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Young people struggling in digital world

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One in four students in OECD countries are unable to complete even the most basic reading tasks, meaning they are likely to struggle to find their way through life in an increasingly volatile, digital world. This is one of the findings of the OECD’s latest PISA global education test, which evaluates the quality, equity and efficiency of school systems.

The OECD’s PISA 2018 tested around 600,000 15-year-old students in 79 countries and economies on reading, science and mathematics. The main focus was on reading, with most students doing the test on computers.

Most countries, particularly in the developed world, have seen little improvement in their performances over the past decade, even though spending on schooling increased by 15% over the same period. In reading, Beijing, Shanghai, Jiangsu and Zhejiang (China), together with Singapore, scored significantly higher than other countries. The top OECD countries were Estonia, Canada, Finland and Ireland.

“Without the right education, young people will languish on the margins of society, unable to deal with the challenges of the future world of work, and inequality will continue to rise,” said OECD Secretary-General Angel Gurría, launching the report in Paris at the start of a two-day conference on the future of education. “Every dollar spent on education generates a huge return in terms of social and economic progress and is the foundation of an inclusive, prosperous future for all.”

The share of students with only very basic reading skills highlights the challenge countries, including those in the developed world, face in achieving the United Nations Sustainable Development Goals for 2030 (SDGs), particularly in relation to “ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all.” (SDG 4). The share of low-performers, both girls and boys, also increased on average between 2018 and 2009, the last time reading was the main focus of PISA.

Student well-being is also an increasing issue; about two out of three students in OECD countries reported being happy with their lives, although the share of satisfied students fell by 5 percentage points between 2015 and 2018. And in almost every country, girls were more afraid of failing than boys and the gap was largest among top performers. One in four students also reported being bullied at least a few times a month across OECD countries.

Around 1 in 10 students across OECD countries, and 1 in 4 in Singapore, perform at the highest levels in reading. However, the gap between socio-economically advantaged and disadvantaged students is stark: the reading level of the richest 10% of students in OECD countries is around three years ahead of the poorest 10%. In France, Germany, Hungary and Israel, the gap is four years.

Yet some countries have shown an impressive improvement over the past few years. Portugal has advanced to the level of most OECD countries, despite being hit hard by the financial crisis. Sweden has improved across all three subjects since 2012, reversing earlier declines. Turkey has also progressed while at the same time doubling the share of 15-year-olds in school.

The latest PISA findings also reveal the extent to which digital technologies are transforming the world outside of school. More students today consider reading a waste of time (+ 5 percentage points) and fewer boys and girls read for pleasure (- 5 percentage points) than their counterparts did in 2009. They also spend about 3 hours outside of school online on weekdays, an increase of an hour since 2012, and 3.5 hours on weekends.

Other key findings include:

Students’ performance in science and maths

Around one in four students in OECD countries, on average, do not attain the basic level of science (22%) or maths (24%). This means that they cannot, for example, convert a price into a different currency.


About one in six students (16.5%) in Beijing, Shanghai, Jiangsu and Zhejiang (China), and one in seven in Singapore (13.8%), perform at the highest level in maths. This compares to only 2.4% in OECD countries.

Equity in education

Students performed better than the OECD average in 11 countries and economies, including Australia, Canada, Denmark, Estonia, Finland, Japan, Korea, Norway and the United Kingdom, while the relationship between reading performance and socio-economic status was weakest. This means that these countries have the most equitable systems where students can flourish, regardless of their background.

Principals of disadvantaged schools in 45 countries and economies were much more likely to report that a lack of education staff affected their teaching standards. In 42, a lack of educational material and poor infrastructure was also a key factor in limiting success in the classroom.

On average across OECD countries, 13% of students in 2018 had an immigrant background, up from 10% in 2009. Immigrant students performed on average less well in reading, by around one year of schooling. Yet in countries including Australia, Jordan, Saudi Arabia and Singapore, immigrant students scored higher or at least the same as their non-immigrant peers.

Gender gap

Girls significantly outperformed boys in reading on average across OECD countries, by the equivalent of nearly a year of schooling. Across the world, the narrowest gaps were in Argentina, Beijing, Shanghai, Jiangsu and Zhejiang (China), Chile, Colombia, Costa Rica, Mexico, Panama and Peru. Boys overall did slightly better than girls in maths but less well in science.

Girls and boys have very different career expectations. More than one in four high-performing boys reported they expect to work as an engineer or scientist compared with fewer than one in six high-performing girls. Almost one in three high-performing girls, but only one in eight high-performing boys, said they expect to work as a health professional.

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In highly uneven recovery, global investment flows rebound

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After a big drop last year caused by the COVID-19 pandemic, global foreign direct investment (FDI) reached an estimated $852 billion in the first half of 2021, showing a stronger than expected rebound.  

