As concerns about the digital security of Canada’s financial system continue to increase, regulators have introduced new rules requiring investment dealers to report any cybersecurity incidents. A big challenge is how those companies will get their investment advisors to be their eyes and ears on the ground.
In mid-November, the Investment Industry Regulatory Organization of Canada (IIROC) introduced mandatory cybersecurity incident reporting for its member dealers. They must inform the self-regulatory organization (SRO) of any cybersecurity incidents that disrupt their businesses in two ways. According to the rules, they must first “provide a preliminary description of the incident and steps taken to mitigate” its impact within three days. Then they “must provide a detailed investigation report, outlining the cause and scope of the issue, and steps taken to mitigate the risk of harm to investors and to the firm” within 30 days.
These new rules arrived just days before the Bank of Canada published its biannual Financial System Survey, in which senior experts who specialize in risk management provide their views on the resilience of Canada’s financial system. The danger of a large cyber incident ranked among the top three risks along with a general deterioration in the global economic outlook and a materialization of geopolitical risk events.
Dealers rely heavily on everyone in the organization when responding to cybersecurity incidents, says Bradley Freedman, partner and national co-leader of the cybersecurity law group at Borden Ladner Gervais LLP in Vancouver.
“Cybersecurity and privacy are team sports because they require a co-ordinated response.”
Advisors are a part of that team. As they deal with clients and their sensitive information every day, they represent the front line in any cybersecurity-related effort, says J.R. Cunningham, vice-president of strategic solutions at Herjavec Group, a Toronto-based provider of cybersecurity products and services to enterprises.
“In a lot of other campaigns centered around awareness, ‘If you see something, say something’ is a great tagline,” he says.
Advisors have a responsibility to educate themselves about cybersecurity, says Irene Winel, IIROC’s senior vice-president of member regulation and strategy.
“It’s a matter of good service and good business practice for advisors to stay up to date.”
Ms. Winel points to several IIROC resources to help advisors spot and report suspicious incidents. These include a Cybersecurity Best Practices Guide, a Cyber Incident Management Planning Guide and a Cybersecurity Tips for Advisors webcast continuing-education course.
At the same time, dealers themselves can be proactive in helping their advisors be aware of what to look for, Mr. Freedman says.
“An essential part of cyber risk management and privacy protection is education and training,” he says. “It can be done at a relatively low cost with significant return.”
Dealers can teach advisors what to watch out for without requiring them to be experts in technology-related matters, Mr. Cunningham says. They don’t have to be tech-savvy to understand what personally identifiable information means.
Dealers must make cybersecurity awareness training relevant to advisors, he adds. That means moving beyond dry lectures in an airless conference room and engaging advisors with practical exercises. In one increasingly common approach, companies send out fake phishing campaigns to test employees’ and contractors’ cybersecurity readiness. Companies can even gamify these exercises to help create a sense of healthy competition.
In many cases, it will be obvious to advisors immediately when they’ve done something wrong. “We’ve all had that lump in our throat after we clicked on a link and thought, ‘I shouldn’t have done that,’” Mr. Cunningham says.
The key to reporting cybersecurity incidents successfully is ensuring that advisors know what to do in those situations – namely, escalating the incident quickly so that the right people can deal with it.
“If something doesn’t seem right, knowing who to call and who to engage at a given time is what’s really important,” Mr. Cunningham says.
Advisors – especially those who report their own mistakes – must feel confident that they won’t be punished. It’s up to executives to create an atmosphere of trust, Mr. Cunningham adds.
Dealers may even consider giving advisors an incentive to report any cybersecurity incident, he suggests. That can be especially useful when dealing with large networks of independent advisors. Mr. Cunningham often sees this in retail and restaurant franchises.
“They’ll say, ‘If you adopt our standards, maybe we’ll help underwrite your cyber insurance risk or we’ll pay for your cyber policy because we’re confident that if you follow our technical standards, you’re not going to be breached.’”
Dealers could also engage advisors as active cybersecurity partners by brokering cybersecurity services. An investment company could procure technology protection tools and offer them to advisors at preferential rates to help engage them in cybersecurity reporting practices.
