Hedge Fund Launches Are Surging

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In the first quarter of 2021, 189 new hedge funds were launched, the highest number since the end of 2017, according to data from Hedge Fund Research.

In the fourth quarter of 2017, 190 hedge funds were started. Since then, the number of launches has been consistently lower, hitting its lowest in the first quarter of 2020 with a total of 84 launches and 304 liquidations.

“The only ones that did get launched [that quarter] were before March,” Kenneth Heinz, president of HFR, told Institutional Investor.

Heinz attributed the newfound surge in launches to three factors: performance, inflation, and risk aversion. According to a statement, the top decile of hedge funds tracked by HFR gained 126.8 percent in the 12-month period ending in the first quarter of 2021. In this quarter alone, the top decile gained 29.7 percent.

Institutional investors are also looking to hedge against inflation, Heinz said. “As the world emerges from the lockdown, inflation is present, and it will continue to build,” he said. “The different strategies provide great protection from inflation.”

These strategies include equity hedge funds and event-driven funds. As of the first quarter of 2021, the greatest portion of industry assets — 30.42 percent — were invested in equity hedge funds. Event-driven funds came in second with 27.53 percent of total industry assets.

Heinz said these particular strategies are appealing to investors because they provide exposure to some hot “meme” stocks. Plus, as the world emerges from a global quarantine, he said there is a large appetite for strategic activity in mergers and acquisitions — a strong point for event-driven funds.

Since the first quarter of 2020 and the onset of the Covid-19 pandemic, Heinz said investors have left their risk complacency in 2019. Heinz said 2019 was a “super beta year,” prompting inventors to worry less about risk and more about returns.

“I liken 2019 to the easiest year in the world to make money because everything went up,” Heinz said. “But then March reminded investors they had become complacent about risk.”

As they move into the new year and recover from the pandemic, investors have taken more defensive positioning against risks that were overlooked in 2019. As for the future of the hedge fund industry, Heinz said he believes the market has entered a period of expansion.

“Even though the markets have recovered and they’ve gone back to record highs, I think institutions that are allocating are still very much more cognizant of risk than they were prior to the first quarter of 2020,” he said. “I think that’s the reason that you’re seeing more capital inflows and more funds launching.”

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By: Jessica Hamlin

Source: Hedge Fund Launches Are Surging | Institutional Investor

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Critics:

A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques in an attempt to improve performance, such as short selling, leverage, and derivatives. Financial regulators generally restrict hedge fund marketing except to institutional investors, high net worth individuals and others who are considered sufficiently sophisticated.

Hedge funds are regarded as alternative investments. Their ability to make more extensive use of leverage and more complex investment techniques distinguishes them from regulated investment funds available to the retail market, such as mutual funds and ETFs. They are also considered distinct from private-equity funds and other similar closed-end funds.

As hedge funds generally invest in relatively liquid assets and are generally open-ended, meaning that they allow investors to invest and withdraw capital periodically based on the fund’s net asset value, whereas private-equity funds generally invest in illiquid assets and only return capital after a number of years. However, other than a fund’s regulatory status there are no formal or fixed definitions of fund types, and so there are different views of what can constitute a “hedge fund”.

Banks Are Giving the Ultra-Rich Cheap Loans to Fund Their Lifestyle

Billionaire hedge fund manager Alan Howard paid $59 million for a Manhattan townhouse in March. Just two months later he obtained a $30 million mortgage from Citigroup Inc.

Denis Sverdlov, worth $6.1 billion thanks to his shares in electric-vehicle maker Arrival, recently pledged part of that stake for a line of credit from the same bank. For Edgar and Clarissa Bronfman the loan collateral is paintings by Damien Hirst and Diego Rivera, among others. Philippe Laffont, meanwhile, pledged stakes in a dozen funds at his Coatue Management for a credit line at JPMorgan Chase & Co.

In the realm of personal finance, debt is largely viewed as a necessary evil, one that should be kept to a minimum. But with interest rates at record lows and many assets appreciating in value, it’s one of the most important pieces of the billionaire toolkit — and one of the hottest parts of private banking.

Thanks to the Bronfmans, Howards and Sverdlovs of the world, the biggest U.S. investment banks reported a sizable jump in the value of loans they’ve extended to their richest clients, driven mainly by demand for asset-backed debt.

Morgan Stanley’s tailored and securities-based lending portfolio approached $76 billion last quarter, a 43% increase from a year earlier. Bank of America Corp. reported a $67 billion balance of such loans, up more than 20% year-over-year, while loans at Citigroup’s private bank — including but not limited to securities-backed loans — rose 17%. Appetite for such credit was the primary driver of the 21% bump in average loans at JPMorgan’s asset- and wealth-management division. And at UBS Group AG, U.S. securities-based lending rose by $4 billion.

Borrowing Binge

“It’s a real business winner for the banks,” said Robert Weeber, chief executive officer of wealth-management firm Tiedemann Constantia, adding his clients have recently been offered the opportunity to borrow against real estate, security portfolios and even single-stock holdings.

Spokespeople for Howard, Arrival and Laffont declined to comment, while the Bronfmans didn’t respond to a request for comment.

Rock-bottom interest rates have fueled the biggest borrowing binge on record and even billionaires with enough cash to fill a swimming pool are loathe to sit it out.

And for good reason. With assets both public and private at historically lofty valuations, shareholders are hesitant to cash out and miss higher heights. Appian Corp. co-founder Matthew Calkins has pledged a chunk of his roughly $3.5 billion stake in the software company — whose shares have risen about 145% in the past year — for a loan.

“Families with wealth of $100 million or more can borrow at less than 1%,” said Dan Gimbel, principal at NEPC Private Wealth. “For their lifestyle, there may be things they want to purchase — a car or a boat or even a small business — and they may turn to that line of credit for those types of things rather than take money from the portfolio as they want that to be fully invested.”

Yachts and private jets have been especially popular buys in the past year, according to wealth managers, one of whom described it as borrowing to buy social distance.

‘Significant Benefit’

Loans also allow the ultra-wealthy to avoid the hit of capital gains taxes at a time when valuations are high and rates are poised to increase, perhaps even almost double. Postponing tax is a “significant benefit” for portfolios concentrated and diversified alike, according to Michael Farrell, managing director for SEI Private Wealth Management.

Critics say such loans are just one more wedge in America’s ever-widening wealth gap. “Asset-backed loans are one of the principal tools that the ultra-wealthy are using to game their tax obligations down to zero,” said Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies.

While using public equities as collateral is the most common tactic for banks loaning to the merely affluent, clients further up the wealth scale usually have a bevy of possessions they can feasibly pledge against, such as mansions, planes and even more esoteric collectibles, like watches and classic cars.

One big advantage for the wealthy borrowing now is the possibility that rates will ultimately rise and they can lock in low borrowing costs for decades. Some private banks offer mortgages on homes for as long as 20 years with fixed interest rates as low as 1% for the period.