That’s according to the latest Investment Trends Monitor, released this Tuesday by the United Nations Conference on Trade and Development (UNCTAD).  

It shows the increase in the first two quarters in FDI, recovered more than 70 per cent of the losses stemming from the COVID-19 crisis in 2020. 

For the UNCTAD‘s director of investment and enterprise, James Zhan, the good news “masks the growing divergence in FDI flows between developed and developing economies, as well as the lag in a broad-based recovery of the greenfield investment in productive capacity.” 

Mr. Zhan also warns that “uncertainties remain abundant”. 

Global outlook  

The duration of the health crisis, the pace of vaccinations, especially in developing countries, and the speed of implementation of infrastructure stimulus, remain important factors of uncertainty. 

Other important risk factors are labour and supply chain bottlenecks, rising energy prices and inflationary pressures.  

Despite these challenges, the global outlook for the full year has improved from earlier projections. 

The growth in the next few months should be more muted than the in the first half of the year, but it should still take FDI flows to beyond pre-pandemic levels. 

Uneven recovery 

Between January and June, developed economies saw the biggest rise, with FDI reaching an estimated $424 billion, more than three times the exceptionally low level in 2020. 

In Europe, several large economies saw sizeable increases, on average remaining only 5 per cent below pre-pandemic quarterly levels.  

Inflows in the United States were up by 90 per cent, driven by a surge in cross-border mergers and acquisitions. 

FDI flows in developing economies also increased significantly, totalling $427 billion in the first half of the year.  

There was a growth acceleration in east and southeast Asia (25 per cent), a recovery to near pre-pandemic levels in Central and South America, and upticks in several other regional economies across Africa and West and Central Asia. 

Of the total recovery increase, 75 per cent was recorded in developed economies. 

High-income countries more than doubled quarterly FDI inflows from rock bottom 2020 levels, middle-income economies saw a 30 per cent increase, and low-income economies a further nine per cent decline.  

Mixed picture for investors 

Growing investor confidence is most apparent in infrastructure, boosted by favourable long-term financing conditions, recovery stimulus packages and overseas investment programmes. 

International project finance deals were up 32 per cent in number, and 74 per cent in value terms. Sizeable increases happened in most high-income regions and in Asia and South America. 

In contrast, UNCTAD says investor confidence in industry and value chains remains shaky. Greenfield investment project announcements continued their downward path, decreasing 13 per cent in number and 11 per cent in value until the end of September.  

Agenda 2030 

After suffering double-digit declines across almost all sectors, the recovery in areas relevant to Sustainable Development Goals (SDGs) in developing countries remains fragile. 

The combined value of announced greenfield investments and project finance deals rose by 60 per cent, but mostly because of a small number of very large deals in the power sector.  

International project finance in renewable energy and utilities continues to be the strongest growth sector. 

The investment in projects relevant to the SDGs in least developed countries continued to decline precipitously. New greenfield project announcements fell by 51 per cent, and infrastructure project finance deals by 47 per cent. Both had already fallen 28 per cent last year.

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Capabilities fit is a winning formula for M&A: PwC’s “Doing the right deals” study

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Ensuring there is a capabilities fit between buyer and target is key to delivering a high-performing deal, according to a new PwC study of 800 corporate acquisitions. . The study finds that capabilities-driven deals generated a significant annual total shareholder return (TSR) premium (equal to 14.2% points) over deals lacking a capabilities fit.

The “Doing the right deals” study looks at the 50 largest deals with publicly-listed buyers in each of 16 industries and evaluates the characteristics that delivered superior financial outcomes for the buyers, as measured by annual TSR.

A capability is defined as the specific combination of processes, tools, technologies, skills, and behaviours that allows the company to deliver unique value to its customers.

Two types of deals were found to outperform the market: capabilities enhancement deals – in which the buyer acquires a target for a capability it needs — and capabilities leverage deals – in which the buyer uses its capabilities to generate value from the target. These represent a true engine of value creation, delivering average annual TSR that was 3.3% points above local market indices. Deals without these characteristics – limited-fit deals – had an average annual TSR of -10.9% points compared to the local market indices.

While 73% of the largest 800 deals analysed sought to combine businesses that did fit from a capabilities perspective, 27% were limited-fit deals. The analysis shows that for every dollar spent on M&A, roughly 25 cents were spent on such limited-fit deals that in many cases destroyed shareholder value.

Alastair Rimmer, Global Deals Strategy Leader, PwC UK said: “Our analysis confirms that deals where the buyer is focused on enhancing its own capabilities or leveraging its capabilities to improve the target can result in a substantial TSR premium. Whether a deal creates value depends less on whether it is aimed at consolidation, diversification or entering new markets. What matters is whether there is a solid capabilities rationale between the buyer and the target.”

