May 21, 2022

Report Explores How Political and Economic Developments Will Shape Africa's Mining Sector

"Rich in natural resources, the African continent has attracted a large inflow of investment in recent years," says the Economist Intelligence Unit (EIU) in a report that explores how political and economic developments will shape the future of the mining sector in Africa and their key implications on prospective projects in the region. The report adds that "Although extraction of Africa's reserves has been largely hindered by weak domestic governance structures and policy impediments, the continent is set to remain one of the major supplier of a number of commodities in the coming years."

Focusing on four key themes: (1) the upside and downside of risks caused by elevated commodity prices, (2) how sanctions against Russia will affect mining activities in the region, (3) the effects of exploration activities and prospective project development in the region, and (4) and the future of mining in Africa, the report's key findings include:
  • Sanctions against Russia—which have largely been more severe than initially expected—will disrupt Russian mining activities in Sub‑Saharan Africa, without having a serious negative impact on domestic mining sectors themselves.
  • African economies will face manageable downside risks, which are markedly outweighed by the risks to the upside that stem from steep commodity price growth. This is due mainly to the insignificance of Russian exports for African economies.
  • As sanctions become increasingly severe, the EIU expects that Russian miners will struggle to finance current and prospective operations, and may ultimately be forced to sell their concessions for reduced amounts.
  • Russia's mining activities in Africa have been growing in recent years, and are increasingly concentrated in weakly governed and authoritarian states. We expect this to continue as the West continues to exclude Russia from the global economy.
  • Although higher prices will benefit current production and operations, inflation will disrupt exploration activities and prospective projects. High energy costs, coupled with heightened global risk and uncertainty, will add to the costs of project development.

The EIU explains that "The African continent is home to substantial reserves of copper and cobalt (in the Democratic Republic of the Congo—DRC—Zambia, South Africa and Zimbabwe), diamonds (in Botswana and Angola), platinum (in South Africa and Zimbabwe), uranium (in Namibia, Niger and South Africa), gold (in Ghana, South Africa and Sudan), iron (in South Africa), manganese (in South Africa, Gabon and Ghana), bauxite (in Guinea), lithium (in Zimbabwe), coal (in South Africa and Mozambique), natural gas (in Algeria, Egypt and Nigeria) and petroleum (in Nigeria, Angola, Algeria and Libya)." Moreover, "Africa contains about 12% of total global oil reserves, 12% of natural gas reserves, more than 80% of platinum group metals and more than 40% of the world's gold. Extraction of Africa's reserves has been largely hindered by weak domestic governance structures and policy impediments, alongside the high risk of investments in Africa and low commodity prices during 2016‑20. This has resulted in a notable shortage of exploration activity in the African mining sector."

The report, however, encouragingly points out that "many African commodity exporters—Zambia and Namibia in particular—have initiated procedures to create a business-friendly environment in order to attract investments into their domestic mining sectors. Elevated commodity prices are fueling an export boom across Africa." What is more, "High prices for copper, oil, iron ore, aluminum and gas will stoke investments and are all helping to reduce external imbalances, stabilize currencies and boost economic growth. However, downside risks abound. The continent depends on energy imports (as net crude exporters have insufficient refinery capacity), and the war in Ukraine is set to stoke strong inflationary pressures."

With respect to the impact of Russia's unprovoked invasion of Ukraine on African economies, the EIU notes: "Total African exports to Russia add up to only about US$5bn, with imports totaling about US$14bn. Total trade between the regions is small, at about US$20bn, and trade disruptions resulting from the Russia-Ukraine conflict will not seriously affect African economies. However, it will affect certain African industries, such as cocoa and tobacco, and textiles and clothing." The EIU expects "the clothing industry in Tunisia, in particular, to be hit by negative impact. The tobacco industries in Nigeria, Tanzania and Mozambique will also be affected by the conflict."

Lastly, the EIU is forecasting "that Africa's mining sector traders will not be heavily affected by loss of Russian exports or activity. The total amount of exports to Russia is relatively small, and the growth in commodity prices will outweigh any marginal loss to total exports." The report importantly notes that "alternative export partners, China in particular, will take up the excess output. Given the strong demand for global commodities, the small amount of lost Russian exports will quickly be taken up by alternative buyers. In countries such as Sudan, Mali and the CAR, discrete Russian mining operations are likely to continue, circumventing sanctions."

What political and economic developments do you think will shape Africa's mining sector?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

May 14, 2022

Report Explores Latin America's Outlook Amid the Ukraine War

Those who have experience working in Latin America will appreciate the following statements from a report published by The Economist Intelligence Unit (EIU): "There is a strong correlation between commodity prices and Latin America's economic growth. Commodity booms, fostered by strong global demand, have been a key driver of economic growth in a region that remains dependent on exports of a small number of basic goods."

Titled The outlook for Latin America amid the Ukraine war: Can the region grow faster? the report importantly explains that growth in Latin American economies has stagnated since the last commodity "supercycle" in 2014. However, following Russia's invasion of Ukraine, spiking commodities prices could in theory be the catalyst for faster growth rates in the region.

To help gauge which countries in Latin America are better placed than others to withstand, and even thrive in, the current global environment, the EIU created a heat map (see below) "that assesses the region's performance in seven key areas." The criteria the EIU thinks are most useful include inflation, public debt, public-sector interest payments as percentage of total revenue, the current-account balance, commodity dependence, and its own assessments of political stability risk and legal and regulatory risk.

