IPCC: No One Is Immune From Effects of Climate Change

The Intergovernmental Panel on Climate Change (IPCC) has issued the 32-volume, 2,610-page report on the changing global climate. The report sounds a clear alarm that global climate change is accelerating and its consequences are having immediate impact on the world’s ecosystems. 

Scientists warn that steps must be taken to mitigate the social impact of climate change and prepare communities to adapt to shifting environmental conditions. 

This is the fifth report issued by the IPCC. The first report was published in 1990 with subsequent updates issued every 5 years. The report, prepared by teams of independent scientists noted two immediate consequences of global warming. Michael Oppenheimer, a lead scientist on the commission noted; “the first consequence is rising mortality rates due to heat waves. Last year over 35,000 people died as a result of prolonged heat waves. Another current impact of climate change is declining crop yields. The study reports that occurrences of declining crop yields dramatically rose while occurrences of increase yields steeply declined”.

Earlier reports of the IPCC advocated for the need to slow the rate of growth of carbon emissions with Cap and Trade market mechanisms. Failing to do so, the world would begin to experience the adverse effects of climate change by the close of this century. Subsequent reports indicated that evidence of climate change was growing and shortened the time frames when the impact of global warming would occur. The report released today indicates that the effects of global climate change are presently occurring and immediate action is required to mitigate the risks and adapt to the inevitable changes in the global environment.

Examples of the effects of climate change cited in the report are numerous. Persistent drought conditions in the Western United States, Australia and Sub Saharan regions and its effect on crop failures, agricultural yields, massive wildfires and water shortages. Accelerated glacial melt in the Himalayas, North America, the Polar Regions and Greenland and its impact on ocean currents, sea rise levels and massive mega storms that are growing in intensity and frequency. The thawing of permafrost soils near the Arctic Circle is releasing massive amounts of methane gas accelerating the greenhouse effect. Deforestation and clear cutting of old growth forests, and the burning of the Amazon and Indonesian flora biomass produce massive carbon emissions into the atmosphere. Paris, Beijing, Mexico City, Dallas Fort Worth and Singapore routinely experience poor air quality conditions due to excessive burning of fossil fuels. 

As the evidence of global climate change proliferates the divisive politics it engenders grows. Climate change deniers seem to represent industry segments tied to the use of fossil fuels. To solve the complex problem of global climate change the diverse interests of competing stakeholders must be moderated by leaders endowed with the political will to address this multifaceted social problem. 

Risk managers representing private industry, government agencies, community planners, disaster response and NGOs must fully engage the threats and opportunities presented by global climate change. Understanding the increasing velocity of this threat, its growing complexity and interconnectedness to other problems, its growing pervasiveness across regions and ecological topographies and how geophysical conditions aggregate multifaceted factors that compound the problem; make mitigation initiatives and adaptive strategies difficult to implement. Risk managers must transcend narrow parochial interests to engineer innovative solutions to these multidimensional social problems. 

Sum2 understands that humans cannot escape the geophysical conditions of our earth bound home. People and communities cannot escape the realities of geophysics. Citizens are called to engage the challenge of global climate change with courage, thought leadership and inspired innovation. 

Get risk aware with Macroeconomic Risk and Event App (MERA) on Google Play; a Mobile Office app that runs on MS Office and Android. MERA helps SME's assess emerging risk factors to mitigate and adapt to the challenges posed by global climate change.

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risk: IPCC, Report on Global Climate Change, agriculture, aquaculture, political stability, water rights, mega storms, greenhouse gases, wildfires, air pollution, smog, deforestation, regulatory, report, climate change

PwC's Risk in Review 2014

Pricewaterhouse Coopers (PwC) has published its annual Risk in Review survey. Nearly two thousand global corporate professionals representing a broad cross section of industries responded to provide insights into how their organizations meet the challenges of enterprise risk management.

The study was published against the backdrop of an emerging Eurozone recovery, US Sequester driven GDP decline, BRICS vacating the leadership role of global market drivers, the factory collapse in Bangladesh, the political turmoil of the implementation of the Affordable Care Act and Eric Snowden’s revelations of NSA privacy violations. 

The previous year survey reflected the perspective of corporate managers still smarting from the economic effects of the Great Recession and global credit crisis; by anointing financial distress and market uncertainty as the principal driver of corporate threats. This years survey cited technological change, IT risks, regulatory complexity and rapidly changing customer needs as the primary focus of corporate risk management programs.

The survey examined the intimate relation of external risk factors and how the organization has aligned its internal GRC processes to address both external and internal risk. The survey identified the ten most common risk management capability gaps. It also offered an evaluative framework to distinguish corporate risk leaders, early stage adopters and organizations beginning to develop a more formalized risk aware culture. 

The survey is an excellent examination of the components of a risk aware enterprise and a proposed framework to develop a risk aware culture within a commercial enterprise. The survey can be downloaded from the PwC website. 

In future posts we will examine some of the major points the survey raises to promote a more risk aware corporate culture.

