June 23, 2017, 10:00 am

Making the Business Case for Sustainability

by: The Financial Blogger    Category: Business

Even though the concept of sustainability has long since worked its way into modern society’s lexicon, the idea is one fraught with confusion. So, it should be no surprise that not every business has seized on its potential.

Sustainability programs are not to be confused with corporate social responsibility programs, which are more oriented to ethical actions and impacts. Sustainability is really more focused on operating in a way that preserves our resources.

It wasn’t all that long ago that nearly one-third of the members of the World Business Council for Sustainable Development – an organization noted for its support of this drive – said their management had little faith in the sustainability business case and didn’t support the concept internally.

Slowly, though, that’s changing, and Canada is one country that has a notable number of businesses that are seizing on the business case for sustainability. Case in point:

Toronto recruitment firm Arrow Professional Services conducts candidate interviews via Skype to avoid transportation costs and reduce its carbon footprint.

Benefits by design in Kingston, Ontario stocks office bicycles so staff can run errands without the hassle of driving a car.

Cisco Systems Canada in Toronto features recycling and take-back programs so customer can better manage their electronic waste at no cost.

One of Toronto’s most active developers, Mizrahi Developments, emphasizes sustainable design and development, as illustrated by its commitment to EnergyStar technology and GreenHouse Certification.

 

There’s absolutely a strong business case for sustainability, these companies and others would argue. As Sam Mizrahi of Mizrahi Developments points out, initiatives centered around sustainability creates a strong competitive advantage, even as it reduces costs through more energy efficient practices.

Environmental trends and their impact support a strong business rationale for sustainability practices that benefit any number of areas of concern. These include:

Risk management. Any number of circumstances – both natural disasters and civil conflict – can disrupt today’s supply chains and risks are only heightened by climate change and water shortages. In one study, 72 percent of the 8,000 suppliers to 75 multinational companies surveyed said climate change presents risks that might significantly affect their organizations. Managing social and environmental risks – all manifested over the long term – means making investment decisions today for tomorrow’s capacity needs and adaptive strategies. Coca Cola realized this fact after it had to shut down a plant in India in 2004 due to a water shortage. That helped lead to its investment of over $2 billion to reduce water use and improve water quality in areas where it operates.

Innovation. Sustainability can also be a major influence over the innovation pipeline when one considers how products and services can be reimagined to meet environmental standards. Nike is one that brought sustainability into its innovation process. One outcome was the $1 billion Flyknit line, launched in 2012. It’s a specialized yarn system of recycled polyester requiring little labor and dramatically reducing waste – by 80 percent, while also diverting 182 million bottles from landfills.

Financial performance. Despite conventional wisdom, you can have both profits and sustainability. And there are any number of examples to prove it. Dow has invested $2 billion in resource efficiency since 1994, saving $9.8 billion in manufacturing costs due to reduced energy and wastewater consumption. WalMart’s drive for fleet efficiency saw an 87 percent improvement from its 2005 baseline, saving the environment from some 15,000 metric tons of CO2 emissions that were avoided.

Sustainability is good for the environment and the business environment. It’s really no longer an optional strategy to make the preservation of our resources a core component of an overarching business strategy. It’s the only way to invest in our shared future.

 

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June 23, 2017, 9:54 am

Auctions Build Anticipation (And Investment Interest) for Fancy Colored Diamonds

by: The Financial Blogger    Category: Investment, Market and Risk

Fancy color diamonds from the Aurora Butterfly of Peace Diamond Collection, ranging from 0.62 to 2.00 ct. Courtesy of Alan Bronstein and Aurora Gems.

Just when you think the market for fancy colored diamonds can’t get any hotter… it does.

This year has seen some notable gem auctions by high-end auction houses and jewelers. And while it’s not just diamonds to go on the block – stunning sapphire, emerald and jade creations have been among the touted pieces – it’s the colored diamonds that have captured the attention and opened the pocketbooks of the most discerning investors.

Indeed, the market for the comparatively scarce fancy colored diamonds has been booming for a number of years. The value of colored diamonds generally has grown 142 percent over the last decade, while the value of fancy pink colored diamonds has really soared, up 315 percent, according to The Fancy Color Research Foundation. Blues, meanwhile, have experienced a surge of 154 percent.

