However, the most significant threat to business continuity in this era is not found solely in the Consumer Price Index or the Federal Reserve’s interest rate adjustments. Rather, it resides in the psychological toll these stressors exact on the human capital that drives the economy, from the frontline employee to the Chief Executive Officer.

International Finance posits that financial stress has metastasised into a cognitive inhibitor, creating a “Scarcity Mindset” that degrades executive function, reduces fluid intelligence, and promotes short-term “tunnelling” behaviours at the expense of long-term strategic vision. Drawing upon extensive data from the third quarter of 2025, behavioural finance theories, and recent psychological research, we analyse the causal link between financial uncertainty and decision-making efficacy.

Jeffrey Anvari-Clark, Assistant Professor of Social Work, University of North Dakota, noted that the concept of Financial Self-Efficacy (FSE) is not merely a personal finance metric, but a critical business competency.

“Unlike financial literacy, which measures knowledge, FSE measures the belief in one’s capacity to exert control over financial outcomes. And this distinction makes all the difference in 2025. Tariffs are disrupting supply chains, and consumer credit default cases are on the rise, so technical knowledge is insufficient without psychological resilience,” he stated.

The macro-micro loop

To understand the psychological pressures weighing on today’s decision-makers, one must first quantify the external forces compressing the corporate and personal balance sheet. The economic environment of 2025 has defied the “soft landing” narratives of previous years, evolving instead into a landscape defined by friction in trade, credit markets, and household purchasing power. This friction is a lived experience that generates the “fog” in which strategic decisions must be made.

The re-emergence of aggressive protectionist trade policies has fundamentally altered the cost structures of American business. By the third quarter of 2025, the implementation of new tariff schedules has created a cascading effect on pricing strategies. The Yale Budget Lab notes that the average effective tariff rate faced by American consumers has risen to levels not seen since the early 20th century.

This is not merely an abstract geopolitical manoeuvre but a direct tax on the supply chain that forces executives into a perpetual state of defensive readjustment. The timeline of these interventions reveals a pattern of whiplash that makes long-term planning nearly impossible.

Administration orders imposing tariffs on imports, only to pause them days later, force supply chain managers and CFOs to operate in a constant state of crisis response, draining cognitive resources that should be allocated to innovation.

The impact varies significantly across sectors. In the apparel and footwear industry, executives express high anxiety regarding holiday season margins. The home improvement sector faces a significant contraction in demand, with executives citing consumer uncertainty as a factor disproportionately impacting demand.

Automotive manufacturers are dealing with increased component costs and a phenomenon of demand pull-forward, followed by stagnation. The tech sector is reeling from the supply chain shock and is emphasising the role of agentic AI to reduce costs. This creates a feedback loop where tariffs raise input costs, companies raise prices, consumer purchasing power erodes, and demand fluctuates wildly.

Inflation has shown signs of cooling, but the affordability baseline has altered significantly since 2020. Convenience prices are rising faster than grocery bills, so the middle class feels like it’s in a recession, even though GDP growth looks positive.

The cumulative psychological impact is “sticker shock fatigue,” where a standard grocery bill represents a tangible erosion of wealth. For the business leader, it represents a workforce that is increasingly agitated, demanding higher wages to match the cost of living, while the business itself faces margin compression from the supply side.

Perhaps the most alarming signal in the 2025 data is the rapid deterioration of consumer credit health. The “hockey stick” growth in credit card debt has returned, with total balances surpassing $1.233 trillion in Q3 2025. Rather than productive leverage, this represents distress borrowing aimed at preserving living standards.

Delinquency rates across credit cards, auto loans, and particularly student loans have spiked, suggesting a systemic failure in the financial resilience of the younger workforce. For the business reader, the implication is twofold. The consumer base is fragile, and the employee base is financially traumatised. When the majority of employees report that financial stress is negatively affecting their work life, the macro economy has effectively breached the office walls.

The neuroscience of scarcity

To understand why financial efficacy is the critical competency of 2025, we must move beyond economics into cognitive psychology. The prevailing assumption in business is that executives and employees are rational actors who make decisions based on available data. However, behavioural finance research, particularly the “Scarcity” framework, proves that the context of financial stress fundamentally alters neural processing.

The human brain has a finite amount of “bandwidth,” a combination of cognitive capacity and executive control. When an individual is preoccupied with scarcity, that preoccupation involuntarily captures attention. This is a biological survival mechanism designed to focus the organism on the immediate threat.

Research indicates that the cognitive load of managing severe financial stress is equivalent to losing a full night’s sleep or suffering a 13-point drop in IQ. In the context of 2025, a significant portion of the workforce is operating with this “bandwidth tax,” which levies a heavy toll on fluid intelligence, which is the capacity to solve novel problems, identify patterns, and adapt to new situations.

The most dangerous byproduct of the scarcity mindset in a business context is “tunnelling.” When resources are scarce, the brain narrows its focus to the immediate problem (the tunnel) and ignores everything outside of it. In an executive setting, tunnelling explains why leaders might slash R&D budgets to meet a quarterly earnings target, ignoring the long-term damage to innovation.

They are solving for the immediate scarcity while becoming blind to peripheral risks. In 2025, tunnelling is visible in the corporate response to tariffs; many organisations are obsessively focused on immediate surcharge costs while potentially missing broader shifts in consumer behaviour or opportunities to fundamentally reinvent their supply chains.

Scarcity also accelerates “temporal discounting,” the tendency to value immediate rewards significantly more than future rewards. A financially stressed individual or corporation will accept a high-interest loan today to solve a cash crunch, even if it guarantees disaster next year. This is known as “hyperbolic discounting,” where the future is heavily discounted because the present feels so perilous.

Ultimately, scarcity requires constant trade-offs. In an abundant environment, a manager can approve several initiatives. In a scarce environment, they must select only one. This ongoing evaluation of trade-offs exhausts executive function, resulting in “decision fatigue.” As fatigue sets in, leaders tend to default to the status quo or the path of least resistance. In 2025, the risk is that decision fatigue will lead to corporate stagnation. The organisations that survive will be those that can preserve the cognitive energy of their leaders by creating “slack”.

Financial stress kills productivity

The macroeconomic volatility and resulting cognitive scarcity translate into measurable losses for corporations. In 2025, financial well-being is the engine of productivity. The data gathered from HR leaders and workforce surveys paints a stark picture of the “invisible” costs of financial stress, which are eroding the bottom line just as aggressively as the visible costs of tariffs.