At the end of the day, advisors will need to keep honing their skills as dealers innovate with new technologies and hackers get ever more dangerous, Mr. Freedman warns.
“This is a permanent state of being for the foreseeable future. Organizations have to be on guard. They have to invest in people, processes and technologies to manage cyber risks and to protect the privacy of personal information.”
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Investment will overshadow trade in Japan-US talks – The Japan Times
WASHINGTON – The Japan-U.S. Trade Agreement (JUSTA), the pinnacle for modern trade policy between the two allies, is now in force.
While it’s not a comprehensive trade deal, the JUSTA will remove barriers for billions worth of traded agricultural and industrial goods. Leaders in Washington and Tokyo can rightly highlight the “win-win” benefits of the agreement. And so, over the coming year we should expect other economic issues besides trade to take the lead for future policy discussions and coordination.
Japan-U.S. trade policy will instead take a back seat in the next 10 months to issues like investment policy. Meanwhile, all eyes will be on Washington as the presidential debates and election take the spotlight. Washington will become a political and rhetorical minefield. Any substantive discussion on trade policy will be out of the question as trade continues to become a highly politicized issue. But Japan-U.S. policy coordination will still continue on a working level.
It’s good the JUSTA is essentially done with (though there are implementing procedures to go through) and negotiations are out of the way. But the election is only one reason why we shouldn’t expect any substantial progress on a comprehensive Japan-U.S. free trade agreement (FTA) in the near future.
It’s almost impossible for Congress to pass a trade deal in an election year. Even though the White House may get Congress to vote on the U.S.-Canada-Mexico Agreement, this leaves little political capital left to take up a Japan-U.S. FTA.
U.S. and Japanese trade negotiators understand these political limitations, despite their efforts to negotiate an FTA. Still, even if it wasn’t an election year, both governments are perfectly fine taking the JUSTA as it is to avoid removing barriers to traditionally protected industries or risking punitive tariffs.
There are still a number of areas where Japan-U.S. trade can become more free. The JUSTA falls short of addressing import taxes and other trade barriers on certain goods such as rice, butter, fresh poultry, grapefruits, mandarins, melons, tomatoes, strawberries and passenger vehicles, to name a few.
That’s not to say Japan-U.S. trade interests won’t completely fall by the wayside this year. Both the United States and Japan still have a keen interest in figuring out how to address trade distortions caused by large economies like China. Dealing with non-market economies through the framework of the World Trade Organization will be a top priority for the U.S., Japan and the European Union at this year’s ministerial conference in June — though they’re unlikely to reach any significant solution.
U.S. representatives are more likely to attract criticism from other WTO members than support after allowing a key feature of the WTO’s dispute system, its appellate body, to fall into limbo last year. So with trade essentially out of the way, this more or less moves investment policy into the front seat for Japan-U.S. bilateral discussions.
Investment is important on its own, given its intersection with trade and when talking about Japan-U.S. investments.
U.S. entities are the largest investor in Japan, having historically invested over $60 billion, according to the Japan External Trade Organization. Japanese entities are the second-largest investor in the U.S., having historically invested over $500 billion in U.S. industry and finance, according to the U.S. Bureau of Economic Analysis.
There’s a lot of new rules around foreign investment emerging in both Washington and Tokyo, and in Asia in general. U.S. regulators just finalized new rules that will affect how they review foreign investment and national security. The Diet just recently passed legislation to update its laws on foreign investment as well.
Much of these new rules focus on administrative concerns, like company ownership, and the legal authority governments have to review foreign investments. Other new rules focus on whether potential bad actors could get access to critical technology and information in industries sensitive to national security, with both countries having an eye toward investments from China. But as the U.S. has seen in the past, investments from our largest partners (the United Kingdom, Japan and Canada) tend to get caught up in this red tape for review just as frequently as investments from China. The same could happen for Japan and its occasional investors.
Meanwhile, China has a new foreign investment law that went into force this year that stipulates foreign investment will be treated as equally as domestic investment. Overbearing Chinese regulations on U.S. investments are one of the issues disputed in the U.S.-China trade war.
