Addressing digital weaknesses to fuel growth opportunities

HLB's Survey of Business Leaders - Financial Services analysis


Key survey findings at a glance:

  • Confidence in global growth is lower for business leaders in financial services. Only 20% of leaders believe the rate of global economic growth is likely to increase over the next 12 months
  • Undertaking joint ventures a priority for financial service business leaders
  • Digital capabilities considered a weakness, but adopting emerging technologies considered an action for growth over the next 12 months

As lockdowns began across the world, many in the financial industry were able to complete services online. However, shutdowns of in-person banking posed difficulties for small or rural institutions. Generational differences in consumer technology use combined with less robust infrastructure left some firms scrambling to adopt contactless technologies. 

Continued restrictions led to revenue losses as business owners and consumers weren’t able to pay loans. The loss of trade and bond values and low interest rates affected profitability. Moreover, business owners began drawing on open credit lines, leaving financial institutions with less liquidity.

With interest rates expected to remain low, financial executives face a myriad of challenges in 2021. We assessed the confidence levels of executives with HLB’s Survey of Business Leaders. Then we pulled datasets for individual sectors, such as the financial services industry, where we looked at top growth priorities, potential vulnerabilities, and future outlooks.

Financial executives are less optimistic about international growth prospects than their global peers, and only 12% say they’re very confident in their own growth prospects. Yet, an emphasis on growth tactics while reducing risks can help institutions navigate the current environment. Below we break down sentiments among global financial services leaders. 


The economy: Uncertainty lowers confidence

Financial services are unique because business activity reflects what’s happening across all industries. Institutions with less client diversity ran into more challenges during the pandemic than firms with assets balanced across multiple sectors. 

Additionally, traditional financial services face stiff competition from fintech backed by a growing customer base of digital-first consumers. Today’s clients are comfortable using online financial services to crowdsource funds or access loans without partaking in the longer in-person banking process. Add in concerns about regulatory changes, potential rising tax rates, and rock bottom interest rates, and those in the financial sector have plenty to be concerned about. 

Globally, 23% of business leaders believe global economic growth will increase. But, only 20% of financial executives feel the same way. In comparison, 26% of technology professionals and 25% of manufacturing leaders expect global economic growth to increase. 

Like other business leaders, 87% of financial executives worry about economic uncertainty, and 78% express concerns over the impacts of COVID-19. The majority of financial leaders also acknowledge potential threats to growth, such as: 

  • 66% cite cybersecurity issues 
  • 65% mention tax risks
  • 63% refer to regulatory change
  • 62% specify social instability

The combination of security, regulations, taxes, COVID-19, and social instability can lead to less faith in growth prospects for individual institutions. Although 65% reported confidence in their own growth prospects over the next twelve months, this lags behind the global average of 75%. 

Growth priorities for financial services leaders

Financial leaders face the same concerns as global peers when it comes to prioritising growth tactics. Nearly all business sectors list improving operational efficiencies and reducing costs as key ways to grow this year. Compared to global leaders, 11% more financial services executives believe the adoption of emerging tech is critical to growth. Furthermore, financial professionals prioritise joint ventures and strategic alliances higher than their global peers, with 12% more making this a top priority.  

Even before the pandemic, leaders focused on mergers and partnerships to improve digital capabilities and expand technologies. But a shift to remote work and client behavioural changes meant institutions had to speed up digital transformations. Fintech firms, wealth management agencies, and the global payment sector rely on technology to provide secure client and employee tools. 

To achieve growth, leaders understand they must reduce costs and develop new efficiencies while connecting with partners who can contribute technologies or new customer bases to balance the costs of implementing emerging technologies. 

Analysing barriers to growth 

Since 55% of financial leaders say digital capabilities are a weakness and believe it’s essential to growth, most executives will concentrate on expanding their digital platforms. The use of technology will also help leaders address other noted vulnerabilities, such as cybersecurity and talent acquisitions. To achieve results, 24% of respondents want to see more innovation, and 29% will focus on operational effectiveness. Strengthening these weaknesses can help the 60% of leaders with their goal of operational efficiency. 

Also, digital capabilities differ by segment. The global payments industry takes the lead with contactless payment technologies supported by hefty fees for card-not-present (CNP) transactions. Wealth management companies look to increase access to big data analytics to generate client insights, track business performance, and deliver real-time investment advice. However, smaller institutions may prioritise consumer-facing technologies in rural areas where 5G roll-outs may influence banking decisions. 

Although many banks are already digital, handling the influx of big data and using it for business decisions is still a challenge. Smaller institutions will continue to look for ways to generate insights from existing data to select the right mix of products and services to increase client acquisitions and retention rates. 

It’s also important to look at the impact of potential regulations and tax increases. For example, the global payments industry saw rapid adoption of Europay, MasterCard, and Visa (EMV) technology during 2020. But many retailers are pushing back against exorbitant CNP fees. While the customer is paying in person, payment processors may charge the higher CNP fee. Increased pressure could result in regulatory changes, or business owners may seek out options with lower costs. 

Future success relies on digital capability improvements 

Like the majority of business leaders, cloud computing is a top priority for digital transformations. However, financial executives are less interested in the internet of things (IoT), virtual reality (VR), and augmented reality (AR) than global peers. Instead, financial services executives identified the following technological advancements as important to future business success: 

  • 37% artificial intelligence (AI)
  • 25% machine learning (ML)
  • 24% 5G technology
  • 23% blockchain

Blockchain, AI, and ML

AI and ML both serve prominent roles in the financial industry, so increasing these capabilities are vital. There’s a growing demand for simple online processes with growth in platforms that tout speed and contactless methods for securing funds, approving applications, and transferring money into accounts. AI and ML can automate much of the back-office processes reducing human errors and operational costs. 

In our global survey, only 10% of respondents consider blockchain essential to future business success, but a digital ledger of transactions presents many opportunities for financial leaders. While some worry about potential revenue losses, others aim to leverage the technology to improve existing systems and reach new markets. With support from prominent financial institutions, such as JP Morgan, Citigroup, PNC, and Wells Fargo, more organisations evaluate ways blockchain can enhance their digital assets. 

Moving forward, many of these technologies will become less of a perk and more of a necessity. As 5G rolls out, financial institutions can use AI, ML, and blockchain to: 

  • Enable cross-border payments in real-time 
  • Reduce transaction costs and the paperwork required to transfer funds internationally 
  • Comply with anti-money laundering and know your customer (KYC) regulations
  • Attract digital-first generations wanting convenience, transparency, and security

Accessing talent and increasing diversity 

With financial leaders listing talent acquisition as a weakness, finding new ways to attract and retain employees is essential. For many in the sector, a shift to remote work has helped break down barriers to talent acquisitions and opened the door to a vast pool of job candidates. Flexible work options allow leaders to source talent with the skills needed for planned technology advancements. In fact, 73% of financial leaders expect remote work to make it easier to source diverse talent compared to 65% of their global peers. 

Indeed, diverse talent is a must for financial services leaders, with 87% saying building diversity in the board and workforce is increasingly important and 84% saying that a more diverse and inclusive workforce will ultimately improve financial performance. Furthermore, 96% agree on the importance of ensuring equal support and opportunities, particularly in the current environment.

Greening of the financial services sector

88% of business leaders in financial services are making changes to their company to profit in the low-carbon economy versus 77% of global peers, making it clear that those in the industry are already feeling the impact of climate change. Since the Network for Greening the Financial System (NGFS) formation in 2017, more executives are tuned into how climate changes affect their organisations. 

According to the Morgan Stanley Institute for Sustainable Investing, “Between 2016 and 2018, climate change-related weather events caused more than $630 billion in economic damage worldwide.” Some of the effects already felt include defaults on loans in areas with extreme weather events, debtors impacted by environmental fines, or manufacturers in the plastic or water-heavy segments losing business from new regulations and water shortages. 

Going forward, leaders aim to take measures to protect asset values and create value through innovation, which may be why 24% of financial leaders want to focus on improving weaknesses with innovation. Moreover, 70% of financial services leaders are reassessing their supply chain to source closer to home. Each of these steps may help executives increase operational efficiency and prepare their institution for climate change disruptions. 

A new way of work

Staying connected and ensuring business continuity during disruption is vital. Industry leaders believe they can leverage remote work to attract top talent, but many don’t feel an entirely remote workforce is the best solution. Furthermore, 86% agree that social distancing and remote working make it challenging to deploy the value of human touch in their businesses.

The top issues with remote work include, 55% of respondents say remote work makes collaborative working harder, 42% believe it affects creativity, and 42% think it dampens empathy. However, similar to other global leaders, 89% of financial services executives say physical and mental wellbeing is a top priority for human resource departments. With this in mind, the hybrid model is a way to support wellbeing while offering the flexibility craved by top talent.  

Looking ahead with optimism 

Although financial leaders keep a close eye on global and internal growth capabilities, they don’t doubt their expertise to navigate challenges. 94%of business leaders based in this sector are confident in their ability to successfully steer the business in a new direction in response to the impact of COVID-19.

With the possibility of future tax hikes, new regulations, and an increased focus on climate risks, financial service experts have their hands full. Intense focus on growth opportunities while increasing digital capabilities will allow institutions to cater to digital-first generations, mitigate risks, and remove barriers.


Findings in this article are based on 93 survey responses from Financial Services business leaders collected in quarter 4 of 2020, as part of HLB’s Survey of Business Leaders 2021. The majority of businesses surveyed are privately or family owned. For the full research report see HLB’s Survey of Business Leaders 2021: Achieving the Post-Pandemic Vision: leaner, greener and keener. 

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Sustainability trending with business growth


Sustainability has built up momentum over the past several decades. What some people thought would be a buzzword came to be a new perspective and way of thinking. It now incorporates all industries and businesses. Building sustainability into the brand doesn’t only help the environment, but it also helps businesses that want to cultivate company longevity.

Environmental, social and governance (ESG) metrics and their impact

Typically, government bodies and interested investors look at a company’s ESG or Environmental, Social, and Governance metrics. These metrics help to demonstrate how far along a company has advanced with its sustainability measures. Each letter stands for a different metric as sustainability is no longer only focused on environmental concerns but also on how it impacts social and governance matters. Modern sustainability means promoting the health of the environment, the health of the local community, and bringing economic profit back into the sector.

Research done by McKinsey and Company promotes companies having a higher ESG rating as it has shown to mean a lower cost of equity and debt. These initiatives foster the health and wellness of the company’s community while still improving a business’s financial performance, meaning a win-win situation for everyone.