The phenomenon of “presenteeism” (being physically at work but mentally absent) is a primary vector for financial stress-related loss. Employees distracted by financial worries are estimated to lose roughly three hours of productivity per week. When aggregated across the American economy, this distraction costs businesses approximately $250 billion annually. The mechanism is the bandwidth tax. An employee engaging in presenteeism is likely on the phone with creditors or calculating daily expenses rather than focusing on work. Financial stress is a “greedy” cognitive process that demands attention.

In 2025, the primary driver of turnover is financial insecurity. Surveys indicate that financially stressed employees are twice as likely to look for a new job. This creates a paradox for employers. They are cutting costs to survive tariff pressures, but those cost-cutting measures are triggering expensive turnover.

Furthermore, the “compensation mismatch” has widened, with a majority of employees reporting that their compensation is not keeping up with the rising cost of living. When an employee feels their paycheck is effectively shrinking every month due to inflation, their loyalty fractures. They become “mercenaries,” jumping ship for minor pay increases simply to keep up with costs, destroying institutional knowledge in the process.

A significant indicator of this financial stress is the rise of the “Side Hustle Generation.” Data reveals that nearly two-thirds of Gen Z and Millennial workers have started or plan to start a side hustle to complement their primary income. While this demonstrates entrepreneurial spirit, it also indicates that the primary employment is failing to meet their financial needs.

For employers, this presents a “split focus” risk. If an employee is reserving their best cognitive energy for their side business because it provides the liquidity they desperately need, the primary employer is receiving a depreciated asset.

Building psychological capital

Financial Self-Efficacy does not exist in a vacuum. It is considered a component of a broader psychological resource base known as Psychological Capital (PsyCap). For organisations weathering the 2025 storm, investing in PsyCap is as vital as investing in working capital. PsyCap is defined by four distinct dimensions, easily remembered by the acronym HERO: Hope, Efficacy, Resilience, and Optimism.

Hope represents the will to succeed and the ability to identify paths to goals. In the context of 2025, this manifests in scenario planning, believing the firm can survive a tariff hike by diversifying supply chains. Efficacy is the confidence in one’s ability to mobilise cognitive resources to execute tasks, crucial for delegation during a crisis.

Resilience is the capacity to bounce back from adversity, driving a “pivoting” logic rather than freezing in panic. Optimism involves a generalised positive attribution regarding success, allowing leaders to use cognitive reappraisal to view inflation as a driver for efficiency innovation rather than a death sentence.

PsyCap bridges the relationship between stress and performance. People with higher PsyCap perceive environmental stressors differently and engage in problem-focused coping rather than emotion-focused coping. Unlike rigid personalities, PsyCap is a mental state and can be trained.

There are workshops and training courses that can be held, like Resilience Engineering and Hope Training, which create safe-to-fail experiences that improve efficacy. By promoting a culture of learning and debate, organisations increase the collective PsyCap of their workforce, turning the ability to learn rapidly from tariff impacts into a competitive advantage.

Armed with the understanding of FSE and PsyCap, leaders must navigate the specific volatility of 2025 using an “Adaptive Leadership” framework. The antidote to the bandwidth tax is “slack”. Organisations designed for maximum efficiency are fragile in 2025. Adaptive leaders prioritise financial slack by holding higher cash reserves to weather shocks without panic.

They cultivate cognitive slack by avoiding back-to-back meetings and scheduling “white space” for strategic thinking to prevent tunnelling. Operational slack is achieved by diversifying suppliers even at a higher cost, viewing redundancy as an insurance premium against chaos.

Leaders must also practice “cognitive reappraisal,” identifying negative emotional responses to market news and reframing them. Techniques like “Thought Labelling,” simply labelling an anxious thought rather than fusing with it, create the distance necessary for rational decision-making, moving processing from the amygdala to the prefrontal cortex.

To maintain high executive FSE, entrepreneurs must psychologically and legally compartmentalise risk. This starts with asset protection and diversification to ensure the personal portfolio is not correlated with the business industry.

Recognising the “Sleep Well” factor is vital. It may be rational to pay off a low-interest mortgage if the psychological relief frees up cognitive bandwidth for the business. Finally, adaptive leaders manage the collective anxiety of their teams by “regulating the distress,” being transparent about challenges without inducing panic, and acting as “external prefrontal cortices” for their teams.

Moving beyond wellness

The final piece of the puzzle is operationalising these insights. Companies must move beyond generic “wellness” programmes to create a “Financial Efficacy Ecosystem” that systematically builds FSE and PsyCap.

The case is well made. Wellness programmes do reduce absenteeism and ensure employees keep showing up. But in 2025, a simple education in wellness isn’t enough. It’s important to have behavioural nudges, such as auto-enrolment in savings plans.

Coaching must replace simple teaching. Surveys highlight a massive demand for personalised coaching. Employees need a “financial therapist” to help them navigate their specific scarcity anxieties. For the leadership tier, training must integrate Financial Psychology.

Executive coaching should focus on identifying “Money Scripts” that drive bias and recognising the signs of “tunnelling” in strategic planning. Finally, organisations must destigmatise financial stress to create psychological safety. When leaders model vulnerability and create a culture where it is safe to discuss financial trade-offs, they prevent the shame-spiral that leads to disengagement.

The economic data suggest that volatility is not a transient weather event, but a new climate. The era of “easy money” and predictable supply chains is over. In this environment, capital is necessary but insufficient for success.

The true competitive advantage of the future lies in Cognitive Capital. Organisations that can protect the “bandwidth” of their people, cultivate “Financial Self-Efficacy,” and build “Psychological Capital” will possess a resilience that their competitors lack. They will not just weather the tariff storms and inflation spikes; they will innovate through them.

The most valuable asset on the balance sheet is the confident, resilient, and efficacious mind. By investing in the cognitive infrastructure of the workforce through FSE training, PsyCap development, and adaptive leadership, organisations can turn the “fog” of 2025 into a strategic advantage.

The post The psychology behind corporate failure appeared first on International Finance.

There isn’t any sector, which got affected by the disruptive innovation. For example, take the banking sector, you have technology changing the game called ‘Customer Interactions’. In 2020, a study on AI in Financial Services conducted by the World Economic Forum in collaboration with the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School found that 85% of the surveyed financial services are utilising AI in some form within their company.

Jump forward in 2024, financial institutions have understood the need to adapt to the rapidly evolving technological landscape and gain the market edge. The stakeholders need to carry on the push by keeping the investments time and capital going.

Innovations galore

As per a September 2023 McKinsey study, while corporate and investment banks (CIBs) are using AI at scale and reaping enormous benefits, the overall industry lags very much, when it comes to embracing technology, as many banks are using “bespoke, artisan-like approaches that are inherently less productive”.

