The Law of Numb3rs

There is no need to mention the migrant crisis anymore, as it will certainly go down in history as one of the largest humanitarian crises the world has ever known.  From genuine economic concerns to grotesque sensationalism, it has birthed many heated debates in the public sphere.

Views ranging from ‘a national threat’ to ‘an economic opportunity’  have being expressed, with voters being harangued by political candidates about the issue.  The Economist‘s cover sums it up quite perfectly:

The topic, however divisive, has been repeatedly de-bunked by the substantial amount of research and literature that has emerged.

This month’s edition of The Internationalist includes a great feature on 10 Economic Myths. The full list can be seen here . We won’t relay the whole feature of course, but nonetheless wished to mention Myth n°4: “Economic migrants are a drain on rich world economies”

Dinyar Godrej, editor, comments: ” In the public mind, inflamed by the rhetoric of both mainstreram media and politicians seeking to distract the electorate from the ravages of austerity, economic migrants are perceived as guzzling public services when not stealing jobs and lowering wages. But looked at more soberly, in the light of research, such imagined impacts are wide off the mark. On average, across the 34 wealthy nations of the OECD, immigrant households made a net annual contribution of €2,500($2,800) each – that’s how much more they contributed in taxes than they received in public provision.”

While the sensationalism of political campaigning can easily get us to feel emotional about the migrant crisis, we strongly encourage looking at numbers, always looking at numbers before buying into flamboyant tirades.

OECD Report: Is migration good for the economy?

Financial Times:  A short-term burden, refugees may yet boost sagging EU economy and, as a counterpoint, Martin Wolf’s The benefits of migration are questionable

Reuters, EU executive sees 3 mln migrants by 2017, likely to boost economy

New York Times, EU predicts economic gain from influx of migrants

 Business Insider, Credit Suisse: Europe’s inflow of migrants is good news for the economy in the short term and great news in the long term

Bruegel, How will refugees affect European economies?

TEDx Amsterdam: What’s Your ‘Big Question”?

Last Friday’s TEDx event at Amsterdam’s Stadsschouwburg was spectacular.

From the eclectic speaker line-up to the creative networking activities during the breaks, the programming team did a very impressive job at keeping the event interactive. Guests were encouraged, on livestream and through various installations, to ask their “Big Question”, from “How to deal with the refugee crisis” to “How can we save the rhinos?”

In the current humanitarian context and with COP21 kicking off today , it was hard not to notice that environmental and social governance topics are prevailing more and more.

HRH Princess Margriet, a member of the Dutch royal family and volunteer for the Red Cross, addressed the various ways in which we can prevent natural disasters from becoming humanitarian catastrophes.

Shayne Smart, one of the TEDx Amsterdam finalists, proposed translating human rights from the Geneva Conventions into visual signs and ideograms, visible at country borders just like traffic signs, so they can be easily understood and shared across the globe.

Zelda La Grange, Nelson Mandela’s former personal assistant, was there to speak on how her unlikely appointment– she voted for the opposition prior to working for ‘Madiba’ – made her question, and eventually, reject, the white superiority ideology that the isolated community she grew up in had taught her.

And since we’re talking about challenging the status quo, what better than a black Sinter Klaas strolling around the venue to get everyone talking? After all, doesn’t his cane look like a big question mark?

Photo credit: Bas Uterwijk

Has the Internet Failed Us?

As financial PRs, we live and breathe the news, but with the world on high security alert in recent weeks, we have been following the media even more keenly.

Last week, as a frantic manhunt was unfolding in Paris, a top French intelligence chief invited to speak on news channel France 24 made alarming remarks about the failings of secret services.

He noted that, while professional Internet hacking has made tracking down terrorists easier, secret services missed the mark by not having secret agents physically infiltrate strategic circles in the latent stages, the ‘old school’ way.

Of course our line of business does not save lives, and in no way involves infiltrating terrorist factions. Not only that, but we often meet rather keen, intelligent people doing both profit-oriented and socially constructive work.

However, with the prevalence of social media, engaging in physical circles in a less targeted way, it seems, is becoming a lost art across the board.

Social media is not the culprit – rather, it is our overdeveloped habit of relying excessively on the Internet both for business intelligence and networking. We tweet, post, share, but how many of our sources, whether business owners, experts, journalists, or intermediaries relaying information have we truly sought face-to-face contact with in recent weeks, months, or even years? While the digital revolution has given us all kinds of tools to do our work more effectively, we are still in the infant phase of learning how to use them.

And even where matters of life and death are concerned, if secret intelligence services can have such slip-ups, how likely is it that we are missing out on creating long-term value, and better safety nets for our businesses?

 

 

 

 

Nation Branding: the “Cool” Duchy?