The report's key findings include:
  • The five countries best placed to take advantage of the current global economic environment this year are Bolivia, Ecuador, Paraguay, Chile, and Peru.
  • The commodity price spike that began in 2021 and gained further momentum on the back of the Ukraine crisis will bring some boost to these export-dependent economies.
  • The five countries most vulnerable to the global economic impact of the Ukraine crisis are El Salvador, the Dominican Republic, Nicaragua, Costa Rica, and Panama.
  • All the above countries have entered into the crisis with relatively high levels of public debt, substantial external imbalances, and high inflation, and none is a major commodity exporter
  • Even for the big commodity exporters, the outlook is not trouble-free. Spiking inflation is adding to the pain of consumers who were hit hard by the pandemic, and driving pressure for increased government support, at a time when governments are under market pressure to narrow fiscal deficits and get a grip on public debt ratios that spiked amid the pandemic

The EIU correctly notes: "The reverberations of the Russia-Ukraine crisis are being felt across the world in commodity markets, financial markets and supply chains. These developments will have important ramifications for Latin America's economy in 2022 and in years to come."

Do you find this report useful in identifying which countries are positioned to take advantage of the current global global economic environment and which are most vulnerable to the global economic impact of the the Ukraine crisis?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

May 1, 2022

How to Improve Women's Use of Mobile Money in Ghana

"In Sub-Saharan Africa, women are 13 percent less likely than men to own a mobile phone; while 75 percent of women own a mobile, 74 million remain unconnected," says a report published by the GSMA. What is more, "In low- and middle-income countries (LMICs), where people are less likely to have formal bank accounts, mobile money is critical to facilitating widespread financial inclusion. ... While wider coverage and mobile ownership is making mobile money more accessible and relevant in people's everyday lives, a persistent gender gap is leaving women behind."

The GSMA explains that its "report focuses on the mobile money user journey in Ghana, highlighting the impact of COVID-19 on mobile money usage for men and women and the barriers to greater usage, with a specific focus on women entrepreneurs." The report's findings "highlight that beyond the high level numbers, women entrepreneurs lag behind in their awareness and usage of the non-core mobile money services in Ghana, which could add value to their businesses."

Below are the report's key findings:
  1. The COVID-19 pandemic has accelerated the adoption of mobile money services among men and women in Ghana.
  2. Mobile money is transitioning from an everyday cash replacement to a true banking alternative, but women entrepreneurs tend to use a narrower range of services than men.
  3. Most male and female mobile money users anticipate that they will use mobile money as often, if not more, in a post-COVID world.
  4. There are opportunities to increase awareness and use of mobile money services beyond payments, particularly among women entrepreneurs.
  5. Women, including entrepreneurs, need more support from others to learn about and use mobile money.
  6. Sustaining mobile money usage among new male and female users who signed up during the COVID-19 pandemic will require overcoming some additional barriers.

The GSMA points out that "Ghana is one of the most mature mobile money markets in the world and, despite having relatively low levels of gender equality, progressive policy and regulatory reforms have improved financial inclusion for men and women since the COVID-19 pandemic." However, as the findings in the report highlight, "that beyond the high level numbers, women entrepreneurs lag behind in their awareness and usage of the non-core mobile money services in Ghana, which could add value to their businesses."

The report importantly adds: "Users who adopted mobile money during the pandemic are less likely than longer term users to be aware of, and use, the full range of services available to them. Since they depend more heavily on agents and family to use their account and are less likely to handle transactions themselves, these users will need additional, on-going support."

To help provide users with on-going support, the report presents the following recommendations:
  1. "As life returns to normal, ensure that men and women who signed up for mobile money during the COVID-19 pandemic have the knowledge and skills they need to continue using it. This group currently lags behind longer term users in terms of knowledge and use of mobile money. As Ghana starts to recover from the pandemic, it is crucial that new users are given clear and accurate information on the benefits of using mobile money longer term. This will help ensure that usage expands and becomes entrenched in day-to-day life, not just during the COVID-19 pandemic.
  2. "Drive usage by increasing women's awareness of the range of mobile money services available. While there is almost no gender gap in account ownership in Ghana, women use a narrower range of mobile money services than men. It is clear that the experiences of men and women differ. For entrepreneurs, this is especially evident in the awareness of non-core mobile money services. Lower awareness is mirrored by lower usage – increasing knowledge through marketing and other approaches aimed at women and women entrepreneurs is likely to lead to greater uptake of a wider selection of mobile money services.
  3. "Improve women's understanding of mobile money to reduce their reliance on others. Women, including women entrepreneurs, are significantly more likely than men to rely on others when learning to use mobile money. Without concerted efforts to reduce women’s reliance on others, this is likely to limit the way they engage with the service, including the range of services they use and the frequency of usage. More needs to be done to provide training resources to women signing up to mobile money to ensure the information they receive is comprehensive and correct. For example, mobile money providers could incentivize agents to provide hands-on support to women to demonstrate how the service works and improve their confidence in using it. Supporting women to use the full range of mobile money services independently is likely to deliver more substantial benefits to women, and women entrepreneurs in particular, as well as higher revenues for the mobile industry."

What are you recommendations for improving women's use of mobile money in Ghana?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

April 26, 2022

How to Make Internet-Enabled Phones More Affordable in Low- and Middle-Income Countries

According to a report published by the GSMA, "Owning an internet-enabled handset can be life changing. Yet, for many living in low- and middle-income countries (LMICs), they are still unaffordable. For the 3.4 billion people who live in areas with mobile broadband coverage but are not using mobile internet, affordability is a key barrier."