“Bankers often see areas across the front, middle, and back offices as too complex to use machine learning. A few leading banks have made AI-related progress in some of these areas, including relationship manager (RM) support and advisory, compliance and risk decisions, and client service on complex bespoke products (think foreign-exchange hedges on forward commodities agreements),” the study commented further.

McKinsey Global Institute (MGI) now estimates that across all of the banking, wholesale, and retail sectors, generative AI will add between $200 billion and $340 billion in value through greater productivity.

In fact, in 2023, we saw Ant Group launching a financial Large Language Model, which is a specialised language model fine-tuned for AI applications in the financial services industry. The innovation also surpassed the existing general-purpose LLMs in key areas like cognition, generation, domain knowledge, professional thinking and compliance.

Ant Group has trained the financial LLM on an extensive dataset, which includes hundreds of billions of token datasets containing Chinese financial documents and over 1,000 billion tokens from general corpus datasets. The new tool has additionally incorporated a dataset of over 600,000 instructions from real-world industry use cases.

Then in November 2023, came a new LLM solution called ‘Slope TransFormer’, specifically trained to understand the language of banks.

In 2023, Swiss enterprise software giant Temenos launched an industry-first secure solution for banks using generative AI to automatically classify customers’ banking transactions, which will help banks provide personalised insights, recommendations, engaging and intuitive digital banking experiences to society, apart from enhancing customer loyalty programmes through more relevant products and offers.

Smart strategy needed?

As the global economy is undergoing its ‘Technological Renaissance’, the question here is ‘Will human jobs end up getting replaced by machines?’ Well, in sectors like banking, the need of the hour is ensuring a ‘Smart Automation’, as reflected in the innovations brought by Ant Group, Temenos and Slope TransFormer, where LLMs are not only taking over the daily mundane tasks but also helping to make functions like customer loyalty programmes ‘smart’ ones for the banks.

Through the tech’s helping hand, human professionals are reading through and classifying customers’ banking transactions, to understand the latters’ banking behaviour and draw up personalised customer loyalty programmes.

As per Chris Tapley, Vice-President of the Financial Services Consulting at the US-based EPAM Systems, financial ventures need to pay attention to the challenging economic environment that is pressuring them to protect the bottom line while delivering the quality and scope of services customers expect.

“Therefore, many banks must take direct and deliberate steps to significantly revise their technology stacks and operational processes to control current costs, optimise near-term revenue and position themselves for future growth,” Tapley stated further in his article, written for the Global Banking and Finance Review.

‘Automated’ road ahead?

Tapley predicts the banking sector’s automation efforts to follow the path called ‘Optimal Implementation’.

While automation will reduce the cost of critical processes, the phenomenon itself will require modernisation, especially in the domain of ‘Underlying Technology Infrastructure’. Tapley believes that there are challenges associated with using AI and automation in the finance sector.

These include ‘regulatory compliance issues’, ‘data privacy concerns’ and the ‘potential for bias/discrimination’. He is pitching for the industry emphasising responsible and ethical usage of the technology.

Tapley says careful planning and execution are the keys to success, when it comes to the banking sector’s automation efforts. The banks need to create essential investment areas to effectively implement automation and create seamless, personalised customer experiences.

Firstly, financial services providers should focus on RPA (Robotic Process Automation) as it will help these ventures streamline repetitive and time-consuming tasks, thus improving operational efficiency and reducing human errors. Tapley sees this course correction automating routine processes like loan processing, account opening, and customer onboarding.

Secondly, banks focussing on RPA will allow their employees to invest more time in strategic tasks like personalised interactions with the customers, apart from analysing market trends, developing new commercial strategies and making decisions to keep the financial services provider competitive.

As per Tapley, artificial intelligence and machine learning will be fundamental to the successful implementation of automation in the financial industry.

“These technologies (AI and ML) can be used in various aspects of banking, including fraud detection, customer service, credit risk assessment and personalisation. Banks should allocate resources for researching and developing in-house AI and ML solutions or partner with dedicated vendors to stay ahead in the swiftly evolving landscape. It is also important to note that all generative AI models should serve as assistive tools, not the sole decision maker,” he stated further.

On the potential of tech transforming the personalisation aspect of banking, Tapley bats for investing in ‘Digital Customer Experience’. Implementing AI-powered customer support chatbots, enhancing the quality of baking apps and leveraging advanced analytics for personalisation will do wonders for the industry.

“After a virtual assistant verifies the customer’s identity, a customer can communicate with these chatbots in real-time and receive details on their accounts that would otherwise require human attention. Financial services can increase customer satisfaction, loyalty and revenue by prioritising the digital customer experience,” Tapley commented further.

The key ‘I’ word

Talking about the banking sector and automation, implementing 21st century breakthrough technologies will require the overhaul of the legacy systems. Having a computer on every desk inside the building (backed by a centralised server) won’t make a financial venture ‘Future Proof’. Their infrastructure game should and must embrace cloud-based technologies, and API-driven architectures, which will be friendly towards the integration of automated solutions like AI-powered personalisation tools.

Also having AI-powered personalisation solutions, for example, will only make sense if the banks back them by investing in data management systems and advanced analytics tools capable of collecting and analysing vast amounts of data in a very short period.

“This will enable them to gain important insights, make informed conclusions, and improve the accuracy of their predictive models, leading to better personalisation and customer experiences,” wrote Tapley.

We all know the impact the fintech (financial technology) companies have made in the market, be it heavily investing in technology or disrupting the financial sector by introducing products and services that are tailor-made as per the customers’ needs (using solutions like AI and ML).

While the fintech ventures have been successful in challenging their legacy counterparts in the last few years, the latter should and must collaborate with these disruptive start-ups and other technology providers to accelerate their automation efforts.

These partnerships will help the banks to benefit from innovative solutions and expertise that may not be available within their existing rulebooks. Fintech companies are known for marketing and diversifying their offering and enhancing customer experiences in the blink of an eye, something which has been only possible due to the ventures heavily investing in breakthrough solutions like AI and data analytics.

Teaming up with fintech companies will only benefit the legacy banks as the latter will be able to improve their AI and personalisation tools, which, in the long run, will help them to offer highly customised and responsive services to their customers.

The post Navigating the banking sector’s AI shift appeared first on International Finance.

Here are the key strategies the business leaders need to leverage to improve productivity in a ‘smart’ manner as they look forward towards their 2024 prospects.

Here Are The Tips

As remote and hybrid work cultures have become the new normal since 2020, employees are getting more control over how and where they work. This new work culture reduces commute times and ensures better work-life balance, but the downside is the blurring of boundaries between work and personal life, which can lead to longer working hours and physical and mental burnout.