Improve brand image = improve the environment

It goes without saying that a company’s brand image pulls out your audience, allowing you to have more of a targeted reach to the people that will lead to conversion and profit. Using and promoting your sustainability initiatives to your customer base improves your brand image while simultaneously improving the environment and the communities the company works in. 

Attracts customers and new Talent

According to a survey done by IBM, almost six out of ten consumers are willing to alter their shopping habits to reduce the environmental impact of their purchases and almost eight out of ten indicated that sustainability is essential. Consumers might drive the change, but it is ultimately up to the company to make it, thereby attracting more of those willing to convert to more sustainably focused brands.

Improved financial performance

Ultimately, without increased financial performance, most companies wouldn’t be interested in promoting sustainable initiatives. As the interest and research around them have increased, promoting and sustaining these initiatives has become more affordable. Since these sustainable production methods or support have become more affordable, the benefits often outweigh the financial siphons.

Increased investment interest

Sustainable strategies are necessary to cultivate a competitive edge, as seen by 62% of company executives. That competition isn’t just for a consumer base but for investment interest. Sustainability isn’t going away, and many investors consider it the route of the future. Jumping on it now and implementing those ESG initiatives is an excellent way to attract more investment interest.

Building a successful company often involves keeping one eye on the present functions and another on future possibilities. Modern sustainable enterprises have been proven to lead to business growth in more ways than one. What is stopping you from going green?

Manosij Ganguli

Global Sustainability Advisory Leader


The effect of climate change on international agriculture


Climate change occurs as a direct result of global warming.  Here’s a quick refresher on the subject: as atmospheric CO2 levels increase, less radiation from the sun leaves the atmosphere. We feel this increase in radiation as heat. Differences in hot and cold air cause wind, which carries precipitation in the form of clouds. 

Historically, wind flowed in a distinct and consistent trajectory that allowed farmers and ranchers to more or less predict weather patterns season after season, and they could plan their cropping accordingly. For example, in certain regions, farmers knew when the first frost would usually occur, and were careful to harvest all of their crops before then for maximum yields.

But, with hotter air in the atmosphere, the wind moves in a way we’re not used to. Areas that used to get regular rainfall are now dry, and dry areas are now flooding. Frost dates are no longer predictable either. Agricultural businesses must think ahead and adapt to the threats of climate change instead of reacting to disasters after they occur.

Common ways climate change affects agriculture businesses

Climate change impacts food production by:

  • decreasing the average rainfall in an area, which leads to drought or water shortages;
  • increasing rainfall in an area, which leads to water-logged soil;
  • making the growing season hotter, which stunts the growth of numerous non-tropical crops and leads to fatal heat stress in livestock; and
  • causing crop failure due to increasingly common extreme weather events, such as wildfires, floods, and unseasonably cold weather.

Climate change also affects the presence of weeds, pests, and pathogens, as well as the ability of farmers and ranchers to tend to their crops or livestock. For example, land cannot be tilled if it’s underwater or water-logged. Many pesticide and herbicide products cannot be applied during extreme temperatures or strong winds. Animals are susceptible to heat stress and may perish before harvest. Mowing and curing hay has to occur during a stretch of sunny weather, or nutrients will leach from the hay and result in a difficult-to-digest forage. 

Examples of how climate change has affected international agriculture

As extreme weather events have become almost commonplace, the following examples of how climate change affects agriculture are no longer conjecture. Instead, they represent the reality facing agriculture businesses around the world:

  1. In the southwest region of the U.S., recurrent droughts have strained the local water supply and caused irrigation water to be rationed. With less water to support plant growth and development, the number of acres devoted to crops has decreased in this region. 
  2. A 2015 study evaluating data from Italian cattle farms found that cows older than 24 months were significantly more likely to die of heat stress than younger cows when exposed to temperatures of at least 90 degrees Fahrenheit for three consecutive days. Heat stress tolerance varies from species to species and breed to breed, with goats, sheep, and cattle breeds originating from the tropics proving to be more heat-tolerant in general. 
  3. Vineyards around the world have noticed a difference in wine quality, which researchers have traced back to rising temperatures that affect the grapes’ chemistry. Vineyards have also been impacted by rising sea levels reducing available land, as well as an increase in pests and insect-borne diseases due to warmer weather. 
  4. A rare winter storm hit Texas in February 2021. South Texans in particular had no infrastructure in place for freezing temperatures, as this area normally gets less than a third of an inch of snow per year. As a result, ranchers didn’t have items like heated water troughs or cold flow improver to keep their diesel tractors running. The storm also caused a disruption of power, which made it difficult to heat hatcheries and barns, resulting in animal death. 
  5. Extreme flooding in southern China in 2020 wiped out millions of acres of farmland reportedly the size of West Virginia. The disaster caused about $21 billion in damages. Because China is the world’s leading food producer, floods like this have the potential to cause serious food instability around the world.
  6. Australia experienced devastating bushfires between 2019 and 2020, which burned more than 2.45 million hectares of agricultural land. Climate change has been implicated in a 30% increased risk of bushfires: extreme heat and severe drought created the perfect conditions for fires to start and spread rapidly. 
  7. Unseasonably late snow in the UK in Spring 2018 caused the deaths of thousands of sheep. Dairy farmers were also forced to throw away vast quantities of Milk as a breakdown of logistics made it impossible to transport the product.

How agriculture businesses can adapt to climate change

Because climate change is an ongoing threat and not projected to reverse or slow down any time in the near future, agriculture businesses must mitigate the risks of climate change with contingency plans. Possible solutions include:

  • Choosing crop varieties that display a greater tolerance toward heat, drought, and/or intermittent flooding
  • Investing in irrigation infrastructure, even if droughts are not currently an issue
  • Adding organic matter to soil to increase water retention and reduce erosion
  • Transitioning from traditional agriculture to indoor hydroponic facilities
  • Generating power on-site with renewable resources to ensure all buildings remain climate-controlled despite mainline power outages
  • Diversiying plants grown and livestock raised just in case one variety is extra sensitive to extreme temperatures
  • Adopting farming methods and cultures from other regions of the world, for example the expansion of viniculture in the UK
  • Supporting investment in new Agritech and plant science
  • Investing in smaller farms and ranches spread across diverse regions and avoid large properties that could be wiped out with a single weather event
  • Transitioning to an agroforest model to use less land more efficiently
  • Developing emergency infrastructure for animals in the event of extreme weather, such as floating chicken coops or a “high and dry” mound for livestock to stand during a flood

The number-one thing agricultural businesses can do to adapt to climate change is to prepare for all foreseeable scenarios. As the saying goes, “Prepare for the worst, hope for the best.”  Extreme weather events can develop very quickly. Learn how to respond to a climate emergency and how to prepare in advance to protect your investments, if possible.

Manosij Ganguli

Global Sustainability Advisory Leader


Real estate leaders eye improvements amid uncertainty

HLB's Survey of Business Leaders - Real estate analysis


Key survey findings at a glance:

  • Real estate business leaders are more optimistic about the economy than their global peers.
  • Leveraging digital technology and improving digital capabilities is one way real estate leaders are responding to the changes brought on by the pandemic
  • 45% of real estate business leaders plan to reassess their supply chain to source closer to home, which is 14% less than their peers

The global financial crisis of 2008 and 2009 left a deep impression on real estate professionals, making them wary about a post-pandemic future. However, many are embracing initiatives to build resilience while optimising operations. 

Since the real estate industry depends on diverse sectors, from retail to industrial, outlooks and business-related strategies vary. Nevertheless, leaders are centring improvement goals on cost management and operational efficiency while strengthening digital capabilities. 

To determine how real estate experts are adjusting and adapting, we reviewed data from our global HLB Survey of Business Leaders. Our study asked executives about their twelve-month outlook, main priorities, and perceived weaknesses. Furthermore, we examined objectives in critical areas, such as talent acquisition and approaches to environmental issues. 

Although the vaccine rollout improves prospects for the second half of 2021, our research suggests a lengthy recovery period. Industry leaders will focus on streamlining and restructuring processes to remain competitive and thrive in the years ahead.

Real estate expectations: Economic outlook

Looking forward to the next twelve months, 22% of real estate leaders believe the rate of global economic growth is likely to increase, and less than half expect a decline. These results suggest that real estate professionals are slightly more optimistic about the economy than their global peers. Still, everyone agrees that the top two risks to growth are economic uncertainty and the impacts of COVID-19. 

According to CBREproperty values for global commercial real estate (CRE) won’t find their bottom until later in the year. In addition, we could see a decline in rental growth, with vacancies continuing well into next year. 

At this point, leasing companies may keep the same asking price for units, but they’re prepared to give a bit in terms of concessions. Few in the real estate industry were immune from the pandemic’s impact, and most face uncertainty in the market.

When will values stabilise?

As things progress, city centres are better positioned to navigate change. Various real estate sectors, such as data centres, industrial properties, and single-family homes, may increase in value while retail and hospitality buildings may decrease. 

Part of the property valuation problem stems from an exodus of people from crowded urban areas, with a noticeable shift in London, New York, and Tokyo. However, it’s unclear how workplace social distancing policies and increased virtual work will affect office building values. 

Companies may downsize square footage to account for remote staff. Others will seek buildings with fewer offices but larger, well-equipped collaboration spaces. Going forward, brands may reassess property value propositions to focus on amenities. 

The bottom line is that leasing space and selling buildings aren’t close to price discovery yet, and the downward trend for certain real estate divisions may last through the year. To this end, real estate executives express less confidence in their own growth prospects, with 65% reporting feeling confident or very confident, compared to 75% of global respondents. In addition, only 12% feel very confident. 

Although economic uncertainty and COVID-19 are agreed-upon barriers to growth, real estate leaders are less concerned than their global peers about disruptive technologies, environmental or climate issues, or exchange rate volatility.

Actionable steps for real estate growth 

In 2021, leaders will focus on several growth activities, with responses for the top two priorities comparable to their global peers. 57% report improving operational efficiencies as a top goal, and 51% want to reduce costs. Building organic growth and developing strategic alliances or joint ventures also ranked high. 

Increasingly, real estate professionals consider strategic partnerships as a key to growth. In CRE, a design firm can help reimagine commercial real estate properties or identify high-value amenities driven by changing behaviours and workflows. 

Moreover, real estate leaders look for opportunities to connect with proptech companies to enhance tenant relationships. For example, mobile applications can improve the digital tenant experience by providing real-time building updates and an online space for community interactions. 

Core areas for improvement 

Efficiency, digital capabilities, and talent acquisition are the prime areas real estate leaders noted as business gaps. They plan to focus on these aspects over the next twelve months. But, 24% of leaders also pointed out identifying new partnerships as an area for priority over the next 12 months. 