The GSMA explains that its "report provides an overview of approaches and business models that are improving the affordability of handsets for various underserved populations in LMICs. It explores some of the nuances among these groups, considerations for meeting their different needs and variations between markets in Sub-Saharan Africa and South Asia." Moreover, the report "also provides practical recommendations for stakeholders to make internet-enabled devices more affordable and an analysis of how the policy environment can contribute."

The report is structured into four chapters. The first one aims at defining handset affordability. The second and third chapters discuss the two key supply-side levers to deliver more affordable handsets: reducing the price of a handset through efficiency gains and cost savings in the value chain and improving customer access to financing. In the final chapter, the GSMA provides eight policy considerations, highlighting the importance of strengthening the enabling environment to improve handset affordability.

Below are the report's key findings:

1. The affordability barrier is not just about the economic cost of purchasing a handset relative to income. "It is just as important to consider the cost of a handset in relation to a person's needs, preferences, and perceived value to their life. Non-income-related constraints also have an influence, such as awareness of mobile internet, digital skills, mobile-related safety and security and the social norms that constrain certain groups from accessing and using mobile and mobile internet, recognizing that some of these constraints disproportionately impact on certain groups of the population, including women."

2. New technologies have emerged, disrupting the market and offering new opportunities to make handsets more affordable. "Over the past few years, two main innovations have driven down the cost of handsets: the development of lightweight operating systems (OS) and remote handset locking technologies. Lightweight OS have enabled the development of handsets that are less costly to manufacture, particularly smart feature phones and ultra-low-cost smartphones. This has narrowed the price differential between a basic 2G phone and a 3G or 4G handset. Similarly, the emergence of remote handset locking technologies has enabled a wider range of providers to offer financing with no or limited credit scoring by using the handset as collateral."

3. Lower prices can be offered by providing customized smartphones that meet local needs. "Several mobile operators, manufacturers and PAYG solar companies have been designing smartphones that are customized to the needs of end users in a specific market or region while simultaneously optimizing the costs of smartphone components."

4. Procurement, distribution and marketing should not be overlooked when lowering handset costs. "It is possible to reduce handset costs by passing on the savings from more efficient procurement, distribution and marketing. The convergence of commercial interests to increase the availability and affordability of internet-enabled handsets has created new opportunities for partnerships, for instance, between the mobile industry and organizations that have developed last-mile distribution networks. Marketing partnerships can not only help reduce costs, but also reach a wider audience and raise awareness of the availability of affordable handsets and finance schemes."

5. The emergence of refurbished phone business models not only opens access to quality phones at a reduced price, but also helps the planet. "Keeping handsets in use for longer or giving them a 'second life' can improve affordability. Those selling their handset receive money in exchange, thereby increasing their buying power. Those purchasing a refurbished handset can benefit from 10 per cent to 80 per cent discounts compared to buying one new."

6. Innovative finance schemes and payment models better suited to the livelihoods of people in LMICs are being developed. "There are context-specific factors to consider when developing an appropriate inclusive handset finance business model. Finance schemes that use alternative data for credit assessments or accept a handset as collateral allow customers to repay the handset in instalments, thereby reducing the upfront cost. Offering flexible payment terms, such as daily micro-repayments, are particularly well-suited to those who earn income on a daily basis."

7. Strengthening the enabling environment is key to improve handset affordability. "This report provides eight key policy considerations to improve access to internet-enabled handsets ownership for underserved populations. This includes reducing sector-specific taxes, providing subsidies to target user groups, developing public-private partnerships to de-risk handset financing, and stimulating demand by increasing awareness and willingness to pay."

8. There is no one-size-fits-all solution. Implementers should be mindful of the context in which they are operating and who they are aiming to reach. "Depending on the region or country, some solutions may be easier to implement than others. For example, a thriving mobile money ecosystem makes it easier to offer handset finance and good infrastructure is necessary for the collection of used phones in a refurbishment business model. Meanwhile, regulations such as high taxes on imported handsets and laws forbidding device locking inhibit innovation."

Referencing the 2021 GSMA Consumer Survey, the report notes that "the affordability of handsets remains the top-reported barrier to mobile ownership in LMICs and a key barrier to mobile internet adoption, particularly for women and rural populations. Ensuring that handsets are affordable for different underserved segments of the population is critical to enable access to mobile broadband and close the digital inclusion gap."

What is more, "Mobile internet connectivity has a strong macroeconomic impact; an increase of 10 percent in mobile internet penetration results in an increase in 1.8 percent of GDP in middle income countries and 2 percent in low-income countries. However, without a compatible device to access mobile internet, millions of people cannot reap the potential benefits mobile internet has to offer."

Lastly, the report importantly points out that "[m]ost of the unconnected live in LMICs and certain groups are more excluded than others, including women and those living in rural areas. Although smartphone adoption continues to increase across LMICs, penetration varies significantly by country and region. For example, in Sub-Saharan Africa, smartphones account for less than half of total connections while in South Asia they account for just over 60 percent."

Do you support the report's findings? What are you recommendations for making internet-enabled phones more affordable in low- and middle-income countries?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

April 24, 2022

China Will Be Home to 892 Million 5G Connections in 2025, Says GSMA Report

"Since the initial outbreak of Covid-19, mobile networks have been instrumental in providing the reliable connectivity needed to sustain social and economic activities," the GSMA says in its 2022 report on China's mobile economy. While the GSMA published its report prior to the spread of coronavirus that is gripping the country, the UK-based organization, which is unifying the mobile ecosystem to discover, develop and deliver innovation foundational to positive business environments and societal change, adds that Chinese "operators have harnessed their networks to support frontline healthcare efforts to curb the spread of the virus, including the use of 5G-powered remote patient diagnosis. In this sense, the pandemic has presented a testing ground for an array of 5G-enabled solutions, further demonstrating the benefits that the technology can bring to society."

