What CEOs are reading

Dominic Barton, Managing Director, McKinsey

1.           The Black Prince of Florence: The Spectacular Life and Treacherous World of Alessandro de’ Medici — Catherine Fletcher (Bodley Head, 2016; nonfiction)

2.           The European Identity: Historical and Cultural Realities We Cannot Deny — Stephen Green (Haus Publishing, 2016; nonfiction)

3.           China’s Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom — Winston Ma (John Wiley & Sons, 2016; nonfiction)

4.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks — Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

Carl Bass, CEO, Autodesk

1.           Emerald Mile: The Epic Story of the Fastest Ride in History Through the Heart of the Grand Canyon—Kevin Fedarko (Scribner, 2014; nonfiction)

2.           Ordinary Grace—William Kent Krueger (Atria Books, 2014; fiction)

3.           Out Stealing Horses: A Novel—Per Petterson (Picador, 2008; fiction)

4.           Fundamentals of Press Brake Tooling—Ben Rapien (Hanser, 2010; nonfiction)

Hakeem Belo-Osagie, Chairman, Etisalat Nigeria

1.           Success and Luck: Good Fortune and the Myth of Meritocracy—Robert H. Frank (Princeton University Press, 2016; nonfiction)

2.           Shoe Dog: A Memoir by the Creator of Nike—Phil Knight (Scribner, 2016; nonfiction)

3.           History’s People: Personalities and the Past—Margaret MacMillan (House of Anansi Press, 2015; nonfiction)

4.           The Tea Party and the Remaking of Republican Conservatism—Theda Skocpol and Vanessa Williamson (Oxford University Press, 2013; nonfiction)

Jamie Dimon, CEO & President, JPMorgan Chase

1.           The Conservative Heart: How to Build a Fairer, Happier, and More Prosperous America—Arthur C. Brooks (Broadside Books, 2015; nonfiction)

2.           Ronald Reagan—Jacob Weisberg (Times Books, 2016; nonfiction)

Reid Hoffman, Executive Chairman, LinkedIn

1.           The Inner Lives of Markets: How People Shape Them—And They Shape Us—Ray Fisman and Tim Sullivan (PublicAffairs, 2016; nonfiction)

2.           More Human: Designing a World Where People Come First—Steve Hilton with Jason and Scott Bade (WH Allen, 2015; nonfiction)

3.           The True Believer: Thoughts on the Nature of Mass Movements—Eric Hoffer (HarperCollins Publishers, 2010; nonfiction)

4.           This Brave New World: India, China and the United States—Anja Manuel (Simon & Schuster, 2016; nonfiction)

5.           The Gene: An Intimate History—Siddhartha Mukherjee (Scribner, 2016; nonfiction)

6.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown & Company, 2016; nonfiction)

Andrew N. Liveris, Chairman, Dow

1.           The Intelligent Investor: The Definitive Book on Value Investing—Benjamin Graham (Harper Business, 2006; nonfiction)

2.           The First Clash: The Miraculous Greek Victory at Marathon and Its Impact on Western Civilization—James Lacey (Bantam, 2013; nonfiction)

3.           Australia’s Second Chance—George Megalogenis (Penguin Books Australia, 2015; nonfiction)

Carlo Messina, CEO & managing Director, Intesa Sanpaolo

1.           When Breath Becomes Air—Paul Kalanithi (Random House, 2016; nonfiction)

Phuthuma Nhleko, CEO & Executive Chairman, Mobile Telephone Networks

2.           The Life of the Mind—Hannah Arendt (Mariner Books, 1981; nonfiction)

3.           The End of Alchemy: Money, Banking, and the Future of the Global Economy—Mervyn King (W.W. Norton & Company, 2016; nonfiction)

Chuck Robbins, CEO, Cisco

1.           Tattoos on the Heart: The Power of Boundless Compassion—Gregory Boyle (Free Press, 2011; nonfiction)

2.           Five Presidents: My Extraordinary Journey with Eisenhower, Kennedy, Johnson, Nixon, and Ford—Clint Hill and Lisa McCubbin (Gallery Books, 2016; nonfiction)

3.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

Roberto Setubal, CEO, Itaú Unibanco

1.           The Man Who Loved Dogs: A Novel—Leonardo Padura (Farrar, Straus and Giroux, 2015; fiction)

2.           Fault Lines: How Hidden Fractures Still Threaten the World Economy—Raghuram G. Rajan (Princeton University Press, 2011; nonfiction)

3.           The Spinoza Problem: A Novel—Irvin D. Yalom (Basic Books, 2013; fiction)

Risto Siilasmaa, Chairman, Nokia

1.           Superintelligence: Paths, Dangers, Strategies—Nick Bostrom (Oxford University Press, 2014; nonfiction)

2.           Who Gets What—and Why: The New Economics of Matchmaking and Market Design—Alvin E. Roth (Eamon Dolan/Houghton Mifflin Harcourt, 2015; nonfiction)