Sum2 publishes a series of risk management apps for SME’s. Our leading product Credit|Redi provides a full complement of risk assessment tools to implement a risk aware corporate culture. Credit|Redi generates in-depth financial analysis reports that spot strengths and weaknesses in a company's financial condition. Credit|Redi also provides a series of enterprise assessment applications to monitor risk and determine opportunities for business growth to build a risk aware enterprise that wins the confidence of lenders and stakeholders.

Get Risk Aware on Google Play here. Get Credit|Redi

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Risk: GRC, PwC Risk in Review, SME, risk culture, ERM, IT, customer risk, capability gap, risk appetite, change management, stakeholder communication, regulatory risk 

SME World 2014: Transparency Gets the Loan

Though 90 per cent of Dubai registered companies are small and medium enterprises (SMEs), just 4% of all business loans goes to SMEs. In developed economies lending to SMEs goes well into the double digits. 

Vikas Thapar, CEO, SME Business, Emirates NBD, offered this observation during a panel discussion at SME World 2014 in Dubai. Mr. Thapar went on to explain that banks are reluctant to provide loans to SMEs because of regulatory compliance restrictions and the lack of transparency in SME business.

Questionable financial health and lack of transparency are two of the principal reasons small businesses get turned down for loans. Lenders need objective insights into a small businesses financial condition. Lenders also require a level of confidence in an SME's business plan to determine creditworthiness. Meeting these two conditions by lenders are critical steps to securing financing from lenders. 

SMEs improve their chances of getting the funds they need to finance growth by demonstrating creditworthiness. SME's accomplish this by providing lenders with an objective credit rating and financial health assessment report. Self generated Z Score reports are excellent measures of an SMEs creditworthiness. A Z Score credit rating combined with a well thought out business plan offers lenders the degree of transparency they require to close a loan with an SME.

Credit|Redi is a tool that demonstrates an SME's creditworthiness to lenders and capital providers. Credit|Redi generates a Z Score credit rating and in-depth financial analysis reports that spot strengths and weaknesses in a company's financial condition. Credit|Redi also provides a series of enterprise assessment applications to review problem areas and determine opportunities for business growth to build a bullet proof business plan that wins the confidence of lenders. 

If your business is looking for a loan or trying to raise capital:

Get Credit|Redi on Google Play here. Get Credit|Redi

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risk; sme, credit redi, sme lending, credit risk, Z Score, credit rating, SME World 2014 Dubai, Vikas Thapar CEO SME Business Emirates NBD 

A Taxing Problem: Digital Assets and Global E-Commerce

The Independent reports that Ireland's Chartered Accountants are warning that "new OECD proposals on taxing hi-tech multinational companies will fundamentally change business landscape." 

The OECD has published a draft discussion on companies operating in the digital economy.  The question of determining tax liability for companies with a business model spanning multiple countries is a growing concern for national tax agencies. Outsourcing, offshoring, the use of tax havens and global e-commerce are perplexing tax authorities seeking to enforce outdated national tax codes written before the explosion of the global digital economy. 

The report proposed redefining when and where a company is liable for tax; suggesting a company would have a tax liability in a country where it had a "significant digital presence".

Ireland is particularly sensitive to this issue in wake of it's recent tax dispute with Apple and other multinationals with operations in the tax friendly EU nation.

Revenue recognition in a rapidly changing global economy with a growing preponderance of digital assets, intellectual capital and digital specie like Bitcoin raise important questions for corporate managers, tax authorities and regulators. Defining revenue, asset types and national jurisdictions of taxing authorities pose great challenges for tax professionals, corporate management, legislators and revenue agencies. Leveraging global disparities in national tax laws to arbitrage local tax codes is the mark of shrewd treasury management. It can also raise questions with tax agencies.

SME's involved in global digital e-commerce must become aware how the evolving tax code opens the door to tax controversy that rises audit risk factors from national revenue agencies.

Sum2 developed the IRS Audit Risk Program (IARP) to provide SME’s an audit risk assessment tool to keep the taxman away from the door. IARP outlines tax code focus areas where caution should be exercised when filing tax returns. Business owners can rest a bit more easy that audit risk is being effectively managed. Get Tax Audit Aware with IARP.

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Risk Bitcoin, CPA, digital assets, e-commerce, EU, global economy, IARP, income repatriation, Irish Independent, IRS, multinational, OECD, off-shoring, outsourcing, revenue recognition, risk: tax, sme

SME's Stand Their Ground to Close the Loan

Terrific piece on SME lending in yesterday's Irish Independent. 

More than half of all lending decisions appealed to the Credit Review Office by small and medium enterprises (SMEs) are overturned. This is a good lesson for SME's to be persistent in the face of rejection. SME's that can show confidence in their business prospects and demonstrate a creditworthiness can turn a negative decision into a green light. The key to this happy reversal of fortune is being able to provide evidence of creditworthiness and present a business plan that will use the loan capital wisely to produce profitable business growth. 

The Credit Review Office was set up to make sure that loan applications by SME's received fair consideration by lenders. The EU banking sector was severely effected by the global credit crisis. The EC "PIGS" (Portugal, Ireland, Greece and Spain) were especially hard hit. 