Cost management via operational efficiencies is a crucial driver for leaders across industries. Yet, digital capabilities are essential to increasing efficiencies. Traditionally, the real estate industry has been slower to adopt new technologies, explaining why they consider it a weakness. Moving forward, going digital will be critical to achieving other goals, such as talent acquisition, operational efficiency, and resilience. 

Digital capabilities for financial and operational resilience

When looking at digital capabilities, the top five priorities are cloud computing, the internet of things (IoT), artificial intelligence (AI), robotics process automation (RPA), and 3D printing. Real estate executives aren’t short on innovation, but they need to upgrade technologies and skillsets to meet today’s demands.

IoT sensor data is increasingly important in the real estate industry. Successful implementation can help build trust and increase engagement with tenants. Furthermore, it can drive decision-making. By analysing tenant behaviour and preferences, owners can see how renters use amenities, enabling property managers to provide personalised experiences. Tenant data also is used to forecast potential lease renewals and develop custom retention strategies. 

By leveraging IoT and AI to collect data, real estate leaders can manage or survey properties in real-time while adjusting activities to account for fluctuations in the demand or supply of spaces. Data suggests that tech investments in property operations and management can help real estate professionals get a clearer view of operations and productivity. To boost resilience, companies plan to:

  • Analyse business workflows and processes
  • Identify ways to decrease redundancies and restructure
  • Update asset management systems
  • Automate or outsource non-core activities
  • Use the cloud, RPA, and AI to  modernise the leasing process

Real estate also has a keen interest in exploring 3D printing, partly due to the convenience and speed of modular construction enabled by 3D printing. Additionally, 80% agree that technological advancements will help overcome cross-border business challenges. Although real estate professionals outsource work overseas, technology has not solved everything, with many leaders experiencing that some systems and processes are not being able to be automated.   

Bolster talent and diversity initiatives

With talent acquisition ranked as a vulnerability, real estate leaders aim to improve it. However, advances in this area rely on increasing digital capabilities. Leaders must find ways to appeal to and retain a multigenerational workforce. To do this, companies will assess processes, redesign job roles, and improve recruiting strategies while focusing on diversity and inclusion. 

For D&I priorities, 86% of real estate leaders agree that building diversity in boards and the workforce is increasingly important. 93% say it’s essential to ensure equal support and opportunities. D&I initiatives can result in a stronger brand from improvements to profitability, creativity, employee morale, and productivity. In the future, hiring managers can expect to hear questions from job candidates about D&I initiatives and the company’s community involvement. 

For those who boost talent outreach to underserved and minority communities, the rewards can be significant. 78% of real estate leaders believe a more diverse and inclusive workforce will ultimately improve financial performance.

Although many industries have similar objectives for talent acquisition and D&I, fewer real estate leaders believe remote work will affect hiring. Globally, 65% think flex or virtual positions will attract diverse talent versus 51% of real estate professionals. Could it be assumed that the sector doesn’t lend itself to remote work, due to its perceived interpersonal nature? Or should we conclude the fact that real estate management have been less willing to embrace virtual work for any position, including those with limited public interactions which is reflected in the responses. 

The human impact: Wellbeing and in-person interactions

During the pandemic, the real estate industry felt the strain of social distancing, as did so many others. Digital technologies, such as virtual reality or drones, may offer 360-degree property views, but nothing beats showing a property in person. 

Accordingly, 82% of professionals feel that remote work and social distancing make it harder to deliver the value of human touch. It’s also an issue of seller-buyer relationships, with 39% of leaders saying that remote work and social distancing are detrimental to establishing trust.

Leaders express concerns about virtual workforces, with 51% feeling that it affects collaborative working and 31% suggesting it thwarts creativity. Balancing a public health crisis with work-related goals isn’t easy. Similar to global leaders, real estate executives overwhelmingly agree “that staff physical and mental wellbeing is a top priority for our human resource department.” 

Going green in real estate

Climate change and green initiatives continue to fuel innovation in the real estate arena, with 71% of business leaders making changes to their business to profit in the low-carbon economy. Increasing digital capabilities and choosing purposeful alliances can further environmental plans. 

New partnerships with smart building designers assist in reconfiguring spaces to attract and retain tenants. IoT devices and sensor technologies help leaders visualise space use and automate building maintenance and management processes. 

Eco-friendly buildings and actions aren’t just about bettering the climate. They can build a better brand. Leaders understand that their clients are under pressure to lighten their industrial footprint or comply with potential new regulations. Real estate leaders can adjust their value propositions to meet clients’ potential needs by rethinking ways to utilise space and build new ones. 

New construction and supply chain challenges

Real estate segments experience varying levels of supply chain issues, with 45% saying they’re reassessing their supply chain to source closer to home, which is 14% less than their global peers. For those eyeing new construction, materials in short supply have led to steep increases in building costs. 

Leaders can avert a possible crisis by diversifying supply lines and looking for local manufacturers when possible. This does the double duty of making businesses more environmentally friendly and less reliant on trade relations.

Looking ahead: Streamline and thrive

The push for leaner operations and cost containment isn’t without challenges. However, 96% of business leaders based in this sector are confident in their ability to successfully steer the business in a new direction in response to the impact of COVID-19. Although 2021 brings uncertainty, real estate leaders are well-positioned to navigate what lies ahead.


Findings in this article are based on 51 survey responses from real estate business leaders collected in quarter 4 of 2020, as part of HLB’s Survey of Business Leaders 2021. The majority of businesses surveyed are privately or family owned. Thank you to Stephen Newbold from Colliers International for his valuable input. For the full research report see HLB’s Survey of Business Leaders 2021: Achieving the Post-Pandemic Vision: leaner, greener and keener. 

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Ralph Mitchison

Global Real Estate & Construction Industry Leader


Ongoing challenges and cautious optimism from UK business leaders

HLB's Survey of Business Leaders - UK analysis


Key survey findings at a glance:

  • Confidence in global growth is significantly lower for business leaders in the UK. 56% of business leaders believe that global growth will decline in 2021, while 29% are not confident in their own organisation’s ability to grow revenue.
  • Brand strength a weakness of UK leaders and an area they are considering strengthening in the next 12 months
  • Digital capabilities considered a weakness, but interestingly innovation is not

2020 dispensed unique hardships for business leaders worldwide. For those in the United Kingdom, pandemic-related pressure was compounded by concerns over Brexit and negatively affected the overall economic outlook. While some industries thrived, others, such as hospitality, leisure, and travel, suffered massive setbacks. 

UK business leaders navigated the challenging landscape by prioritising digital transformation, assessing vulnerabilities, and preparing to mitigate threats for upcoming environmental-based emergencies. 

To evaluate the pandemic’s effects on UK business leaders, we gleaned insights from our global HLB Survey of Business Leaders. The study looked at how executives responded to questions about the economy, digital technologies, talent acquisition, and trade relations. Moreover, we reviewed the overall recovery outlook by evaluating planned actions to reduce risks from climate change and supply chain concerns.

Initially, our results found that UK business leaders were more pessimistic about global growth prospects. Fortunately, falling COVID-19 rates and the ongoing vaccine rollout over the last six weeks of the survey increased positive feelings about economic growth. 

Confidence in the economy rises, but growth is slow

In 2020, only 21% of UK business leaders believed the rate of global economic growth was likely to increase over the next 12 months, compared with 23% of global peers. Furthermore, 29% of surveyed UK leaders say they are not confident in their company’s ability to increase revenue over the next 12 months, versus 24% of global executives. 

The confidence gap may be partially from a lack of trust in political leaders relating to Brexit and the initial pandemic response. Like global leaders, 87% of UK executives view economic uncertainty as a barrier to growth, while 91% worry about the impacts of COVID-19. Yet, UK leaders are less concerned about threats from protectionism, disruptive technologies, and social instability than their peers globally. 

Recent improvements suggest that trust is slowly returning, resulting in improved economic outlooks. With nearly 21 million vaccinated in the UK and manufacturers adjusting to post-Brexit changes, an increase in stability may boost optimism. 

UK variances by sector

Recent data from the Centre for Retail Research (CRR) and published by the British Press Association shows the restaurant industry lost 29,684 jobs in 2020, and redundancies increased by 163%. With new variations of COVID-19 on the rise, the hospitality sector continues to face vast challenges.

As we progress in 2021, the travel industry also continues to experience ongoing issues. New restrictions imposed on 5 January 2021 and the suspension of travel corridors on 18 January 2021 cut into profits. The hotel quarantine programme which began on 15 February 2021, may, however, bolster some hospitality revenues. 

With the Prime Minister’s February announcement that hospitality venues cannot seat guests indoors until at least 17 May, leaders in these UK sectors are rightly concerned. Yet, the ban on evicting commercial tenants may be extended an additional three months instead of ending at the end of March, which could help struggling UK business owners keep their storefronts. Unfortunately, the Coronavirus Business Interruption Loan Scheme ends in March, leading to full business rates going forward.

Although data from the Office for National Statistics (ONS) shows declines for many sectors in 2020, certain segments did well. Online retailers, household goods stores, digital publishers and broadcasters, supermarkets, and online education and training services were well-positioned to weather the storm. Other bright spots include 3.3% growth in the manufacturing sector and a 4.6% rise in construction output during the fourth quarter of 2020. 

Optimistic forecasts for business revenue growth

Even with many respondents expressing concern over economic and revenue growth, the overwhelming majority feel confident or very confident that their business can increase revenue in 2021. 

This positivity is likely due to the increased vaccination rate, adjustments to business post-Brexit, and hopefulness for relaxed restrictions in the second quarter. Moreover, goals to improve vulnerable business areas also may improve outlooks. Despite this, less than half of UK business leaders believe the rate of global economic growth will stay the same or increase.

UK business leaders prioritise improvements

To prepare for future disruption, UK leaders identified key weaknesses to focus on over the next 12 months. The top three priorities include enhancing operational effectiveness, digital capabilities, and brand strength. Talent acquisition, cost management, and supply chain vulnerabilities also rate highly. 

For small and medium enterprises (SMEs), brand strength impacts market share. A higher number of SME survey respondents may be the reason why 9% more UK business leaders list brand strength as a weakness than their global peers. 

Since talent acquisition also affects brand strength, improvements to this area can support overall brand importance. Survey responses also differed on forming new partnerships. 16% of global leaders identified new alliances as a weakness they planned to focus on over the next 12 months versus only 7% of UK leaders. 

To overcome existing deficiencies, 64% of UK leaders plan to improve their operational efficiency. Plus, 61% aim to build organic growth, while 43% expect to launch new products or services. 