“Without a regular cadence of in-person and virtual communication, there can be silos throughout companies that ultimately decrease collaboration. In these circumstances, meetings are often largely spent getting the rest of the team up to speed, resulting in productivity losses,” mentioned the Entrepreneur.

To handle this, businesses are now focussing on adapting to the new and tech-savvy work cultures, while maintaining a specific focus on fostering collaboration. Some of the ventures are leveraging in-person and virtual communication opportunities for purposeful connection between the employees. Expect the trend to continue in 2024 as well.

CEOs need to understand the fact that just because employees can do the same activity in less time, doesn’t mean that it will lead to increased results. Instead of doing the same, mundane activities, the tasks need to be smart and goal-oriented ones, especially at a time when technology is there to take care of these repetitive tasks.

Businesses need to foster a culture of innovation to ensure growth.

“Great leaders ensure their team is focused on activities that drive the company’s goals. They measure performance by effectiveness, rather than solely efficiency. These leaders also aren’t afraid to stop investing in initiatives that no longer meet the required productivity metrics. They are right-sizing both their hiring and marketing investments, moving incrementally to ensure they are effective before they continue to invest,” Entrepreneur remarked further.

Streamlining and optimising the company’s resources, time and labour will ensure the business growth for a CEO, as the move will drive his/her venture’s profitability and market competitiveness quotient.

Since business metrics are critical for CEOs to chart their road ahead, they need to measure productivity through smart metrics like revenue per employee and profit per employee, to ensure that their businesses proactively identify areas where operational improvements and resource allocation are needed.

A company generating higher revenue and profits per employee, often possesses the resources to invest in employee development, job creation and career advancement opportunities. This becomes a win-win situation as it helps to boost employee satisfaction and retention ratios, while also attracting top talent, thereby creating a growth cycle.

Consistent Review Is The Key

After setting up the business strategy for the year, the CEOs need to practice governance to drive progress, as time-bound task completions will lead to a situation where the businesses can accommodate more initiatives within the financial year that will generate new investment opportunities.

“Weekly and monthly check-ins on progress against goals provide a structured framework for evaluating priorities, identifying bottlenecks and setting strategic goals. When teams participate in regular reviews of what they plan to accomplish, each person knows exactly what they should be working on and how their tasks will contribute to the company’s overall success. Further, it ensures that the team is celebrating the progress and successes along the way,” Entrepreneur stated further.

Businesses need to adapt to the technology and enhance overall productivity by equipping employees with the resources they need to streamline tasks, automate routine processes, and facilitate smooth communication and collaboration.

An October 2023 study by the Vistage CEO Confidence Index shows over 65% of business leaders investing in AI in 2024, given the fact that it will power individual worker productivity and offset some of the pressures created by the persistent lab or shortage.

Increased productivity will result in higher revenues and lower costs, the fundamental elements of sustainable growth and profitability.

In the coming years, CEOs need to prioritise ‘Smart Productivity’, if they want lasting success and resilience for their businesses.

The post Tips to increase workplace productivity in a ‘smart’ manner appeared first on International Finance.

It’s a smart decision to focus on customer satisfaction because of competition, but there are other considerations. Investing in customer retention strategies can also help businesses reduce their marketing spend. According to Forbes contributor Alex McClafferty, it’s six to seven times more expensive to acquire a new customer than it is to keep an old one.

In addition, regular customers spend an average of 33% more than new customers. And don’t underestimate word of mouth, which can be amplified in the age of social media. Overall, companies will attract more consumers if existing ones are happy with what their brands offer.

Bearing all these ideas in mind, here are seven ways to improve customer satisfaction and retention.

Provide Excellent Customer Service

Ensure that your customer service is top-notch by training your staff to be friendly, knowledgeable, and responsive. Address customer inquiries and concerns promptly, and go above and beyond to exceed their expectations.

Actively Listen To Customers

Take the time to listen to your customers and understand their needs. Actively seek feedback through surveys, focus groups, or social media channels. Use this information to improve your products, services, and overall customer experience.

Personalize The Customer Experience

Treat each customer as an individual by personalizing your interactions. Use customer data and insights to tailor your communication, recommendations, and offers to their preferences and past behaviours. This demonstrates that you value their business and understand their unique needs.

Implement A Loyalty Program

Reward your loyal customers through a well-designed loyalty program. Offer incentives such as exclusive discounts, early access to new products, or special perks. This not only encourages repeat purchases but also strengthens the emotional connection between the customer and your brand.

Continuously Improve Your Products & Services

Regularly evaluate and enhance your offerings based on customer feedback and market trends. Strive to deliver high-quality products or services that address the pain points and desires of your target audience. By providing value, you increase customer satisfaction and reduce the likelihood of them seeking alternatives.

Foster A Positive Company Culture

A happy and engaged workforce is more likely to deliver exceptional customer experiences. Create a positive company culture that emphasizes teamwork, respect, and continuous learning. Invest in employee training and development to ensure they have the skills and knowledge needed to meet customer expectations.

Communicate Proactively

Keep your customers informed about relevant updates, such as product releases, service interruptions, or policy changes. Be proactive in your communication to prevent surprises and demonstrate transparency. Utilize multiple channels, such as email, social media, and your website, to reach your customers effectively.

The post Seven ways to improve customer satisfaction & retention appeared first on International Finance.

Some people might believe that those who are not yet considered legal adults should not invest. However, there are no age restrictions for investing, unlike at a casino or a pub. Although opening a brokerage account typically requires that you be at least 18 years old, investors under the age of 18 still have a variety of options available to them, though they may need to work with an adult or receive varying levels of supervision.

The importance of investing early
Younger people have an advantage over older people beyond simply being permitted to invest; simply put, the earlier you start investing, the more time your money has to grow. The force of compounding increases this early-mover advantage for younger investors. Starting to invest while time is on your side is even more advantageous since when you reinvest your capital gains and interest to produce more returns, the value of your account may increase.

A little example will help to highlight the benefits of starting early. Say you start saving for your retirement when you’re 22 years old and start your career. When you reach retirement age, you would have $710,810.83 if you consistently saved $100 each month and earned a respectable 10% return on your investment (compound yearly). However, if you had begun investing when you were 15 years old, you would now have $1,396,690.23, or almost twice as much.

Riley Adams, a CPA and prominent authority on teen investing, is the creator and publisher of the popular website Young and the Invested. He believes that supporting young people’s financial empowerment begins with educating them about the advantages of starting investments early.