This isn’t to say U.S. and Japanese officials haven’t been communicating on these new rules at all. For the U.S., it’s the most comprehensive reform of this type of foreign investment law since 2008. Officials want to make sure they get the right mix of input from stakeholders because the last thing they want is to stifle foreign investment.
For Japanese officials, and more importantly Japanese companies, it’s also about making sure that when the U.S. establishes a new whitelist of “excepted foreign states,” where a few countries will see some relief from these new rules, Japan manages to get on the list. But that decision may not be made for another two years.
Other types of investments in Asia are as likely to be in focus this year as well. Just a few months ago, the U.S., Japan and Australia introduced what’s called the Blue Dot Network, an effort that piggybacks on previous investment agreements backed by Japan, the U.S. and Australia to make sure development projects in the Indo-Pacific are high-quality.
Chinese investments abroad, either as a part of its “Belt and Road” initiative or in technologies related to the Made in China 2025 plan, will continue to be the focus for U.S. and Japanese efforts in 2020, too.
Trade will re-emerge as a leading issue in the U.S. as Congress takes up the renewal of America’s leading trade law in 2021. Until then, expect investment to lead the policy discussion and coordination for U.S. and Japanese officials.
Riley Walters is a policy analyst with the Asian Studies Center at the Heritage Foundation.
Should Air Lease Corporation’s (NYSE:AL) Weak Investment Returns Worry You? – Yahoo Finance
First up, we’ll look at what ROCE is and how we calculate it. Second, we’ll look at its ROCE compared to similar companies. Then we’ll determine how its current liabilities are affecting its ROCE.
Understanding Return On Capital Employed (ROCE)
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Generally speaking a higher ROCE is better. Overall, it is a valuable metric that has its flaws. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since ‘No two businesses are exactly alike.” data-reactid=”30″>ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Generally speaking a higher ROCE is better. Overall, it is a valuable metric that has its flaws. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since ‘No two businesses are exactly alike.
So, How Do We Calculate ROCE?
Analysts use this formula to calculate return on capital employed:
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)” data-reactid=”33″>Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
Or for Air Lease:
0.052 = US$1.1b ÷ (US$22b – US$356m) (Based on the trailing twelve months to September 2019.)
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="So, Air Lease has an ROCE of 5.2%. ” data-reactid=”36″>So, Air Lease has an ROCE of 5.2%.
Does Air Lease Have A Good ROCE?
ROCE is commonly used for comparing the performance of similar businesses. Using our data, Air Lease’s ROCE appears to be significantly below the 9.4% average in the Trade Distributors industry. This performance could be negative if sustained, as it suggests the business may underperform its industry. Setting aside the industry comparison for now, Air Lease’s ROCE is mediocre in absolute terms, considering the risk of investing in stocks versus the safety of a bank account. Investors may wish to consider higher-performing investments.
You can see in the image below how Air Lease’s ROCE compares to its industry. Click to see more on past growth.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="When considering ROCE, bear in mind that it reflects the past and does not necessarily predict the future. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. ROCE is only a point-in-time measure. What happens in the future is pretty important for investors, so we have prepared a free report on analyst forecasts for Air Lease.” data-reactid=”53″>When considering ROCE, bear in mind that it reflects the past and does not necessarily predict the future. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. ROCE is only a point-in-time measure. What happens in the future is pretty important for investors, so we have prepared a free report on analyst forecasts for Air Lease.
How Air Lease’s Current Liabilities Impact Its ROCE
Short term (or current) liabilities, are things like supplier invoices, overdrafts, or tax bills that need to be paid within 12 months. Due to the way ROCE is calculated, a high level of current liabilities makes a company look as though it has less capital employed, and thus can (sometimes unfairly) boost the ROCE. To counteract this, we check if a company has high current liabilities, relative to its total assets.
Air Lease has total liabilities of US$356m and total assets of US$22b. As a result, its current liabilities are equal to approximately 1.6% of its total assets. Air Lease reports few current liabilities, which have a negligible impact on its unremarkable ROCE.
Our Take On Air Lease’s ROCE
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Based on this information, Air Lease appears to be a mediocre business. But note: make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20). ” data-reactid=”58″>Based on this information, Air Lease appears to be a mediocre business. But note: make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.” data-reactid=”64″>If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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