The wealthy can also hedge against higher borrowing costs for a fraction of their pledged assets’ value, according to Ali Jamal, the founder of multifamily office Azura.

“With ultra-high-net worth clients, you’re often thinking about the next generation,” said Jamal, a former Julius Baer Group Ltd. managing director. “If you have a son or a daughter and you know they want to live one day in Milan, St. Moritz or Paris, you can now secure a future home for them and the bank is fixing your interest rate for as long as two decades.”

Risks Involved

Securities-based lending does comes with risks for the bank and the borrower. If asset values plunge, borrowers may have to cough up cash to meet margin calls. Banks prize their relationships with their richest clients, but foundered loans are both costly and humiliating.

Ask JPMorgan. The bank helped arrange a $500 million credit facility for WeWork founder Adam Neumann, pledged against the value of his stock, according to the Wall Street Journal. As the value of the co-working startup imploded, Softbank Group Corp. had to swoop in to help Neumann repay the loans and avert a significant loss for the bank.

A spokesperson for JPMorgan declined to comment.

Still, for the banks it’s a risk worth taking. Asked about securities-backed loans on last week’s earnings call, Morgan Stanley Chief Financial Officer Sharon Yeshaya said they’d “historically seen minimal losses.” Among the bank’s past clients is Elon Musk, who turned to them for $61 million in mortgages on five California properties in 2019, and who also has Tesla Inc. shares worth billions pledged to secure loans.

“As James [Gorman] has always said, it’s a product in which you lend wealthy clients their money back,” Yeshaya said, referring to Morgan Stanley’s chief executive officer. “And this is something that is resonating.”

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Source: Banks Are Giving the Ultra-Rich Cheap Loans to Fund Their Lifestyle

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Reference:

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Ethereum Co-Founder Anthony Di Iorio Says Safety Concern Has Him Quitting Crypto

Anthony Di Iorio, a co-founder of the Ethereum network, says he’s done with the cryptocurrency world, partially because of personal safety concerns.

Di Iorio, 48, has had a security team since 2017, with someone traveling with or meeting him wherever he goes. In coming weeks, he plans to sell Decentral Inc., and refocus on philanthropy and other ventures not related to crypto. The Canadian expects to sever ties in time with other startups he is involved with, and doesn’t plan on funding any more blockchain projects.

“It’s got a risk profile that I am not too enthused about,” said Di Iorio, who declined to disclose his cryptocurrency holdings or net worth. “I don’t feel necessarily safe in this space. If I was focused on larger problems, I think I’d be safer.”

Back in 2013, Di Iorio co-founded Ethereum, which has become the home of many of the hottest crypto projects, particularly in decentralized finance — which lets people borrow, lend and trade with each other without intermediaries like banks. Ether, the native token of the network, has a market value of about $225 billion.

He made a splash in 2018 when buying the largest and one of the most expensive condos in Canada, paying for it partly with digital money. Di Iorio purchased the three-story penthouse for C$28 million ($22 million) at the St. Regis Residences Toronto, the former Trump International Hotel & Tower in the downtown business district.

In recent years, Di Iorio jumped into venture-capital investing and startup advising. He was also for a time chief digital officer of the Toronto Stock Exchange. In February 2018, Forbes estimated his net worth was as high as $1 billion. Ether’s price has more than doubled since then.

Decentral is a Toronto-based innovation hub and software development company focused on decentralized technologies, and the maker of Jaxx, a digital asset wallet that garnered about 1 million customers this year.

Di Iorio said he has talked with a couple of potential investors, and believes the startup will be valued at “hundreds of millions.” He expects to sell the company for fiat, or equity in another company — not crypto.

“I want to diversify to not being a crypto guy, but being a guy tackling complex problems,” Di Iorio said. He is involved in Project Arrow, run by a high-school friend that’s building a zero-emission vehicle. He is also consulting a senator from Paraguay.

“I will incorporate crypto when needed, but a lot of times, it’s not,” he said. “It’s really a small percentage of what the world needs.”

Source: Ethereum Co-Founder Anthony Di Iorio Says Safety Concern Has Him Quitting Crypto – Bloomberg

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Critics:

Anthony Di Iorio is a Canadian entrepreneur primarily known as a co-founder of Ethereum and an early investor in Bitcoin. Di Iorio is the founder and CEO of the blockchain company Decentral, and the associated Jaxx wallet. He also served as the first chief digital officer of the Toronto Stock Exchange. In February 2018, Forbes estimated his net worth at $750 million–$1 billion.

Di Iorio grew up with two older siblings in north Toronto, Ontario. He graduated with a degree in marketing from Ryerson University. Di Iorio began developing websites during the early 1990s, and eventually entered the rental housing market as an investor and landlord in Toronto, Ontario. In 2012 he sold his rental properties in order to invest in Bitcoin, and began to organize companies in the field of cryptocurrency.

He first learned about bitcoin from a podcast called Free Talk Live in 2012. According to The Globe and Mail, he “had an anti-authoritarian streak” and  questioned “the fundamentals of mainstream economics.” Di Iorio bought his first bitcoin the same day for $9.73. He created the Toronto Bitcoin Meetup Group which held its first meeting at a pub in the same year.

It was at this first meeting where he met Vitalik Buterin who went on to be the founder of Bitcoin Magazine and one of the original creators of Ethereum. As the Meetups grew from about eight attendees to hundreds, Di Iorio formed the Bitcoin Alliance of Canada.

References:

High Turnover? Here Are 3 Things CEOs Do That Sabotage Their Workplace Culture

She has one too many deadlines to deal with

Every CEO wants long-standing employees, but their ineffective leadership causes organizational stress that cripples the workplace culture. Quite often, we read articles or hear of CEOs abusing their power and tarnishing their company’s reputation.

This is due to them neglecting feedback from their team and making decisions based solely on their own judgement. Not only does this erode trust, but it sets a standard that employee and leadership voices are not welcome.

When employees are taken care of, they go above and beyond to drive the company forward. Conversely, when they don’t feel valued, appreciated or kept in the loop, employees quickly become disengaged. The cost of a disengaged employee impacts more than the bottom line.

It decreases productivity, creates negative client experiences and destroys the company culture, to name a few. According to a Gallup survey, the State of the American Workplace 2021, 80% of workers are not fully engaged or are actively disengaged at work.

While CEOs claim to embody a people-first and feedback-driven culture, they believe, due to their position, that they know better than everyone else. Todd Ramlin, manager of Cable Compare, said, “if a person is fortunate to have the opportunity to be a CEO, they need to ask themselves if they can live by the company values, expectations, rules and processes that are in place.” They can’t pick and choose which rules and processes to abide by, yet punish others when they do the same. Doing so cultivates a toxic workplace and demonstrates poor leadership.

Here are three things CEOs do that sabotage their workplace culture.

Embraces Data, Dodges Emotions

The workplace is made up of a diverse group of experiences and perspectives. CEOs who lack the emotional intelligence to understand another person’s viewpoint or situation will find themselves losing their most valuable people. Sabine Saadeh, financial trading and asset management expert, said, “companies that are only data driven and don’t care about the well-being of their employees will not sustain in today’s global economy.”