This has all created a lot of anticipation each time another diamond auction is announced, and small wonder, given the records the sales are setting. Among the events that have set this year’s pace:

  • The Pink Star sale by Sotheby’s at its April auction in Hong Kong may have been the event of the year – if not the decade. The Pink Star is the stunning 59.6 carat diamond that is the largest flawless fancy vivid pink ever to have been graded by the Gemological Institute of America. The winning bid of $71.2 million by Hong Kong jeweler Chow Tai Fook smashed all previous world records for any diamond or jewel – even if it fell short of an earlier $83 million failed bid by New York diamond cutter Isaac Wolf.
  • Bonhams New York auction, also in April, may not have featured a marquee draw like the Pink Star, but still offered enough variety to entice a crowd. Fancy colored diamonds were the highlight of the lot, but also of interest were signed pieces by Cartier, Art Deco items and statement sapphires and emeralds. A fancy vivid yellow diamond and diamond ring (valued at $400,000 to $600,000) was the sale’s top piece. It was notable for its unusual old-fashioned cutting style that showcased its brilliance and depth of color.
  • Christies, too, has been showcasing colored diamonds alongside other gems in its auctions, and its most recent, the Hong Kong Magnificent Jewels Sale in May, lived up to its billing. The auctions provided an exciting selection of magnificent gems. The top piece was an exceptional fancy vivid blue diamond ring by Moussaieff, highlighted by a pink diamond surround, valued at between $8 million to $10 million. Another noteworthy auction piece was a rare platinum and gold bracelet of colored and white diamond florets – each flowerhead featuring a oval-shaped pink diamond at its center, with the clasp featuring a blue one. It was valued at between $2.8 million to $3.8 million.

Although details are not yet known, there’s also a high level of anticipation building over a similar planned showcase of fancy pink diamonds – the 2017 Argyle Pink Diamond Tender. This invitation only-event provides an opportunity to appreciate and bid on some of the rarest stones produced by the Rio Tinto Group’s Argyle Mine. It’s the source of 90 percent of the world’s high quality pink diamonds.

Events like these underscore the unabated enthusiasm for diamonds – and colored diamonds especially – as a likely option for discerning investors.

There’s more demand for them among investors these days. But they get an added bonus as their investment is in an asset that is also a stunning piece of jewelry, notes Michael King, Director of Trading at Paragon International Wealth Management, a Toronto-based firm that is a leader in acquiring and managing hard investment assets, with a specialty in fancy colored diamonds. Paragon International Wealth Management’s King also adds that, “They’re [colored diamonds] long-term investments with a great return — often many times over their original price.

 

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June 14, 2017, 12:53 pm

Attention Aspiring CFOs: Are You Adding Value Beyond the Numbers?

by: The Financial Blogger    Category: Business,Career

Becoming a CFO is no longer just about your financial chops. In our fast paced and fluid environment, companies are searching for financial leaders who can think strategically about overarching business needs while at the same time, applying their experiences and persuasive skills to influence members of the C-suite, boardroom, key stakeholders and beyond. In this new context, the CFO is emerging as the advisor who ensures the organization is translating numbers into opportunities. Yet, being viewed as a partner and a trusted advisor is often where many fall short and fail to break out of the accountant mould.

“The CFO has become the new Chief Operating Officer,” said Ross Woledge, CFO Practice Leader for Odgers Berndtson in Canada — a leading global executive search firm. “Traditionally, the finance role was about reporting the numbers. Now it’s about telling the story behind the numbers.” And while some of this competency can be chalked up to how leading CFOs look at the world, some of it can — and should — be learned.

A study of top Canadian financial executives, conducted by Odgers Berndtson, uncovered some interesting trends that defy popular stereotypes of financial leader traits. In examining the psychometric profiles of close to 300 top CFOs and finance executives in Canada, the United States, Asia and Europe, it became clear that the majority of today’s successful CFOs share the following four key leadership characteristics:

  1. Less process driven and rule oriented than other executives: While traditional CFOs might be perceived as set in their ways and detail-oriented to a fault, modern CFOs are much more willing to challenge the status quo and call for change among their executive cohort.
  2. Competitive and driven to achieve: Interestingly, the profile for these successful CFOs is more similar to that of business development executives or entrepreneurial CEOs than it is to that of budget- or control-oriented individuals. This high achievement orientation makes CFOs exceptionally well suited for executive roles — particularly if they’re gunning for future CEO positions.
  3. Resilient, hard-working and self-accepting, which allows them to deal with the pressures of high-profile roles where they’re accountable not only for protecting the financial integrity of their organizations but also, increasingly, for facilitating growth and capacity for innovation.
  4. Strong relationship-building skills, comfortable in the spotlight, which allows them to engage in meaningful interactions with co-workers as well as peers in the C-suite, on the board, and investors alike.