3.           Cryptonomicon—Neal Stephenson (Avon Books, 2002; fiction)

4.           Global Energy Interconnection—Zhenya Liu (Academic Press, 2015; nonfiction)

5.           花木兰—the Chinese folk tale of Mulan (fiction, in Mandarin)

Wendell P. Weeks, Chairman, Corning

1.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

2.           The Gilead trilogy, comprising Gilead, 2006; Home, 2009; and Lila, 2015—Marilynne Robinson (Picador; fiction)

3.            Search Inside Yourself: The Unexpected Path to Achieving Success, Happiness (and World Peace)—Chade-Meng Tan (HarperOne, 2014; nonfiction)

http://www.mckinsey.com/global-themes/leadership/what-ceos-are-reading?cid=other-eml-alt-mip-mck-oth-1607

My First Pick:
When Breath Becomes Air—Paul Kalanithi &
 The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo

The party winds down

Across the world, politically connected tycoons are feeling the squeeze    - Economist

May 7th 2016 | From the print edition

·         

TWO YEARS ago The Economist constructed an index of crony capitalism. It was designed to test whether the world was experiencing a new era of “robber barons”—a global re-run of America’s gilded age in the late 19th century. Depressingly, the exercise suggested that since globalisation had taken off in the 1990s, there had been a surge in billionaire wealth in industries that often involve cosy relations with the government, such as casinos, oil and construction. Over two decades, crony fortunes had leapt relative to global GDP and as a share of total billionaire wealth.

It may seem that this new golden era of crony capitalism is coming to a shabby end. In London Vijay Mallya, a ponytailed Indian tycoon, is fighting deportation back to India as the authorities there rake over his collapsed empire. Last year in São Paulo, executives at Odebrecht, Brazil’s largest construction firm, were arrested and flown to a court in Curitiba, a southern Brazilian city, that is investigating corrupt deals with Petrobras, the state-controlled oil firm. The scandal, which involves politicians from several parties, including the ruling Workers’ Party, is adding to pressure on Brazil’s president, Dilma Rousseff, who is facing impeachment on unrelated charges.

A Malaysian investment fund, 1MDB, that is answerable to the prime minister, is the subject of a global fraud probe. Supporters of Rodrigo Duterte, the front-runner to win the presidential election in the Philippines on May 9th, hope he will open up a feudal political system that has allowed cronyism to flourish. In China bosses of private and state-owned firms are now routinely interrogated as part of Xi Jinping’s purge of “tigers” (a purge that has left Mr Xi’s family well alone). Worldwide, tycoons’ offshore financial cartwheels have been revealed through the Panama papers.

The economic climate has been tough on cronies, too. Commodity prices have tanked, cutting the value of mines, steel mills and oilfield concessions. Emerging-market currencies and shares have fallen. Asia’s long property boom has sputtered.

The result is that our newly updated index shows a steady shrinking of crony billionaire wealth to $1.75 trillion, a fall of 16% since 2014. In rich countries, crony wealth remains steadyish, at about 1.5% of GDP. In the emerging world it has fallen to 4% of GDP, from a peak of 7% in 2008 (see chart 1). And the mix of wealth has been shifting away from crony industries and towards cleaner sectors, such as consumer goods (see chart 2).

Despite this slowdown, it is too soon to say that the era of cronyism is over—and not just because America could elect as president a billionaire whose dealings in Atlantic City’s casinos and Manhattan’s property jungle earn him the 104th spot on our individual crony ranking.

Behind the crony index is the idea that some industries are prone to “rent seeking”. This is the term economists use when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market. Cartels, monopolies and lobbying are common ways to extract rents. Industries that are vulnerable often involve a lot of interaction with the state, or are licensed by it: for example telecoms, natural resources, real estate, construction and defence. (For a full list of the industries we include, see article.) Rent-seeking can involve corruption, but very often it is legal.

Our index builds on work by Ruchir Sharma of Morgan Stanley Investment Management and Aditi Gandhi and Michael Walton of Delhi’s Centre for Policy Research, among others. It uses data on billionaires’ fortunes from rankings by Forbes. We label each billionaire as a crony or not, based on the industry in which he is most active. We compare countries’ total crony wealth to their GDP. We show results for 22 economies: the five largest rich ones, the ten biggest emerging ones for which reliable data are available and a selection of other countries where cronyism is a problem (see chart 3). The index does not attempt to capture petty graft, for example bribes for expediting forms or avoiding traffic penalties, which is endemic in many countries.

The rich world has lots of billionaires but fewer cronies. Only 14% of billionaire wealth is from rent-heavy industries. Wall Street continues to be controversial in America but its tycoons feature more prominently in populist politicians’ stump speeches than in the billionaire rankings. We classify deposit-taking banking as a crony industry because of its implicit state guarantee, but if we lumped in hedge-fund billionaires and other financiers, too, the share of American billionaire wealth from crony industries would rise from 14% to 28%. George Soros, by far the richest man in the hedge-fund game, is worth the same as Phil Knight, a relative unknown who sells Nike training shoes. Mr Soros’s fortune is only a third as large as the technologyderived fortune of Bill Gates.