Available in English and 中文, the report explains that "[b]y the end of 2021, over 1.2 billion people subscribed to mobile services in China, equivalent to 83% of the population. While this places China among the world's most developed mobile markets, unique subscriber growth is slowing. Nevertheless, smartphone adoption and mobile internet usage continue to grow steadily as operators focus on expanding access to digital services such as video. Increasing engagement with bandwidth-hungry applications will drive the rise in data traffic, which is set to grow by almost 3.5× by 2027."

With respect to the Chinese mobile ecosystem looking to frontier technologies, the report importantly notes: "The metaverse – broadly defined as myriad virtual environments blended with the real world to enable immersive user experiences – is receiving huge interest around the world. This emerging phenomenon is being explored by tech firms across China, as well as mobile operators, which could use 5G as a main pathway to engage in this space." What is more, "Operators are looking to combine best-in-class telecoms networks with frontier technologies to make an impact in key sectors, including manufacturing and mining."

According to the GSMA, "4G adoption peaked in 2020 and fell throughout 2021 as consumers increasingly switched to 5G packages. Due to the rapid take-up of 5G in China, the region is one of the global leaders in terms of 5G adoption." Companies developing services utilizing 5G technology will appreciate that "As consumers signal relatively strong upgrade intentions, GSMA Intelligence expects that China will be home to 892 million 5G connections in 2025 (representing 52% adoption)."

On the topic of the mobile industry continuing to tackle digital exclusion and social challenges in China, the report asserts: "Mobile operators play a key role in efforts to achieve the UN Sustainable Development Goals (SDGs), primarily by delivering the connectivity that enables access to life-enhancing services and tools, and providing a platform for industrial transformation. As a consequence of operators' heavy network investments, more than 1.04 billion people in China now use mobile internet services. This figure is expected to increase by a further 146 million by 2025, reducing the proportion of unconnected people to 20% of the population."

Lastly, "During the Covid-19 pandemic," the GSMA says "society has relied heavily on communications and digital technologies, which have acted as a lifeline for citizens, businesses and institutions. In a post-pandemic world, supportive investment-friendly policies will be fundamental to stimulating telecoms infrastructure build-out, which will be a central pillar of economic recovery and future crisis resilience." I support the assertion that "As countries bring the pandemic under control, a top priority for governments will be to drive economic recovery, promote sustainable growth and increase resilience to future shocks. Advanced connectivity will be crucial to realizing this objective, for instance by enhancing productivity and efficiency through 5G- and IoT-enabled digital transformation of industries."

While a post-pandemic world is not arriving as quickly as Chinese officials planned, corporations and entrepreneurs alike are continuing to develop innovative cloud, big data, IoT, AI, blockchain, and security solutions.

What are you recommendations for driving economic recovery, promote sustainable growth and increase resilience in a post-pandemic world?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

March 31, 2022

Merchant Mobile Payments Nearly Doubled in 2021, According to GSMA's Annual Report on the Mobile Money Industry

"Over the past decade, mobile money has expanded from a niche offering in a handful of markets to a mainstream financial service, moving millions of households in low- and middle-income countries (LMICs) from the informal cash economy into a more inclusive digital economy," according to GSMA's State of the Industry Report on Mobile Money 2022. Available in English and Français, the GSMA, a UK-based organization that aims to unify the mobile ecosystem to discover, develop and deliver innovation foundational to positive business environments and societal change, adds: "In 2012, there were 169 mobile money deployments in 71 countries. Ten years on, the number of live deployments has almost doubled to 316 and expanded to 98 countries worldwide."

A product of GSMA's Mobile Money program, which works to accelerate the development of the mobile money ecosystem for the underserved, the report examines the following major industry trends of 2021:

1. A trillion dollars transacted as the industry diversifies. "In 2021, the mobile money industry processed more than $1 trillion in transactions. The year-on-year increases in transaction values have been driven by new customer uptake and a growing number of mobile money use cases. For example, in 2012, ecosystem transactions such as bill payments, bulk disbursements, merchant payments and international remittances accounted for less than 10 percent of overall transactions. Ten years on, this has risen to 20 percent, a clear sign that mobile money providers are embracing diversification."

2. Mobile money adoption and activity continue their upward trajectory. "In 2021, the number of registered accounts reached 1.35 billion globally, up 18 percent since last year and 10 times more than there were in 2012 (134 million). 518 million of these accounts were active on a 90-day basis and 346 million on a 30-day basis, growing nearly 15 times and 13 times respectively since 2012. The volume and frequency of transactions also registered strong growth. In 2021, more than 1.5 million person-to-person (P2P) transactions were made every hour on average, compared to fewer than 68,000 in 2012, and the average account makes 3.5 P2P transactions per month."

3. Agent networks continue to thrive. "Between 2012 and 2021, the number of active agents grew more than 10 times, from 534,000 to 5.6 million, unlocking access to financial services for the most underserved customers. Despite closures and restrictions on movement during the COVID-19 pandemic, the value cashed in and digitized via mobile money agent networks grew by 18 percent in 2021, reaching a total of $261 billion or more than $715 million a day. Even the most established agent networks registered strong growth, with the 25 largest networks growing by more than 25 percent on average from 2020 to 2021."

