C-Suite accountability, understanding the threat, implementing the change, educating your people, and continually monitoring your IT infrastructure, you will be taking important measures towards mitigating the countless cybersecurity risks we all now face.
Although the economic story of the twenty-first century is still very young, its first two decades can arguably be summarized as a period of transition in global economic leadership. The North-Atlantic-centric economies that have dominated the global economic landscape for the better part of the past century and a half are handing the baton off to the faster-growing or “emerging” economies of Asia, Latin America and Africa. By the end of the third decade of the century, the transition will likely be complete, with the anchors of global economic growth cast across the Pacific and the Southern Hemisphere. With an ever-larger and increasingly educated middle class, particularly in Asia and Latin America, growth in consumption and business investment in these regions will not only lead the way as the engines of global economic activity but will contribute to a gradual transition toward higher-end consumer goods and business services, such as healthcare, insurance and investments. Transition in Global Economic Leadership Since 2008 and the peak of the financial crises, faster growing economies have dominated new economic activities globally. According to estimates from the World Bank, the global economy has added US$10.655 trillion to its GDP during this period, of which roughly US$8.28 trillion — or more than 77 percent — have come from the faster-growing economies. Since the beginning of the century, nearly 65 percent of all new activity has occurred in these economies, which, as of the end of 2015, represent slightly more than 42 percent of the global economy, up from almost 30 percent at the end of 2000 (see Chart 1). Chart 1: Share of Global GDP Economic recoveries post financial crises have, in general, proved to be weaker than other recoveries, impacting investments, employment and regulatory environments disproportionately. However, the outperformance of faster-growth economies over the North Atlantic-centric ones (where the financial crises originated) since 2008 has been largely due to significantly stronger fiscal balances, favorable demographics and a growing and consuming middle class increasingly confident about its future income prospects. Relatively stronger fiscal balances have permitted continued government investment in national and regional housing and transportation infrastructures (especially across Asia, Latin America and the Persian Gulf), contributing to the fast rate of urbanization. Investment in healthcare and educational infrastructures has continued to increase longevity, contributed toward productivity growth, and improved the relative competitiveness of the agriculture, manufacturing and even certain services sectors. Faster-growing economies are likely to see a slight downtick from their 2000–2015 average as Chinese growth converges to more sustainable levels. But with an average growth of 4.0 percent, we expect the faster-growing economies will surpass their North Atlantic-centric peers and complete the transition in global leadership by 2030 (see Chart 2). The Rising Middle Class The North-Atlantic-centric economies have benefited greatly from their consumers’ size and growth over the past half century. As the transition in global leadership progresses over the coming decades, the faster-growing economies of Asia and Latin America, in particular, will begin to experience this stabilizing economic force as their investment in the infrastructure of consumption begins to pay off. By 2025, 10 of the top 25 cities ranked by GDP will be located in the faster-growing economies. When measured by the number of individuals making more than US$20,000 per year (a figure that could be considered upper middle class even by the higher-cost standards of larger cities by 2025), 14 of the top 25 will likely be cities located in faster-growing economies (see Table 1). The historical experiences of the North Atlantic-centric economies teach us that, as urbanization evolves and the middle class begins to dominate the landscape of cities and economic activity, growth in demand for services such as healthcare, education, leisure and financial (that is, insurance and investments) accelerates. But the middle class of Asia, Latin America, the Middle East, Africa and even Eastern Europe will be a different middle class than in the North Atlantic. Cultural, educational, and religious traditions and qualities will need to play a significant role in “new” offerings, particularly in services. Success for many multinationals in this arena may very well be defined in terms of “innovation differentiation.” Chief among these differentiating factors are: • Investment, financial services and insurance for retirement: Retirees and savers in these countries will play a significant role in the transfer of capital to companies (as they have done in the advanced economies), but meeting their needs will require different innovations and product offerings. To be successful, companies will need to cater to the specific needs of the market instead of relying on the models of advanced economies. • Transition to a service economy: Although much of the infrastructure of the growing economies will still be pivoting off of their competitive advantage in manufacturing and agriculture over the coming years, a larger, better-educated and wealthier middle class will demand more and more services. Human capital plans designed around meeting the labor market needs of agriculture and manufacturing will thus be grossly inadequate. The new competitive advantage will be a workforce that is prepared for this transition to services. • The role of technology: Technology is not all about robotics and the assembly line replacing humans. Over the past three decades, the agricultural and manufacturing sectors have seen significant productivity gains in growth economies thanks to technology. However, investments in analytics, data gathering and management, e commerce/marketing, intelligence and security will be just as important in the years to come. Investing in the technology skills of human capital, including in the services sectors via education and training, will be key to earning a competitive advantage over companies in advanced economies. Today’s Challenges With tailwinds come headwinds that can disrupt and delay but not derail this transition story. The relatively anemic economic recoveries from the financial crises of 2008–09 have left most of the North Atlantic-centric economies reeling, with government deficits and ever-larger debt burdens, intensified by prerecession trends like the aging workforce and the decline of the manufacturing sector. The resulting rise of the voices of populism, protectionism and economic nationalism, as exemplified by the results of the Brexit referendum in the UK, elections in the US and constitutional referendum in Italy, are not likely to abate any time soon. The upcoming 2017 elections in the Netherlands, France and Germany will heavily test the staying power of the political movements that support globalization, regional economic unions and looser regulation of the cross-border movement of capital and labor. How policymakers in Asia, Latin America and elsewhere in the growing economies handle this challenge will be key to their own successes in not only avoiding trade wars but in how the transition in leadership is completed. Meeting the challenges of an ever-growing and consuming middle class in the growing economies — while simultaneously steering themselves through the challenges facing globalization in the coming decade or so — will need to be the priorities for multinationals desiring to be one step ahead of competitors. 1 Countries outside the European Union, Switzerland, Norway, Iceland, United States, Canada, Japan, Australia and New Zealand 2 World Bank 3 IMF Working Paper. Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten, 2013. 4 McKinsey Global Institute. Urban world: Cities and the rise of the consuming class, 2012.