Developing economies account for 43% of global GDP but 65% of crony wealth. Of the big countries Russia still scores worst, reflecting its corruption and dependence on natural resources. Both its crony wealth and GDP have fallen in dollar terms in the past two years, reflecting the rouble’s collapse. Their ratio is not much changed since 2014. Ukraine and Malaysia continue to score badly on the index, too. In both cases cronyism has led to political instability. Try to pay a backhander to an official in Singapore and you are likely to get arrested. But the city state scores poorly because of its role as an entrepot for racier neighbours, and its property and banking clans.

Encouragingly, India seems to be cleaning up its act. In 2008 crony wealth reached 18% of GDP, putting it on a par with Russia. Today it stands at 3%, a level similar to Australia. A slump in commodity prices has obliterated the balance sheets of its Wild West mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to moguls. The vast majority of its billionaire wealth is now from open industries such as pharmaceuticals, cars and consumer goods. The pin-ups of Indian capitalism are no longer the pampered scions of its business dynasties, but the hungry founders of Flipkart, an e-commerce firm.

In absolute terms China (including Hong Kong) now has the biggest concentration of crony wealth in the world, at $360 billion. President Xi’s censorious attitude to gambling has hit Macau’s gambling tycoons hard. Li Hejun, an energy mogul, has seen most of his wealth evaporate. But new billionaires in rent-rich industries have risen from obscurity, including Wang Jianlin, of Dalian Wanda, a real-estate firm, who claims he is richer than Li Ka-shing, Hong Kong’s leading business figure.

Still, once its wealth is compared with its GDP, China (including Hong Kong) comes only 11th on our ranking of countries. The Middle Kingdom illustrates the two big flaws in our methodology. We only include people who declare wealth of over a billion dollars. Plenty of poorer cronies exist and in China, the wise crony keeps his head down. And our classification of industries is inevitably crude. Dutch firms that interact with the state are probably clean, whereas in mainland China, billionaires in every industry rely on the party’s blessing. Were all billionaire wealth in China to be classified as rent-seeking, it would take the 5th spot in the ranking.

The last tycoons

A possible explanation for the mild improvement in the index is that cronyism was just a phase that the globalising world economy was going through. In 2000-10 capital sloshed from country to country, pushing up the price of assets, particularly property. China’s construction binge inflated commodity prices. In the midst of a huge boom, political and legal institutions struggled to cope. The result was that well-connected people gained favourable access to telecoms spectrum, cheap loans and land.

Now the party is over. China’s epic industrialisation was a one-off and global capital flows were partly the result of too-big-to-fail banks that have since been tamed. Optimists can also point out that cronyism has stimulated a counter-reaction from a growing middle class in the emerging world, from Brazilians banging pots and pans in the street to protest against graft to Indians electing Arvind Kejriwal, a maverick anti-corruption campaigner, to run Delhi. These public movements echo America’s backlash a century ago. The Gilded Age of the late 19th century gave way to the Progressive Era at the turn of the 20th century, when antitrust laws were passed.

Yet there is still good reason to worry about cronyism. Some countries, such as Russia, are going backwards. If global growth ever picks up commodities will recover, too—along with the rents that can be extracted from them. In countries that are cleaning up their systems, or where popular pressure for a clean-up is strong, such as Brazil, Mexico and India, reform is hard. Political parties rely on illicit funding. Courts have huge backlogs that take years to clear and state-run banks are stuck in time-warps. Across the emerging world one response to lower growth is likely to be more privatisations, whether of Saudi Arabia’s oil firm, Saudi Aramco, or India’s banks. In the 1990s botched privatisations were a key source of crony wealth.

The final reason for vigilance is technology. In our index we assume that the industry is relatively free of government involvement, and thus less susceptible to rent-seeking. But that assumption is being tested. Alphabet, the parent company of Google, has become one of the biggest lobbyists in Washington and is in constant negotiations in Europe over anti-trust rules and tax. Uber has regulatory tussles all over the world. Jack Ma, the boss of Alibaba, a Chinese e-commerce giant, is protected by the state from foreign competition, and now owes much of his wealth to his stake in Ant Financial, an affiliated payments firm worth $60 billion, whose biggest outside investors are China’s sovereign wealth and social security funds.

If technology were to be classified as a crony industry, rent-seeking wealth would be higher and rising steadily in the Western world. Whether technology evolves in this direction remains to be seen. But one thing is for sure. Cronies, like capitalism itself, will adapt.