Credit: Cheese Lu

“The only remaining global superpower is international public opinion….that of seven billion people.”

Simon Aholt, an independent policy advisor, and creator of the Good Country Index, is often quoted for this brilliant aphorism he used during a TEDx talk in Amsterdam in 2014.

In this day of viral information, successful “nation-branding” – a term Anholt coined himself in 1998 – is a reigning factor in any country’s financial welfare, including one of today’s enduring monarchies: Luxembourg.

In a way not quite comparable to England’s “Cool Britannia” renaissance of the mid-90’s, Luxembourg has, in recent years, taken giant strides to add colours – literally and figuratively – to its international image.

Through generous state funding, the Grand Duchy has launched a number of cultural initiatives, and despite its persistent image as a concrete-laden tax haven, it now boasts a number of art festivals, concerts, carnivals, and even a women’s tennis tournament.

Of course, a drive through downtown Luxembourg is nowhere near as picturesque as its medieval city centre, but isn’t that contrast a trait of most cities? A thousand of the country’s inner landmarks have made the UNESCO World heritage list.

In this era of trendy liberalism and fluttering rainbow flags, it is not completely irrelevant to mention that staunchly Catholic Luxembourg has elected a gay Prime Minister, who married his partner during this year’s Diversity Week – another of the country’s highly-publicised moments of multicultural pride. The Prime Minister is also known for two of his most controversial reforms, replacing catechism classes with ethics classes, and – a no brainer – legalising gay marriage.

Why does Luxembourg even need to make itself more attractive, you may ask? Can it not be satisfied with its tax haven status, and being one of the richest countries per capita in the world?

The truth is, Luxembourg’s tax haven status has suffered greatly in recent years. The country’s generous tax breaks culture backfired, contributing to the deceiving “too big to fail” status of giant corporations – one of the key triggers of the financial crisis. The forced overhaul of the bank secrecy culture, and increasing demand for transparency, has done no favours for the country’s reputation. Moreover, like many other nations, Luxembourg has received its prescribed dose of scandal – more recently, when Luxleaks revealed that the country had offered “sweetheart” deals to multinationals. But, especially after Germany’s recent Volkswagen scam, you would be hard-pressed to find one country that has not yet been involved in dodgy dealings.

Anholt highlights that what determines the ultimate value of a country is, not how much it’s worth, but how much it gives. In this regard, it has been a good year for Luxembourg’s value as a nation. With $119 per inhabitant dedicated to international humanitarian aid, Luxembourg was ranked second, right after Kuwait, in a recent independent report on national net revenue allocated for humanitarian aid. Luxembourg also welcomed 398 refugees from Syria in September.

Luxembourg came 16^th in the Good Country Index Overall Rankings, 10^th in the Culture Index, and 12^th in the Planet and Climate Index.

The Case for Stability

With over a 1,000 of them available to investors, the popularity of multi asset or balanced funds has been growing continuously over time.

Built towards maintaining the steadiest possible returns through Bulls and Bears, these funds tend to attract the most conservative and risk-averse of investors. Consistency and diversification are key components of these funds, which aim to protect investors’ portfolios from steep loss curves, rather than trying to drive the highest possible returns at the cost of later sharp dives.

While no investment approach is ever a fool proof shield against losses, the methodology of such funds is worth taking a look at, in particular because of their seemingly counter-intuitive approach: instead of relying on a large macro calls to grow the fund, they try to maintain a balance over time, in order to withstand any market environment.

As they make an art out of risk-balancing, such funds can be used as a cornerstone for an investor’s portfolio, providing some elbow room to make more risky investments throughout the rest of it.

Using volatility to one’s advantage

Stable return funds are not emotion-prone – in fact, portfolio management teams aim to achieve the opposite. “In the last three months, some investors have caught on the euphoria of the sharp rise in UK and US bond yields”, remarks Asbjorn Trolle Hansen, Head of Multi-Asset at Nordea Investment Management. Despite such peaks, the Nordea 1 –Stable Return Fund stuck to its philosophy by not divesting from those bonds. “Investors may have opinions about what is happening in these markets, but we do not let ourselves be distracted by sudden peaks. When we find a bear market driven by risky assets, that’s when we need true diversification. High quality government bonds are among the best tools to protect the portfolio in this kind of environment”, Hansen emphasizes.

Micro, not macro: the bottom-up approach

True to its philosophy of spreading risk as much as possible across carefully selected asset classes, the Nordea 1- Stable Return Fund invests in all permissible types of asset classes such as equities, bonds and money market instruments. “Other funds suffer because their asset exposure is less spread out and they need at least 60-70 % fixed income to maintain low volatility”, Hansen explains.

