Business
How businesses stand to lose more than they save with radical cost cutting
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Source: Finance Derivative
Spokesperson: Benjamin Swails, Northern Europe General Manager
For years, my career was focussed on the next big conference, the customer meeting that required a flight and hotel stay, or the big customer dinner where the right bottle of wine really mattered. Since becoming the General Manager of Pleo’s Northern European business, my remit has expanded to understanding how much money we have coming in versus going out. Today, I’m asking whether my teams travel to travel, or because it’s necessary? What are we spending on the tools and applications required to do the job and what is the ROI? How many coffees is my team expensing every day? To some this might seem like overkill, but these details matter to me in 2024. And they should matter for you too.
That’s because, ahead of what’s expected to be a challenging year for UK business, a quarter of small and medium-sized enterprises (SMEs) are looking to reduce business spending in 2024. This is according to Pleo’s CFO Playbook for 2024, which polled over 500 UK financial decision makers. But, when it comes to where these spending cuts will manifest most strongly, 1 in 5 UK businesses are exploring reducing pay for remote workers – a decision that has the potential to impact 16% of full-time British workers. With just under half (41%) of businesses asking their teams to come into the office more, it’s obvious that business leaders are keen to bring back in-person collaboration and make the most of costly office rents. But is reducing pay for remote workers really the answer?
Before they sign off on spending decisions that can have potentially damaging ramifications for employee morale, businesses must first bring some clarity to their spending oversight and find the balance between a leaner business and one that still operates a flexible culture. This means having a tighter rein on spending – including deeper insights and fewer spending blind spots – to reduce the need for radical cost-cutting strategies. Because in 2024, details matter.
Why there is a need to reduce spending
The past few years have undoubtedly been a challenge for UK SMEs. In late 2023, for the first time in over a decade, more businesses were closing down than starting up. Fast forward and 2024 has kicked off with similar uncertainty. Encouraging EY forecasts expect the UK economy to grow 0.9% this year, up from the 0.7% growth projected in October’s Autumn Forecast – while GDP growth expectations for 2025 have been upgraded from 1.7% to 1.8%. But, less than a month on, the UK finds itself in a recession.
This has increased the pressure on organisations to reduce spending for the year ahead. However, only a third (34%) of UK businesses feel they’ve got an excellent grip on managing their spending, and just 28% feel they have strong visibility of their financial health and performance. Yet, curiously, almost 50% of UK businesses believe 2024 will be “easier” than 2023. Something that, in light of the challenges businesses face and the lack of significant investment into spending visibility and performance, is hard not to interpret as wishful thinking. And businesses risk flying blind in their quest to cut costs without comprehensive spending oversight to navigate them.
Cost cutting shouldn’t be a Hail Mary
Let’s use the notion of reduced pay for remote workers as a case study for making spending decisions without spending oversight. Renewed calls for workers to return to the office is one thing, but this feels like more of a financial misfire that declares the contribution of remote workers less valuable. Pleo is currently thinking about the role of its own office space. But, what’s crucial is that we don’t plan on putting financial pressure on those who prefer to work from home. Instead, we’re thinking bigger and evaluating our office needs for all London-based staff. This ensures we can save money on rent, not people, before investing it into amenities our team wants.
Many of our employees are still working remotely and while, in a perfect world, I would love to see 80% of our team come into the office to help contribute to the culture that makes Pleo so special, we need to strike a balance of office requirement and productivity preferences, and keep our culture intact as we do so. Ultimately all of our employees need to feel valued.
As businesses strive to streamline their spending, the decisions made at the collective level are likely to impact individuals most – from work models and colleagues to pay and progression. And so before making such drastic spending cuts, businesses need to ask themselves how they can manage spending better. Not with broad strokes, but by looking at the detail. And this starts with more comprehensive spending oversight across multiple departments and activities.
Where to start with cost consolidation
Though streamlining costs might present some businesses with a significant shift, it is worth the effort. Better spend management offers an opportunity to truly unlock enhanced efficiency and resilience.
One area of opportunity that’s set to become more key in 2024 is addressing technology investments and tool consolidation. We know that digital transformation is well underway for many businesses, yet consolidating platforms and software is languishing towards the bottom of the priority list. Only 16% in the UK see it as a big ambition for 2024 – something they might want to reconsider considering the average worker is overburdened across 9 tools every day. Such ‘digital overwhelm’ is not only a concern for the workforce and productivity, but budget too.