The study also revealed that diverse experience can make a difference. The most successful CFOs build both a depth and breadth of expertise that comes from seeking out as many varied experiences as possible. Among Mr. Woledge’s recommendations for executives looking to advance in financial leadership roles:

  1. Go beyond your accounting designation: Consider developing your capital market skills by pursuing a CFA. Or if you’ve got your sights set on being a CEO, an executive MBA can provide practical skills and know-how that can take your career to the next level.
  2. Take a “corkscrew” approach to your career: Take advantage of opportunities to move out from the comforts of the finance department, to work in different functions or industries altogether. The result is a CFO “who deeply understand[s] how the company really makes money, not just how to read what shows up on the income statement.”
  3. Hone your stakeholder skills: “You can be the smartest person in the room, but if you can’t bring people around to your perspective, you’re going to fail,” noted Mr. Woledge. If you lean towards the numbers-side of finance (vs. the people-side), then consider spending time with your Investor Relations team to hone your media and communications skills. Getting facetime with key stakeholders will enhance your ability to learn their pain points, speak their language, and ultimately, rouse support from among the C-suite ranks.
  4. Take risks and have an opinion: In ultra-competitive economies, CFOs are often called upon to be catalysts for change, to instill a financial approach that reduces costs while also helping other parts of the business perform better. Being an effective change-maker requires a degree of poise, flexibility, and above all else, an openness to dealing with ambiguity that comes from a combination of innate attitude plus the experience to know that taking calculated risks can often pay off with big rewards.

Advancement in any career requires taking on new challenges. You may also consider programs like the Business Leadership for Finance Executives (a partnership between Odgers Berndtson and the Rotman School of Management) that continue to develop the intellectual and emotional agility of finance leaders and critical leadership skills to accelerate their rise through the executive ranks.

And remember: Being a trusted advisor does not happen overnight. As with everything, it takes practice, and being close to the business (whether it’s the sales, marketing, operations or other teams) enables you to hone your approach to running a company.

 

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June 8, 2017, 10:26 am

Business Owners: Is it Time to Ditch Your Bank?

by: The Financial Blogger    Category: Banks and You

‘My name’s Mark, and I’m a small business owner. I’d like to tell you about some of the challenges I’ve faced as a self-employed person. My local bank was siphoning more out of my revenue stream than I cared for. So, I went in search of cost-effective alternatives, and this is what I’ve found.’

I run a CMS enterprise where I produce aggregated content for a wide range of industries, including gaming, fashion, and technical operations. My clients are based all over the world, and I subcontract to freelancers and industry experts whenever required. As you can imagine, international transactions factor into my daily business operations. I’ve been engaged in this line of work for the past 15 years, and for the most part I am happy. My client base is steadily growing, and the efficiency of my business has improved.

There was one worrying aspect of my small business that troubled me: fees, commissions, and bank charges. As a sole proprietor or small business, you know that the buck stops with you. You are the first and last line of defense for your own well-being, and you have to take responsibility for all decision-making. Once my business was operating at maximum capacity, I was clearing $150,000 per annum, but I was a veritable workaholic. I never saw a day of rest, even on my wedding day which was interrupted with a morning session of work. Nonetheless, I accepted the challenges because I enjoyed the independence of being able to work from a virtual office.

Boom or Bust – Banks Are Not on Your Side

Being a home-based business has its merits. You don’t have to answer to a boss, other than your clients, and you don’t have to deal with the employees, since you’re dealing with freelancers. The flipside of the coin is that all complaints are yours to deal with and you cannot shift responsibility to anyone else.

Marketing, invoicing, collections, social media, content management, quality control and all other aspects of the business are my responsibility. When it came time to invoice my clients at the end of the month I realized that my cost structure was being hampered by the extortionary fees, charges, and commissions I was paying to banks, PayPal, and other payments processing companies.

As a small business, you often get clients with small work orders. When these clients are based overseas, the only way you can get the money transferred to you is via a payment system that your client is willing to use, and one which you are willing to use. Unfortunately, many of my clients used banks and PayPal. These are two of the most expensive ways to transfer money. Consider one client that owed me £100 for a work order that I’d completed.

This client had a bank in Cyprus which then had to convert euros into pounds sterling. There were fees associated from the originating bank to my bank, and additional fees were tacked on by the receiving bank. Add currency cross exchange rates into the mix and you can imagine my displeasure when I received the final payment. Many similar examples occurred over the years. At the time, I simply accepted this as part of the process.

Originating banks and receiving banks

I invoiced my clients, accepted that banks were going to fleece me along the way and came out with a lot less than I’d charged them. My overinflated gross income always looked much more attractive than my net income. It didn’t much matter whether I used banks or PayPal – they were equally bad. The problem is that anytime money is transferred across international borders, you have originating banks and receiving banks, fees, margins and all sorts of unfriendly exchange rates to contend with.