From the print edition: International

http://www.economist.com/news/international/21698239-across-world-politically-connected-tycoons-are-feeling-squeeze-party-winds?cid1=cust/ednew/n/bl/n/2016055n/owned/n/n/nwl/n/n/n/n

3 ways Warren Buffett wants you to think bigger

Entrepreneurs who've been lucky enough to receive personal business advice from Warren Buffet know that when the "Oracle of Omaha" speaks, you should pay attention.

Adam Xavier, cofounder and CEO of motorcycle security company RoadLok, is one such entrepreneur. RoadLok's flagship product is a bike "immobilizer" that locks wheels in place, making it harder for motorcycles to be stolen. The device also acts as a safer alternative to wheel lock systems that can cause accidents when motorcyclists forget to take them off.  

When Xavier was just starting RoadLok in 2005, he sent Buffett his company's business plan hoping the Berkshire Hathaway CEO might respond with feedback. About six weeks later, Buffett returned the proposal with handwritten advice on how to tweak his idea and think bigger, Xavier says. Buffett did not return a phone call for comment.

Today, Los Angeles-based RoadLok has sold more than 27,000 units of its patented product, which sells for between $240 and $300. Xavier declined to disclose annual revenues. The company also has worldwide distribution and has inked partnerships with several large motorcycle brands. Here are three tips Xavier received from Buffett that have contributed to RoadLok's success.

 

1. Identify your threats. On the business plan Xavier originally sent Buffett, Xavier wrote that RoakLok did not have any threats because the product was patented. What was Buffett's response? "No investor will ever agree with that," he wrote. Just because your company has a patent doesn't mean you won't face challenges from competitors, especially once your business grows to the point that other entrepreneurs in your field start to take notice of you. The lesson? Think about the problems you don't have today but that you might encounter once you start to scale.

2. Find a path to recurring revenue. When Xavier pitched his bike lock company to Buffett, the business model dictated that customers would make a one-time purchase of the product for their bike. Buffett encouraged Xavier to attack the market in another way by exploiting opportunities in insurance and other subscription-based offerings. Now, RoadLok has added its own insurance policy on top of its product that will reimburse customers up to $5,500 if their bike is stolen while using RoadLok.

3. Align your company with a strong brand. After reading Xavier's business plan, Buffett advised him to pursue original equipment manufacturers that would resell RoakLok's product under their own name and branding. During the past few years, RoadLok has teamed up with major motorcycle brands like Harley Davidson, KTM and Yamaha, and is in the process of negotiating a deal with Ducati. All of these partnerships have helped expand RoadLok's distribution.

In addition to helping Xavier with his business model, Buffett also introduced RoadLok to auto insurance company GEICO, which partnered with RoadLok on an incentive program.

Though Xavier admits he was fortunate to get a reply from Buffett, whom he's still never met, he says that persistence — not dumb luck — is the key to long term success as an entrepreneur. 

"You have to be prepared to hear a no 99 times and get a yes on the 100th time," he says.

Read more: http://www.inc.com/graham-winfrey/3-ways-warren-buffett-wants-you-to-think-bigger.html#ixzz3aGx9yRxZ

India's Modi Aims to Rekindle U.S. Investment

- Wall Street Journal

Prime Minister's First Official U.S. Visit Includes Talks with Corporate Executives

NEW DELHI—When Indian Prime Minister Narendra Modi arrives for his first official U.S. visit on Friday, a top goal will be resuscitating investment interest in his country's sputtering economy.

Not too long ago, investors and executives had hoped the South Asian nation would follow China to become an Asian economic powerhouse. But many companies drawn by that potential ended up tangled in a knot of challenges.

Overstretched infrastructure, confusing and sometimes contradictory regulations, foreign-investment restrictions and tax authorities that sometimes seem to target big foreign firms convinced some firms India wasn't worth the trouble.

Foreign direct investment from the U.S. into India has shrunk in recent years—to around $800 million in the year ended March 31, from a peak of $1.9 billion four years earlier—as India's economic growth has slowed and executives have been disappointed by New Delhi's failure to modernize the country's infrastructure and pass key economic policy changes.

Mr. Modi was elected this spring after pledging to get the economy moving again. He has taken steps to cut red tape and open the economy wider to outside participation, but hasn't embarked on the kind of sweeping liberalization some businesses had hoped to see.

The Indian leader's U.S. trip will be an attempt to reassure American executives that he is serious about dismantling many of the country's long-standing barriers to doing business. The question is: Will that be enough?

On Monday, he will be meeting with more than 15 top executives from companies including General Electric Co., Boeing Co., International Business Machines Corp., Citigroup Inc. and PepsiCo Inc.

The day he departed for the U.S. on Thursday, Mr. Modi unveiled a campaign in New Delhi aimed at attracting more investment, especially for manufacturing.

"With the steps we have taken, your investments will not fail," he told local and international executives as he unveiled the country's new "Make in India" slogan and lion-shaped logo. "I have sensitized the bureaucracy to ensure they aren't creating hurdles."