4. Regulatory challenges persist. "Despite the huge success of mobile money services in many countries, in others, the sustainability of mobile money services is threatened by certain policy and regulatory interventions, from taxes on transactions to poorly implemented instant payment solutions and costly data localization mandates. The high cost of compliance is shared by mobile money providers and customers alike with potentially negative consequences on future investments in, and customer usage of, mobile money services. Dialogue between policy makers, regulators and industry leaders is of paramount importance in order to prevent adverse policy and regulatory interventions."

5. Merchant payments nearly doubled. "After a momentous year for merchant payments in 2020, in 2021 they nearly doubled, reaching an average of $5.5 billion in transactions per month and accounting for 21 percent of the value circulating in the mobile money system (P2P + merchant payments), up from around 10 percent in the past two years. Uptake has been in part driven by the number of businesses actively accepting and receiving mobile money payments."

6. International remittances are still flowing fast. "Two years on since the onset of the COVID-19 pandemic, diasporas around the world increasingly send money home using mobile money. The number of international remittances sent and received via mobile money grew by 48 percent in 2021, reaching $16 billion. Still, mobile money represents less than three percent of all remittances globally, meaning there is significant potential to digitize remittances and offer faster and more affordable ways to send money worldwide."

7. Bill payments leapt again in 2021. "Like other ecosystem transactions, the number of bill payments processed via mobile money leapt in 2021, growing by 37 percent to exceed $5 billion in transactions per month. For customers, mobile money-enabled bill payments can unlock access to a range of new services, such as off-grid energy, and help low-income users build economic identities. For government agencies and utility companies, mobile money-enabled bill payments can make revenue collection more efficient and cost-effective, strengthen financial transparency and circumvent fraud."

8. Bulk disbursements are seeing remarkable growth. "After registering 28 percent growth in 2020, mobile money-enabled bulk disbursements grew by another third in 2021, topping $65.8 billion. This growth is likely due to an uptick in salary payments as more and more employers turned to mobile money to pay their employees, with the number of unique accounts receiving salaries via mobile money increasing. The number of unique accounts receiving Government-to-person (G2P) payments were also up, as governments forged new partnerships with mobile money providers to deliver pandemic relief and other forms of social support."

9. Savings, credit and insurance are building financial resilience. "According to our Global Adoption Survey, approximately two in five (44 percent) mobile money providers offer credit, savings or insurance products. Uptake of these products in 2021 was encouraging across mature mobile money markets while they also gained traction in less mature markets, where customers are seeking out products to help protect their families and businesses against uncertainty and crisis, invest in their livelihoods and improve their standard of living.

10. Partnerships are pushing interoperability. "After recording exceptional growth in 2020, the value of transactions flowing between banks and mobile money platforms also grew quickly in 2021, up 46 percent, more than doubling since 2019. The continued acceleration of these types of transactions confirms the complementary relationship between banks and the mobile money industry that has been observed in the past few years, confirming mobile money’s key position in the financial ecosystem."

11. The mobile money gender gap is holding women and economies back. "Across LMICs, women are still less likely than men to own a mobile money account. This is due to a variety of reasons including not owning a mobile phone, lack of awareness of mobile money and lack of perceived relevance, knowledge and skills. Encouragingly though, once women have a mobile money account, their likelihood of using it is almost on par with men. As part of the GSMA Connected Women Commitment Initiative, 26 mobile operators across Africa, Asia and Latin America have made formal commitments to reduce the gender gap in their mobile money customer base since 2016."

12. Mobile money is enabling access to humanitarian assistance, utilities and agricultural solutions. "Mobile money is an enabler of many other services that can help solve critical socio-economic and environmental challenges, such as providing access to essential utilities, sustaining the livelihoods of smallholder farmers and delivering rapid financial relief to vulnerable populations. For mobile money providers, these use cases represent valuable opportunities to diversify, which many have already embraced."

The report concludes by explaining that "2021 has shown how the scale and power of mobile money can build a more inclusive world. Behind the numbers and milestones in this report are hundreds of millions of people participating in a more inclusive digital economy." What is more, "Individuals, communities and the public, private and non-profit sectors are all reaping the socio-economic benefits of mobile money."

The GSMA further says "even more profound benefits are possible if the industry and all stakeholders can catalyze efforts, reducing the mobile gender gap and meeting diverse customer needs to activate the billion registered customer accounts that are currently so infrequently used. In practical terms, this can also mean delivering more fast and secure cash transfers among the over 235 million people in need of humanitarian assistance; providing credit, insurance and other risk management tools to more of the nearly 500 million smallholder farmers growing a third of the world's food; and opening further access to affordable, reliable and safe water, energy and sanitation among the more than 1.2 billion people without access to core urban services."

It is encouraging to read how mobile money continues to grow rapidly, bringing a suite of financial products to hundreds of millions of users worldwide and disrupting traditional financial services. Moreover, mobile money is providing significant growth in merchant payments and enabling access to humanitarian aid, utilities and agricultural solutions. Nevertheless, while I recognize recent improvements to increase financial inclusion for women, more must be done to eliminate the mobile gender gap.

Are there aspects of GSMA's report on the mobile money industry that you found of particular interest?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

March 25, 2022

Understanding How the War in Ukraine Will Change Business

Since Russia's unprovoked invasion of Ukraine on Feb. 24th, 2022, I have held several conversations with colleagues asking how the war will change business. A report published by The Economist Intelligence Unit (The EIU) aims to address this question by noting: "Although primarily a humanitarian disaster, the Russia-Ukraine conflict will also accelerate changes already provoked by the pandemic, US-China tensions and climate change."