It can cost as much as £25 for a UK bank to receive an international wire, and as much is $50 for a US bank. These fees simply don’t make sense. PayPal may not charge the high upfront fee, but their commissions are about as user unfriendly as you can imagine. I guess I had gotten stuck in a rut, accepting that those fees were never going to change and that I should simply charge clients more to come out a little bit ahead.

However, I didn’t want to price myself out of the market.

Then I started searching for options other than banks and PayPal for money transfers. I realize that enemy #1 are the actual currency transfers between my business and my suppliers, or between my clients and myself. The unfavorable rates offered by banks are the problem. Banks will always buy for less than what they sell at. They also tack on many extra charges to make any international currency transfer as unfavourable to the client as possible. I have heard horror stories of two-way money transfers eating up as much is 13% of the value of the currency transfer.

Imagine selling your home in the UK for £100,000, transferring that money to the US and then transferring it back to the UK again and paying £13,000? Some banks will do that to you. That’s why I quickly ran a search on best international money transfer options and I came up with multiple alternatives to High Street banks. The wire fees are significantly lower, if at all, and transfers are far easier and quicker than with banks. I initially had qualms about credibility of non-bank money transfer services, but those are quickly allayed when I realized that the top money transfer companies are reliable, and the latest FinTech disruptors.

Banks are now playing catch-up with these companies because they’re losing sole traders and small business owners like myself by the truckload. I highly recommended cutting costs by switching to non-bank money transfer companies. There are many benefits in this, and you can use those cost savings towards your 401(k) retirement plan.

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June 6, 2017, 1:39 pm

5 Reasons ERP is Essential for Manufacturers Trying to Scale

by: The Financial Blogger    Category: Business

One of the most commonly misunderstood features of growth is just how much support and infrastructure it takes to nurture and sustain. Growth is not its own energy source. And once you’ve managed to achieve it, it won’t continue and accelerate unless conditions are just right. That means whatever your situation was before the growth initiated, it needs to change now that your output is on the rise.

Obviously you will need to think about purchasing new machinery, adding new staff, or moving to a larger or newer facility. But you will also need to think about the way you manage operations, forecast orders, cultivate clients, and ensure consistency.

Many manufacturers turn to ERP to handle the data challenges faced by all modern enterprises. What they are pleased to discover is that ERP is an asset at all times, and truly invaluable during times of growth. Here are five reasons it is essential for manufacturers before, during, and after a period of scaling up:

Simplify Data Management

If data management is a challenge now, it does not get any easier once your enterprise has grown. Not only is your output higher, but you are likely relying on more data-driven processes. As a result, even modest growth can multiply the volume of data you currently deal with. ERP makes it easy to funnel all of this new data directly into a system that gives it instant form and function. You don’t need to worry about your administrators or IT managers getting overwhelmed. You also don’t need to worry about valuable data being lost or wasted.

Integrate New Vendors and Distributors

As you grow you will be forming important partnerships with businesses throughout your supply chain. But integrating those distributors and vendors into your workflows is not small feat. The best ERP for manufacturing will make creating and sustaining these partnerships a seamless process. You no longer need to worry about losing an opportunity simply because of administrative hurdles.

Alleviate the IT Burden

Manufacturing ERP should ideally be housed in the cloud for a number of reasons. One of the most significant is that cloud ERP takes away much of the burden of maintenance, monitoring, and security that currently falls to your IT team. If and when you grow, you don’t need to worry about your in-house IT team becoming overwhelmed. You also don’t need to hire more staff. Your technology is already equipped to scale to meet your exact needs and wants.

Eliminate Conflicts and Confusions

Growth brings with it both excitement and uncertainty. It also changes things more broadly and more deeply than anyone expects. When your manufacturing enterprise is undergoing a major period of transformation, you want everyone to work with the same information and insights without fail and without friction. Quality manufacturing ERP creates a common platform through which real-time information flows seamlessly. When everyone needs to be on the same page, ERP makes it easy.

Manage Costs and Seize Opportunities

When you’re adopting new approaches or gaining ground in new markets, it is easy for costs to spiral out of control. It is just as easy to be so focused on the day-to-day that you lose sight of strategic opportunities or vulnerabilities. ERP is an asset during these times because it allows you to see the forest through the trees. Stress and excitement can’t get in the way of your better judgment when you can easily and instantly generate reports and analytics.

Having ERP is a real asset. But not having ERP may be an even greater risk. Make sure your growth survives the short term and carries into the long term by putting the right tools in place today.

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