World Manufacturing Risk Index and Pioneer Index Report

1. A Manufacturing Risk Index assesses the, economic, technological and environmental risks in site selection for new manufacturing facilities.

2. A report by Cushman & Wakefield (C&W), ontains an Established Index, which ranks the 30  largest countries by manufacturing output, and a Pioneering Index, which measures the attractiveness of growing but less mature markets.

3. The highest rankings are described as “the scenario of a highly automated manufacturer” and the factors and weightage are as follow:

(i) Conditions - including labor force, logistics, and business environment are weighted at 40 percent.

(ii) Risks - including natural disasters,  economics and energy, are weighted at 20 percent.

(iii) Costs - including labor, construction and  electricity, are also weighted at 20 percent.

4. The rankings also factor in alternative  scenarios, such as manufacturers driven by low  operating costs, which weighs conditions and risks at 20 percent and costs at 60 percent.

[Framework] IFRS 17 Insurance Contracts - Part 3 - PAA on liability for remaining coverage

1. The Premium Allocation Approach (PAA) is a simplification of the Building Block Approach (BBA) to measuring insurance contract assets and liabilities. The IASB developed the PAA as an approximation during the coverage period for a short duration contract.

2. It is an optional measurement approach for contracts of short duration under IFRS 17, prior to and during the exposure period of the contracts. 

3. This post focus on the liability before the occurrence of an insured event (liability for remaining coverage). There is no contractual service margin under the liability for incurred claims as by definition the contractual service margin is amortized over the coverage period of the contract.

4. The liability for incurred claims is measured using risk-adjusted expected present value of fulfilment cash flows.

[Framework] IFRS 17 Insurance Contracts - Part 2 - Remeasuring, Presentation and Impact

1. Remeasuring after subsequent period.

2. Presentation in Financial Statement

3. Impact on Insurers (Life and General)

[Framework] IFRS 17 Insurance Contracts - Part 1 - Summary and Features

1. IFRS 17: Insurance Contracts will take effect on 1 January 2021.  

2. The new standard will replace interim standard IFRS 4: Phase I for entities to continue with their current diverse practices of reporting insurance contracts. 

[Misconduct] Deutsche Bank Fined £163 Million and $7.2 Billion for 2 Serious Failings

1. Deutsche Bank reaches a $7.2 billion settlement over US mortgage-backed securities

2. Deutsche Bank Fined £163 million by FCA for Anti-Money Laundering Failings.

ASEAN Manufacturing - Part 3 - Malaysia's Potential Industry

1. Although the weak ringgit has made Malaysia an inexpensive market for foreign investors, the country remained a resilient economy despite having been affected by global financial volatilities. Oil and gas, biotechnology and electrical and electronics are among the sectors on a list of National Key Economic Areas.

2. The government has singled out chemicals, E&E and machinery and equipment under the 11MP to drive the manufacturing sector’s transition to high-value, high-technology production. Along with these industries, other industries such medical devices and aerospace have been identified as segments with potential for substantial levels of growth. 11MP targets the manufacturing sector to grow at 5.1% per annum and contribute 22.5% to GDP, as well as 18.2% of total employment by 2020.

ASEAN Manufacturing - Part 2 - Key Sectors Review and Changing Trends

1. Businesses must understand the changing landscape and how it could affect their decisions on the location of manufacturing plants and could use a new methodology for making better decisions about plant location in the region.

2. ASEAN countries account for about 5 percent (McKinsey Global Institute) of global manufacturing (in value added terms) with dominant shares in sub-sectors such as chemicals, food and beverage, metals, and motor vehicles with new trends shaping these sectors.

ASEAN Manufacturing - Part 1 - Overview & US Manufacturing Outlook

1. A brief overview of recent developments that have influenced investors to build and expand operations in the region as foreign investors are diverting their attention towards ASEAN.

2. And also an overview on the growth forecast  in the U.S. economy as well as its manufacturing sector and subsectors.

[Framework] Guide to Industry 4.0

1. Industry 1.0 was based on the introduction of mechanical production equipment driven by water and steam power. Industry 2.0 was based on mass production achieved by division of labor and the use of electrical energy. Industry 3.0 was based on the use of electronics and IT to further automate production. Industry 4.0 was based on the use of cyber-physical systems. 

2. The Smart Factory is quickly becoming a real place, where the technology and capabilities developed under Industry 4.0 will be put to work. Connecting real machines with information technologies and the Internet will increase productivity, add unprecedented levels of flexibility to manufacturing, and leverage the benefits of new business models and value creation networks.