Another opportunity for consolidation isn’t necessarily about cost, but mindset. Too often, businesses conceive of spend and expenses as two separate things. The former more likely to be high-value items such as office rent, ad spend and international business travel; the latter more likely to be smaller cost items like coffees, office supplies and local travel costs. In fact, despite only 19% of businesses thinking of expenses and spend as the same thing, only 27% of organisations had clear guidelines on what separates them – potentially opening up a black hole in terms of unaccounted outgoings.
At the end of the day, businesses just want to know how much they have coming in vs going out. Whether it’s an expense or spend, it’s all outgoing. And when 25% of decision makers say they use different platforms, this fractured view of company outgoings is allowing a lot to slip through the cracks.
The priority of pocket repair
There is no doubt that UK businesses face a challenging 12 months ahead. In order to focus on revenue growth and filling their pockets in the coming months, business leaders first need to check there aren’t any holes in them. This means ensuring their spending oversight is exhaustive and leaves no stone unturned – and no finance strategy half-baked.
This is how businesses can reduce business spending and, crucially, avoid doing so as part of a trade-off with working culture and productivity. Because without financial oversight and strategy, ill-conceived cost cutting will remain a bigger risk and could potentially end up costing business leaders in more ways than one.
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Business
Building Compliance into Business Culture is Essential in Fintech
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Source: Finance Derivative
Tetyana Golovata, Head of Regulatory Compliance at IFX Payments
Regulation plays a critical role in shaping the fintech landscape. From Consumer Duty and FCA annual risk reporting to APP fraud, the tectonic plates of the sector are shifting and whether you consider these regulations as benefiting or hindering the industry, businesses are struggling to keep up.
According to research by fraud prevention fintech Alloy, 93% of respondents said they found it challenging to meet compliance requirements, while in a new study by Davies a third of financial leaders (36%) said their firms had been penalised for compliance breaches in the year to June. With the FCA bringing in its operational resilience rules next March, it is more important than ever to ensure your company makes the grade on compliance.
Lessons from history
Traditionally, FX has struggled with the challenge of reporting in an ever-developing sector. As regulatory bodies catch up and raise the bar on compliance, responsible providers must help the industry navigate the changes and upcoming deadlines.
Fintechs and payments companies are entering uncharted waters – facing pressure to beat rivals by offering more innovative products. When regulators have struggled to keep up in the past, gaps in legislation haveallowed some opportunists to slip between the net, as seen in the collapse of FTX. Because of this, implementation and standardisation of the rules is necessary to ensure that innovation remains seen as a force for good, and to help identify and stamp out illegal activity.
Culture vs business
Culture has become a prominent factor in regulatory news, with cases of large fines and public censure relating to cultural issues. As the FCA’s COO Emily Shepperd, shrewdly observed in a speech to the finance industry, “Culture is what you do when no one is looking”.
Top-level commitment is crucial when it comes to organisational culture. Conduct and culture are closely intertwined, and culture is not merely a tick-box exercise. It is not defined by perks like snack bars or Friday pizzas; rather, it should be demonstrated in every aspect of the organisation, including processes, people, counterparties, and third parties.
In recent years, regulatory focus has shifted from ethics to culture, recognising its crucial role in building market reputation, ensuring compliance with rules and regulations, boosting client confidence, and retaining employees. The evolving regulatory landscape has significantly impacted e-money and payments firms, with regulations strengthening each year. Each regulation carries elements of culture, as seen in:
- Consumer duty: How do we treat our customers?
- Operational resilience: How can we recover and prevent disruptions to our customers?
- APP fraud: How do we protect our customers?
Key drivers of culture include implementing policies on remuneration, conflicts of interest, and whistleblowing, but for it to become embedded it must touch employees at every level.
This is showcased by senior stakeholders and heads of departments facilitating close relationships with colleagues across a company’s Sales, Operations, Tech and Product teams to build a collaborative environment.
Finance firms must recognise the trust bestowed on them by their customers and ensure the protection of their investments and data is paramount. Consumer Duty may have been a wake-up call for some companies, but progressive regulation must always be embraced and their requirements seen as a baseline rather than a hurdle.
Similarly, the strengthening of operational resilience rules and the upcoming APP fraud regulation in October are to be welcomed, increasing transparency for customers.
Compliance vs business
Following regulatory laws is often viewed as a financial and resource drain, but without proper compliance, companies are vulnerable to situations where vast amounts of money can be lost quickly.
A case in point is the proposed reimbursal requirement for APP fraud, which will mean payment firms could face having to pay compensation of up to £415,000 per case.