Since taking office in May, Mr. Modi's government has announced plans to improve the country's infrastructure and open up the defense and insurance sectors to more foreign investment. He has also asked bureaucrats to cut back on the approvals businesses need and started making it easier for firms to hire and fire.

In India, some of the prime minister's biggest fans are executives that have done business in the western state of Gujarat, where Mr. Modi was chief minister for more 

than a decade.

Foreign firms have tended to be more cautious in their views of Mr. Modi, saying it is too soon to judge whether he can live up to the business-friendly reputation he built as a state leader.

At Thursday's event, Kenichi Ayukawa, managing director of Maruti Suzuki India Ltd., pointed to "the well-recognized fact that India is not the easiest place to do business." But he said he was optimistic about Mr. Modi's efforts to improve matters.

Maruti Suzuki, which is majority-owned by Japan's Suzuki Motor Corp. is one of India's biggest foreign-investment success stories. It makes close to 45% of all the passenger cars sold in India and is now building a new plant in Gujarat.

Among the international companies that have made big bets on India and ended up butting heads with authorities are Vodafone Group, Nokia Corp., Wal-Mart Stores Inc. and recently even Amazon.com Inc. and Uber Technologies Inc.

Vodafone is India's second-largest phone company in terms of subscribers, but it is stuck in international arbitration to resolve a multibillion-dollar tax dispute.

Indian tax authorities slapped it with a $2 billion bill on Vodafone's 2007 purchase of a controlling stake in an Indian phone company. India's highest court said in 2012 that Vodafone didn't owe taxes on the deal, but Parliament later passed a retroactive law to impose them.

Mr. Modi's party had pledged during the election campaign to end "tax terrorism." But since coming to power, it has affirmed the government's "sovereign right" to impose retroactive taxes—though it has said it won't ordinarily due so.

Tax issues have affected others as well. Nokia's handset factory near the southern city of Chennai, was left out of Microsoft Corp.'s acquisition of Nokia's handset business earlier this year as tax authorities froze the asset, claiming it had avoided taxes.

Meanwhile, Indian authorities have said they are investigating whether Amazon, which acts as an online marketplace in India rather than a retailer, is breaking foreign-investment rules and whether it owes taxes on products in its warehouse in Bangalore.

After years of lobbying for India to open up its retail industry to more foreign investment, retail giant Wal-Mart has put its big India roll out plans on hold until restrictions on foreign firms are eased. It currently operates only through wholesale outlets in India.

These high-profile cases as well as the tough realities of doing business in India are among the reasons why India ranked 134 out of 189 last year in the World Bank's measure of ease of doing business. China ranked 96th.

While most global companies understand there is a great opportunity to make money in India as the incomes of a billion people rise, some think it just isn't worth it.

"India has long been identified unfortunately with red-tapism, inspector Raj and cumbersome rules and regulations that hindered smooth transaction of business," India's commerce minister, Nirmala Sitharaman, said on Thursday. "We are fully conscious of these perceptions. We want to chart out a new course, a new path wherein business entities are extended the proverbial red carpet," she added.

India needs to rev up its manufacturing and exports if it ever hopes to provide more quality jobs and better incomes for its populace of more than 1.2 billion people. India has some of the lowest wage rates in the world, but it has failed to become a major exporter.

Manufacturing still makes up only about 15% of India's gross domestic product. Its share of global exports has been stuck below 2% for the last 20 years. China's slice of the world's exports has jumped from less than 3% in 1995 to close to 12% last year.

"We have to increase manufacturing and at the same time ensure that the benefits reach the youth of our nation," Mr. Modi said on Thursday. "We have to create opportunities of employment. If the poor get jobs, the purchasing power of families will increase."

http://online.wsj.com/articles/indias-modi-hopes-to-rekindle-u-s-corporate-investment-1411664078

Climate change may lead India to war: UN report

Vishwa Mohan,TNN | Apr 1, 2014, 01.35 AM IST

NEW DELHI: Asia is facing the brunt of climate change and will see severe stress on water resources and food-grain production in the future, increasing the risk of armed conflict among India, Pakistan, Bangladesh and China, the latest report of a UN panel has warned.

UN's Intergovernmental Panel on Climate Change, in its report assessing impacts of climate change on human health, settlements and natural resources released on Monday, carried a dire warning. "The worst is yet to come," it said, if no measures are taken to curb the ill-effects of global warming.

India, like other developing economies, may lose up to 1.7% of its Gross Domestic Product (GDP) if the annual mean temperature rises by 1 degree Celsius compared to pre-industrialization level, hitting the poor the most.

The report also predicts an increase in extreme weather events such as last year's flash floods in Uttarakhand and cyclone Phailin in Odisha if steps are not taken to control the rise in temperature.

"Nobody on this planet is going to be untouched by the impacts of climate change," R K Pachauri, IPCC chairman said while making the report public in Yokohama, Japan.

The report says rise in temperatures would also affect 'beach tourism' in many countries. India surprisingly stands out as the most vulnerable among 51 countries where beach tourism is an important sector.