Chinese Companies Expanding Abroad and the Challenges

1. China has the world’s largest supply of foreign currency reserve and Beijing’s easing restrictions on outbound cash has helped facilitate overseas investment. The government has also eliminated the need for companies to have their out bound investments approved by the State Administration of Foreign Exchange (SAFE).

2. The Chinese government monitors the outflow of foreign reserves and closes the gates if they see too much money leaving the country. However, the government has chosen to leave the gates open despite a massive outflow of foreign reserves making it easier for companies to go abroad.

3. The beginning of Q1 2016 recorded Chinese companies raking up acquisitions approximately $68 billion and $100bn of announced M&A transactions worldwide.

4. This was accelerated by the Government's initiatives such as China’s One Belt One Road (OBOR) inspired by the Silk Road trade path from China to Europe and is expected to build a huge economic corridor taking in almost two-thirds of the world’s population and accounts for one-third of the world’s wealth.


5. This initiative in China’s ‘going global’ objective was forseen when domestic growth slows down and is a major plank for many Chinese companies taking to the international stage.

Top Chinese Companies Going Global and PR in a Foreign Country

1. China’s outbound M&A activity for the first nine months of 2016 totaled $174 billion, (From Dealogic data) surpassing that of the United States for the first time.

[Framework] 10 Recommendations for Risk Management Improvements and 6 Useful KRIs

1. 10 actions to help firms better manage their risks.

2. 6 KRIs serving as a good tool for firms to summarise issues for management, the board, the non-executive Directors, the clients and the regulators.

[Framework] Consultation Paper on Regulation of UAE's Life Insurance Industry

1. In November, a consultation paper concerning regulations for the UAE's life insurance industry, Circular No. (33) of 2016 (Life Regulations), was released by the UAE Insurance Authority (IA).

2. The objective is mainly toregulate the manner in which life insurance investment contracts have been sold and marketed in the UAE.

[Misconduct] FCA's Asset Management Review Uncovers 'Market Failure'

1. In November 2016, the Financial Conduct Authority (FCA) released a report and labeled the asset management sector as ‘a market failure in the economic sense’.

2.  Notably in the performance of actively managed funds and the charging structure used for such funds.

China's Debt Bubble - Part 2 - The Actual Situation

This post continues from part 1 discussing where the credit risks lies and how China's banks circumvent the system.

China's Debt Bubble - Part 1 - Debunking the Beliefs

SUMMARY OF CHINA'S DEBT BUBBLE
1. In November 2016, Fitch Ratings warned that China’s bad loans in the banking system might be 10 times the official estimates of 1.8% of total assets. 

2. The predictions of a Chinese banking crisis have been proven wrong multiple times and  the concerns should lie somewhere else in the system rather than in a systemic blow-up.

[Misconduct] Wells Fargo Employees Creating Fictitious Accounts

1. Imagine paying fees on a ghost account you didn't sign up for.

2. In September,  federal regulators reported that Wells Fargo  employees secretly created millions of unauthorised bank and credit card accounts without their customers knowing it since 2011. 

Will China Become The Next Japan?

While some draw parallels between China's slowed economic growth today and Japan in the late 1980, there are some differences.

Rebalancing China Explained in 6 Charts

1.  In september 2016, IMF published a working  paper titled "Rebalancing in China - Progress and Prospects" explaining  China's economic transition utilizing the "rebalancing" approach.

2. China is transitioning to a greener, more inclusive, more consumer and service based, and less credit-driven economy.  

3. Below are 6 charts explaining the key areas involved.

Overview and Thoughts on China's Economic Rebalancing

DEFINING  A REBALANCED CHINESE ECONOMY

1. China is rapidly reaching the point of diminishing economic and political returns from its investment-driven model, which is headed for change one way or another: either through a proactive rebalancing, with reforms and policy adjustments, or a forced rebalancing precipitated by rising stresses in and beyond the financial system. 

2. Rather than depending on the old growth engines of property development and exports, the emergence of new growth engines will lead the country through an extended period of rebalancing and ensure that growth is maintained. The structural transformation involves increased private consumption and a lower trade surplus.

3. China’s economic rebalancing can be viewed in terms of global trade balances and domestic dynamics. From a US-China rebalancing standpoint, China is intending to save less and spend more on consumption, while the US is spending less and saving more.