Complying not only safeguards the client and their money, but also the business itself. About nine in ten (88%) financial services firms have reported an increased compliance cost over the past five years, according to research from SteelEye. Embedding compliance earlier in business cultures can be beneficial in the long run, cutting the time and money needed to adapt to new regulations and preventing the stress of having to make wholesale changes rapidly.
Building a cross-business compliance culture
Compliance is a key principle at IFX, and we strive to be a champion in this area. In response to these challenges, the business restructured, establishing dedicated risk and regulatory departments, along with an internal audit function.
Regulatory compliance aims to support innovation by developing and using new tools, standards, and approaches to foster innovation and ensure product safety, efficacy, and quality. It has helped the firm to navigate the regulatory landscape while driving growth and maintaining high standards.
This organisational shift allowed each business line to own its own risk, with department partaking in tailored workshops designed to identify existing, new, and potential risk exposure. Shared responsibility for compliance is the only way to create a culture which values it. We see this as a great way for organisations to drive innovation while sticking to the rules.
Business
How AI virtual assistants are transforming education and training
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By Gregor Hofer, CEO and Co-founder at Rapport
What separates good doctors from excellent doctors, the type that might get five-star reviews if, like an Uber driver, their services were supported by a smartphone app?
Medical knowledge, expertise, and better outcomes are, of course, the most important factors. But – particularly when dealing with patients’ relatives, discussing risk assessment and imparting bad news – we shouldn’t underestimate the importance of bedside manner.
This might come naturally to some doctors but there are none for whom training isn’t useful, whether at medical school or on the job.
There will always be a place for real human interaction in this training, the type that involves role-play, with actors or colleagues playing out different scenarios that explore the most effective ways to handle difficult situations.
But what if this could be supplemented by more readily available and less resource-intensive experiences that simulate these training environments? And what if it could be applied across numerous sectors, industries and professions, of which there are a great many that could benefit from such an opportunity?
What might that mean for those instigating tricky conversations and, perhaps more importantly, those at the receiving end of them?
Advances in generative artificial intelligence – or GenAI – mean that these are no longer hypothetical questions.
There’s no limit to the type of person this technology could help, but we’ll review three – doctors, those working in corporate HR, and online students – to give a flavour of the benefits it brings.
Before we do, a quick word on how such applications work.
An overview of the technology
It all starts with data. With access to enough content, the type that you store and curate on your internal systems, large language models (LLMs) can be trained to find the most appropriate response to whatever user input they’re exposed to, whether in writing or spoken, and then you as a user can respond to that response, and so the cycle continues.
You’ll have experienced something similar using the likes of CharGPT, but because this is based on your own content, you’re more in control. (For simpler and more prescriptive scenarios, though, I’d add that with the best solutions, you can alternatively import predefined branching dialogue to keep your conversations on track.)
It doesn’t stop there, though; by tapping into a solution that’s supported by experts in linguistics and computer-aided animation, your colleagues can interact in real-time with avatars equipped with believable facial expressions, accurate lip-synching capabilities, natural gestures and the ability to detect emotions.
All of this adds to the user’s willing suspension of disbelief that they’re interacting with a real person, or AI avatar, thereby enhancing the effectiveness of their learning.
These innovations are reshaping how we approach learning and skill development in so many critical fields. We said we’d look at three. We’ll start by returning to medicine.
Medical training
AI assistants can supplement the way doctors are taught to break bad news to patients, one of the hardest things they’ll face in practice and, given its subjectivity, something that can’t easily be looked up in a textbook on anatomy or physiology.
As we said from the outset, this is easier for some doctors than others, but given the literal life-and-death nature of such conversations and the shattering impact that the death of a loved one can have on a relative, there’s always room to improve medics’ empathy and communication skills – which is exactly what this technology delivers.
By utilizing experiential AI tools, clinicians can better use their time, alleviate pressure, fatigue and burnout symptoms, and ultimately allow them to better serve their patients.
Corporate HR
In corporate HR, virtual assistants can significantly streamline and enhance the hiring and firing process, as well as any difficult conversation; whether it’s a tough review, a disciplinary hearing, letting down an employee about a promotion they’d applied for or any other scenario that might bring a bead of sweat to your forehead, it’s all about providing safe and cost-effective practice before doing it for real.
Tech research consulting firm Gartner recently found that more than three-quarters (76%) of HR leaders believe that if their organisation doesn’t adopt and implement AI solutions, such as generative AI, in the next 12 to 24 months, they’ll lag in organizational success compared to those that do, while 34% of HR leaders participating in their January benchmarking session said they were exploring potential use cases and opportunities when it came to generative AI.