The digital transformation takes centre stage

The fast shift to digital-everything left many leaders scrambling to adapt workflows and sales tactics for a virtual environment. Going forward, UK executives will focus on perfecting the basics of digital technologies, such as adopting cloud computing at higher rates and gaining access to 5G speeds. 

For rural business owners struggling with digital capabilities when using 3G speeds, a shift to 5G can greatly soothe their concerns, which may be why 16% of UK executives noted this as a promising technological advancement.

The top five technological improvements that UK leaders feel are most important to their future business success include cloud computing, artificial intelligence (AI), 5G, robotic process automation (RPA), and machine learning (ML). The overwhelming push for cloud computing aligns with an estimated 18.4% increase in global spending on public cloud services in 2021, as noted by Gartner. Interestingly, although 31% of UK leaders see digital capabilities as a weakness, only 15% acknowledge problems with innovation. 

Talent and diversity enriches financial performance

Overall, UK leaders agree with their global peers on the importance of diversity and equality. 97% recognise that staff physical and mental wellbeing is a top priority for their human resource department, and 95% agree on the importance of ensuring equal support and opportunities, particularly in the current environment.

A large majority of UK leaders agree that building diversity in the board and workforce is growing in importance, with 80% giving this response. Still, this percentage represents a slight variance from 85% of their global peers who agree that the value of diversity is rising. Moreover, 77% of UK business owners believe that an inclusive and diverse workforce will ultimately improve performance versus 82% globally.

With most UK responses coming from SMEs or family-owned businesses, they may be building workforces that reflect their customers and products, which may not be as diverse as their global peers. It is possible that reshoring efforts stemming from Brexit may tighten the labour pool. Leaders focusing on brand importance may put greater emphasis on inclusive campaigns for talent acquisition. 

Leaders embrace agility to mitigate threats from upcoming crises 

As nearly all business owners agree, being prepared for the next crisis is vital. The pandemic highlighted weaknesses and encouraged leaders to make changes now instead of waiting for the next emergency to force their hand. 

With this in mind, 81.3% of business leaders in the UK are altering their business to profit in the low-carbon economy. They believe the business recovery process is an opportunity to make these changes. Of course, as legislation takes on carbon reporting, leaders also feel increased pressure to look into the low carbon economy. 

Furthermore, UK leaders’ current business priorities can help fuel environmental and sustainability goals. Greater access to 5G, cloud computing, and artificial intelligence support a wide-range of climate objectives. As executives focus on a digital transformation, gains made in this area can enhance a company’s agility and ability to navigate upcoming disruptions. 

Supply chain concerns remain prominent

Throughout most of 2020, business leaders expressed concerns about the double whammy of Brexit and COVID-19. Many manufacturing companies experienced a drop in exports via British ports for supplies moving from the UK to the EU. This also is partially due to issues at major container ports resulting in material shortages. 

As Brexit effects become evident, manufacturers continue to monitor its impact on exporting and importing products to EU customers, the availability of raw materials, and supply chain price changes. Many post-Brexit questions remain about sourcing materials or products from overseas, logistics, and data transfers to or from the EU. These concerns and others weigh heavily on business leader’s minds, with 43% re-assessing their supply chain to source closer to home.

This is both a climate concern and an operational concern. Manufacturing companies frequently look for ways to bring back businesses from China to the UK, allowing leaders better control over output and opening the door to employing local services. 

Recovery outlook: Confident yet focused on challenges

93% of business leaders based in the UK are confident in their ability to successfully steer the business in a new direction in response to the impact of COVID-19. However, remote working poses many challenges for business owners. Overcoming these hurdles and delivering on the promise of human touch is key to success in a changing environment. 

Figuring out how to tackle these concerns in a way that does not increase costs or reduce operational efficiency is critical. Our HLB Survey of Business Leaders finds that 52% of UK executives miss in-person collaboration, 39% feel the digital environment affects creativity, and 37% say remote work reduces spontaneity. 

Nevertheless, since a third of UK leaders view digital capabilities as a weakness, improving these areas can help leaders find ways to improve collaboration, creativity, and spontaneity while working online. 

UK business leaders forge a new path

Although the United Kingdom will face ongoing challenges in 2021, updated priorities, operational improvements, and new product launches may boost revenue. As business leaders adapt to changing consumer behaviours, those who can act quickly on opportunities may gain a competitive edge in the market.


Findings in this article are based on 75 survey responses from UK business leaders collected in quarter 4 of 2020, as part of HLB’s Survey of Business Leaders 2021. The majority of businesses surveyed are privately or family owned. For the full research report see HLB’s Survey of Business Leaders 2021: Achieving the Post-Pandemic Vision: leaner, greener and keener. 

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Foreign direct investment trends and opportunities in the Caribbean

By Marcelo Fonseca, Global FDI Leader


The Caribbean is a diverse region with robust economic potential and growth opportunities. It consists of small island economies with Gross National Income (GNI) per capita that ranges from US$800 to over US$30,000. These countries are major players in a wide range of global industries. Some of these economies rely on commodity exports, while others depend heavily on tourism. According to the World Bank, the region’s countries are split into the following distinctive groups, according to their main source of export earnings: Services Dependent, Light Manufacturing Dependent, Agriculture and Food Dependent and Natural Resources Dependent. 

  • Services dependent: Antigua and Barbuda; The Bahamas; Barbados; Dominica; Grenada; Jamaica; St. Kitts and Nevis; Dominican Republic; Haiti
  • Light manufacturing dependent: Dominican Republic; Haiti
  • Agriculture and food dependent: Guyana; Belize
  • Natural resources dependent: Suriname; Trinidad and Tobago

The region’s main natural resources include petroleum, fish, and natural gas, while the key industries are tourism, sugar, light manufacturing, and component assembly for export. 

Tourism accounted for 13.9% of the Caribbean’s GDP in 2019 and 15.2% of total employment. This is the region with the highest contribution from tourism globally, but for some countries, the role of tourism is much higher than for others. For example, for the Eastern Caribbean States and the Bahamas, Belize and Jamaica, tourism and travel make up more than 25% of GDP.

The pandemic greatly affected the region’s countries, although to a varying degree due to their high dependence on travel and tourism, which collapsed because of border closures and other restrictions imposed to curb the spread of the virus. With tourism coming to a standstill and main markets in advanced economies dipping into recession, the region’s economic activity is greatly affected by the pandemic due to dependence on travel and tourism, likely with a likely sharp and protracted economic contraction. It is estimated that it will take years before Cross-border tourism returns to levels where it was before. Also, the significant drop in oil prices negatively impacts commodity exporters in the region through a loss in exports and fiscal revenues. Finally, Caribbean countries face longer-term challenges, including the adverse impacts of climate change, natural hazards and extreme weather events.

The principal exports are sugar and molasses, rum, other foods and beverages, chemicals, electrical components, and clothing.

Although the tourism sector plays a significant role in economic activity, investments are diversified across major Caribbean economies, with inflows of capital from all over the world.

Overview, demographics, macroeconomic indicators and business regulations for selected countries 

Puerto Rico:

Puerto Rico has very limited natural resources, with arable land being one of the country’s most critical natural resources. However, despite its importance, only 6% of the island’s total area is considered arable. Puerto Rican agriculture includes sugar cane, coffee, pineapple, plantains, animal products and chickens. 

Despite having a substantial agricultural potential, agriculture accounts for just 0.7% of Puerto Rico’s GDP and employs only 2.1% of the labour force. Puerto Rico experiences several challenges that hinder the country’s full utilisation of its agricultural potential, mainly due to the low number of people willing to work in the agricultural sector. As a result, the island satisfies about 85% of its food needs from imports, even though most of its land is fertile. 

Industry accounts for 50% of GDP and employs 19% of the labour force. The Puerto Rican industrial production includes drugs, electronic devices, petrochemicals, processed foods, clothing and textiles. The country’s economic profile has shifted from industrial production relying on labour — such as the food industry, tobacco, copper and textiles —to a capital-based service industry. Services now represent the second-largest sector in the Puerto Rican economy, contributing 41.5% to the GDP and employing the overwhelming majority (79%) of the labour force. The service industry’s main sectors include tourism, finance, insurance, trade, real estate, transportation and utilities.  


Trinidad and Tobago:

 Trinidad and Tobago is one of the wealthiest countries in the Caribbean. The most important sector of the economy is oil and gas production which accounts for around 40% of GDP while employing only 5% of the labour force. Trinidad and Tobago is also a major producer of ammonia and methanol. In recent years, services like finance and tourism have been rapidly expanding as the government is trying to diversify the economy. Yet, corruption, poor infrastructure and drug-related crime are the major obstacles to harnessing the full growth potential in the private sector and tourism.



 Traditionally, the backbone of the Jamaican economy has been the tourist industry and the mining sector. Jamaica is the world’s third-largest producer of bauxite and alumina and the sector is the country’s second-largest foreign exchange earner, second only to tourism. Other sectors that are essential contributors to the economy include agriculture and manufacturing. In the case of the former, sugar and bananas were the crops produced for export, though these have been on the decline despite recent improvements in the sugar industry. The garment industry was a traditional main export contributor but has declined because of increased competition from lower-cost exporters. The country’s main trading partner is the USA and while it’s economic diversification is to be commended, its lack of investment weakens its competitivity. In 2013 Jamaica launched a plan to stabilize its economy with positive results in reducing its public deficits and unemployment rate. 


Cayman Islands:

Tourism and the well-developed offshore financial sector is the mainstay of the Cayman Islands’ economy. As a tax haven — a jurisdiction with no taxes on personal or corporate income, profits or property — Cayman Islands also have liberal regulations which allow foreigners to purchase real estate and no exchange controls. The services sector accounts for 87% of GDP with financial and insurance services accounting for one third. With no other significant economic activity, the country virtually imports all that they need. There is a large trade deficit, but this is easily financed by revenue from tourism and the financial sector.


Dominican Republic: 

The Dominican Republic is one of the fastest-growing economies of the Caribbean. Traditionally, the agricultural sector was the mainstay of the economy. However, the decline in this sector has led tourism, communication and construction to be the major contributors to the economy. As such, the government has been investing in tourism-related projects in hopes of revitalising the economy. Recently, the mining and manufacturing sectors have also started improving their performance. The country needs to improve its competitiveness while struggle with bureaucracy costs and access to credit.


Business regulations:

The table below comprises information from the report “Doing Business” issued by The World Bank. As stated on this report:

“Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 190 economies— from Afghanistan to Zimbabwe—and over time”.

Figures below represent each item measured and its rank among 190 countries. An overall rank is given to each country in accordance to the World Bank method.