When the credit bubble popped, asset valuations dropped like a rock. The good fortune of SME's evaporated as the drivers of their prosperity,real estate, construction and service sectors crashed.

SME's were confronted with two immense business challenges. The first was creating a business that could adapt to a drastically changed business environment. The other was to convince lenders in a capital constrained economy that they were a good credit risk and that their business plan will generate sufficient returns to grow the business and pay off the loan.

Credit|Redi is a tool that demonstrates an SME's creditworthiness to lenders and capital providers. Credit|Redi generates a Z Score credit rating and in-depth financial analysis reports to spot strengths and weaknesses in the company's financial health. Credit|Redi also provides a series of enterprise assessment applications to review problem areas and determine opportunities for business growth to build a bullet proof business plan that wins the confidence of lenders. 

If your business has been turned down for a loan don't give up.

Get Credit|Redi on Google Play here. Get Credit|Redi

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risk; sme, credit redi, EU, Credit Review Office, Irish Independent,  sme lending, credit risk, Z Score, credit rating,"PIGS", Portugal, Ireland, Greece, Spain, ECB, AIB

 

File an FBAR or Find Yourself Behind Bars

A few years ago the IRS offered a tax amnesty program for US citizens who failed to declare assets held in foreign bank accounts. This came on the heels of a highly publicized legal action against UBS. The IRS forced the Swiss based bank to turn over the account information of US citizens. The IRS was clamping down on tax evaders, exploiting the protection of Switzerland's bank secrecy laws to hide income and assets. The IRS was looking to determine if FBARs had been filed by the banks American clients.

Individuals and corporations with assets greater then $10,000 held in foreign bank accounts must file a Foreign Bank Account Report (FBAR) with the IRS or face potential legal action.

UBS counted 52,000 US citizens as private banking clients. It would be safe to assume that most of those accounts had balances greater then the $10,000 declaration threshold. 

Any US investor participating in a foreign based fund partnership or investment vehicle must also file an FBAR. High Net Worth (HNW) investors and their tax advisers should conduct due diligence on private bankers and asset managers to confirm that FBARs and appropriate declarations and forms have been filed by investment partnerships and their administrators. HNW tax advisers should contact the chief compliance officer at the fund to request an attestation letter stating that the fund is in full compliance with foreign bank reporting requirements.

Bernie Madoff and Sir Allen Stanford may look good in orange prison jumpsuits but that doesn't mean it will look good on you. Don't become a slave to fashion. Get compliant. Check with your tax adviser to make sure FBARs are filed.

Get compliant and file an FBAR with Sum2's AML SAR Filing BSA Reporting App. The app is used by financial institutions, compliance professionals and industry service providers to comply with Anti-Money Laundering (AML) best practice provisions and regulations. Protect your clients and your business from money laundering risk with this critical compliance application.

Since 2002,  Sum2's AML compliance products have helped investment managers, broker dealers, MSB's, banks and credit unions comply with the AML provisions of The Patriot Act, BSA Reporting and OECD best practices. 

Get AML aware. Download AML SAR Filing / BSA Reporting App on Google Play.

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Risk: AML, FBAR, legal, compliance, tax, reputation, criminal prosecution, IRS, OECD, Patriot Act, MSB, private banking, hedge funds, CPA, UBS, Credit Unions, SAR filing, BSA Reporting

Singapore Sling: Basel III Amps SME Credit Risk

SME lending just got more expensive in Singapore. Basel III capital requirements has increased the risk weighting on SME loans. Banks are now required to set aside more capital to protect against SME loan defaults. This will drive up the cost of capital for SME’s as lenders pass on added costs to borrowers to maintain healthy margins on SME loans; Singapore’s Business Times reports.

SME’s are a critical driver of economic growth in Singapore. Bank loans to the segment grew more than 10% in 2013. At DBS Bank, SME lending produced a $1.8 billion increase in revenue. 

The Government of Singapore has long been friendly to SME's and remains committed to support the segment as a keystone to the economic recovery of this vibrant Asian Tiger. The government has maintained a risk sharing program to guarantee 50% of an SME loan. Due to the increase in the loan loss reserves mandated by Basel III; the government will now increase its risk share to 70%. It is hoped that this will protect the the flow of capital to SME's.  

This regulatory initiative is another example of the compounding macroeconomic risk factors confronting SME’s. Shifts in credit market conditions and healthy functioning credit channels are major risk factors for SME’s. Acute macro risk, forces market players to compete for capital during restrictive business cycles. SME’s must assess macroeconomic risk factors surrounding the capital funding landscape to maintain profitability.

Get risk aware with Macroeconomic Risk and Event App (MERA) on Google Play; a Mobile Office app that runs on MS Office and Android. MERA helps SME's  assess emerging risk factors to profit from the opportunities shifting markets present.

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risk: sme lending, regulatory, credit risk, Basel III, Singapore, DBS Bank, OCBC, UOB, macroeconomic risk, Strait Times, Singapore Business Times, government spending