Businessolver’s 2021 State Of Workplace Empathy report, revealed that “68% of CEOs fear that they’ll be less respected if they show empathy in the workplace.” CEOs who fail to lead with empathy will find themselves with a revolving door of leadership team members and employees. I once had a CEO tell me that he didn’t want emotions present in his business because it created a distraction from the data. His motto was, “if it’s not data, it’s worthless”.

As such, he disregarded feedback of employee dissatisfaction and burnout. Yet, he couldn’t understand why the average tenure of his employees very rarely surpassed one year. Willie Greer, founder of The Product Analyst, asserted, “data is trash if you’re replacing workers because you care more about data than your people.”

Micromanages Their Leadership Team

One of the ways a CEO sabotages a company’s culture is by micromanaging their leadership team. Consequently, this leads to leadership having to micromanage their own team to satisfy the CEOs unrealistic expectations. When leadership feels disempowered to make decisions, they either pursue another opportunity or check out due to not being motivated to achieve company goals.

As such, the executives who were hired to bring change aren’t able to live up to their full potential. Moreover, they’re unable to make the impact they desired due to the CEOs lack of trust in them. Employees undoubtedly feel the stress of their leadership team as it reverberates across the company.

Arun Grewal, founder and Editor-in-chief at Coffee Breaking Pr0, said, most CEOs are specialists in one area or another, which can make them very particular. However, if they want to drive their company forward they need to trust in the experts they hired rather than trying to make all of the company’s decisions.

At one point during my career, I reported to a CEO who never allowed me to fully take over my department. Although he praised me for my HR expertise during the interview, once hired, I quickly realized he still wanted full control over my department. Despite not having HR experience, he disregarded everything I brought to the table to help his company.

I soon began questioning my own abilities. No matter how hard I tried to shield my team from the stress I endured, the CEO would reach out to them directly to micromanage their every move. This left our entire department feeling drained, demoralized and demotivated. Sara Bernier, founder of Born for Pets, said, “CEOs who meddle in the smallest of tasks chip away at the fundamentals of their own company because everything has to run through them”. She added, “this eliminates the employee’s ownership of their own work because all tasks are micromanaged by the CEO.

Neglects Valuable Employee Feedback

Instead of seeking feedback from their leadership team or employees, CEOs avoid it altogether. Eropa Stein, founder and CEO of Hyre, said, “making mistakes and getting negative feedback from your team is a normal part of leading a company, no matter how long you’ve been in business.”

She went on, “as a leader, it’s important to put your ego aside and listen to feedback that will help your business grow. If everyone agrees with you all the time, you’re creating a cult mentality that’ll be detrimental to your business’ success in the long run.” This results in a toxic and unproductive workplace culture.

What’s worse than avoiding constructive feedback is receiving it and disregarding it entirely. Neglecting valuable feedback constructs a company culture where no individual feels safe voicing their concerns. Rather than silence those who give negative feedback, CEOs should embrace them. These are the individuals who are bringing issues forward to turn them into strengths in an effort to create a stronger company.

Follow me on Twitter or LinkedIn. Check out my website.

I’m a Leadership Coach & Workplace Culture Consultant at Heidi Lynne Consulting helping individuals and organizations gain the confidence to become better leaders for themselves and their teams. As a consultant, I deliver and implement strategies to develop current talent and create impactful and engaging employee experiences. Companies hire me to to speak, coach, consult and train their teams and organizations of all sizes. I’ve gained a breadth of knowledge working internationally in Europe, America and Asia. I use my global expertise to provide virtual and in-person consulting and leadership coaching to the students at Babson College, Ivy League students and my global network. I’m a black belt in Six Sigma, former Society of Human Resources (SHRM) President and domestic violence mentor. Learn more at http://www.heidilynneco.com or get in touch at Heidi@heidilynneco.com.

Source: High Turnover? Here Are 3 Things CEOs Do That Sabotage Their Workplace Culture

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Critics:

Organizational culture refers to culture in any type of organization including that of schools, universities, not-for-profit groups, government agencies, or business entities. In business, terms such as corporate culture and company culture are often used to refer to a similar concept.

The term corporate culture became widely known in the business world in the late 1980s and early 1990s. Corporate culture was already used by managers, sociologists, and organizational theorists by the beginning of the 80s. The related idea of organizational climate emerged in the 1960s and 70s, and the terms are now somewhat overlapping,as climate is one aspect of culture that focuses primarily on the behaviors encouraged by the organization

If organizational culture is seen as something that characterizes an organization, it can be manipulated and altered depending on leadership and members. Culture as root metaphor sees the organization as its culture, created through communication and symbols, or competing metaphors. Culture is basic, with personal experience producing a variety of perspectives.

Most of the criticism comes from the writers in critical management studies who for example express skepticism about the functionalist and unitarist views about culture that are put forward by mainstream management writers. They stress the ways in which these cultural assumptions can stifle dissent towards management and reproduce propaganda and ideology. They suggest that organizations do not encompass a single culture, and cultural engineering may not reflect the interests of all stakeholders within an organization.