Climate change is not just about the future. The report said people around the world were already getting hit as it directly affects livelihoods, reduces food-grain production, destroys homes and raises food prices. These trends will accelerate if climate change is left unchecked.

Among other things, the report warns that climate change increases the risk of armed conflict around the world because it worsens poverty and economic shocks.

"Climate change is already becoming a determining factor in the national security policies of states", said a statement issued by the UN Framework Convention on Climate Change (UNFCCC) which has been working to arrive at a global climate deal by 2015 to fight the menace effectively through combined efforts of nations.

Though the report doesn't have country-specific predictions, its region-wise findings brought out many eye-opening conclusions for India.

Aromar Revi, lead author of one of the chapters of this report, said the impacts of climate change would be felt severely in Indo-Gangetic plains, affecting poor people in the entire region. "The areas which are facing frequent floods these days may face drought like situation in the distant or near future. We cannot ignore the changes which are taking place either in the Indus river basin or in Brahmputra river system over the longer period," said Revi, explaining the implications of the report in Delhi.

Another lead author, Surender Kumar, explained how climate change would affect the poorer nations. He said if mean temperatures increased beyond 1 degree C, it would knock 3% off the GDP of developing economies.

Key messages from IPCC report 

* Coming years will see more extreme weather events (floods, cyclones, cloud bursts, unseasonal excessive rains and drought etc) in most parts of the globe 

* Maldives, China, India, Pakistan, Bangladesh and Sri Lanka will be among the most affected countries in Asia 

* Severe stress on fresh water resources in South Asia and China (Himalayan river basins) may become a reason for armed conflict in the region by middle of the 21st century 

* Climate change may be a determining factor in national security policies 

* Coastal flooding will not only kill people and cause destruction, it will also affect tourism in India (like in Goa and Kerala) 

* Decline in foodgrain production (wheat in India/Pakistan and wheat and maize in China) 

* Big coastal cites like Mumbai and Kolkata will be affected by sea-level rise in 21st century 

* Some fish and other marine animals will face extinction by 2050, affecting fishing community 

* In many regions, changing precipitation or melting snow and ice are altering hydrological systems, affecting water resources in terms of quantity and quality 

* Glaciers (including Himalayan) continue to shrink almost worldwide due to climate change, affecting run-off and water resources downstream 

* Climate change will impact human health mainly by exacerbating health problems that already exist.


http://timesofindia.indiatimes.com/home/environment/global-warming/Climate-change-may-lead-India-to-war-UN-report/articleshow/33034504.cms

The rise of the digital bank

- Mckinsey

As European consumers move online, retail banks will have to follow. The problem is that most banks aren’t ready.

July 2014 | by’Tunde Olanrewaju

Across Europe, retail banks have digitized only 20 to 40 percent of their processes; 90 percent of European banks invest less than 0.5 percent of their total spending on digital. As a result, most have relatively shallow digital offerings focused on enabling basic customer transactions.

Neither customers nor digital upstarts are likely to wait for retail banks to catch up. Recent analysis shows that over the next five years, more than two-thirds of banking customers in Europe are likely to be “self-directed” and highly adapted to the online world. In fact, these same consumers already take great advantage of digital technologies in other industries—booking flights and holidays, buying books and music, and increasingly shopping for groceries and other goods via digital channels. Once a credible digital-banking proposition exists, customer adoption will be breathtakingly fast and digital laggards will be left exposed.

We estimate that digital transformation will put upward of 30 percent of the revenues of a typical European bank in play, particularly in high-turnover products such as personal loans and payments. We also estimate that banks can remove 20 to 25 percent of their cost base by leveraging this digital shift to transform how they process and service. Put together, the economics of a digital bank will give it a vast competitive edge over a traditional incumbent. It’s fair to say that getting digital banking right is a do-or-die challenge.

So why are European banks not aggressively moving in this direction? One of the reasons for the slower transformation in banking is that bank executives have tended to view digital transformation too narrowly, often as stand-alone front-end features such as mobile apps or online product-comparison charts. Commonly lost in the mix are the accompanying changes to frontline tools, internal processes, data assets, and staff capabilities needed to stitch everything together into a coherent front-to-back proposition. Although the journey may begin “digitally” on an online form or payment calculator, it does not remain so for long, as anyone who has taken on a mortgage can attest. Instead, the onerous documentation requirements and significant manual intervention that characterize the typical bank’s mortgage process soon emerge. This can seem jarring to customers accustomed to more seamless interactions with nonbanking services.

Some banks point to security and risk concerns as justification for their slow approach, but this is a contrast to other industries. The airline industry, arguably beset by even stronger risk concerns, has automated just about every aspect of its customer experience in the last ten years, boosting customer service without compromising safety. Banks can do the same. What’s more, the effort is likely to pay for itself—and then some.

Where exactly is the value in digital banking?