“The one thing, the last true edge in investing, is really time in the market,” Riley Adams explains. People who realize this edge and begin to take advantage of it sooner in life increase their chances of financial success.

Custodial accounts
A minor’s investments in a custodial account are managed by an adult on their behalf until they reach 18 or 21 years of age, depending on the state in the USA. Custodial accounts are an excellent way to transfer assets to a kid or teen under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), but the custodian adult retains the legal obligation and the final say in investment decisions.

People younger than 18 can even get an early start on retirement planning through a custodial Roth individual retirement account (Roth IRA), but they will need earned income from a job or another paid activity to begin contributing. Although investment decisions are typically subject to the approval of the adult co-owner, there are joint brokerage accounts that permit minors to share legal ownership with an adult. These accounts may encourage younger people to play a more active role in society.

Are you ready to invest?
The advantages of investing while you are young are clear enough, but some teenagers might still be unsure about their readiness to make the plunge. When deciding whether to make their first investments, teens may want to ask themselves the following questions: Do you have money from a job or another source that you won’t need to access immediately? Can you afford to lose this money if your investments do not play out as planned? If you are under the age of 18, do you have a parent or another adult willing to help you invest? Do you know what you are getting into? In other words, do you understand the investment you are considering and how it works?

Riley Adams claims that companies that teens deal with frequently can pique their interest in investing. Purchasing stock in a well-known corporation is a smart approach to entering the stock market while adhering to the maxim “invest in what you know.”

“Being engaged with companies you see on a regular basis gets you interested, makes you want to understand how they tick, how they grow, how they make decisions. And then once you kind of understand that, digging a little deeper and asking the question of: Do I think this is good, do I think this is going in the right direction, and then do I have money that I want to invest in it?” he said.

The risk of investing
Younger people should be aware of the benefits of making frequent and early investments, as well as the risks. It goes without saying that the biggest disadvantage of investing is the possibility of losing some or all of your money. While it is impossible to escape the reality of potential losses, you can control how much risk you are willing to take on by choosing investments that are riskier than others. Generally speaking, a riskier investment has a higher potential to yield higher returns.

All investors, young and old, must understand this trade-off in order to choose a strategy. But once more, being young has its benefits. Younger investors may afford to take more risks since they have more time to stay in the markets, which increases their potential gains. Younger investors have time to wait for the markets to rebound when the inevitable market downturn occurs.

This explains why conventional investment wisdom recommends taking more risks when pursuing distant goals while becoming more cautious as you get closer to the moment when you’ll need to access your funds. However, no matter your age, it is important to discover your own style as an investor, ensuring that you are okay with the level of risk you’re facing.

“People have different risk tolerances, and I think you need to be honest with yourself. If someone walks you through the logic of ‘You’re young, you should take on risk, you should let it grow’—but you just don’t feel comfortable with it, you absolutely should not do that. You should look for lower-risk investments that might not have as much upside but also might not have as much downside,” Riley Adams advises.

Where teens can invest in
Once you have an understanding of your own risk tolerance, you can look into investments that have the qualities you think will best enable you to achieve your objectives. Here are a few of the more popular investment types, or asset classes, that you might choose to buy, depending on what you hope to achieve and when.

Stocks
A small portion of ownership, or equity, in a publicly traded corporation, is acquired when you purchase a stock. Two possibilities exist for stocks to generate income: Many businesses give their shareholders payments known as dividends. The market’s assessment of a company’s value affects stock prices, and if the price of your stock rises, you may be able to sell it for a profit. Stocks can be risky due to their value fluctuations, or volatility as it is known in the market. It is possible that you will end up with shares that are not worth what you bought for them if the firm you invested in starts to struggle. Stocks are a good investment for younger people with better risk tolerance because of the higher potential profits that come with them.

Funds
While stocks represent a share in a single company, you can also buy shares of funds that invest in multiple stocks and other types of assets. Mutual funds are managed by qualified money managers and invest in a variety of assets in accordance with a prospectus-stated goal. Exchange-traded funds (ETFs) are similar to mutual funds in that they possess a variety of investments, but unlike mutual funds, they may be exchanged on the stock market and are intended to track a particular market index, industry, or other assets.

Younger investors have access to many benefits through funds. Funds provide built-in diversification because they combine numerous investments into one. In other words, investors automatically possess a variety of assets through a fund, protecting their investment from total loss in the event that one component loses value. While some mutual funds have high fees for managing the portfolio actively, passively managed and index-tracking funds typically have low fees and a track record of generating good returns, especially over the long term.

Bonds
Bonds are an example of a debt instrument, as opposed to equity or ownership in a corporation. When you purchase a bond, you are essentially lending money to the bond issuer, who promises to repay you with interest and the principal you borrowed. Governments and corporations both issue bonds. Bonds are regarded as fixed-income investments as they offer predetermined payments over a specific time frame. They are especially helpful for investors who want to make a consistent income. They are less risky than stocks, though, and as a result have lower potential returns, which makes them unsuitable for young investors looking for long-term gain.

Other investments
Some young investors could be better suited to other financial asset classes. For instance, certificates of deposit (CDs) let you invest money and earn a fixed interest rate over a set period of time. Similar to savings accounts in operation, CDs offer a greater interest rate because you commit to leaving the money alone for the duration of the investment. Compared to stocks or bonds, CDs are more conservative and have a smaller potential return while having a more moderate risk profile.

There are yet more prospective investments on the list. From high-risk cryptocurrencies to derivatives including futures and options, there are plenty of ways to put your money to work. These products are better suited for experienced investors rather than those who are just starting because they are riskier and more complicated.

The bottom line
When it comes to investing, teens have the advantage because they have time on their side, even though they will need to work with a parent or another adult before investing. Teenagers have the chance to start accumulating their wealth early, thanks to custody accounts and joint accounts.

The post An investment guide for teens appeared first on International Finance.

Many traders and investors are unaware of the alternative way of generating income in falling markets, as they tend to stay away from the market during such times. Before understanding how to generate returns in a falling market, let us know about the three phases of markets:

Bullish Market: A market trending upwards due to the rise in prices of the shares is called a bullish market.

Sideways Market: The term sideways market means there are no clear trends found in the market.

Bearish Market: A market trending downwards due to the fall in shares prices is called a bearish market.

Financial markets around the globe include asset classes such as equities, derivatives, currencies, and commodities for trading. Equities are nothing but stocks that are traded in the Equity-Cash market.

Dr. Kamakhya Narain Singh, IEPF Chair Professor at IICA said, “Trading in futures and options market is high risk and high reward activity.”

A derivative is an instrument whose value is derived from its underlying assets like stocks, currencies, and commodities. The three most common types of derivative instruments are Forwards, Futures and Options.