The EIU presents five ways in which the war in Ukraine will change business:
  1. The war will add to supply-chain disruptions in sectors such as automotive, increasing the pressure for localization.
  2. A surge in energy and other commodity prices will hasten public- and private-sector efforts to improve food security.
  3. The investment needed to reduce Europe's reliance on Russian energy will affect funding for clean-energy investments in developing countries.
  4. Financial sanctions against Russia may accelerate the transition from US dollar-backed financial systems to interoperable central bank digital currencies (CBDCs).
  5. Geopolitical tensions over technology (already central to the US-China trade war) will intensify as Russia curbs internet access and faces technology sanctions.

Among the five points presented by The EIU, three are worth exploring more deeply. "Supply chains have already been disrupted by the pandemic, as well as the earlier US-China trade war," the report says. "The difficulties caused by the Russia-Ukraine war will prolong these disruptions and place added pressure on companies in sectors such as automotive to shorten their supply chains and build resilience. This may mean increasing stock of major components, reining in just-in-time production norms or investing in more local suppliers."

As for price increases in commodities driving adoption of sustainable food policies, "The war in Ukraine will keep fuel and commodity prices elevated for much of the year. This will not only raise business costs, but will also heighten existing concerns about energy and food security." Moreover, "The war is already forcing several governments to examine their food and agricultural policies closely, not just in Europe, but also in the Middle East, Singapore and China, among others."

In a separate article, The EIU explains says it expects the "average grain prices to rise by almost a third this year, on top of the 40% increase recorded in 2021" and "prices of sunflower seed oil to increase rather than fall in 2022, as originally forecast before Russia's invasion; prices increased by nearly 60% in 2021."

With respect technology becoming increasingly geopolitical and regionalized, this is happening in two ways. "First," according to the report, "access to technology is seen as a competitive advantage for countries, as evident in US attitudes towards semiconductors. Because the chip sector is fragmented and the product is complex, every actor will need to use US equipment at some point; therefore, any US technology sanction makes a country or company unable to purchase semiconductors."

As for the second way, "the internet is becoming more national and less global. China has driven this change by using a national firewall to restrict access to content that its government deems dangerous—a measure that Russia wants to adopt. The EU, through its values-led approach to data privacy and regulation of artificial intelligence, has also created regional barriers to the internet."

However, the report importantly notes: "This regionalization of the internet will not necessarily lead to a 'splinternet,' where different systems are completely separate and not interoperable. The broader battle is between the US, which wants to retain the multistakeholder governance model of the internet (open, decentralized and industry-led), and China, which wants a cyber-sovereignty model (closed, centralized and country-led). However, the tensions are not just between democracies and autocracies, but also between blocs, as the relationship between the US and EU shows."

The EIU published a subsequent report presenting ten ways the war in Ukraine will change the world:
  1. Russia's war in Ukraine will bring about a new division of Europe.
  2. Russia's violation of Ukraine's sovereignty signals the end of the post-cold war order.
  3. The war in Ukraine will deepen Russia's strategic alliance with China.
  4. Russia's actions accelerate the bifurcation of the world into two hostile, competing camps.
  5. A renewed focus on European security will constrain the US tilt to Asia.
  6. The war in Ukraine will accelerate a global arms race.
  7. Germany may begin to play a more assertive role in European security policy.
  8. Europe will be forced to decide where it stands in the new global order.
  9. The challenge to global democracy will become more pronounced.
  10. The war in Ukraine will embolden others and inflame existing conflicts.
With respect to the first point of Russia's war bringing out a new division of Europe, The EIU points out that "Russia's brutal invasion aims to destroy Ukraine's sovereignty and prevent the country from ever joining NATO or the EU. Russia intends to annex at least part of Ukraine, thereby creating a buffer zone between Russia and the West that also includes Belarus and Kazakhstan." Moreover, "Russia's repudiation of the Western-led 'rules based order' signals a turning away from Europe and the creation of a new division of the continent, three decades after the fall of the Berlin Wall."

More troubling is how Russia's actions will accelerate the bifurcation of the world into two hostile, competing camps. As the report explains, "China and the West have been competing for several years to establish dominance in the industries and technologies of the future and to prepare the ground for a future decoupling. The coronavirus pandemic has reinforced this trend, fostering a move towards regionalization and away from globalization." What is more, "By bringing about a decisive rupture with the West, Russia's actions will speed up the division of the world between two rival poles. Some countries will take sides, but many others will seek to maintain a foot in both camps. As time goes on, this balancing act will become increasingly difficult."

I appreciate how The EIU's first report explores the impact Russia's unprovoked war with Ukraine will have on key global industry sectors and the risks these present to businesses. The second analysis also serves as a useful tool in outlining how the conflict will influence the global balance of power and lead to a further unravelling of the post-Cold War order. The situation in eastern Europe has increased several risk factors businesses will need to navigate.

How is the war affecting your business?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

March 5, 2022

Challenges, Opportunities, and Strategies for Data Protection and Digital Rights in Africa

Promoting the benefits of a digital economy in Africa is a topic of regular discussion on this Forum. As referenced in the previous post, Africa is seeing a rapid growth of startups led by entrepreneurs who are developing innovative products and solutions for people across the African continent. Similar to Europe and North America, data protection and the securing of digital rights in Africa, the home of approximately 1.4 billion citizens, are persistent challenges. Therefore, it was with great interest to read a Note, as it is formally called by the Stanford Technology Law Review, entitled "Africa in the Information Age: Challenges, Opportunities, and Strategies for Data Protection and Digital Rights."

Authored by Justin Bryant in 2021 while matriculated at Stanford Law School, Mr. Bryant asserts that the "contemporary data protection landscape on the African continent must be tailored to better address the needs of young, vibrant, entrepreneurial societies and resonate with the values therein. Toward this end, this Note issues recommendations aimed at creating effective legal and extralegal enforcement mechanisms. The implementation of these recommendations stands to position the continent well in the years to come and amplify the voices of African nations in the evolving global dialogue."