References

  • Schein, E. H. (1990). Organizational culture. American Psychologist, 45, 109–119. doi:10.1037/0003-066X.45.2.109
  • Compare: Hatch, Mary Jo; Cunliffe, Ann L. (2013) [1997]. “A history of organizational culture in organization theory”. Organization Theory: Modern, Symbolic and Postmodern Perspectives (2 ed.). Oxford: Oxford University Press. p. 161. ISBN 9780199640379. OCLC 809554483. Retrieved 7 June 2020. With the publication of his book The Changing Culture of a Factory in 1952, British sociologist Elliott Jaques became the first organization theorist to describe an organizational culture.
  • Jaques, Elliott (1951). The changing culture of a factory. Tavistock Institute of Human Relations. [London]: Tavistock Publications. p. 251. ISBN 978-0415264426. OCLC 300631.
  • Compare: Kummerow, Elizabeth (12 September 2013). Organisational culture : concept, context, and measurement. Kirby, Neil.; Ying, Lee Xin. New Jersey. p. 13. ISBN 9789812837837. OCLC 868980134. Jacques [sic], a Canadian psychoanalyst and organisational psychologist, made a major contribution […] with his detailed study of Glacier Metals, a medium-sized British manufacturing company.
  • Ravasi, D.; Schultz, M. (2006). “Responding to organizational identity threats: Exploring the role of organizational culture”. Academy of Management Journal. 49 (3): 433–458. CiteSeerX 10.1.1.472.2754. doi:10.5465/amj.2006.21794663.
  • Schein, Edgar H. (2004). Organizational culture and leadership (3rd ed.). San Francisco: Jossey-Bass. pp. 26–33. ISBN 0787968455. OCLC 54407721.
  • Schrodt, P (2002). “The relationship between organizational identification and organizational culture: Employee perceptions of culture and identification in a retail sales organization”. Communication Studies. 53 (2): 189–202. doi:10.1080/10510970209388584. S2CID 143645350.
  • Schein, Edgar (1992). Organizational Culture and Leadership: A Dynamic View. San Francisco, CA: Jossey-Bass. pp. 9.
  • Deal T. E. and Kennedy, A. A. (1982, 2000) Corporate Cultures: The Rites and Rituals of Corporate Life, Harmondsworth, Penguin Books, 1982; reissue Perseus Books, 2000
  • Kotter, J. P.; Heskett, James L. (1992). Corporate Culture and Performance. New York: The Free Press. ISBN 978-0-02-918467-7.
  • Selart, Marcus; Schei, Vidar (2011): “Organizational Culture”. In: Mark A. Runco and Steven R. Pritzker (eds.): Encyclopedia of Creativity, 2nd edition, vol. 2. San Diego: Academic Press, pp. 193–196.
  • Compare: Flamholtz, Eric G.; Randle, Yvonne (2011). Corporate Culture: The Ultimate Strategic Asset. Stanford Business Books. Stanford, California: Stanford University Press. p. 6. ISBN 9780804777544. Retrieved 2018-10-25. […] in a very real sense, corporate culture can be thought of as a company’s ‘personality’.
  • Compare: Flamholtz, Eric; Randle, Yvonne (2014). “13: Implications of organizational Life Cycles for Corporate Culture and Climate”. In Schneider, Benjamin; Barbera, Karen M. (eds.). The Oxford Handbook of Organizational Climate and Culture. Oxford Library of psychology. Oxford: Oxford University Press. p. 247. ISBN 9780199860715. Retrieved 2018-10-25. The essence of corporate culture, then, is the values, beliefs, and norms or behavioral practices that emerge in an organization. In this sense, organizational culture is the personality of the organization.
  • Compare: Flamholtz, Eric; Randle, Yvonne (2014). “13: Implications of organizational Life Cycles for Corporate Culture and Climate”. In Schneider, Benjamin; Barbera, Karen M. (eds.). The Oxford Handbook of Organizational Climate and Culture. Oxford Library of psychology. Oxford: Oxford University Press. p. 247. ISBN 9780199860715. Retrieved 2018-10-25. The essence of corporate culture, then, is the values, beliefs, and norms or behavioral practices that emerge in an organization.
  • Jaques, Elliott (1998). Requisite organization : a total system for effective managerial organization and managerial leadership for the 21st century (Rev. 2nd ed.). Arlington, VA: Cason Hall. ISBN 978-1886436039. OCLC 36162684.
  • Jaques, Elliott (2017). “Leadership and Organizational Values”. Requisite Organization: A Total System for Effective Managerial Organization and Managerial Leadership for the 21st Century (2 ed.). Routledge. ISBN 9781351551311. Retrieved 7 June 2020.
  • “Culture is everything,” said Lou Gerstner, the CEO who pulled IBM from near ruin in the 1990s.”, Culture Clash: When Corporate Culture Fights Strategy, It Can Cost You Archived 2011-11-10 at the Wayback Machine, knowmgmt, Arizona State University, March 30, 2011
  • Unlike many expressions that emerge in business jargon, the term spread to newspapers and magazines. Few usage experts object to the term. Over 80 percent of usage experts accept the sentence The new management style is a reversal of GE’s traditional corporate culture, in which virtually everything the company does is measured in some form and filed away somewhere.”, The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company.
  • One of the first to point to the importance of culture for organizational analysis and the intersection of culture theory and organization theory is Linda Smircich in her article Concepts of Culture and Organizational Analysis in 1983. See Smircich, Linda (1983). “Concepts of Culture and Organizational Analysis”. Administrative Science Quarterly. 28 (3): 339–358. doi:10.2307/2392246. hdl:10983/26094. JSTOR 2392246.
  • “The term “Corporate Culture” is fast losing the academic ring it once had among U.S. manager. Sociologists and anthropologists popularized the word “culture” in its technical sense, which describes overall behavior patterns in groups. But corporate managers, untrained in sociology jargon, found it difficult to use the term unselfconsciously.” in Phillip Farish, Career Talk: Corporate Culture, Hispanic Engineer, issue 1, year 1, 1982
  • Halpin, A. W., & Croft, D. B. (1963). The organizational climate of schools. Chicago: Midwest Administration Center of the University of Chicago.
  • Fred C. Lunenburg, Allan C. Ornstein, Educational Administration: Concepts and Practices, Cengage Learning, 2011, pp. 67
  • “What Is Organizational Climate?”. paulspector.com. Retrieved 2021-05-01.

Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market

https://images.wsj.net/im-189934?width=620&size=1.5

Financial strains among Chinese property developers are hurting the Asian high-yield debt market, where the companies account for a large chunk of bond sales.

That’s widening a gulf with the region’s investment-grade securities, which have been doing well amid continued stimulus support.

Yields for Asia’s speculative-grade dollar bonds rose 41 basis points in the second quarter, according to a Bloomberg Barclays index, versus a 5 basis-point decline for investment-grade debt. They’ve increased for six straight weeks, the longest stretch since 2018, driven by a roughly 150 basis-point increase for Chinese notes.

China’s government has been pursuing a campaign to cut leverage and toughen up its corporate sector. Uncertainty surrounding big Chinese borrowers including China Evergrande Group, the largest issuer of dollar junk bonds in Asia, and investment-grade firm China Huarong Asset Management Co. have also weighed on the broader Asian market for riskier credit.

“Diverging borrowing costs have been mainly driven by waning investor sentiment in the high-yield primary markets, particularly relating to the China real estate sector,” said Conan Tam, head of Asia Pacific debt capital markets at Bank of America. “This is expected to continue until we see a significant sentiment shift here.”

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Such a shift would be unlikely to come without a turnaround in views toward the Chinese property industry, which has been leading a record pace in onshore bond defaults this year.

But there have been some more positive signs recently. Evergrande told Bloomberg News that as of June 30 it met one of the “three red lines” imposed to curb debt growth for many sector heavyweights. “By year-end, the reduction in leverage will help bring down borrowing costs” for the industry, said Francis Woo, head of fixed income syndicate Asia ex-Japan at Credit Agricole CIB.

Spreads have been widening for Asian dollar bonds this year while they’ve been narrowing in the U.S. for both high-yield and investment grade amid that country’s economic rebound, said Anne Zhang, co-head of asset class strategy, FICC in Asia at JPMorgan Private Bank. She expects Asia’s underperformance to persist this quarter, led by Chinese credits as investors remain cautious about policies there.

“However, as the relative yield differential between Asia and the U.S. becomes more pronounced there will be demand for yield that could help narrow the gap,” said Zhang.

Asia

A handful of issuers mandated on Monday for potential dollar bond deals including Hongkong Land Co., China Modern Dairy Holdings Ltd. and India’s REC Ltd., though there were no debt offerings scheduled to price with U.S. markets closed for the July 4 Independence Day holiday.

