Connect with us

Reports

COVID-19 crisis threatens SDGs financing

Published

on

oecdfront

According to the OECD’s latest Global Outlook on Financing for Sustainable Development, developing countries are facing a shortfall of USD 1.7 trillion in the financing they would need this year to keep them on track for the 2030 Sustainable Development Goals (SDGs), as governments and investors grapple with the health, economic and social impacts of the COVID-19 crisis.

The report says developing countries are set to see a USD 700 billion drop in external private finance in 2020 and a gap of USD 1 trillion in public spending on coronavirus recovery measures compared to what is being spent in advanced economies, where governments have a greater capacity to borrow. The drop in private finance comes from a fall in portfolio investments, foreign direct investment and a decline in remittances sent home by migrant workers.

“Financing for sustainable development is at risk of collapse when it is needed more than ever. COVID-19 is erasing years of development progress and causing major setbacks to all sources of finance for developing countries under stress, many of which entered the crisis with already severe structural impediments,” said OECD Secretary-General Angel Gurría, presenting the report at a high-level meeting of the OECD’s Development Assistance Committee. “With COVID-19 already reversing development advances and many challenges still ahead, it is urgent that we redesign global finance to incentivise sustainable investment and step up our efforts to help developing countries recover from the crisis in an inclusive, resilient and sustainable manner.”

The projected USD 1.7 trillion shortfall for 2020 adds to an existing gap of USD 2.5 trillion in annual financing for developing countries towards achieving the 17 SDGs by 2030. Meanwhile, 90 out of 122 developing countries are now in economic recession as the virus hurts sectors like tourism, manufacturing and commodities. The pandemic also risks putting pressure on flows of development aid from advanced to developing economies.

At USD 379 trillion, global financial assets are at their highest value since before the global financial crisis, yet 80% of these assets are held in advanced economies and a lack of universally accepted criteria means that little is known about their sustainable development and climate impact, the report says. Just 20% of financial assets are held in developing countries, where more than 80% of people on the planet live. According to the report, reallocating just 1.1% of the total assets held by banks, institutional investors or asset managers – USD 4.2 trillion – would be sufficient to fill the gap in SDG financing.

Fixing the inefficiencies in financial and taxation systems that enable money to drain away from developing countries through tax evasion and avoidance and high remittance transfer fees (which averaged 7% over 2017-19) would help to improve the geographic distribution of assets. The report also calls for better incentives to guide financing, increased transparency and accountability of finance flows, and a systemic solution to developing country debt to avert liquidity problems, ensure access to capital markets and preserve banking stability. Building on the Global Outlook’s findings, the OECD is working with the United Nations to design a framework to improve alignment of global finance with the SDGs.

Reports

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

Published

on

city business

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.”

Continue Reading

Reports

Companies may be overlooking the riskiest cyber threats of all

Published

on

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.”

Continue Reading

Reports

Are we on track to meet the SDG9 industry-related targets by 2030?

Published

on

A new report published by the United Nations Industrial Development Organization (UNIDO), Statistical Indicators of Inclusive and Sustainable Industrialization, looks at the progress made towards achieving the industry-related targets of Sustainable Development Goal (SDG) 9 of the UN 2030 Agenda for Sustainable Development. The report is primarily based on the SDG9 indicators related to inclusive and sustainable industrialization, for which UNIDO is designated as a custodian agency, showing the patterns of the recent changes in different country groups.

Six years after the adoption of the 2030 Agenda for Sustainable Development and its 17 SDGs, there has been increasing demand for information on whether the SDG targets could be reached, and what actions should governments take to accelerate progress. The UNIDO report introduces two new tools developed by UNIDO to help countries measuring performance and progress towards SDG9 industry-related targets: the SDG9 Industry Index and SDG9 progress and outlook indicators. The SDG9 Industry Index benchmarks countries’ performance on SDG-9 targets over 2000-2018 for 131 economies. In addition, the report develops two measures to answer the main questions:

  • Progress: how much progress has been made since 2000?
  • Outlook: how likely is it that the target will be achieved by 2030?

The global COVID-19 pandemic has inevitably had a negative toll on the progress towards reaching the SDG9 indicators, but the extent of the long-term impact remains to be seen. Industrialized countries continue to dominate global manufacturing industry, but their relative share has gradually declined over the past decade. In 2010, industrialized economies made up 60.3% of global production, which has decreased to 50.5% in 2020. China has been the largest manufacturer, now accounting for 31.7% of global production. This is a trend that has been reinforced by the pandemic.

Progress for the least developed countries (LDCs), at the heart of the 2030 Agenda, is a different story. While economic theory and countries’ experiences across the world have established that industrialization is an engine of sustainable growth, progress among LDCs remains very diverse. Asian LDCs are poised to double their share of manufacturing in GDP and thus meet SDG target 9.2, but African LDCs have stagnated.

SDG9 Industry Index

The SDG-9 Industry Index, consisting of five dimensions, covers three targets and five indicators and assigns a final score to countries. In 2018, the top ten consisted of exclusively industrialized economies, with Taiwan, Province of China, Ireland, Switzerland, the Republic of Korea and Germany making up the top five. In general, industrialized economies perform best in all dimensions of the Index.

The countries at the bottom of the ranking are LDCs, in particular those located in sub-Saharan Africa. Although some African countries have been displaying impressive growth rates, growth has been driven by an extended commodity boom and foreign capital inflows, while industrialization and structural transformation have stagnated. Additionally, substantial data is lacking for a significant amount of the countries. In the SDG9 Industry Index, only 24 out of 54 African countries are included, from which only eight are LDCs. It is clear that national statistics offices need strengthening, as data availability helps countries formulate, review and evaluate their development plans and programmes.

Continue Reading

Publications

Latest

Putin erdogan sochi Putin erdogan sochi
Russia2 hours ago

Russia, Turkey and the new geopolitical reality

The recent Russia – Turkey summit in Sochi, even though yielding no tangible outcomes (as became clear well before it,...

Defense4 hours ago

Iran in the SCO: a Forced “Look East” Strategy and an Alternative World Order

On September 17, a package of several dozen documents was signed in Dushanbe at the summit of the Shanghai Cooperation...

Africa6 hours ago

Shaping the Future Relations between Russia and Guinea-Bissau

Russian Foreign Minister Sergey Lavrov and Guinea- Bissau Suzi Carla Barbosa have signed a memorandum on political consultations. This aims...

Tech News8 hours ago

Online game showcases plight of our planet’s disappearing coral reefs

One of the world’s leading producers of online word games joined a global effort to help protect the planet’s coral...

South Asia10 hours ago

A Peep into Tehreek-e-Taliban Pakistan’s Tricky Relations with Afghan Taliban

To understand the interesting relationship between the Tehreek-e-Taliban Pakistan (TTP), also known as Pakistani Taliban, and the Afghan Taliban, one...

Environment14 hours ago

Act Urgently to Preserve Biodiversity for Sustainable Future — ADB President

The world must act urgently to preserve ecosystems and biodiversity for the sake of a sustainable future and prosperity, Asian...

Health & Wellness16 hours ago

Stockholm+50: Accelerate action towards a healthy and prosperous planet for all

The United Nations General Assembly agreed on the way forward for plans to host an international meeting at the highest...

Trending