American investment manager James Chanos, said, “Derivatives in and of themselves are not evil. There’s nothing evil about how they are traded, how they are accounted for, and how they are financed, like any other financial instrument, if done properly.”

A forward market is a marketplace that sets the price of assets and financial instruments for future delivery and is used for trading. It allows contract parties to customize the time, amount, and rate at which the contract will be performed.

For example, consider the case of a farmer who harvests a particular crop but is uncertain about its pricing three months later. In this situation, the farmer can lock in the price at which he will sell his produce in the next three months, by entering into a forward contract with a third party.

In an interview with Forbes magazine, Berkshire Hathway CEO Warren Buffet said, “The future is never clear”, citing the uncertainty of the market.

A futures market is a central financial exchange where participants buy and sell futures contracts for delivery on a specified date.

Futures are exchange-traded derivative contracts that lock in the future delivery of a commodity or security at a price set today.

Futures contracts are made in an attempt by producers and suppliers of commodities to avoid market volatility. These producers and suppliers negotiate contracts with an investor who agrees to take on both the risk and reward of a volatile market.

Futures markets are where these financial products are bought and sold for delivery at some agreed-upon date in the future with a price fixed at the time of the deal. Futures markets are for more than simple agricultural contracts, and now involve the buying, selling, and hedging of financial products and future values of interest rates.

Futures contracts can be made or “created” as long as open interest is increased, unlike other securities that are issued.

Imagine an oil producer who plans to produce one million barrels of oil over the next year. It will be ready for delivery in 12 months. Assume the current price is $75 per barrel. The producer could produce the oil, and then sell it at the current market prices one year from today.

Given the volatility of oil prices, the market price at that time could be very different from the current price. If the oil producer thinks oil will be higher in one year, they may opt not to lock in the price now. But, if they think $75 is a good price, they could lock in a guaranteed sale price by entering into a futures contract.

By entering into this contract, in one year the producer is obligated to deliver one million barrels of oil and is guaranteed to receive $75 million. The $75 price per barrel is received regardless of where spot market prices are at the time.

Standardized contracts

For example, one oil contract on the Chicago Mercantile Exchange (CME) is for 1,000 barrels of oil. Therefore, if someone wanted to lock in a price (selling or buying) on 100,000 barrels of oil, they would need to buy/sell 100 contracts. To lock in a price on one million barrels of oil/they would need to buy/sell 1,000 contracts.

Retail traders and portfolio managers are not interested in delivering or receiving the underlying asset. A retail trader has little need to receive 1,000 barrels of oil, but they may be interested in capturing a profit on the price moves of oil.

Futures contracts can be traded purely for profit, as long as the trade is closed before expiration. Many futures contracts expire on the third Friday of the month, but contracts do vary so check the specifications of contracts before trading them.

For example, it is January, and April contracts are trading at $55. If a trader believes that the price of oil will rise before the contract expires in April, they could buy the contract at $55. This gives them control of 1,000 barrels of oil. They are not required to pay $55,000 ($55 x 1,000 barrels) for this privilege, though. Rather, the broker only requires an initial margin payment, typically of a few thousand dollars for each contract.

The profit or loss of the position fluctuates in the account as the price of the futures contract moves. If the loss gets too big, the broker will ask the trader to deposit more money to cover the loss. This is called maintenance margin.

The final profit or loss of the trade is realized when the trade is closed. In this case, if the buyer sells the contract at $60, they make $5,000 [($60-$55) x 1,000]. Alternatively, if the price drops to $50 and they close out the position there, they lose $5,000.

The advantage is that you can also sell first and buy later in the futures market. This process is known as Shorting Futures.

Examples of futures markets are the New York Mercantile Exchange (NYMEX), the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBoT), etc.

CA Rachana Ranade, a Chartered Accountant, on Twitter wrote, “If you trade in futures and options without proper knowledge, you will have no future, and you will be left with no options.”

The term option refers to a financial instrument that is based on the value of underlying securities such as stocks.

Options are versatile financial products. These contracts involve a buyer and seller, where the buyer pays a premium for the rights granted by the contract.

Traders and investors buy and sell options for several reasons. Options allow a trader to hold a position in an asset at a lower cost than buying them. Investors use options to reduce the risk exposure of their portfolios.

American options can be exercised any time before the expiration date of the option, while European options can only be exercised on the expiration date or the exercise date. Exercising means utilizing the right to buy or sell the underlying security.

Ways to participate in options market

Buying Call Options

Call options allow the holder to buy an underlying security at the stated price called the strike price, by the expiration date called the expiry. The holder has no obligation to buy the asset if they do not want to purchase the asset. The risk to the buyer is limited to the premium paid. Fluctuations of the underlying stock have no impact.

Buyers are bullish on a stock and believe the share price will rise above the strike price before the option expires.

Their profit on this trade is the market share price less the strike share price plus the expense of the option — the premium paid and any brokerage commission to place the orders. The result is multiplied by the number of option contracts purchased, then multiplied by 100 — assuming each contract represents 100 shares.

If the underlying stock price does not move above the strike price by the expiration date, the option expires worthlessly. The holder is not required to buy the shares but will lose the premium paid for the call.

For example, suppose Microsoft (MFST) shares trade at $100 per share and you believe they will increase in value. You decide to buy a call option to benefit from an increase in the stock’s price.

You purchase one call option with a strike price of $115 for one month in the future for 37 cents per share, called your premium. Your total cash outlay is $37 for the position plus fees and commissions (0.37 x 100 = $37).

If the stock rises to $116, your option will be worth $1. The profit on the option position would be 170.3% since you paid 37 cents and earned $1—that’s much higher than the 16% increase in the underlying stock price from $100 to $116 at the time of expiry.

In other words, the profit in dollar terms would be a net of 63 cents or $63 since one option contract represents 100 shares [($1 – 0.37) x 100 = $63].

If the stock falls to $100, your option would expire worthlessly, and you would be out a $37 premium.

The upside is that you didn’t buy 100 shares at $100, which would have resulted in a $15 per share, or $1500, total loss.

As you can see, buying call options can help limit your downside risk and earn an exponential profit.

To quote the famous Warren Buffet — “Don’t invest in something you don’t understand”.

Selling call options

Selling call options is known as writing a contract. The writer receives the premium fee. In other words, a buyer pays the premium to the writer (or seller) of an option. The maximum profit is the premium received when selling the option.

An investor who sells a call option is bearish and believes the underlying stock’s price will fall or remain relatively close to the option’s strike price during the life of the option.

