Categories ArchivesNews and Analysis

Project Finance and Conflict Responsibility link

The importance of project finance in promoting infrastructure development in the developing world is well known. Without the billions of dollars of support generated for infrastructure projects using project finance, hundreds of millions of poor people in the developing world would not have access to basic needs such as electricity, clean water, and sewage treatment. Typical project financing involves the issuance of a non-recourse loan, wherein the sponsor has no obligation to make payments on the project loan if revenues generated by the project are insufficient to cover the principal and interest payments. Lenders seek to minimize the risks associated with making non-recourse loans by requiring indirect credit supports in the form of guarantees, warranties, and other covenants from the ...

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The Best Cybersecurity Investment You Can Make Is Better Training link

As the scale and complexity of the cyber threat landscape is revealed, so too is the general lack of cybersecurity readiness in organizations, even those that spend hundreds of millions of dollars on state-of-the-art technology. Investors who have flooded the cybersecurity market in search for the next software “unicorn” have yet to realize that when it comes to a risk as complex as this one, there is no panacea — certainly not one that depends on technology alone. Spending millions on security technology can certainly make an executive feel safe. But the major sources of cyber threats aren’t technological. They’re found in the human brain, in the form of curiosity, ignorance, apathy, and hubris. These human forms of malware can ...

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WannaCry on Cyber Monday link

As the scale of the WannaCry cyber-attack continues to astound security experts and law-enforcement officials, we need to realize that its unprecedented spread, spanning more than 150 countries, occurred over the weekend. Within hours of its initial discovery, which was originally concentrated in Europe, the ransom attack spread to more than 70 countries within 10 hours affecting some of the largest companies around the world, such as FedEx, Spain’s Telefónica, among many other systems in both the public and private sectors. What the WannaCry exploit underscores is the speed, and geographic spread that cyber threats can have giving them a quality more akin to systemic risk than traditional siloed threats. As the work week nears and with it the opening ...

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Data is not just a tool for growth – it is the growth link

Financial institutions recognize the importance of valuation of intangible assets, but few of them recognize just how valuable their data is, and how critical it can be to the success of the digital transformation process. A definition for what constitutes the “Enterprise Value of Data” — or EvD — has only recently been developed. But EvD has the potential to become a centerpiece of corporate value creation and business continuity. The failure to quantify EvD may not only rob a company of value, but may severely inhibit its ability to get the most out of the digital transformation process. EvD and digital transformation intersect in a number of ways. One example is the valuation of personal data through the eyes ...

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Micro-jurisdictional risk: One of AML’s missing links link

High level jurisdiction risk assessments alone are often too broad in scope to include in anti-money laundering policies; Micro-jurisdictional risk analysis could help allay model bias. Some aspects of AML policies and procedures are in need of an overhaul, to capture variables important to making accurate analysis Low risk jurisdictions have high-risk neighbourhoods and, conversely, not all customers and transactions from high-risk jurisdictions warrant heightened scrutiny Financial institutions should go beyond existing AML guidelines and apply a more granular risk-based approach to geography to stay ahead of upcoming best practices Financial institutions tend to build their anti-money laundering (AML) frameworks based on regulatory guidelines and commonly accepted industry standards. This can include jurisdiction risk, a common input banks use when ...

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Do I Have a Right to Be Uninsured? link

With the ongoing attempts to repeal the Affordable Care Act, one key argument against the ACA is that the mandate for all individuals to have health insurance coverage strips Americans of their right to make a personal decision. But is it only personal? Should individuals have the right to refuse coverage and go uninsured? On paper in a zero-sum world, the answer to this question is easy. If you want to take the risk of not having health insurance, who is to stop you? Presumably individuals can weigh the cost of having coverage against the chance of needing medical attention and determine if they wish to forego coverage. However, it’s not that simple. When others go without insurance, it not ...

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The World Needs a DARPA-Style Project to Prevent Pandemics link

When the Blizzard of ’78 hit the Northeast, it caught the region by surprise. Some meteorologists had predicted only a minor snowstorm, and forecasts were still unreliable enough that many people simply went about their regular business. When the hurricane-force storm hit, traffic came to a complete standstill due to the fast-accumulating snow – even the plows were stuck — and thousands of cars were abandoned. Not all the stranded people would survive. It took over a week – and help from the National Guard – to clear the roads again. Today, even as weather events have become more extreme due to climate change, we’re in many ways more prepared for them: scientists’ forecasting techniques have gotten better, and governors ...

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GM and Lessons in Surviving Tit for Tat Political Risk link

It stands to reason that rising populist sentiments combined with economic and social turmoil, particularly in single-cylinder economies, will give rise to economic nationalism. This tendency naturally coincides with a greater likelihood of traditional political risks, such as the recent expropriation of GM’s assets in Venezuela. This case, like many other examples of political risks to corporate assets, raises a series of important questions – ones likely to dominate board rooms and strategy planning for quite some time as we are firmly in a period of “tit for tat” economic reprisals. Looking at the GM case more closely, it follows all the hallmarks of classical political risks. At once aimed at sending a signal to an iconic American brand and ...

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Foreign Economic Nationalism link

Economic nationalism is upsetting the risk management landscape by presenting challenges in once stable environments. Economic nationalism not only has an impact domestically but presents significant risks for the global economy as well. Political risk research firm The Eurasia Group cites “independent America” as a top risk for global stability and warns that 2017 will see a “geopolitical recession” that marks “the most volatile political environment in the postwar period, at least as important to global markets as the economic recession of 2008.” Add to that the way other nations are turning inward and sealing their own borders in response to stalled economies, a surge in refugees or a shift in the way terror attacks are carried out by individuals, ...

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Cyber Security – The Next Systemic Crisis? link

In the summer of 2007, an unexpected threat was on the horizon for the U.S. and global economy. August 2007 marked an opening salvo in how systemic risk can affect the global economy. As the Brookings Institute so eloquently observed in “The Origins of The Financial Crisis,” the crisis “had its origins in an asset price bubble that interacted with new kinds of financial innovations that masked risk; with companies that failed to follow their own risk management procedures; and with regulators and supervisors that failed to restrain excessive risk taking.” Many of these very elements and correlations are inflating the growing cyber security bubble and many of the same “fox watching the chicken coop” tendencies are influencing this systemically ...

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