The Caribbean Region Key FDI Indicators 


Since 2013, the Caribbean region has made 635 FDI-related projects. Over the period, the number of projects varied between the individual years significantly—from 35 in 2020 to 116 in 2016. The current number of FDI-related projects is only nine. During the same period, the region recorded nearly $28 billion in FDI-related capital expenditure. This indicator also exhibited significant variability over the years, ranging from a record-high $6.82 billion in 2013 to $678 billion in 2020. The two metrics — the number of FDI-related projects and total capital expenditure — when taken together, mean that the average capital expenditure per project is $46 million, with individual values per year ranging from $19 million (2020) to $79 million (2013). During that period, the FDI-related projects created over 100 thousand jobs with an average value of 166 new jobs per project. 


Marcelo Fonseca

Global Foreign Direct Investment Leader


One year with COVID-19:

how has cross-border business changed


In the early part of 2020, the world as we know it now was different. Before COVID-19 (BC), global businesses had plans and they worked. While there was some amount of uncertainty, there was no way to predict that just a few months later the world would be facing an event that would change the behaviours of consumers and nations quite so dramatically. The good news is that the dark shroud that is the pandemic is slowly lifting, heralding the arrival of a new era, now referred to as after COVID-19, or AC.

Before COVID, cross-border business was humming along. International travel was unrestricted, sourcing and shipping were unhindered, and companies could navigate international landscapes with ease. Then the pandemic struck, and many aspects of cross-border business were turned upside down.

In 2020, BC cross-border business was projected to grow the most in high-growth markets such as South America and Asia. The pandemic brought a wave of e-commerce customers in more developed countries as consumers began to purchase more items online. Let’s explore the differences between the BC and AC world that we will soon see.


  • International travel was easy.
  • Employees came to work at the office.
  • Plans to learn more about and expand into fast-growth markets were in place and being implemented.
  • Supplier and shipping issues were relatively straightforward and easy to solve.
  • Consumer needs and marketing had been fleshed out according to the times.
  • Consumers targeted for both brick and mortar and e-commerce.
  • Cross-border business regulations were easily tracked and relatively involatile.


  • Teams have internationally diversified.
  • More employees are working from home (team reorganisation).
  • Plans to expand into high-growth markets become more focused.
  • Suppliers are near or on-shored.
  • Logistics are restructured for shipping in smaller batches.
  • Consumer needs have shifted to purchasing an increasing number of day-to-day supplies online.
  • Consumers are more individually targeted for e-commerce.
  • Possible cross-border regulation changes are increasingly factored into business models.

While BC and AC are two completely different worlds, BC businesses were headed in the direction of an AC world. The pandemic has brought these changes around faster than most companies had projected. The acceleration of change left many cross-border businesses scrambling to implement changes they did not see coming for years and has left many behind in the dust.

Are You Prepared for Change?

The pandemic has changed many of the rules to do business. Some are unspoken shifts in sentiment, while governments have mandated others. The most obvious change is the movement from in-person execution of business to virtual collaboration. As AC rolls around, in-person activities will occur again, but there will be a heightened focus on how and where those interactions occur.

Travel and Workspace

During the pandemic, people who needed to do in-person cross-border business could travel to some world regions, but this was not so in all cases. Many companies have hired employees in specific areas to conduct business in desired countries with little interruption to solve this problem and move forward.

As we advance, this model is likely to stick. Online communication and collaboration are becoming more manageable and less expensive, making a work-from-home business model a reasonable and scalable solution in the AC world.

Targeting New Markets

Hiring workers in locales of interest will allow companies to become better specialists in the markets they are targeting. BC, you may have had a local associate periodically travel to Sao Paulo to interact with customers and learn better ways to market to the region. With an employee native to the area, you instantly have non-stop access to data and information from the region in real-time. These changes carried forward in AC will raise revenues and reduce costs over time.

Logistics, Regulations, and Changes in Consumer Behaviour

BC, you may have had storefronts or stores that sold your products in batches. Now that the individual consumer is now shopping online, your logistics lean more to parcel post than bulk shipping. It is essential to note that this movement had started years BC. Shipping between countries in the EU was complicated due to the taxes imposed. BC the EU rolled out new rules for taxes on mini one stop shops (MOSS), and AC they plan to expand on these rules to make it easier and less costly for EU businesses to ship to other countries within the EU. The new rules will be implemented in the summer of 2021.

Yes, shipping smaller packages will be more costly for a time. After the summer, cross-border tax rates should come down for businesses involved in cross-border sales.

The pandemic also brought about supply chain problems due to producers and distribution centres being forced to shut down. Many small and midsized businesses that rely on imported supplies are looking to move these business aspects closer to home or closer to their target market.

In this case, it is also important to note that BC overseas production prices had been increasing, and many business owners and CEOs had started to look at these solutions previously. Many businesses that had been on the fence about moving suppliers to more convenient locations have been nudged to follow through with their plans by the pandemic.

What Should I be Doing to Function Better in an AC World?

It is easy to stick to a plan that has been working and then continue to try to stick to it when things change. Identify the most significant problems faced during the pandemic. Ask yourself if these are problems are only temporary, or will they continue to exist as the world progresses to the AC era. Next, take a good look at how you can diversify the use of your current assets, such as your location, team, equipment, connections, and knowledge. Talk to the best members of your team and come up with a plan that will allow you to flourish as we walk into the AC era together.

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Overcoming difficulties through innovation in agriculture

HLB's Survey of Business Leaders - Agriculture analysis


Key survey findings at a glance:

  • Agriculture business leaders rank consequences of COVID-19 as the top risk to business growth, followed by economic uncertainty 
  • Confidence in global growth is significantly lower for business leaders in this sector. 60% of business leaders believe that global growth will decline in 2021, and only 12% are confident in their own organisation’s ability to grow revenue.
  • Digital capabilities are a weakness of agriculture leaders and an area they are considering strengthening in the next 12 months
  • 72% of agriculture leaders plan to improve operational efficiency, with 72% re-assessing their supply chain to source closer to home.

There’s no doubt that the agriculture, food, and beverage industries felt the impact of COVID-19. Nor that the effects continue to weigh heavily on the minds of leaders across the globe. From reports of dairy farmers dumping milk to a volatile commodity market, the uncertainty left many in and outside of the industry alarmed. 

However, the pandemic also exposed the public to these issues. When supermarket shelves ran bare, and restaurants closed, consumers started asking where their food comes from. Moreover, as agriculture leaders look towards diversifying income streams or adding new products, the direct to consumer (D2C) market can provide opportunities. 

To learn how the pandemic affected producers and processors in 2020, along with their outlook for 2021, we surveyed global business leaders as part of HLB’s Survey of Business Leaders. We asked questions relating to overall confidence levels and the concerns they had moving forward. Furthermore, we looked for insights to learn how innovation and increased digital capabilities could affect agriculturalists in the coming year, not only on finances and the labour pool but also on trade relations and climate concerns. 

We found that although agricultural business leaders are less confident in growth prospects over the next twelve months, the majority aim to get new products to the market while improving operational efficiencies to make up the gap. 

Top concerns for agriculture industry leaders

60% of survey respondents expect a decline in the rate of global economic growth over the next twelve months, suggesting that a downturn for the agricultural industry is expected. However, the pessimism is understandable when looking at the severity and reach of the impact. 

For example, early in the pandemic, many industries were hit hard by closures to hospitality businesses and schools while also suffering from closures at the borders. Although business leaders had a supply of products, their typical buyers were not purchasing. Schools no longer required large shipments of milk for children. Restaurants didn’t need bulk-packaged products. 

Unfortunately, factories were not equipped to transform bulk food products for sale into consumer-sized goods. The time and resources required to reimagine food production and delivery were not there. This problem only got worse as shutdowns continued because, especially in the hospitality industry, a lack of customers buying food products outside of their homes means fewer orders from suppliers, and those vendors didn’t need as much produce from farmers. 

Moreover, as trade commodities turned volatile and prices dropped, producers who already face low margins felt the pinch. The agriculture industry took hit after hit with bottlenecks at ports due to COVID-restrictions and increasing concerns about imported products. Even the cost of biofuel prices fell, leaving little left for farmers to put in their pockets. Overall, agricultural leaders express more concern about 2021’s prospects. 33% say they’re not confident in their company’s ability to grow revenue over the next twelve months compared to 24% of global business leaders. 

The challenge of international trade and exchange rates

The effects of 2020 show up clearly in survey responses, with 58% reporting concerns about international trade flow disruption, which is higher than the global average of 49%. Another 54% cite concerns over exchange rate volatility versus 40% in the global sector. 

With the agricultural industry covering such a wide swath of niche sectors, what impacts a ginseng grower selling to its biggest market in China may not affect a grain producer exporting to multiple locations. 

Yet, the concern over international trade flow disruption is vital to note. Both the US and UK recently saw significant changes that could affect global trade. Many experts don’t expect an immediate impact from the new administration for the US, and it’s unclear if trade relations with China will remain unstable. While it’s possible a reduction in tariffs could help the American agriculture industry, it’s simply too early to tell how policy changes will directly affect producers. In the UK, Brexit is a source of concern for European business leaders. Cross-border transactions are not as seamless as they once were, and things haven’t been ironed yet, leaving much uncertainty about the future impact. 

For agriculture leaders in other parts of the world, the concern is over a shift to local products, resulting in fewer export buyers. Since the pandemic highlighted supply chain problems, many countries have made a push to produce and manufacture more products closer to home. Still, this solution is not immediate and will take some time to fund and ramp up operations.  Until then, countries will continue to import much-needed supplies and products. In the meantime, the question is if consumers will continue to shop globally or if they also will seek out local products to replace those that they couldn’t get during the pandemic. 

As to exchange rate volatility, in nearly all countries, agricultural producers, such as farmers, are older than the population at large. Although traditionally, agriculture leaders are more fiscally conservative, they haven’t worked within the global trade market as long as leaders in other fields. This unfamiliarity with the technology and a lack of desire to hedge bets against future contracts means they’re less likely to go online to manage their exchange rate risk. 

Agriculture leaders address climate and environmental concerns

Lastly, 47% of agriculture leaders expressed concern over environmental and climate risks compared to 32% of global leaders. There are many possible reasons for this concern. Unlike other industries, the agricultural sector is deeply impacted by the weather. A couple of great years on the books can be quickly dashed by two years of drought or natural disasters. Farmers also face increased pressure regarding water rights and CO2 emissions.  

Climate concerns from consumers and business partners also lead to uncertainty. For instance, the demand for beef globally continues to decline, and there is a public push to reduce CO2 emissions stemming from cattle. Our survey finds that 84% of agriculture leaders are making changes to profit in the low-carbon economy. Yet, few believe the solution is clear cut. 