The fund relies on a “bottom-up” quantitative, data-driven approach, preferring to look at the long term risk-reward trade-off each asset class offers to make up the portfolio rather than relying on a broader macroeconomic outlook. Top-performing* companies in the portfolio include Johnson & Johnson, Google Inc., Oracle Corporation and United Health Group Inc. (source: Morningstar). The current portfolio has a 33% net exposure to global equities, 42% of high quality government bond positions, and a very small position in credit with 3% exposure.

There will be Bears: relying on losses for better gains

The overall methodology could seem counter-intuitive, however it could not be more apt to weather the winds of volatility. Instead of relying on a top down, traditional approach to asset class allocation, the fund is constructed by combining two groups of assets: those that work during recessionary periods and those that perform well during recovery periods. The final allocation is based on the risk contribution both groups bring to the basket, and on the correlations they tend to have over a full investment cycle. This is done by capturing the underlying return drivers within each asset class, and assessing their individual contribution to the expected risk/return ratio. “The only constraint we have when constructing the portfolio is to try to have a very low probability of negative returns after three years of investment.” explains Hansen.

There are two types of return drivers which make up the dynamics of the portfolio: ‘risk-on’, and ‘risk-off’, each rated according to an associated risk premium. For example, with credit bonds, the total return is spread across two premia with the emphasis laid strongly on credit and duration The individual return drivers perform differently and can be used to obtain true diversification.

Nordea’s core belief is that the return driver/risk-premia approach is the most reliable, and that volatile times require an investment approach that is balanced at all times and not alternatively defensive or aggressive depending on one specific market view.

Achieving predictable returns

As would most low-risk funds, the Nordea 1 – Stable Return Fund opts for being predictable**. Hansen is very circumspect with regard to anything that might drive investors to make choices based on momentum, or short-term losses: “We stay true to our philosophy despite the short-term headwinds.” The fund, however, is not completely inflexible: “We can slightly correct our positioning when faced with changing market conditions.”

*Date: 30.06.2015

**In the last three years, the return for the Nordea 1 – Stable Return fund was 7.05% per annum (30.06.2015).

Out of Thick Air

Over the last few years, our work with clients in the field of ESG has allowed us to understand the level of reporting required for a company to qualify as non-harmful to the environment.

As the Volkswagen story has shown, it should not come as a surprise if, as governance criteria continue to multiply, other companies attempt to find ever-more-so creative ways to bypass them.

History is not lacking in examples of greed-driven fraudulent reporting – Enron, WorldCom, and Tyco, to name very few of them. Most of those cases involved financial breaches, but the Volkswagen case, whose scandalous nature is only made worse by the impending Paris Climate Conference, is not just a simple case of false accounting or bribery.

It hits at health and environmental issues, both at a corporate and consumer levels. It hits at our right to accurate information on the products we buy or invest in, our right to reliable carbon footprint monitoring, and, even more fundamentally, our right to preserve our lungs, and those of our families.

While investing in the environment is a fairly novel trend, investors are awaking more and more to the necessity to adapt to market transformations. The old folklore around investment has been strained by the ongoing shift in demographics, worldwide mass consumption, and finite use of natural resources.

In cases such as Volkswagen, crisis communications can only do so much to fix a stained reputation, but provided that a company is determined to come clean and amend its practices, previous cases have shown that time, clear messaging and a large management overhaul can be redemptive.

Lately, however, health scandals have become so common that we are almost desensitized to them. Four years ago, British multinational pharmaceutical company GSK was fined almost £2bn in the US after it admitted bribing doctors and encouraging the prescription of unsuitable antidepressants to children. Obviously, when greed endangers public health, things should get personal.

We hope the Volkswagen fraud case will be an opportunity to revive the conversation around the importance of ESG, and increase the level of transparency for investors, consumers, and all other parties involved.

The Art of Rebranding

In today’s increasingly visual, competitive media landscape, rebranding has become an art in its own right.

Traditionally, we financial PRs have been considered a very different breed from our fellow marketers and advertisers, and rightly so. Pre-Big Data, marketing and PR were very distinct disciplines. However, as company identity becomes more digitalised, the intersection of both disciplines will undeniably become more and more frequent.

A few days ago, Luxembourg’s leading financial magazine Paperjam held the Brand Duchy 2015, an event around challenges faced by brands in today’s competitive market. According to this year’s Brand Duchy study, 82% of companies in Luxembourg consider their communications department a primary business driver.

While branding does matter, companies can only truly be successful when their  branding is congruent with their PR strategy, and the core values and standards they communicate to their target audience. The current market has some great examples of such ‘holistic’ rebrandings.

Last week, the Luxembourg Private Equity & Venture Capital Association (LPEA) introduced a new logo as part of its plan to expand its activities in other countries.