Providing case studies from six countries (Angola, Ghana, Mauritius, Nigeria, South Africa, and Tunisia), Mr. Bryant notes that "the divergent development of data protection laws across the continent while simultaneously underscoring how common predominant influences—including past and present vestiges of colonialism— have left Africa short of effectiveness on this front."

General Data Protection Regulation (GDPR) is the European law on data protection and privacy in the European Union (EU) and the European Economic Area (EEA). And, as Mr. Bryant explains, GDPR "has quickly become the global standard for data protection law since coming into effect in 2018." While substantively different than GDPR, the state of California followed the EU's move in passing data protection legislation with the California Consumer Privacy Act or CCPA. Many people worldwide are watching whether GDPR or CCPA will become the standard regulatory framework for other nations. Experts whom I have spoken with, suggest GDPR, as a law that binds multiple nations, may be the prevailing model.

Could a data protection and privacy policy similar Europe's or California's be adopted in Africa? Mr. Bryant says while "The Information Age presents endless possibilities for African countries ... they will not be able to take full advantage of these possibilities by governing the digital space with laws that do not meet their particular contexts, challenges, and circumstances. As global standards form in this arena, African nations should be contributors, not simply adopters."

With respect to compliance challenges in Africa, the Note insightfully points out that "While country-level legislation on data protection is being enacted in Africa, it is important to remember that most African countries still do not have comprehensive legal frameworks for data protection, and those that do face considerable obstacles in enforcement." Furthermore, "As major gaps exist in Africa's data privacy landscape, challenges will persist for years to come."

Mr. Bryant's Note covers other key topics such as the transplant effect and consequences of the status quo, creating community-based models for norm diffusion, and a thoughtful discussion on threats posed by international actors in Africa's digital space. But his conclusion, in part, is something stakeholders in Africa should pay particular attention to:
It is long past time for African stakeholders to have productive discussions to identify their priorities in internet governance with an eye towards the continent's youth and desired position in the decades to come. There must be a diversity of voices and perspectives at the table so lawmakers can comprehensively understand the needs of various constituencies. There must be honesty and transparency surrounding the relationship between the government and its citizens and clarity surrounding boundaries set in constitutions. Once legislation is ratified, African leaders should see that implementation follows as soon as possible thereafter, and aim to stick to predetermined timelines to create confidence in these laws.
As the mentioned in the previous blog post, Africa, with a youthful and increasingly educated population, will see a dramatic rise in new tech startups for years to come. The success of these startups, however, will depend on fair, transparent, and consistent legal regulations across a wide-array of areas including data protection and digital rights. Consumers and enterprises alike in the West have enjoyed the benefits of the innovative products and services created since the dawn of the internet age of the 1990s. However, there is continuing abuse by some tech companies that are infringing on the privacy of individuals. It is my hope that African stakeholders learn these lessons when creating and implementing policies to their unique constituencies.

Do you agree with Mr. Bryant's findings? What strategies do you recommend for how to improve the data protection landscape in Africa and protecting the digital rights for all Africans?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

March 3, 2022

How to Reduce Africa's Reliance on Commodities

"Despite being home to 17% of the world's population, Africa is an underinvested market," a newsletter published by Morgan Stanley, a financial services firm, says. The newsletter also points out that "72% of investors surveyed do not currently invest there. We believe that despite near-term challenges, the continent offers compelling long-term opportunities vis-à-vis private markets and infrastructure."

Moreover, "Africa's median age, at 19.7, is considerably lower than those of Asia and South America, at 32.0 and 32.1, respectively. Furthermore, according to the World Economic Forum, Africa is expected to have the world's largest working-age population by 2034. The expected increase in the working-age population will likely promote middle class growth, building on trends already in place."

As an investor and entrepreneur, I appreciate how these statistics represent future opportunities. However, as an advisor to several officials representing African nations, I wish these leaders understood the importance of these statistics and the opportunity that exists for the citizens they represent. In my conversations with African government officials, I am often asked for my opinion on how to attract foreign direct investment to grow their private sector. While I strongly advocate for establishing policies and making investments to build a thriving digital economy in Africa, these officials mistakenly focus our conversation on how to increase their overdependence on raw materials and commodities such as minerals, oil, gas, and lumber.

Even The Economist notes that "many African economies have relied too much on raw materials for too long." The article further explains that "The UN defines a country as dependent on commodities if they are more than three-fifths of its physical exports. Fully 83% of African countries meet that threshold, up from 77% a decade ago. Some depend on produce such as tea, but most rely on mining or on pumping oil. When commodities crashed in 2015, foreign direct investment (FDI) and growth tumbled and have yet to fully recover."

The article importantly adds: "Broad averages obscure some of the progress that has been made to diversify economies. Over the past decade resources have become less important to GDP. The share of commodities in goods exports from the continent as a whole has fallen, too. And in countries such as Botswana and Malawi, services have grown strongly. Even manufacturing is rebounding."

However, "Africa has a long way to go if it is to break free of the resource curse. In countries rich in diamonds or oil, political power can be a license to loot. So unscrupulous folk are tempted to grab and hang on to it by any means available. Resource-rich countries are more likely to suffer dictatorships, and also tend to have more and longer civil wars."