Many leaders worry about the effect that climate migration may have on farmland, with farmers already trying to co-exist in urban environments. New neighbours are not responding as kindly to the early hours and aroma of farm life. So figuring out how to present the best image and appeal to the public while protecting their farmland and crops from environmental damage will be a challenge in the years ahead. 

Labour: A positive outlook

Fortunately, there is one area where agriculture leaders are less concerned than global leaders, and that’s in talent acquisition. Only 39% of respondents identify this as a top area of concern versus 47% of global leaders. This is partly due to greater efficiencies that began well before 2020, resulting in less labour-intensive operations. 

Large machinery and automated processes reduced the reliance on skilled labour well before 2020. Although some work in processing facilities and farms were affected by the pandemic, many essential jobs still took place, and workers were allowed to cross borders to keep the supply chain running. Sectors that saw the most impact include those with labour-intensive requirements, such as high-value crops, fisheries, and meat products. In fact, many farmers struggled to secure a meat processor as nearly all were booked and simply didn’t have the capacity or labour to meet the demand. 

98% of business leaders recognise that it’s important to ensure equal support and opportunities for their people. Regardless of the sector, professionals understand the critical role employees and partnerships play in their business and the supply chain as a whole.

Moving forward: focus on improvements

To respond to concerns over revenue, industry leaders plan to improve their operational efficiency. 72% suggest this is a key way they will enhance their business in 2021. Additionally, 51% plan to launch new products and services. For many, the growth may be related to finding direct to consumer avenues instead of relying on retailers or manufacturers to create the final product and reap the rewards. 

Furthermore, 72% expect to reassess their supply chain to source closer to home versus 59% of their global peers. For this very competitive market with low margins, increasing local sales, creating new products, and improving efficiencies can help ensure future sustainability. 

To get to a better place, agriculture leaders recognise that it’s essential to strengthen weak areas. Digital capabilities, innovation, and cost management are the main areas where leaders believe they are vulnerable. Overwhelmingly, leaders point to cloud computing as a crucial area for improvement. However, many producers live in rural areas with less high-speed internet access, which may hinder their progress towards this goal. Yet, others already use cloud computing to oversee their operations, especially those who don’t live near their farm ground. 

Technology improvements in artificial intelligence (AI) and robotics are seen as fundamental areas for improvement. Nevertheless, some wariness exists. In many ways, producers enjoy the benefits of technology used in large farm machinery and to automate repetitive tasks. But it also proves more costly as they’re unable to handle regular machine maintenance and repairs due to AI-driven machines and computerised equipment. To fully take advantage of digital innovations, agriculture leaders will need to shore up their digital capabilities and seek out tools that’ll help them better serve a direct to consumer market and get products out to customers faster. 

Innovation leads the way

Agriculture, food and beverage leaders faced a myriad of issues before the pandemic. Indeed, these problems were only magnified in 2020. From shifts in consumer demands to continuing outcries for climate-friendly products, 2021 will surely be one of great change. How that change will be reflected on family farms and local producers remains to be seen. 

For sure, consumers are shifting their focus to healthier lifestyles and seem concerned about where their food comes from. This outlook represents an opportunity for food producers. However, agriculture leaders face challenges in their quest to enter the D2C market, navigate environmental issues, and shorten the supply chain. By using innovation and digital technology, farmers may improve operational efficiencies while launching new products that encourage people to invest in local producers.



Findings in this article are based on 57 survey responses from agriculture, food and beverage business leaders collected in quarter 4 of 2020, as part of HLB’s Survey of Business Leaders 2021. The majority of businesses surveyed are privately or family owned. For the full research report see HLB’s Survey of Business Leaders 2021: Achieving the Post-Pandemic Vision: leaner, greener and keener. 

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Transactions Outlook 2021:

An Overview of Global M&A Trends


The past year was unprecedented in so many ways. It changed the way we interact, do business and go just about everything in our lives. A recent HLB Cross-Border Business Talks podcast episode features our HLB experts — Chris DeMayo, HLB’s Global Emerging Technology Leader, Patrizio Prospero from HLB Malta and HLB USA’s David Sacarelos. They wrapped up 2020 and offered insights into what 2021 holds for the world economy.

Deal-Making Activity Stayed Strong in 2020

The pandemic did not affect every business in the same way. There were companies that have benefited from the disruption and from good opportunities that opened, while others had to pause and reconsider their decisions, which means that some deals fell through. 

Despite an unparalleled disruption brought upon the world economy, 2020 has seen a significant increase in M&A activity, but for various reasons. 

Some acquisitions happened as a result of the devastating effect of the pandemic on some businesses. Without enough gumption to continue for another year or two and rebuild from the pandemic on their own, they resorted to a merger option as a lifeline. On the other side of these transactions were big companies with big balance sheets that had the capital to deploy and acquire good technology and a good employee base. 

Another group of deals involved companies that were positively impacted by the pandemic such as online retailers, especially those operating in the food sector. They went out on the market and raised funding at high valuations off of exceptionally aggressive revenue growth. 

The past year has seen a rise of companies, especially in new emerging technology, that seized opportunities to acquire companies that did not manage to sustain their business through the pandemic. Some other companies put their plans on hold as they tried to make sense of the impact of the virus outbreak.  Deals that were put on hold in 2020 could be finalised this year, but some of them based on reassessed values to account for the pandemic. 

There is real optimism about 2020. Robust government response to roll out vaccines and curb the pandemic, coupled with a view that there are ample funding and demand available reassures the market that 2021 will be an excellent year with deals that see the same valuations, if not higher than in the past. The outlook is especially positive for technology, healthcare and consumer goods, while the retail and real estate are at the downside of that trend. 

Remote Work and Its Impact on the Real Estate

The real estate sector will have to reassess and decipher how the new work models impact the industry and how the supply and demand will continue to evolve. Emerging companies have found new ways to attract both financial capital and human capital and technology and other aspects of innovation globally as the pandemic revealed that employees don’t have to be in the same building to get the work done.

Still, it’s becoming more evident that some employees — especially younger ones — are getting tired of not going into the office and not spending time with other people. They believe that in some cases, remote work does hamper innovation. But at the same time, they don’t want to completely go back to the previous work model. Instead, they want to be able to do both — to be home on some days and go in on some others. As these developments unravel, the real-estate market will have to assess the supply and demand, David Sacarelos said. 

In addition to that, the market needs to factor in a potential change in regulatory rules and tax laws as the new Biden administration takes over. These factors will also have a significant impact on the real estate market, especially in Silicon Valley, where the idea of putting start-ups in tax-efficient opportunity zones is gaining traction.  In larger markets, such as California and New York, evictions from commercial properties are stopped at least until June, impacting technology and emerging companies that have long term leases on their balance sheets at the moment. 

Working from home has enabled many companies to cut costs and relocate their offices or change the use of their space, which had a positive financial impact. Still, Patrizio  Prospero draws attention to another aspect of the work-from-home model that needs to be accounted for, and that is the impact on human capital. The negative impact is especially prominent in technology companies, once perceived as fun companies to work in. Having time to meet each other, brainstorm new ideas, and discuss possible new things to do were probably one of their critical success factors as they used to approach human capital differently. Prospero cites statistics showing that there are people who feel more depressed, as they are deprived of the possibility to share and meet other people and exchange ideas. 

“Employees in tech companies used to identify themselves with the company’s culture and feel more sense of belonging to the company. But today, when they work from home, their work experience is standardised. This means that although work from home has positive financial repercussions, it has also negatively impacted innovative companies’ work experience.” Patrizio Prospero, HLB Malta

David Sacarelos finds that remote work opens up many new possibilities. First, companies can now seek talent in places that are far from their offices. They are now able to accommodate talent that doesn’t want to live in traditional business hubs such as New York City or California. 

This will also have a visible impact on the way offices are laid out. Sacarelos finds that it may or may not change the square footage, but it will change the way the office space is designed. New commercial real estate will likely have more collaboration space and fewer offices and cubicles because not as many people will need them as they will probably share spaces more than they will use permanent spaces. Or perhaps, they will not share spaces, but then spaces will be substantially smaller. 

“The ripple effect of remote work and remote work environment is so deep. It is not binary; we are not going to go to the full remote environment because there is absolutely a very real benefit to be around people. But I haven’t talked to a single client that has said we are going back to five day work week in the office. Those days are over.” HLB USA’s David Sacarelos

Commercial real estate is facing many potential changes, and we don’t know yet what the outcome will look like. Some of these changes will be positive; some will be very damaging. For example, online conferencing has advanced ten years in a matter of ten months. It will have a decimating effect on travel and hospitality as the world has seen that business travel does not have to happen anymore in a way that once did. Even big and important business meetings can now happen on video conferences. This shift will reconfigure the dynamics of the marketplace. And although no one can fully predict long term impact, there will certainly be winners and losers. Still, cultural norms are yet to be set as to what can we expect from our employee basis in the future. 


The Rise of SPACs as Format for Tech Companies to Go Public

Going public is a fairly long, drawn-out, expensive process which can take years. SPACs (special purpose acquisition companies) have fast-tracked it, making it much more simple for private companies to go public. 

SPACs are shell companies that don’t have any commercial operations but instead merge with private companies that do have. A SPAC goes out and acquires a private company which makes that company a public company. Merging with a SPAC is a way for private companies to go public without the SEC’s administrative burden. It can be done in a matter of months, rather than taking years to do. This possibility to fast track the process of going public has created a vibrant market in the US regarding potential SPAC targets in Silicon Valley.

The SPACs offer an enticing financing option for all innovative companies, from traditional SaaS companies to FinTechs and electric vehicles companies. Chris DeMayo highlighted that already five companies have announced plans to go public through a SPAC merger at valuations over of billion-dollar. Over the last four months, only one deal didn’t include a SPAC as they offer a faster, cheaper way for tech companies to raise capital, while also being attractive to private equity companies in California. For these reasons, we will likely see many more of this type of funding in the coming years. 

David Sacarelos agrees that this way of going public reduces disclosure at the front end as companies have more opportunities to speak more directly to their investors. Still, for him, the critical question is whether or not these valuations are realistic. There are conversations in Congress and Federal reserves to decide whether or not there needs to be more regulation around this activity. 

Chris DeMayo agrees that SPACs open up challenges for the marketplace for the next couple of years as private companies with thin infrastructure continue to go public. 

Many questions need to be addressed as SPACs proliferate the marketplace. Will these companies have an internal accounting function that will provide accurate financial statements every quarter? Will they be able to speak accurately to Wall Street about revenue projections and growth? These are things they were never trained to do as private companies. Putting that infrastructure in place is part of the two-year process of going public that they are skipping. 