Capabilities fit delivers shareholder value across industries

The capabilities premium was found to be positive across all of the 16 industries studied. The share of capabilities-driven deals was highest in pharma & life sciences (92%), an industry where deals often combine one company’s innovation capabilities with another’s strength in distribution.  Other leading industries in capabilities fit deals were health services and telecommunications (both with 90% capabilities-driven deals) and automotive (86%).  Limited fit deals were found to be most prevalent in the oil & gas industry (62%), where asset acquisition can play an important role in addition to capabilities fit.

The analysis shows that the stated strategic intent of a deal, as defined in corporate announcements and regulatory filings, has little to no impact on value creation. Whether a deal fits or not depends less on stated goals of consolidation, diversification or entering new markets. What matters is whether there is a capabilities fit between the buyer and the target.  Deals aiming for geographic expansion notably stood out as performing less well than others, largely because many of them (34%) were limited-fit deals.

The M&A playing field has shifted due to COVID-19

More than ever, companies must be clear in defining which capabilities they can leverage to succeed, and which capabilities gaps they need to fill.

Hein Marais, Global Value Creation Leader, PwC UK added: “Deal rationales have shifted in a COVID context, reflecting the heightened need for new and different capabilities if an enterprise is to generate value and create sustained outcomes.  The need to move quickly increases the pressure to do deals at pace – and thereby the risk of failing to evaluate capabilities fit with enough care. Ensuring such capabilities fit, however, dramatically increases the chances of your deal creating value.”

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Companies may be overlooking the riskiest cyber threats of all

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A majority of companies don’t have a handle on their third-party cyber risks  – risks obscured by the complexity of their business relationships and vendor/supplier networks.  This is the finding of the PwC 2022 Global Digital Trust Insights Survey.  The survey of 3,600 CEOs and other C-suite executives globally found that 60% have less than a thorough understanding of the risk of data breaches through third parties, while 20% have little or no understanding at all of these risks.

The findings are a red flag in an environment where 60% of the C-suite respondents anticipate an increase in cyber crime in 2022. They also reflect the challenges organizations face in building trust in their data — making sure it is accurate, verified and secure, so customers and other stakeholders can trust that their information will be protected.

Notably, 56% of respondents say their organizations expect a rise in breaches via their software supply chain, yet only 34% have formally assessed their enterprise’s exposure to this risk. Similarly, 58% expect a jump in attacks on their cloud services, but only 37% profess to have an understanding of cloud risks based on formal assessments.

Sean Joyce, Global & US Cybersecurity & Privacy Leader, PwC United States said: “Organizations can be vulnerable to an attack even when their own cyber defenses are good; a sophisticated attacker searches for the weakest link – sometimes through the organization’s suppliers.  Gaining visibility and managing your organization’s web of third-party relationships and dependencies is a must.  Yet, in our research, fewer than half of respondents say they have responded to the escalating threats that complex business ecosystems pose.”

Asked how their companies are minimizing third-party risks, the most common answers were auditing or verifying their suppliers’ compliance (46%), sharing information with third parties or helping them in some other way to improve their cyber stance (42%), and addressing cost- or time-related challenges to cyber resilience (40%). But a majority have not refined their third-party criteria (58%), not rewritten contracts (60%), nor increased the rigor of their due diligence (62%) to identify third-party threats.

Simplifying the way to cybersecurity

Nearly three quarters of respondents said the complexity of their organization poses “concerning” cyber and privacy risks. Data governance and data infrastructure (77% each) ranked highest among areas of unnecessary and avoidable complexity.

Simplification is a challenge, but there is ample evidence that it is worthwhile.  While three in 10 respondents overall said their organizations had streamlined operations over the past two years, the “most improved” in our survey (the top 10% in cyber outcomes) were five times more likely to have streamlined operations enterprise-wide.  These top 10% organizations are also 10 times more likely to have implemented formal data trust practices and 11 times more likely to have a high level of understanding of third party cyber and privacy risks.

CEO engagement can make a difference

Executive and CEO respondents differ on how much the support the CEO provides on cyber, with CEOs seeing themselves as more involved in, and supportive of, setting and achieving cyber goals than their teams do. But there is no disagreement that proactive CEO engagement in setting and achieving cyber goals makes a difference.  Executives in the “most improved” group, reporting the most progress in cybersecurity outcomes, were 12x more likely to have broad and deep support on cyber from their CEOs.  Most executives also believe that educating CEOs and boards so they can better fulfill their cyber responsibilities is the most important act for realizing a more secure digital society by 2030.

Sean Joyce concluded: “Our survey shows that the most advanced organizations see cybersecurity as more than defense and controls, but as a means to drive sustained business outcomes and build trust with their customers.  As leaders of organizations, CEOs set the tone for focusing their cyber teams on bigger-picture, growth-related objectives rather than narrower, short-term expectations.”

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