Our modeling indicates that European retail banks that pursue a full digital transformation, pulling all improvement levers, can realize improvements in earnings before interest, taxes, depreciation, and amortization of more than 40 percent over the next five years. Almost two-thirds of this potential value comes from the impact of digital on the cost base and loss provisions rather than from revenue uplift, which is why a focus beyond front-end investments is critical.

While the cost-saving opportunity for banks comes in many forms and touches every area of the bank, there are two areas that are especially significant and represent the bulk of the value: automation of servicing and fulfillment processes and migration of front-end activity to digital channels. On automation, European banks can realize 40 to 90 percent cost reductions in a range of internal processes through careful deployment of work-flow tools and self-servicing capabilities for customers and staff. On front-end transformation, beyond diverting existing branch activity into digital channels, digital tools can also be used to augment frontline servicing (for example, with iPad forms rather than paper forms, or videoconference access to specialists to maximize their utilization)—easily doubling staff productivity and enhancing the customer experience.

The potential for revenue uplift is not quite so concentrated. Rather, European banks need to pursue a broader range of opportunities, including improved customer targeting via digital marketing and microsegmentation, more dynamic, tailored pricing and product bundling, third-party integration (for example, with Facebook), product white-labeling, appropriate distribution via aggregators, and, of course, establishment of distinctive mobile and online sales offerings. In the near term, we expect shorter-tenure, high-turnover products like credit cards, loans, and payments to see the most digital transformation. In fact, these are the areas most under attack from new digital entrants. Looking further ahead, bank accounts and mortgages, which together drive more than 50 percent of many banks’ revenues and usually provide “sticky” annuity streams, will be brought into the fray. Given this development, European banks will need to carefully watch the evolution of their digital share and the success rate of digital products in the front book. The future replacement rate of these annuity streams will be increasingly dependent on digital capabilities. In essence, it’s about securing the future and not being lulled into a false sense of security based on the back book.

How to go digital without going crazy

Going digital doesn’t have to mean millions in new investment dollars or convulsive upheaval in IT. Sizable investment will no doubt be necessary in some areas, but in general, many of the elements banks need to exploit this opportunity may already be in place. Banks just need to leverage them better and invest in these targeted ways.

Maximize the use of existing technology. Many banks have widely deployed imaging and work-flow systems, online servicing, capacity-management software, interactive-voice-response systems, and other connectivity and work-management technologies. But they’re not using them widely or well enough. One European bank, for instance, installed a new high-resolution-imaging platform but never fully enforced its use. Customer-service representatives continued to send documentation by fax, and the poor image quality led to significant inefficiency in downstream processing. Addressing this problem requires systematic evaluation of existing capabilities, their usage rates, and barriers to adoption.

Apply lightweight technology interventions. Banks can generate significant performance gains with surprisingly small targeted investments. Examples include wider deployment of tools like e-forms and work-flow systems, which can be implemented relatively rapidly, sometimes without deep integration into complex legacy architectures. The relationship managers and underwriters at one bank, for instance, got together with IT to design a stripped-down and user-friendly online loan application. The form automatically adapts to input data and guides underwriters on which risk processes to follow. Another European bank sped up mortgage decisions by tweaking its existing application to follow standard rules, such as minimum down-payment thresholds and rating data, which allowed applications to be scored and routed faster, with less manual intervention.

Place a few selective big bets. There will be places where you need to pursue more sweeping transformation investments. However, instead of trying to automate every aspect of a given process or product, home in on the few that drive the most capacity consumption and give the greatest return. Do not build a gleaming digital empire for the sake of it. One European bank that went through a systematic mapping of its processes for automation potential found fewer than ten processes that represented the bulk of full-time-employee capacity. In these targeted areas, the bank embarked on more radical investments, retiring old platforms, deploying new digital solutions, and reinventing the way the process works.

Address the people dynamics

No amount of technology will help if you don’t address the people issues driven by digital. Success requires more than rethinking technology; it requires rethinking the organizational model, too, especially when it comes to skills, structure, incentives, and performance management. The following steps can help.

Set the right structure and incentives. There’s more than one way to organize around digital. Some European banks appoint a head of digital with profit-and-loss responsibility. Others use a center-of-excellence (COE) model to develop offerings that the rest of the business can take and deploy. Either model can work, but you must make concerted efforts to realign incentives to ensure collaboration. For instance, creating a COE but not giving the business digital targets often leads to a lot of technology being successfully built, but with limited drive and pull for adoption. In extreme cases, the wrong functionality is built—it’s exciting to demonstrate to senior leaders and wins awards externally but ultimately creates no bottom-line impact.

Increase the focus on business outcomes, not digital activity. Too often, banks manage the progress of their digital transformations by tracking activity metrics, such as the number of app downloads and log-in rates. Such metrics are inadequate proxies for business value. Banks must set clear aspirations for value outcomes, looking at productivity, servicing-unit costs, and lead-conversion rates, and link these explicitly to digital investments. Only then will the collective focus be on shaping the right actions to fully capture the value available.