“The risk that I see out there is that so many companies that are going to be targets of SPACs, they are not really ready to be public companies. They are going to snap a finger and all of a sudden they are going to be a public company. The rules of their reporting are no different than rules for a traditional public company…How is that going to affect the market in the future when you have companies that are sort of building the plane as they are flying and going into a big IPO. And now you have public markets that are investing in these companies. They are going to have to really step up.” Chris DeMayo, HLB’s Global Emerging Technology Leader

Final Thoughts From Experts: The Tech Losers and Winners in 2021

We have seen many tech winners and losers during this pandemic. Those companies that provide services to people who stay at home are the clear winners. For example, in pre-pandemic times, Zoom had 10 million subscribers. In just a few months during the pandemic, the company reached 200 million users. Other winners include gaming and streaming companies like Netflix or Amazon as people are spending more time at home and have to entertain themselves. Gaming companies like Nintendo has more than doubled sales during the pandemic. 

There are also tech companies that won in some aspects but also lost in some others. For example, Amazon is perceived to be a big winner, but at the same time, the public raised a lot of concerns about work conditions at Amazon, which is creating a lot of pressure on the company. Finally, there are those identified as significant losers. Companies like Uber, which had to change the business model moving into food delivery space or once-booming tech middlemen like AirBnB and Booking that have also experienced significant losses. 

2020 has seen a massive increase in revenue of the online businesses which were able to deliver goods conveniently. But the impact is not confined to the pandemic. As Chris  DeMayo puts it, that change marks a permanent shift. As people were forced to adopt new technology, now that they have, they will stay with it. Retailers will have to deal with the fact that fewer people will walk into the stores to buy goods, now that they became comfortable buying online. 

This shift spans across demographics. Before the pandemic, younger people were already shopping online, but those in 50-70 year age bracket —  a massive buying demographic — were much less inclined to do so. Now that they have experienced the benefits of online shopping, they are not going back. 

Hospitality will likely struggle for a long time. We will probably see a surge in leisure-related travel when the pandemic is over and people want to go on their vacations. Still,  business travel, traditionally more lucrative than vacations, will be much different over the long term. 

Looking beyond economics, one area that DeMayo finds important is leadership in crisis. When revenue is going north and money is flowing in from investors, it is easier for companies to lead as they face fewer pressures. 

But when a crisis hits, companies that demonstrate a capacity to respond to challenges such as cutting costs, dealing with people, or other difficult decisions to be made, they emerge as leaders. Companies that come through the other side will be better, more solid businesses because they know it is not only about burning cash and how fast they can spend money, but about building a business that can survive adverse events. This may be one of the most important byproducts of the pandemic, which Sacarelos believes we maybe don’t see now, but that will grow out over time. 

David Sacarelos cites technology and healthcare as sectors that will remain at the forefront, but also AgTech where the field robotics and farming are niches that investors keep their eye on. Artificial intelligence and Machine Learning, remote work technology, cloud companies are also expected to fare well and fintechs and businesses related to enterprise, health and wellness. FoodTech, where we see innovative companies creating lab-grown meat and technology run insurance industry, will be essential as well as mobility companies, retail health and wellness. Finally, anything connected with supply chain technology that makes easier to move things is expected to perform well. 

Anant Patel

Global Transaction Advisory Services Leader


Limiting the loss: how to stop the hospitality sector's talent drain


Before COVID-19, big cities such as London, New York, and LA attracted workers from out of town or other countries thanks to their thriving hospitality industry. However, the lockdowns are causing substantial impacts on their economies. 

The revenue per available room (RevPAR) for Hilton, which operates over 6,200 properties across 118 countries, has tumbled 81% from the same period a year ago in the second quarter of 2020. Tourism spending in London is projected to fall by £10.9bn as a result of COVID-19 while 77% of hotels in the US will need to lay off more employees. 

Many experienced hospitality workers are forced to leave the industry and the talent drain can have long-term negative impacts.

The hospitality talent drain

London, with its large population of European hospitality workers, serves as a good illustration of this talent crisis.

Eight in ten workers in the UK hospitality sector were furloughed during the pandemic. In addition, workers who aren’t qualified to be furloughed (e.g., seasonal or contract workers) were left out of the scheme altogether.

Even though some furloughed workers may sit out the economic downturn and return to the industry, we expect that many would not or simply can’t afford to wait for international travel to resume and tourism to bounce back. 

Meanwhile, many highly-experienced foreign workers who have spent years in the UK hospitality industry have decided to return to their home countries and don’t plan to return. In fact, 158,000 non-UK workers have left or lost their jobs in the sector and the number is only going to rise for as long as the restrictions stay in place.

The impact of such a talent drain can be particularly acute for the hospitality industry in which most of the work (e.g., customer interactions) can’t be replaced by automation. Businesses are losing skilled workers who not only excel at their jobs but also have the experience and expertise to mentor the next generation of hospitality workers. This can have a lasting impact on the industry’s competitiveness in the global market.

How to retain hospitality talents

In a relationship-focused industry such as hospitality, companies should do everything they can to retain employees who have that “Midas touch” with customers. To minimise hiring challenges post-pandemic, keep ties with your furloughed employees so you can get them back at a moment’s notice.

  • Communicate your furlough decision clearly to show that you’re treating everyone fairly. This increases the chance of getting the best workers back when you need them.
  • Have a clear written policy on how you adjust to staffing changes (e.g., when outdoor dining isn’t possible due to bad weather) to ensure transparency in your decision-making process.
  • Identify talented employees and promote them to different roles. When you invest in staff members, you reinforce their loyalty and commitment to the organisation.
  • Take care of your furloughed workers. For example, continue their healthcare coverage, offer meal care packages, and provide job training opportunities.
  • Keep the line of communications open with your furloughed workers. For instance, hold weekly town hall meetings to keep them connected and provide resources to help them through tough times.
  • Identify new opportunities in which work can be done remotely so you can shift your most prized employees to work on those initiatives instead of letting them go.

The hospitality industry needs to hang onto experienced talents now more than ever. Otherwise, it’ll suffer when demand picks up. Industries leaders should invest in retaining talents to ensure that they don’t lose expertise and knowledge during this critical time.

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Preventing Financial Fraud - Ensure your organisation is protected

By Raghunath T, HLB UAE


According to the Federal Trade Commission (FTC), in 2019 a reported $1.9 billion was lost to financial fraud, and that represented an increase of over 15% from the previous year. However, not all financial fraud involves companies losing money in an immediately quantifiable manner. Often, the fraud centers around deception that results in a slow drain of funds or drop in profitability that can span several years. Regardless of the immediate or long-term effect, it’s important to know how to pinpoint—and stop—financial fraud before it affects your bottom line.

Evolution and Types of Financial Fraud

The most common types of financial fraud involve inflating earnings through various means. The objective is to keep specific groups of stakeholders happy. This often includes private investors, the stock market, or people or organisations holding the company’s debt. There are several ways this kind of fraud is levied, but some of the most common include:

  • Extending the period of depreciation to delay when the depreciation gets factored into the company’s accounts. Many assets depreciate, steadily, year-to-year. If a valuable asset’s depreciation is left off the books for an extra year or so, stakeholders can be fooled into thinking the company’s financial performance is more valuable than it actually is.
  • Hiding liabilities by shifting debt from the main company to a special purpose entity. This kind of fraud involves creating or maintaining a separate company that the main company can shovel off its debt to. The entity’s balance sheet reflects the debt that used to be on the main company’s records.
  • Recognising revenue early while delaying the recognition of expenses. Some companies will enter their revenue but leave out the funds they spent to make that money until a later date. When both are, eventually, included, the books balance true. But before then, it looks like the company’s revenue to expense ratio is a lot higher than it actually is.
  • Incorrect capitalisation of expenses. When a company capitalises something, they categorise it as an asset instead of an expense. As a result, it shows up on the balance sheet instead of the income statement, which accounts for expenses. If an investor or other stakeholder were to ask to see the income statement, this potentially sizeable expense wouldn’t be factored in, artificially inflating the company’s performance.
  • Factoring in non-existent inventory to fraudulently reduce the cost of goods sold (COGS). The lower your cost of goods sold, the more efficient your company’s production system looks. To calculate COGS, the Initial inventory is added to Purchases made during the period and the period ending inventory is deducted. So, if a company pretends that they have more inventory at the end of the period, their COGS is lower, making them look better to investors.

Cases of Financial Fraud

The history of financial fraud is long and complex, but here are some of the more notable examples.

One of the largest and the most high profile frauds was that of Enron.

Enron, which was once a poster boy of Wall Street, was found to have engaged in serious  fraudulent activity which involved keeping large debts off the balance sheets. While the high stock prices did arouse suspicions, it was eventually an internal whistleblower’s revelations that  led to the downfall of the organization. The scandal ended up costing shareholders around $74 billion and resulted in the creation of the Sarbanes-Oxley Act of 2002.

In 2016, the car manufacturer Volkswagen was embroiled in a scandal that ended in a settlement estimated to be in excess of $25 billion. This was not a direct financial fraud, but nevertheless, one that had serious financial consequences . In order to avoid failing to meet emission standards set by  authorities in the US and other markets, Volkswagen installed software in their vehicles that enabled them to fool emissions testers. Thus, vehicles tended to show far lesser emission levels than actual and were considered roadworthy. Once the cover-up was unearthed, it led to a recall of almost 500,000 vehicles and led to serious financial and reputational losses for the company.

Other cases like the Lehmann Brothers scandal that triggered the economic recession in 2008, the Wells Fargo scandal and Bernie Madoff’s outrageous Ponzi scheme were also noteworthy, but the unfortunate situation is that despite all efforts from authorities across the world, there are still several cases which continue until this day.

The most high profile case in recent times was that of the German financial services company Wirecard.

The Wirecard scandal has been dubbed the “Enron of Germany.” The payment provider falsified their books by reporting money that simply did not exist, executing a fraud that spanned the globe. They owed creditors nearly $4 billion. While the CEO was arrested, their COO, who was considered to be a key figure in this scandal, is still missing at the time of writing this article.

The Next Big Bubble—Cryptocurrency Fraud

Cryptocurrencies have reached a total market capitalisation of $600 billion. This is only a small fraction of fiat currencies worldwide, which are valued at around $36.8 trillion, but this doesn’t minimize the potential for cryptos to be exploited by fraudulent actors. There are several reasons why fraudsters may soon target cryptocurrencies.