If the prevailing market share price is at or below the strike price by expiry, the option expires worthlessly for the call buyer. The call option seller pockets the premium as their profit.

However, if the market share price is more than the strike price at expiry, the seller must either sell shares from their portfolio holdings or buy the stock at the prevailing market price to sell to the call option buyer.

The contract writer incurs a loss. How large of a loss depends on the cost basis of the shares they must use to cover the option order, plus any brokerage order expenses, but less any premium they received.

Let us consider the following example. Assume that Microsoft shares trade at $100 per share, and you feel that the value will not go beyond $115.

You decide to sell a call option at a strike price of $115 for 37 cents per contract. The net premium received by you is $37(0.37*100) considering 100 shares in a contract. Your profit is limited to your premium collected i.e $37.

If the shares rise to $116 and the premium becomes $1, you will be at a loss of $63 ($1 – 37 cents*100). If the shares rise further to $120, your option premium will increase by $4. Now you will be at a loss of $463 ($5 – 37 cents*100). This loss excludes the brokerage and order expenses.

As you can see, the risk to the call writers is far greater than the risk exposure of call buyers. The call buyer only loses the premium. The writer faces infinite risk because the stock price could continue to rise, increasing losses significantly.

Another Warren Buffet quote will be the aptest to describe the above. “Derivatives are financial weapons of mass destruction”.

Buying put options

Put options are investments where the buyer believes the underlying stock’s market price will fall below the strike price on or before the expiry date.

Since buyers of put options want the stock price to decrease, the put option is profitable when the underlying stock’s price is below the strike price.

Their profit on this trade is the strike price less the current market price, plus expenses—the premium paid and any brokerage commission to place the orders. The result would be multiplied by the number of option contracts purchased, then multiplied by 100—assuming each contract represents 100 shares.

The value of holding a put option will increase as the underlying stock price decreases. Conversely, the value of the put option declines as the stock price increases. The risk of buying put options is limited to the loss of the premium if the option expires worthlessly.

Consider that Microsoft shares trade at $110 per share, and you believe that the value will decrease. You decide to buy a put option to benefit from a decrease in stock’s price.

You buy a put option of $100 strike price for the current month expiry, trading at a premium of 37 cents per share. In case the stock price moves against you, your loss is limited to the premium you have paid i.e $37 (37cents*100)

If the stock price falls to $99 and the premium turns to $1, you are in profit of $63 ($1 – 37 cents*100). If it further falls to $89 then your premium rises to $10 and you will be in a profit of $1063. A profit of 2873%.

As you can see, buying put options will help you earn an exponential income during the falling markets with limited risk.

Selling put options

Selling put options is also known as writing a contract. A put option writer believes the underlying stock’s price will stay the same or increase over the life of the option, making them bullish on the shares.

If the underlying stock’s price closes above the strike price by the expiry, the put option expires worthlessly. The writer’s maximum profit is the premium.

The risk for the put option writer happens when the market’s price falls below the strike price.

The seller is forced to purchase shares at the strike price at expiry. The writer’s loss can be significant depending on how much the shares depreciate.

The writer (or seller) can either hold on to the shares or hope the stock price to rise back above the purchase price or sell the shares and take the loss. Any loss is offset by the premium received.

An investor may write put options at a strike price where they see the shares being a good value and would be willing to buy at that price. When the price falls, they get the stock at the price they want with the added benefit of receiving the option premium.

For example, Microsoft is trading at $110 per share, and you sell a put option of a strike price of $100 with a premium of 37 cents. Your profit is limited to your premium i.e $37.

If the price falls to $99, you will be at a loss of $63.

If the price falls to $89, you will either have an option to take a loss of $1063 or you can buy the shares at the strike price of $100 hoping the stock price to rise above your purchase price.

Charlie Munger, vice chairman of Berkshire Hathway, once said, “The world of derivatives is full of holes that very few people are aware of. It’s like hydrogen and oxygen sitting on the corner waiting for a little flame.”

One can earn in the falling market by shorting futures, buying put options, and selling call options.

“Making money consistently requires a lot of knowledge and experience. Beginners should be very cautious about taking trades in the F&O market without fully learning about the mechanism of investment and related risks,” Dr.Kamakhya Singh said.

The post How to make money when the market is falling appeared first on International Finance.

In its statement Wednesday, The company said that it had been evaluation the Irish property market for several years and is dedicated to deploying its capital into the local build-to-rent and purpose-built student accommodation sectors.

Round Hill has a successful track record of investing in, and operating residential and student accommodation assets across Europe. It has acquired, built and managed more than 110,000 residential and student housing beds in recent years. Overall, the company operates about 65,000 accommodation beds in eight European states. Its approach incorporates multiple strategies like acquiring assets, developing new purpose-built, forward-purchasing and repositioning assets.

It’s currently funding a pipeline of more than 7,000 student accommodation beds across UK, Ireland and continental Europe. The company has stated that it is targeting 20,000 student beds in these markets by 2010. Currently, it has 333, 875 sq m of residential and commercial projects under constructions across Europe.

John Vaudin has been appointed as the managing director of its Irish operation, which will be based at 12 Merrion Square in Dublin. He will oversee the group’s investment, development and operational strategy.

“I’m excited about joining the Round Hill Capital team and helping to bring their extensive international experience to bear in the Irish student accommodation and residential sectors,” said Vaudin.

“We have ambitious plans and over €1 billion of capital to deploy in Ireland and setting up a locally staffed office is a sign of our intention to invest for the long term.” He added.

Round Hill founder and chief executive Michael Bickford stated that the Irish market was struggling with supply and demand issues.

“Consistent with many European countries, the Irish student and residential housing markets suffer from structural supply/demand imbalances,” he said.

“Round Hill has a proven 15-year track record of investing into such markets, where we identify opportunities that will deliver sustainable housing, whilst creating long-term jobs. We look forward to building a substantial student and residential platform in Ireland in a responsible manner.” He added.

“I am delighted to welcome John to the Round Hill team. I am confident that his deep industry knowledge, expertise, networks and ability to deliver will prove invaluable as we continue to grow Round Hill’s business in Ireland and wider Europe.” He concluded.

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SB: How did the World Business Angels Forum (WBAF) address the issue of financing?
BA: Access to finance is important for investors, who put their money in startups and the ones that want to scale too. It is essential to be able to raise funds at second, third or even fourth rounds. Investors also must be connected to other sources of finance that will support their long-term investments, to be able to create a success story. WBAF 2018 not only connected startups with angel investors, but also ensured these very angel investors can establish industry relations with venture capitalists, private equity fund managers and major wealth management institutions. This is ultimately a platform for connecting angel investors with other financial institutions.