Formulate and implement a people vision. Finally, you need a vision for the role of employees in the new digital reality. This takes two forms: expectations of how they spend their time and how they work alongside the new technologies, and clarity on what technology competencies they need to develop. Digital transformation will clearly diminish the importance of some roles, which is why many employees will view it as a threat and be resistant to the change that digital brings. However, it also shifts the focus of many workers’ time toward higher-value tasks, creating exciting new opportunities for development. For example, relationship managers will spend less time capturing customer details and more time giving valuable advice. Additionally, deeper awareness of the technical capabilities available and how they can affect processes will be a prerequisite to effectively manage in this new world. Business leaders need to be conversant in how technology can be leveraged to address commercial challenges. You cannot rely on bringing in new talent from digitally savvy industries to transform your bank. New talent provides an important stimulus, but digital needs to become a new management competence across the organization.

Digitization will change the traditional retail-banking business model, in some cases radically. The good news is that there is plenty of upside awaiting those European banks willing to embrace it. The bad news is that change is coming whether or not banks are ready.

About the author

’Tunde Olanrewaju is a principal in McKinsey’s London office. This article was originally published in the Financial Times on October 25, 2013 (ft.com).

http://www.mckinsey.com/Insights/Business_Technology/The_rise_of_the_digital_bank?cid=DigitalEdge-eml-alt-mip-mck-oth-1407

BCIM project cooperation could be key to development of border regions

By K. Yhome

The Bangladesh-China-India-Myanmar (BCIM) economic corridor is a test case for cooperation between India and China in regional development as well as addressing common challenges. India's development initiatives in the Mekong region and China's growing presence in South Asia are now converging in the BCIM region. 

India and China's inroads into each other's peripheries have increased their economic presence and political profile. The ideas driving the BCIM economic corridor project are a combination of domestic and external interests of both New Delhi and Beijing, notwithstanding the security reservations in some quarters of the Indian establishment.

The past decades have witnessed phenomenal economic growth in both India and China. 

A major challenge has been to address the economic imbalance between the coastal developed regions and the underdeveloped frontier regions. Given the continental size of both, the interior regions have not benefited as much as the coastal regions that enjoy the geographical advantage of maritime connectivity. 

The BCIM project is an important part of New Delhi's and Beijing's strategies to open up their landlocked frontier regions to the neighboring countries.

Yunnan Province of China is a landlocked region far-off from the booming coastal areas in the east. Regional cooperation allows China to provide sea access to its southwest provinces or what some Chinese scholars refer to as "from continental to maritime economies." 

Since the launching of the "Gateway Strategy" in 2009, Yunnan has been made the gateway to Southeast and South Asia with several networks of road, rail, and air connectivity being planned to connect Yunnan with the neighboring countries.  

An important part of the strategy is to revive the ancient "Southern Silk Road," believed to have connected China with India. Within the renewed China's "Going Out" policy, Yunnan's geographical location that shares common borders with Myanmar, Laos and Vietnam is seen as the gateway. 

Similarly, India's landlocked Northeast region has lagged behind compared to other parts of the country. Within the "Look East" policy, New Delhi's strategy has been to encourage greater economic integration of the Northeast with the neighboring economies through border trade and connectivity to provide sea access to the region.

Like Yunnan Province, the Northeast region shares common borders with Bhutan, Bangladesh, Myanmar and China, making it the bridge between India and its eastern neighbors. 

This is also in line with India's new approach toward its periphery that aims at creating a regional environment conducive for economic growth. The idea of regional connectivity has become synonymous with New Delhi's new regional diplomacy. 

The border regions of the BCIM countries have a complex development-security nexus. The protracted ethnic conflicts in India's northeast and northern Myanmar have had serious security and development impacts on the border areas of the BCIM region. 

The "geographical isolation" argument has long been the main reason for the underdevelopment of these border areas, fuelling and sustaining ethnic unrest. 

The BCIM region has a geographical advantage of connecting South, Southeast and East Asia. This subregion is viewed as having the potential to promote the economic integration of Asia. 

Two issues could emerge with serious implications. The line dividing "internal affairs" and "external interference" may narrow and if not handled carefully, could even threaten relations among the countries involved.

China's rethink of its "Going Out" policy in the region, particularly, after its experiences in Myanmar, is critical for the BCIM project. An engagement policy that is guided by respect and sensitivity to culture and the environmental concerns of local people is key for the success of "win-win cooperation" in these border regions of BCIM countries, which are rich in biodiversity and ethnically diverse people.

The BCIM economic corridor has the potential of transforming a conflict zone into a cooperation zone. This can happen only if adequate measures are taken to check any possible negative impacts of the corridor by involving all of the key stakeholders. 

The author is a research fellow at the Observer Research Foundation, New Delhi. yhome@orfonline.org

http://www.globaltimes.cn/content/832878.shtml#.Us5eu_QW28g