  • Spreads on Asian investment-grade dollar bonds were little changed to 1 basis point wider, according to credit traders. Yield premiums on the notes widened by almost 2 basis points last week, in their first weekly increase in six, according to a Bloomberg Barclays index
  • Among speculative-grade issuers, dollar bonds of China Evergrande Group lagged a 0.25 cent gain in the broader China high-yield market on Monday. The developer’s 12% note due in October 2023 sank 1.8 cents on the dollar to 74.6 cents, set for its lowest price since April last year

U.S.

The U.S. high-grade corporate bond market turned quiet at the end of last week before the holiday, but with spreads on the notes at their tightest in more than a decade companies have a growing incentive to issue debt over the rest of the summer rather than waiting until later this year.

  • The U.S. investment-grade loan market has surged back from pandemic disruptions, with volumes jumping 75% in the second quarter from a year earlier to $420.8 billion, according to preliminary Bloomberg league table data
  • For deal updates, click here for the New Issue Monitor

Europe

Sales of ethical bonds in Europe have surged past 250 billion euros ($296 billion) this year, smashing previous full-year records. The booming market for environmental, social and governance debt attracted issuers including the European Union, Repsol SA and Kellogg Co. in the first half of 2021.

  • The European Union has sent an RfP to raise further funding via a sale to be executed in the coming weeks, it said in an e-mailed statement
  • German property company Vivion Investments Sarl raised 340 million euros in a privately placed transaction in a bid to boost its real estate portfolio, according to people familiar with the matter

By:

Source: Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market – Bloomberg

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Critics:

The Chinese property bubble was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009, possibly driven by both government policies and Chinese cultural attitudes.

Tianjin High price-to-income and price-to-rent ratios for property and the high number of unoccupied residential and commercial units have been held up as evidence of a bubble. Critics of the bubble theory point to China’s relatively conservative mortgage lending standards and trends of increasing urbanization and rising incomes as proof that property prices can remain supported.

The growth of the housing bubble ended in late 2011 when housing prices began to fall, following policies responding to complaints that members of the middle-class were unable to afford homes in large cities. The deflation of the property bubble is seen as one of the primary causes for China’s declining economic growth in 2012.

2011 estimates by property analysts state that there are some 64 million empty properties and apartments in China and that housing development in China is massively oversupplied and overvalued, and is a bubble waiting to burst with serious consequences in the future. The BBC cites Ordos in Inner Mongolia as the largest ghost town in China, full of empty shopping malls and apartment complexes. A large, and largely uninhabited, urban real estate development has been constructed 25 km from Dongsheng District in the Kangbashi New Area. Intended to house a million people, it remains largely uninhabited.

Intended to have 300,000 residents by 2010, government figures stated it had 28,000. In Beijing residential rent prices rose 32% between 2001 and 2003; the overall inflation rate in China was 16% over the same period (Huang, 2003). To avoid sinking into the economic downturn, in 2008, the Chinese government immediately altered China’s monetary policy from a conservative stance to a progressive attitude by means of suddenly increasing the money supply and largely relaxing credit conditions.

Under such circumstances, the main concern is whether this expansionary monetary policy has acted to simulate the property bubble (Chiang, 2016). Land supply has a significant impact on house price fluctuations while demand factors such as user costs, income and residential mortgage loan have greater influences.

References

SoftBank Invests $200 Million In Brazil’s Largest Crypto Exchange

Brazil’s leading cryptocurrency exchange, Mercado Bitcoin raised $200 million from the SoftBank Latin America Fund, Mercado’s parent company 2TM Group announced today. The investment values 2TM Group at $2.1 billion and is SoftBank’s largest capital injection in a Latin America crypto company.

Following closely on the tails of SoftBank’s investment in the $250 million round raised by Mexican cryptocurrency exchange Bitso in May, the deal shows a growing interest in bringing bitcoin and other cryptocurrencies to Latin America.

“This series B round will afford us to continue investing in our infrastructure, enabling us to scale up and meet the soaring demand for the blockchain-based financial market,“ says Roberto Dagnoni, executive chairman and CEO of 2TM Group. “We want to be the main solution provider for corporate players.”

The São Paulo-based exchange aims to increase the number of listed assets (the exchange currently lists approximately 50 tokens) and grow its 500-member team to 700 by year’s end. Further plans involve regional expansion with focuses on Mexico, Argentina, Chile and Colombia and growth acceleration across 2TM Group’s portfolio, which also include digital wallet provider MeuBank and digital custodian Bitrust (both are subject to regulatory approval).

Founded by brothers Gustavo and Mauricio Chamati in 2013, Mercado Bitcoin has become the largest cryptocurrency exchange in the country. In January, it scored its first financing round co-led by G2D/GP Investments and Parallax Ventures with participation from an array of other investors.

Like many of its counterparts, Mercado Bitcoin has seen significant growth over the past year, with its client base reaching 2.8 million in 2021 – more than 70% of the total number of individual investors on Brazil’s stock exchange B3. Approximately 700,000 clients signed up just between January and May.

Over the same period, trade volume on the exchange had increased to $5 billion, surpassing the total for its first seven years combined. “Every single month [of this year], we are trading the full volume of 2020,” says Dagnoni.

“Mercado Bitcoin is a regional leader in the crypto space and the leading crypto exchange in Brazil. They are tapping into a huge local and regional addressable market measured by potential use cases for crypto,” says Paulo Passoni, managing partner at SoftBank’s SBLA Advisers Corp. (which manages the SoftBank Latin America Fund).

“At SoftBank we look to invest in entrepreneurs who are challenging the status quo through tech-focused or tech-enabled business models that are disrupting an industry – Mercado Bitcoin is doing just that.”

Despite the rapid growth of the local crypto market, Brazilian regulators have been lagging behind. In 2018, Brazilian antitrust watchdog, the Administrative Council for Economic Defense (CADE), opened an investigation into the country’s largest banks for allegedly abusing their power by closing accounts of crypto brokerages. The probe was ongoing as of last year.

In April 2020, Senator Soraya Thronicke proposed an extended set of rules for Brazil’s “virtual asset” businesses, custodians and issuers, consumer protection, crypto taxation and criminal enforcement, however no apparent action has been taken on the bill so far. Nonetheless, Dagnoni says the nation’s regulatory environment is favorable, and the company is closely working with regulators “to build a consistent framework for alternative digital investments in Brazil, in line with its vision of a convergence of the traditional and blockchain-based financial markets.”

Follow me on Twitter or LinkedIn.

I report on cryptocurrencies and emerging use cases of blockchain. Born and raised in Russia, I graduated from NYU Abu Dhabi with a degree in economics and Columbia University Graduate School of Journalism, where I focused on data and business reporting.

Source: SoftBank Invests $200 Million In Brazil’s Largest Crypto Exchange

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Critics:

SoftBank Group Corp. is a Japanese multinational conglomerate holding company headquartered in Minato, Tokyo. The Group primarily invests in companies operating in the technology, energy, and financial sectors. It also runs the Vision Fund, the world’s largest technology-focused venture capital fund, with over $100 billion in capital, backed by sovereign wealth funds from countries in the Middle East.