No Sovereign Backing

The value of a currency is driven by the financial health of the body that issues it. For example, the US dollar has more value than the Jamaican dollar, primarily because the US economy is more stable and powerful. The value of each currency is relative, and a country’s gross domestic product (GDP), exports, imports, and other factors all affect how much their money is worth in comparison to those of other nations.

While Bitcoin does have the likes of Elon Musk endorsing it, there is no sovereign backing for the currency. Therefore, the only thing anchoring their value is the speculation of investors. Without verifiable financial fundamentals, fraudulent actors could swing the value of cryptos without being checked by a regulatory body.


Bitcoin, which comprises 66% of the total cryptocurrency market cap, went from being valued at $1 to $32 per coin in just three months. Fast-forward to the time of writing, and a single bitcoin is worth over $40,000. However, this is more than 10 times what it was in December 2018 when it dropped to around $3,400.

The meteoric rise and falls experienced by cryptocurrencies have created an atmosphere where large fluctuations are the norm rather than the exception. Sudden dips or drops in value hardly raise an eyebrow, leaving open the possibility for widespread valuation fraud.

Lack of Clarity

There’s a cloud of confusion around how cryptocurrencies work, as well as their vulnerabilities. As a result, many seasoned finance professionals and institutions have warned investors to steer clear of cryptos.

Cryptocurrency infrastructure depends on people using computers to solve mathematical problems, called hashes, on a register called the blockchain. While blockchain infrastructure itself does a good job of rebuffing hackers, the anonymity cryptos provide, as well as the lack of financial oversight, provides fertile ground for fraud.

How Can Organisations Ensure That Financial Frauds Are Better Prevented?

The good news is that financial fraud can be prevented. There are several steps companies can take to prevent fraud from impacting their organisation, its partners, and customers.

Study the Governance Mechanisms

The governance infrastructure of a company can form the foundation of a fraud-prevention strategy. This would necessitate strong governance mechanisms at the board level, including the board’s constitution. A thorough examination and evaluation of the constitution is best performed by external experts with the various tasks involved given to separate committees.

It’s also important to delegate authorities effectively, making sure the right people are in charge of examining the most fraud-sensitive areas of the organisation. One way to make these authorities’ jobs easier is to implement whistle-blower policies that provide protection for those that speak up when they see something wrong.

To prevent fraud before it takes root, it’s important to perform due diligence on customers and suppliers. In addition, at times, employees also have to be investigated to mitigate the risks posed by internal vulnerabilities. This can be done by limiting the tenure of people in key positions, as well as re-examining the rights of people who have access to sensitive systems.

Audit Environment

A healthy audit environment sets the stage for a more thorough and transparent audit procedure. This requires clear and independent external and internal audit charters. In addition, there needs to be open communication between external and internal auditors, including those on audit committees. At times, the roles of audit committee members should be re-evaluated to ensure the integrity of the process.

Stakeholder Relationships

Certain stakeholders are naturally more compelled to attempt fraud than others. Here are some questions to ask to make sure your company is remaining vigilant:

  • Are there instances of exceptionally favourable or unfavourable financial terms with banks?
  • Are there suppliers who appear to be getting exceptionally large shares of the business or are paid far higher than market rates?
  • Are there customers who appear to be getting significantly more favourable prices and terms than others?

These kinds of questions can help identify those who may be more likely to levy fraud against your company. Digging into the answers can help you stay a step ahead.

Business Model and Sector Performance

While there are always outliers, in most cases, a company’s performance should be similar to others within its sector. This is typically true because they often have similar target customers and deal with the same, or parallel, micro- and macro-economic factors. Therefore, it’s prudent to raise questions such as:

  • Is the business model clear and sustainable?
  • Is the auditor able to visualise what this company would look like financially in the next 5 or 10 years?
  • Is the company reporting earnings significantly more than its peers? If so, is there a clear competitive advantage that it has that justifies this earning?

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Brexit: What the UK-EU trade and cooperation agreement means for businesses


After nine months of negotiations, the UK and the EU have reached the UK-EU Trade and Co-operation Agreement that will govern large bilateral trade worth more than £650 billion. Coming against the backdrop of surging Covid-19 cases in the UK, the deal sets out a new relationship with the UK’s biggest trading partner.

We look at the main aspects of the deal and their impact on businesses after the UK became a so-called “third country” — one that is outside the EU’s single market and customs union.

Trade in goods

The agreement, which appears to mostly cover trade in goods, ensures zero tariffs or quotas on trade between the UK and the EU for goods produced in either of these markets. But to qualify for zero-tariff trade, exporters will need to demonstrate the origin of their goods to benefit from the preferential tariff rates agreed in the trade agreement. This requirement, also known as rules of origin, means that exporters need to certify that their goods are locally sourced to avoid tariffs. To qualify as locally sourced, UK’s goods must have approximately 50% of UK content for most products, which is incredibly hard in many cases — particularly challenging for companies with complex international supply chains.

These rules will not come into effect before the end of the year to give companies exporting goods between the UK and the EU enough time to provide the supporting paperwork from their suppliers proving their goods are eligible for zero-tariff access to the EU. But although businesses will have twelve months to adapt to the new trading environment, the government is clear that they must make every effort to obtain suppliers declarations retrospectively. 

This means they should ensure that their goods comply with rules of origin before self-certifying that they’re eligible for zero tariffs, as, after the 12-month grace period, they could be required to provide these documents as part of compliance activity. Although the deferral of the rules of origin provides some breathing space, there is not enough clarity over the issue, particularly around the treatment of potential early errors before companies become fully adept with red tape introduced by the agreement.

Although there will be no tariffs or quotas on goods for qualified goods, a delicate “rebalancing mechanism” was introduced to preserve the EU’s “level playing field” with the UK. Subject to arbitration, this mechanism allows the EU to restrict access to the European market if the UK diverges too far from EU standards. Under the rebalancing mechanism, potential tariffs don’t always need to be applied to the same policy area where the dispute occurs. Despite a tariff- and quota-free trade deal at present, there is no guarantee in this agreement that this will remain in the future. 

Thus, although the level playing field agreements allow the UK to deviate from EU rules, such a decision may prove not to be worthwhile in many cases. But this time, disputes and arbitration mechanism will not fall under the European Court of Justice realm but will be subject to an arbitration panel instead. All those decisions would have to go to an independent arbitration panel involving representatives from both sides and independent experts or judges. Since it’s not always easy to prove that fair competition is being distorted, the new arbitration system’s role will be crucial and could become even controversial.

Trade is expected to become a lot more burdensome, with a complex set of new customs and regulatory checks, slowing down cross-border economic activity while businesses adjust to the new reality. What was once unrestricted trade flow now will become subject to red tape, including rules of origin, safety checks, customs declarations and stringent local content requirements.

Professional services

As the trade deal failed to achieve pan-EU mutual recognition of professional qualifications, there will no longer be automatic recognition of licenses and professional qualifications. This will likely have a negative impact on trade in services, a sector that makes up close to 80% of the UK economy and one where the UK has a comparative advantage.

This means that professional services such as accountancy, auditing, legal services, engineering, advertising, market research, recruitment services, etc. must have their qualifications recognised in each EU member state where they want to work. Short-term business trips and temporary secondments of highly skilled employees will be excluded from this regime.

Financial services: Negotiations continue

Since the current agreement does not cover financial services — a sector that contributes 7% of the UK’s economy —  the country’s access to EU markets is yet to be determined by a separate process, which leaves considerable uncertainty about how the EU – UK treatment of financial services is likely to evolve. If the EU does not unilaterally grant “equivalence” to the UK and its regulated companies, British firms will need to seek permissions from individual member states where they want to operate.

At present, with the end of so-called pan-European passport, UK-based firms can no longer provide cross-border financial services to EU clients or establish branches in member states based on an authorisation they obtained under their domestic law. This means that UK entities will have to provide services as a branch of a third country entity or through a subsidiary in a member state holding the necessary authorisation in that member state.

Many EU laws on financial regulation can grant third countries equivalence if a regulatory framework achieves outcomes “equivalent” to those of the EU’s, which may be the option for the UK too. However, equivalence does not cover many core banking and financial activities. Equally important, equivalence decisions can be withdrawn at any time at 30 days’ notice. They may also be affected by political rather than economic factors.

While both sides clearly committed to future dialogue on financial services through a (non-binding) Joint Declaration, there is no clarity as to what shape this cooperation is likely to take.

Still, even if the EU grants equivalence, it is much less robust framework than broad, wholesale market access. Similar arrangements the EU has with the US and Japan.

Free movement of people and immigration: points-based system

Freedom of movement between the United Kingdom and the EU has ended, which means people can no longer move unrestricted between the two regions to work and live, although short visits remain visa-free.

The new UK points-based immigration system governs the process from the UK’s side, but the rules for UK workers seeking to work in EU countries are more fragmented as freedom of movement has been replaced by a patchwork of national immigration schemes.

The UK would no longer participate in the Erasmus program enabling EU students to study at a different European university. Instead, the country plans to replace Erasmus with a Turing program, enabling its students to spend time at universities worldwide.

Other considerations

Contrary to the EU’s initial demand, the UK will not copy EU state aid rules directly. Instead, the country will set up an independent state aid authority.

A new joint body called Partnership Council, consisting of more than twenty committees and working groups, will be established to monitor how the relationship develops in the future and seek to resolve disputes when necessary.

There will be an automatic review of the agreement after five years, but both sides can call for a formal review of the entire agreement if they think it isn’t working. This means that as a political issue, the deal may remain open in the future. For example, if the UK government at any point in the future gives more weight to access to the European market than to the notion of sovereignty it could choose to interpret the deal in a different way.

Unlike their British peers, businesses from Northern Ireland will not be subject to non-tariff barriers such as certifications, checks on goods and paperwork. Due to historical reasons, a special arrangement — Northern Ireland Protocol —  was put in place to prevent the resurgence of a hard border between Northern Ireland and the Republic of Ireland, which means this part of the UK will effectively remain within the EU’s single market for goods, following EU customs rules.

Final remarks

Just days before the deadline, after months of tense negotiations, new rules for trade between two blocs were finally agreed. A significant milestone has been achieved at the eleventh hour, ensuring tariff- and quota-free trade. 

Still, the agreement has left a great deal of uncertainties, particularly in the area of financial services, but in other areas too. Although the two sides can diverge from agreed standards, safeguards are put in place to secure fair competition — a “rebalancing mechanism” managed by arbitration. 

This means that the future relationship and the framework governing cross-border economic activity may remain a source of potential frictions between the two regions. In the end, the agreement itself will be subject to a five-year review. This will all make Brexit more of a process rather than an event.

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