The below captions from Paperjam, show that nothing is left to chance when redesigning a logo:

A large amount of strategic thinking went into, not just the logo, but the overall campaign for LPEA, so as to reflect an expanded view and adaptability to various markets. The red is for risk-taking, which wasn’t reflected in the previously blue logo.

Google’s recent rebranding is equally clear in its intentions. The deceptively simple new logo, carefully thought out to appear smoothly on any flat-screen device, announces the generalist direction taken by the company. As Google continues to diversify its activity, its branding has to adapt to different types of products, from healthcare to cars. The former logo, though iconic, was too strongly associated with the company’s primary SEO capabilities.

While visual identity is important for brands across all sectors, it is undeniable that, as companies become more and more transparent and interactive with their customers, a good logo alone is not enough to sustain a company’s image.

Rather, it is the associations we make with them, that make the strength of the logo. Such associations can only exist through sustained thought leadership, a cornerstone of what PR does to develop the voice, presence, and message of a company in the relevant markets.

When Folklore Goes Out of Date

Today is Prinsjesdag in the Netherlands, otherwise known as Budget day. Every third Tuesday of September, King Willem-Alexander addresses the Dutch government about financial measures for the year to come.

At 12.45 will begin the Golden Carriage procession in The Hague. The gilded contraption, like many royal attributes, once served to showcase the wealth of the monarchy and the land.

In these times of austerity, however, it appears as a remarkably outdated symbol. Since 2013, the Netherlands has been known as the ‘Apostle of Austerity’ for implementing a cumulative 46 billion euros ($61 billion) in budget cuts to bring down government spending.

Moreover, in 2014, the King announced the end of the welfare state in the Netherlands, and that the national debt had risen by 150 billion euros since the beginning of the financial crisis. Finance Minister Jeroen Dijsselbloem presented a full package of reforms in order to achieve the government’s ambitious six billion euros of spending cuts.

Holland’s EU neighbours don’t seem to have any ceremonies attached to annual budget announcements. The UK has, however, maintained its red briefcase tradition:

Creating a Knowledge Sharing Culture: Neelie Kroes at AmCham

A few days ago, we had the opportunity to see former Vice-President of the European Commission Neelie Kroes speak at AmCham.

A dynamo of a woman and tireless advocate for start-ups, Kroes created the network StartupDelta, which supports and emboldens young entrepreneurs in the process of launching a start-up.

Kroes covered some important points on attitudes in business, such as fear of failing, which she deems to be very cultural in the Netherlands. As part of her mission to encourage risk-taking, Kroes has made a strong push for the revision of tax laws, but also for increasing flexibility in employment and bankruptcies.

Kroes also shared an anecdote about two teenagers exchanging knowledge about companies they were building. She pointed out that years of corporate culture have made us reluctant to share knowledge freely, and that such old-fashioned attitudes in business are not beneficial for real creativity and more sustainable growth to occur. Kroes’s overall key-message is to be bold and share, and for corporations to embrace the sharing culture of start-ups, as there are risks but also great opportunities through sharing.

Amsterdam has become a vibrant startup scene in the last ten years, with many young entrepreneurs making use of the possibilities that the Internet has to offer to bring economic activity to the Netherlands.

Dutch start-ups in the financial sector include: Flexpay, provider of compensation management and flexible benefits, Zencap, a digital lending marketplace connecting individual investors to small and medium sized businesses, and Vitrius, a platform that connects private companies and funds with their shareholders.

Bows and handshakes

A few weeks back, Amsterdam hosted SAIL, a quinquennial event of gargantuan proportions in tribute of Dutch sailing heritage – for the occasion, modern ships, naval ships and replicas from all over the world stayed moored in Amsterdam’s harbour for three days.

Each boat, whether from Chile, Sweden, Russia, or France, came with a story of its own, of wars it fought and goods it carried.

Centuries later, global trading continues to increase exponentially. And because we so often have to deal with counterparts from other countries, cultural awareness has become an intrinsic part of running a successful business.

If anything will teach you that we are products of our own culture, it’s doing business abroad.

A few days ago, I spoke with a self-made American entrepreneur who has frequent dealings with Hong Kong. His line of business brings him across many Chinese executives, all of whom smoke the Zhongnanhai, Mao’s favourite cigarettes, during negotiations.

So strong is the tradition, he explained, that, during a meeting, if any of the invited parties is without a cigarette, someone, without fail, will offer him one. Not smoking in such meetings is simply not an option.

Of course it’s more than just the bonding opportunity that even Western smokers –and drinkers – will admit can often facilitate business. In this particular case, the red and gold cigarette pack also happens to show your political leaning.

Culture is so steeped in the way we do business, that we do not always realise that what is normal to us can be perceived as bad etiquette elsewhere. Haven’t we all, on some level, been confronted with cultural dilemmas, and having to make compromises, when dealing with foreign business counterparts?