The company is known for the leadership by its founder and largest shareholder Masayoshi Son. It operates in broadband, fixed-line telecommunications, e-commerce, information technology, finance, media and marketing, and other areas.

SoftBank was ranked in the Forbes Global 2000 list as the 36th largest public company in the world, and the second largest publicly traded company in Japan after Toyota.

The logo of SoftBank is based on the flag of the Kaientai, a naval trading company that was founded in 1865, near the end of the Tokugawa shogunate, by Sakamoto Ryōma.

Although SoftBank does not affiliate itself to any traditional keiretsu, it has close ties with Mizuho Financial Group, its main lender.

See also

 

China’s GDP Surge Is Chance To Reboot Country’s Image On World Stage

China’s economy had a great 12 months, leading the globe out of the Covid-19 era. Yet the last year has damaged something equally important: Beijing’s soft power.

Beijing’s handling of questions about what happened in Wuhan—and why officials were so slow to warn the world about a coming pandemic—boggles the mind. If China’s handling of the initial outbreak was indeed the “decisive victory” that it claims, why overreact to Australia’s call for a probe?

Harvard Kennedy School students might one day take classes recounting how China’s leaders squandered the Donald Trump era. As the U.S. president was undermining alliances, upending supply chains, losing allies, and playing down the pandemic, Beijing had a once-in-a-lifetime opportunity to increase the country’s influence at Washington’s expense.

And now, many in Beijing appear to understand the extent to which they blew it. Earlier this month, Xi Jinping urged the Communist Party to cultivate a “trustworthy, lovable and respectable” image globally. It’s the clearest indication yet that the “wolf warrior” ethos espoused in recent times by Chinese diplomats was too Trump-like for comfort—and backfiring.

The remedy here is obvious: being the reliable economic engine leaders from the East to West desire.

The Trump administration’s policies had a vaguely developing-nation thrust—favoring a weaker currency, banning companies, tariffs of the kind that might’ve worked in 1985, assaulting government institutions. They shook faith in America’s ability to anchor global finance. The last four years saw a bull market in chatter about replacing the dollar as reserve currency and the centrality of U.S. Treasury debt.

China is enjoying a burst of good press for its gross domestic product trends. Not just for the pace of GDP, but the way Xi’s team appears to be seeking a more balanced and sustainable mix of growth sources. Though some pundits were disappointed by news that industrial production rose just 6.6% in May on a two-year average basis, it essentially gets Asia’s biggest back to where it was pre-Covid-19.

China is getting there, slowly but surely. Far from disappointing, though, data suggest Xi’s party learned valuable lessons from the myriad boom/bust cycles that put China in global headlines since 2008. That was the year the “Lehman shock” devastated world markets and threatened to interrupt China’s meteoric rise.

Instead, Beijing bent economic reality to its benefit. Yet the untold trillions of dollars of stimulus that then-President Hu Jintao’s team threw at the economy caused as many long-term headaches as short-term gains. It financed an unproductive infrastructure boom—one prioritizing the quantity of growth over quality—that fueled bubbles. It generated a moral-hazard dynamic that encouraged greater risk and leverage.

Unfortunately, Xi’s government doubled down on the approach in 2015, when Shanghai stocks went into freefall. The impulse then, as in the 2008-2009 period, was to throw even more cash at the problem—treating the symptoms, not the underlying ailments.

The ways in which Team Xi restored calm—bailouts, loosening leverage and reserve requirement protocols, halting initial public offerings and suspending trading in thousands of companies—did little to build a more nimble and transparent system. The message to punters was, no worries, the Communist Party and People’s Bank of China have your backs. Always.

Yet things appear to be changing. In 2020, while the U.S., Europe and Japan went wild with new stimulus schemes, Beijing took a targeted and minimalist approach. Japan alone threw $2.2 trillion, 40% of GDP, at its cratering economy. The Federal Reserve went on an asset-buying tear.

The PBOC, by sharp contrast, resisted the urge to go the quantitative easing route. That is helping Xi in his quest to deleverage the economy. It’s a very difficult balancing act, of course. The will-they-or-won’t-they-default drama unfolding at China Huarong Asset Management demonstrates the risks of hitting the stimulus brakes too hard.

The good news is that so far China seems to be pursuing a stable and lasting 2021 recovery, not the overwhelming force of previous efforts. And that’s just what the world needs. A 6% growth rate year after year will win China more soft-power points than the GDP extremes. So will China accelerating its transition from exports to an innovation-and-services-based power.

It’s grand that President Joe Biden rapidly raised America’s vaccination game. That means the two biggest economies are recovering simultaneously, reinforcing each other.

China’s revival could have an even bigger impact. Look at how China’s growth in recent months is lifting so many boats in Asia. In May alone, Japan enjoyed a 23.6% surge in shipments to China. Mainland demand for everything from motor vehicles to semiconductor machinery to paper products is helping Japan recover from its worst downturn in decades. South Korea, too.

The best thing Xi can do to boost China’s soft power is to lean into this recovery, and provide the stability that the rest of the globe needs. Xi should let China’s GDP power do the talking for him.

I am a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” My journalism awards include the 2010 Society of American Business Editors and Writers prize for commentary.

Source: China’s GDP Surge Is Chance To Reboot Country’s Image On World Stage

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Critics:

The economy of China is a developing market-oriented economy that incorporates economic planning through industrial policies and strategic five-year plans. Dominated by state-owned enterprises (SOEs) and mixed-ownership enterprises, the economy also consists of a large domestic private sector and openness to foreign businesses in a system described as a socialist market economy.

State-owned enterprises accounted for over 60% of China’s market capitalization in 2019 and generated 40% of China’s GDP of US$15.66 trillion in 2020, with domestic and foreign private businesses and investment accounting for the remaining 60%. As of the end of 2019, the total assets of all China’s SOEs, including those operating in the financial sector, reached US$78.08 trillion. Ninety-one (91) of these SOEs belong to the 2020 Fortune Global 500 companies.

China has the world’s second largest economy when measured by nominal GDP, and the world’s largest economy since 2014 when measured by Purchasing Power Parity (PPP), which is claimed by some to be a more accurate measure of an economy’s true size.It has been the second largest by nominal GDP since 2010, which rely on fluctuating market exchange rates.An official forecast states that China will become the world’s largest economy in nominal GDP by 2028.Historically, China was one of the world’s foremost economic powers for most of the two millennia from the 1st until the 19th century.

The Chinese economy has been characterized as being dominated by few, larger entities including Ant Group and Tencent. In recent years there has been attempts by the Xi Jinping Administration to enforce economic competition rules, and probes into Alibaba and Tencent have been launched by Chinese economic regulators.