SB: One of your panel discussions is on the growth of the secondary market. How will this impact global trade and finance in the new generation?

BA: SME’s, also known as traditional entrepreneurs, run around 96% of the global economy. Due to the advent of technology, we now we have millennial entrepreneurs, who are focused on IT and mobile applications. Around 25% of equity market investment goes to millennial entrepreneurs.

I believe it is important to understand the power of both kinds of entrepreneurs. If we focus only on millennials because they are responsible for innovation, we are making a mistake as we are not giving room to SMEs to grow.

This is where policy makers can play a deeply influential role. I think that more than supporting entrepreneurs directly, its more important to support those who support entrepreneurs – which are the investors. Governments and policy makers should come up with policies that will allow for smarter use of public money for creating a larger social impact on global trade. This can be achieved significantly by tapping into what angel investors can bring to the table such as networking, mentorship, and business expertise.

SB: How can angel investing benefit Islamic finance?
BA: This was one of the more important panel discussions at WBAF 2018, moderated by Kaiser H. Naseem, Head of IFC Banking & Digital Finance Advisory Services, MENA and Central Asia; the panel comprised Sheikh Ebrahim bin Khalifa Al Khalifa, former minister of housing, Chairman of Accounting and Auditing Organization for Islamic Financial Institutions; Bahrain Salah Jelassi, regional director, Islamic Development Bank Group’s regional office in Turkey and Meliksah Utku, CEO, Albaraka Turk, Turkey.

In Europe alone, €6.8billion was invested by around 320,000 angel investors. Around US$26 million was invested by 340,000 angel investors in USA and Canada. An angel investor puts his money in a venture he thinks will make him money, in addition to providing his valuable business expertise, mentorship and access to his network. He seldom expects an RoI with a fixed interest or yields. The angel investment system is compliant 100% with the Islamic investment mindset, but the opportunity hasn’t been tapped into just yet.

This topic was discussed at length during WBAF with the aim of creating awareness about angel investment in an Islamic finance ecosystem and how we can develop co-investment funds between Islamic finance instruments and angel investors. Eventually, we would like to see if we can change the mindset of investors in Islamic countries to move from investing in real estate to investing in start-ups.

The World Business Angels Investment Forum & World Congress 2018 was held in Istanbul, Turkey between 18^th and 20^th February, 2018, running five summits concurrently and hosting more than 1,000 delegates from around the world.

You can read the entire interview here

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February 15, 2017: When faced with the need to invest safely and capitalise our savings we often ask ourselves if this is possible. Our first and immediate answer will be no, as every investment involves some level of risk, with the possibility that it can lose value. But let us explore further and not be carried away by this first assumption.

While it is a fact that in most countries the pension fund is legally ‘untouchable’, there have been constants episodes where companies or governments supported by the sparse or better said ‘bad regulation’ of supervisory agencies, much often motivated by greed, easy money and, let’s be honest, low levels of financial literacy among consumers, make decisions that do not contribute to our goals. Consumers are simply not involved with the decision making, and they are rarely made aware of the funding status or investments held by the managers.

The relative risk of investments varies widely. Indeed, some investments are inherently more risky than others, but a good start to investing safely is improving our financial literacy and educate ourselves on which types of investments are available on the market, theirs returns and, of course, what are the associated risks.

In order to reduce our investment risk, we must understand it first, as the more we get to know, the more comfortable we get to making good and financially responsible decisions.

Looking at investment offers in the market, we have on one end the spectrum of super-safe investments with low returns and on the other end, riskier but higher-yielding alternatives. It is a mistake, however, to think that this is a general rule. Alternative investment options exist — like the forex market where each trader choses how much risk he wants to assume and not the broker. This is just another example of our lack of financial knowledge. Indeed, the fact that banks aren’t capable of delivering decent returns, doesn’t mean that it isn’t possible.

Finally, and getting back to my question, the secret to investing safely as you climb up the risk/reward scale is knowledge. The more you know, the better you can discern which risks to take and which to avoid. Never let an opinion decide for your own investments — no one needs a bachelor in finance to take his finances into his own hands.

And, of course, don’t invest money that you do not have. Investments will always involve some level of risk and you don’t want to owe money that you cannot afford to pay. Last but not least, remember that the financial market is ever changing — never stop learning.

The post Investing safely starts with improving financial literacy appeared first on International Finance.

February 16, 2017: FTI Consulting, Inc. (NYSE:FCN) published an update to its interactive Global Shareholder Activism Map, which shows that shareholder activism gained momentum and geographic breadth in 2016.

To measure the potential risk in each jurisdiction, FTI Consulting — a global business advisory firm — created an index to track activism threat level by country and map key activists within each location. The analysis reveals that 342 activism campaigns took place outside the United States last year, compared to only 70 non-US activist campaigns in 2010.

The research shows that Canada, Australia and the United Kingdom have the highest risk for an increase in activism outside the United States. These countries have experienced changing economic factors, including a strong US dollar, undervalued asset prices and increased global scrutiny of corporate governance standards.

New markets, such as South Korea and Japan, felt the effect of governance changes and increasingly shareholder friendly sentiment in 2016 with landmark shareholder activism campaigns. Investors likely will continue to exert their influence in this region as they become more comfortable with this environment.

“The success of shareholder activism in North America continues to fuel its spread across the globe,” said Steven Balet, a Managing Director and Head of Corporate Governance and Activist Engagement at FTI Consulting. “These global shareholder activists are not necessarily US-based nor do they necessarily conduct their activism in the US style. They have, however, been increasingly successful in many jurisdictions across Europe, the UK and Asia.”

The disruptive threat of activism presents boardrooms around the globe with fresh impetus to better understand shareholder issues and concerns in order to prevent activism occurring and to be better prepared should they be targeted, Balet added.

Research Methodology

The Strategic Communications segment of FTI Consulting conducted secondary research to map the regulatory environment of 14 critical activist investor jurisdictions. The Global Shareholder Activism Map contains activist campaign data as of December 31, 2016, sourced from Activist Insight. The map examines nearly 4,500 activist campaigns and excludes campaigns aimed at amending bylaws, as they are often automatic filings from passive investors.

FTI Consulting developed an index to indicate country-specific activism threat levels, which encompass current campaign trends, corporate governance changes and the overall likelihood of future activism investment. Country insights include summary overviews, disclosure requirements, shareholder rights and company defense advantages/disadvantages. FTI Consulting’s Global Shareholder Activism Map is expected to be updated regularly to reflect the most recent developments by country and highlight new trends in global activism investing.

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