If they do manage to adopt the right technology, the impact will be massive among those who deploy it wisely. After all, which company wouldn’t want to upskill its HR professionals in tangible soft skills such as empathy, communication, problem-solving, and conflict resolution in a controlled setting?
Online education
AI-powered tools can hugely boost student engagement in remote learning environments, and the research suggests that it comes close to rivalling in-person experiences. When you consider the staff-to-student ratios common in most educational settings, this should be no surprise – think how many students can fit into a lecture hall (even if they don’t always turn up!).
But we’re not necessarily talking about formal education; this applies equally to any informal setting in which someone needs to improve their education in some way.
With this technology, you can invent new ways to educate your students – or staff – by transforming lessons into experiences, using interactive characters reflective of the subject. This means you can increase user satisfaction and performance without compromising on content.
Whatever the scenario and whatever the use case, the chances are that if you have the right content in sufficient quantities, you can tap it for interactions that would otherwise be lacking in uniqueness or prohibitively expensive.
With AI virtual assistants, everyone’s a winner.
Business
How GenAI is Shaping the Future of Compliance
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Gabe Hopkins, Chief Product Officer, Ripjar
Generative AI or GenAI uses complex algorithms to create content, including imagery, music, text, and video with amazing results. Less well known are some of the ways in which it can transform data processing and task performance. This groundbreaking technology not only saves time, effort, and money, but has become a game-changer in enhancing operational efficiency and fostering innovation across various sectors.
However, some industries like anti-financial crime compliance – have been slow to adopt new innovations like GenAI, predominantly due to concerns over potential risks. In fact, they can even see it as a risk in itself. Legal, Compliance and Privacy leaders rank rapid GenAI adoption as their top issue in the next two years, all while other, less risk-averse organisations enjoy the upside of implementing GenAI in their systems.
This delay means many compliance teams are not taking advantage of AI tools that could revolutionise their processes and help them save up to 200 hours annually per user.
Entering the New Era of GenAI in Compliance
Teams in largely regulated sectors like banking and fintech face enormous pressures. Their responsibilities include identifying risks, such as sanctioned individuals and entities, updating policies to keep up with ever-evolving regulations, and handling expansive datasets. The high volume of this data makes manual reviews exhausting and susceptible to errors, which can lead to financial and reputational damage.
One way to overcome these challenges is by leveraging GenAI. For example, false positives – where a risk is raised incorrectly or false negatives, where a real risk is not flagged, are common issues caused by trying to deal with very high volumes of alerts and risk matches. Implementing GenAI can reduce these inaccuracies, significantly enhancing the efficiency and effectiveness of customer and counter-party screenings.
In practical terms, GenAI can reinvent how compliance tasks are performed. For instance, in drafting Suspicious Activity Report (SAR) narratives, where analysts need to justify suspicions in transactions, GenAI can help automate this writing process, combining human oversight with artificial efficiency. Platforms using GenAI excel in summarising vast amounts of data— crucial for tasks like screening adverse media, where they assist in identifying potential risks linked to negative information about clients.
Understanding the Opportunities of GenAI and Overcoming Fears
For the compliance sector, it’s a crucial time to explore how to incorporate GenAI effectively and securely without undue risks. Dispelling fears about data misuse, the high costs of initial model setups, and the ‘black box’ nature of AI models are central to this transition. Teams are particularly cautious about sharing sensitive data and the hidden biases that AI might carry.
Yet, some strategies can counter these challenges. By choosing suitable models that ensure robust security and privacy and adjusting these models within a solid statistical framework, biases can be mitigated. However, organisations will need to turn to external expertise – whether data scientists or qualified vendors – to support them in training and correctly deploying AI tools.
The latest advancements in GenAI suggest that virtual analysts powered by this technology are achieving, and sometimes surpassing, human-level accuracy. Despite ongoing concerns, which may slow adoption rates, the evident potential benefits suggest a bright future for compliance teams using GenAI. These technological innovations promise not only to improve speed and efficiency but also to enhance the capability of teams to respond and adapt swiftly.
Embracing GenAI will not only significantly elevate the effectiveness of compliance operations but also safeguard organisations against potential pitfalls while maintaining trust and integrity in their industry practices.
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Building Compliance into Business Culture is Essential in Fintech
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How AI virtual assistants are transforming education and training
![](http://www.futuresparity.com/wp-content/uploads/2023/04/b-5-80x80.jpg)
How GenAI is Shaping the Future of Compliance
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