The crackdown on monopolies by tech giants and internet companies follows with recent calls by the Politburo against monopolistic practices by commercial retail giants like Alibaba. Comparisons have been made with similar probes into Amazon in the United States.

See also

Crypto Exchange And XRP Refuge Bitsane Vanishes, Scamming As Many As 246,000 Users

Exchange for Ripple's XRP scam users.

Ireland-based cryptocurrency exchange Bitsane disappeared without a trace last week, likely taking hundreds of thousands of users’ assets with it.

Account holders told Forbes that attempts to withdraw bitcoin, XRP and other cryptocurrencies began failing in May, with Bitsane’s support team writing in emails that withdrawals were “temporarily disabled due to technical reasons.” By June 17, Bitsane’s website was offline and its Twitter and Facebook accounts were deleted. Emails to multiple Bitsane accounts are now returned as undeliverable.

Victims of the scam are comparing notes in a group chat with more than 100 members on the messaging app Telegram and in a similar Facebook group. Most users in the groups claim to have lost up to $5,000, but Forbes spoke with one person in the U.S. who says he had $150,000 worth of XRP and bitcoin stored in Bitsane.

Bitsane’s disappearance is the latest cautionary tale for a cryptocurrency industry trying to shed its reputation as an unsafe asset class. Several exchanges like GateHub and Binance have been breached by hackers this year, but an exchange completely ceasing to exist with no notice or explanation is far more unusual.

Bitsane had 246,000 registered users according to its website as of May 30, the last time its homepage was saved on the Internet Archive’s Wayback Machine. Its daily trading volume was $7 million on March 31, according to CoinMarketCap.

“I was trying to transfer XRP out to bitcoin or cash or anything, and it kept saying ‘temporarily disabled.’ I knew right away there was some kind of problem,” says the user who claims to have lost $150,000 and asked to remain anonymous. “I went back in to try to look at those tickets to see if they were still pending, and you could no longer access Bitsane.”

At the height of the cryptocurrency craze in late 2017 and early 2018, Bitsane attracted casual investors because it allowed them to buy and sell Ripple’s XRP, which at the time was not listed on Coinbase, the most popular U.S. cryptocurrency exchange. CNBC published a story on January 2, 2018 with the headline “How to buy XRP, one of the hottest bitcoin competitors.” It explained how to buy bitcoin or ethereum on Coinbase, transfer it to Bitsane and then exchange it for XRP.

Three of the five Bitsane users Forbes spoke to found out about the exchange through the CNBC article. Ripple also listed Bitsane as an available exchange for XRP on its website until recently. A Ripple spokesperson did not respond to a request for comment.

Bitsane went live in November 2016 according to a press release, registering in Dublin as Bitsane LP under CEO Aidas Rupsys, and its chief technology officer was Dmitry Prudnikov. Prudnikov’s LinkedIn account has been deleted, and neither he nor Rupsys could be reached for comment.

A separate company, Bitsane Limited, was incorporated in England in August 2017 by Maksim Zmitrovich. He wanted to own the intellectual property rights to part of Bitsane’s code and use it for a trading platform his company, Azbit, was building. Zmitrovich says Bitsane’s developers insisted that their exchange’s name be on the new legal entity he was forming. But Azbit never ended up using any of the code since the partnership did not materialize, and Bitsane Limited did not provide any services to Bitsane LP.

On May 16, Bitsane Limited filed for dissolution because Zmitrovich wasn’t doing anything with it and the company’s registration was up for renewal. Some of the Bitsane exchange’s victims have found the public filing and suspected Zmitrovich as part of the scam, but he insists accusations against him are unfounded.

He says he hasn’t spoken to Prudnikov—who was in charge of negotiations with Azbit—in at least five months, and Prudnikov has not returned his calls since account holders searching for answers began contacting him. Azbit wrote a blog post about the Bitsane scam on June 13, explaining Bitsane Limited’s lack of involvement.

“I’m sick and tired of these accusations,” Zmitrovich says. “This company didn’t even have a bank account.”

The location of the money and whereabouts of any of Bitsane LP’s employees remain a mystery to the scam victims, who are unsure about what action to take next. Multiple account holders in the U.S. say they have filed complaints with the FBI, but all of them are concerned that their cash is gone for good.

Follow me on Twitter or LinkedIn. Send me a secure tip.

I’m a reporter on Forbes’ wealth team covering billionaires and their fortunes. I was previously an assistant editor reporting on money and markets for Forbes, and I covered stocks as an intern at Bloomberg. I graduated from Duke University in 2019, where I majored in math and was the sports editor for our student newspaper, The Chronicle. Send news tips to htucker@forbes.com.

Source: Crypto Exchange And XRP Refuge Bitsane Vanishes, Scamming As Many As 246,000 Users

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Critics:

Cryptocurrency and crime describes attempts to obtain digital currencies by illegal means, for instance through phishing, scamming, a supply chain attack or hacking, or the measures to prevent unauthorized cryptocurrency transactions, and storage technologies. In extreme cases even a computer which is not connected to any network can be hacked.

In 2018, around US$1.7 billion in cryptocurrency was lost due to scams theft and fraud. In the first quarter 2019, the amount of such losses was US$1.2 billion.

Exchanges

Notable cryptrocurrency exchange hacks, resulting in the theft of cryptocurrencies include:

  • Bitstamp In 2015 cryptocurrencies worth $5 million were stolen
  • Mt. Gox Between 2011 and 2014, $350 million worth of bitcoin were stolen
  • Bitfinex In 2016, $72 million were stolen through exploiting the exchange wallet, users were refunded.
  • NiceHash In 2017 more than $60 million worth of cryptocurrency was stolen.
  • Coincheck NEM tokens worth $400 million were stolen in 2018
  • Zaif $60 million in Bitcoin, Bitcoin Cash and Monacoin stolen in September 2018
  • Binance In 2019 cryptocurrencies worth $40 million were stolen.

Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015. The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.

Following its shut-down, in 2018 a class action lawsuit for $771,000 was filed against the cryptocurrency platform known as BitConnect, including the platform promoting YouTube channels. Prior fraud warnings in regards to BitConnect, and cease-and-desist orders by the Texas State Securities Board cited the promise of massive monthly returns.

OneCoin was a massive world-wide multi-level marketing Ponzi scheme promoted as (but not involving) a cryptocurrency, causing losses of $4 billion worldwide. Several people behind the scheme were arrested in 2018 and 2019.

See also

How Entrepreneurs Are Capitalizing on Digital Transformation in the Age of the ‘New Normal’

How Entrepreneurs Are Capitalising on Digital Transformation in the Age of the 'New Normal'

The Covid-19 pandemic has carried a significant impact on the rate in which businesses are embracing digital transformation. The health crisis has created an almost overnight need for traditional brick and mortar shopping experiences to regenerate into something altogether more adaptive and remote. While some businesses are finding this transition toward emerging technology a little tricky, it’s proving to be a significant opportunity for entrepreneurs in the age of the “new normal.”

Astoundingly, data suggests that digital transformation has been accelerated by as much as seven years due to the pandemic, with Asia/Pacific businesses driving forward up to a decade in the future when it comes to digital offerings.

With entrepreneurs and new startup founders finding themselves in a strong position to embrace modern digital practices ahead of more traditional companies, we’re likely to see a rise in innovation among post-pandemic businesses. With this in mind, let’s take a deeper look into the ways in which digital transformation are benefiting businesses in the age of the new normal:

Fast, data-driven decisions.

Any digital transformation strategy needs to be driven by data. The emergence of big data as a key analytical tool may make all the difference in ensuring that startups take the right steps at the right time to ensure that they thrive without losing valuable resources chasing the wrong target audience, or promoting an underperforming product.

Enterprises today have the ability to tap into far greater volumes of data than ever before, thanks largely to both big data and Internet of Things technology. With the right set of analytical tools, this data can be transformed into essential insights that can leverage faster, more efficient and accurate decisions. Essentially, the deeper analytical tools are embedded in business operations, the greater the levels of integration and effect that may have.

By incorporating more AI-based technology into business models, it’s possible to gain access to huge volumes of big data that can drive key decisions. The pandemic has helped innovations in terms of data and analytics become more visible in the world of business, and many entrepreneurs are turning to advanced AI capabilities in order to modernise their existing applications while sifting through data at a faster and more efficient rate.

Leveraging multi-channel experiences.

Digital transformation is empowering customers to get what they want, when they want, and however they want it. Today, more than half of all consumers expect to receive a customer service response within 60 minutes. They also want equally swift response times on weekends as they’ve come to expect on weekdays. This emphasis on perpetual engagement has meant that businesses that aren’t switched on 24/7/365 are putting themselves at a disadvantage to rivals that may have more efficient operations in place.

The pandemic has led to business happening in real-time – even more so than in brick and mortar stores. Although customers in high street stores know they’re getting a face to face experience, this doesn’t mean that business representatives can offer a similar personalised and immediately knowledgeable service than that of a chatbot or a live chat operative with a sea of information at their disposal.

Modern consumers are never tied to a single channel. They visit stores, websites, leave feedback through mobile apps and ask questions for support teams on social networking sites. By combining these interactions, it’s possible to create full digital profiles for customers whenever they interact with your business – helping entrepreneurs to provide significantly more immersive experiences.

Fundraising via blockchain technology.

Blockchain technology is one of the most exciting emerging technologies today. Its applications are far-reaching in terms of leveraging new payment methods and brokering agreements via smart contracts, and while the use cases for these blockchain applications will certainly grow over the coming years, today the technology is already being widely utilised by entrepreneurs as a form of raising capital through Initial Token Offerings (ITOs), also known as Initial Coin Offerings (ICOs).

As an alternative to the use of traditional banks, venture capital firms, angel investors or crowdfunders, ITO tokens can be made available for exchanges where they can trade freely. These tokens are comparable to equity in a company, or a share of revenue for token holders.

Interested investors can buy into the offering and receive tokens that are created on a blockchain from the company. The tokens could have some practical use within the company where they can be spent on goods or services, or they could purely represent an equity share in a startup or project.

There are currently numerous companies that use blockchain technology to simply and secure its operations. From large corporations like HSBC’s Digital Vault, which is blockchain-based custody platform that allows clients to access details of their private assets to small education startups like ODEM, which aim to democratize education.

Another company that’s pioneering blockchain technology within the world of business is OpenExO, which has developed its own community-driven utility token EXOS, to help build a new transformation economy that helps companies to accelerate, democratise and internationalise their innovation.

Salim Ismail, OpenExO founder, is the former Yahoo technology innovator who developed the industry of Exponential Organizations. He has become a household name in the entrepreneur and innovation landscape, and now he launches the blockchain ecosystem that includes Fortune 500 companies, cities and even countries.

Reaping widespread rewards.

Although digital transformation could begin with a focus on just one facet of a startup, its benefits can be far reaching for employees, consumers and stakeholders alike. It could limit the mundane tasks required of workers, offer greater levels of personalisation for consumers and free up new skills to be developed in other areas of a business.

This, in turn, helps to build more engaged and invested teams that know the value of fresh ideas and perspectives. Although the natural adaptability of entrepreneurs makes the adoption of digital transformation an easier one to make than for established business owners, the benefits can be significant for both new and old endeavours.

The pandemic has accelerated the potential of emerging technologies by over seven years in some cases, the adoption of these new approaches and tools can be an imperative step in ensuring that your business navigates the age of the new normal with the greatest of efficiency.

Dmytro Spilka

By: Dmytro Spilka / Entrepreneur Leadership Network VIP – CEO and Founder of Solvid and Pridicto

Source: How Entrepreneurs Are Capitalising on Digital Transformation in the Age of the ‘New Normal’

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Critics:

Digital Transformation (DT or DX) or Digitalization is the adoption of digital technology to transform services or businesses, through replacing non-digital or manual processes with digital processes or replacing older digital technology with newer digital technology. Digital solutions may enable – in addition to efficiency via automation – new types of innovation and creativity, rather than simply enhancing and supporting traditional methods.

One aspect of digital transformation is the concept of ‘going paperless‘ or reaching a ‘digital business maturity’affecting both individual businesses and whole segments of society, such as government,mass communications,art,health care, and science.

Digital transformation is not proceeding at the same pace everywhere. According to the McKinsey Global Institute‘s 2016 Industry Digitization Index,Europe is currently operating at 12% of its digital potential, while the United States is operating at 18%. Within Europe, Germany operates at 10% of its digital potential, while the United Kingdom is almost on par with the United States at 17%.

One example of digital transformation is the use of cloud computing. This reduces reliance on user-owned hardware and increases reliance on subscription-based cloud services. Some of these digital solutions enhance capabilities of traditional software products (e.g. Microsoft Office compared to Office 365) while others are entirely cloud based (e.g. Google Docs).

As the companies providing the services are guaranteed of regular (usually monthly) recurring revenue from subscriptions, they are able to finance ongoing development with reduced risk (historically most software companies derived the majority of their revenue from users upgrading, and had to invest upfront in developing sufficient new features and benefits to encourage users to upgrade), and delivering more frequent updates often using forms of agile software development internally.This subscription model also reduces software piracy, which is a major benefit to the vendor.

Digitalization (of industries and organizations)

Unlike digitization, digitalization is the ‘organizational process’ or ‘business process’ of the technologically-induced change within industries, organizations, markets and branches. Digitalization of manufacturing industries has enabled new production processes and much of the phenomena today known as the Internet of Things, Industrial Internet, Industry 4.0, machine to machine communication, artificial intelligence and machine vision.

Digitalization of business and organizations has induced new business models (such as freemium), new eGovernment services, electronic payment, office automation and paperless office processes, using technologies such as smart phones, web applications, cloud services, electronic identification, blockchain, smart contracts and cryptocurrencies, and also business intelligence using Big Data. Digitalization of education has induced e-learning and Mooc courses.

See also

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