Building a thriving economy while strengthening government institutions with better transparency and will require investments in education and infrastructure. Using Sierra Leone as an example, The Economist says the west Africa nation "now spends about 21% of its budget on education, up from 13% in 2017. As a result, more youngsters are passing their final exams than ever before. Mining began in Sierra Leone about a century ago. 'If we had invested in humans for a hundred years,' sighs David Moinina Sengeh, the education minister, 'we would be in a much better place today.'"

While I agree with the authors of Morgan Stanley's newsletter that many investors are missing out on lucrative opportunities in Africa, there is evidence this is changing. As reflected in the chart at the top of this post, African startups raised $4.4 billion in 2021, which was more than 2.5 times the amount raised in the previous year, according to "Africa: The Big Deal," a website managed by Max Cuvellier and Maxime Bayen.

With respect to specific sectors, fintech startups raised $2.3 billion from investors last year (see chart below). While this sector captured 53% of funds raised, other key sectors such as energy, retail, healthcare, education, and logistics and transportation are also on the rise.

I do not completely believe the notion that institutional investors in America or Europe are investing in African startups because they see the market as a great investment opportunity. Their investment is a result of chasing higher yields since the average junk-bond yields in America and Europe are 5.1% and 3.3%, respectively, well below inflation. And while there is good reason to cheer the recent increases in investments on the continent and the revenues some of these startups are reporting, I am still waiting for announcements of profitability and successful exits through an initial public offering or acquisition. Nevertheless, as someone who has supported tech startups in Africa for over 20 years, I am optimistic that the trend in the number of investors, amount raised, and overall number of startups on the continent will continue to grow for years to come.

I look forward to future conversations with government leaders in Africa on how to reduce their reliance on commodities by investing in education and infrastructure. Such investments will only help their growing working-age population enjoy the fruits of a middle-class lifestyle.

What opportunities and risks are you seeing in Africa's startup ecosystem?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

March 1, 2022

Adoption of Mobile Internet Services Has Not Kept Pace With Expansion of Network Coverage, Says GSMA's Annual Global Mobile Economy Report

"In 2021, the number of mobile internet subscribers reached 4.2 billion people globally," according to GSMA's report entitled The Mobile Economy 2022, which provides the latest insights on the global state of the mobile industry. The report reveals continued momentum in 5G adoption, with the total number of 5G connections expected to reach one billion in 2022, as usage grows rapidly in pioneer markets.

Highlighting the mobile industry's instrumental role in extending connectivity to people worldwide, the report, which is authored by GSMA Intelligence, the research and consulting arm of the GSMA, a UK-based organization representing the interests of mobile operators worldwide, notes that "Operators' investments in network infrastructure over the last decade have helped to shrink the coverage gap for mobile broadband networks from a third of the global population to just 6%." The 'coverage gap' refers to those living outside of areas covered by mobile broadband networks.

"But although the industry continues to invest in innovative solutions and partnerships to extend connectivity to still underserved and far-flung communities," the report points out that "the adoption of mobile internet services has not kept pace with the expansion of network coverage. This has resulted in a significant usage gap. In 2021, the usage gap stood at 3.2 billion people, or 41% of the global population." The 'usage gap' refers to those who live within areas covered by mobile broadband networks but do not yet subscribe to mobile broadband services.

The report's other key findings include:
  • By the end of 2025, 5G will account for around a quarter of total mobile connections, and more than two in five people worldwide will live within reach of a 5G network.
  • In 2021, mobile technologies and services generated $4.5 trillion of economic value, equating to 5% of global GDP. The report predicts that this will grow to $5 trillion in 2025.
  • As 5G adoption accelerates in leading markets such as China, South Korea, and the US, 4G begins to decline. Globally, 4G adoption will account for 55% of total connections by 2025, down from a peak of 58% in 2021.
  • But 4G still has room to grow in most developing markets. For example, in Sub-Saharan Africa, 4G adoption is below a fifth of total connections.
  • 3% billion people subscribed to mobile services, representing 67% of the global population, by the end of 2021.
  • In a growing number of markets, most adults now own a mobile phone, meaning that future growth will come from younger populations taking out a mobile subscription for the first time.

With respect to the achieving the United Nations' Sustainable Development Goals (SDGs) before the deadline in 2030, the report says "Mobile technology will play a central role in those efforts, from improving access to education and healthcare to addressing issues with poverty and inequality." The report also outlines a set of policy recommendations for achieving a resilient post-pandemic recovery. This involves investing in digital skills training, utilizing public funds for connectivity, adopting a balanced approach to collecting revenues through taxes and fees in the mobile sector, and prioritizing digital transformation in government services.

Returning to the topic of the usage gap, the reports explains:
The reasons for the usage gap are multifaceted and vary by region, but they generally relate to a lack of affordability, relevance, knowledge and skills, in addition to safety and security concerns. Furthermore, the barriers to mobile internet adoption are particularly acute among certain segments of the population, including women, the elderly, those in rural areas and persons with disabilities – or a combination thereof. Addressing the usage gap for these key groups will extend the benefits of the internet and digital technology to more people in society, and will require concerted efforts by a broad range of stakeholders working together with mobile operators and other ecosystem players, such as device manufacturers and digital content creators.
Infographic: GSMA Intelligence

What do you think of the report's findings? What solutions do you recommend for bridging the usage gap?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

February 27, 2022

Questions Boards Should Ask to Guide Cybersecurity Preparedness

"Boards are demanding more oversight of cybersecurity," says EY, a consultancy, in a report on how boards can help the companies they govern be better prepared to prevent cyber attacks. After surveying "411 CEOs, chief information officers (CIOs) and other cybersecurity decision-makers about their companies' use of information security solutions," the report reveals "that simple actions taken now can reap substantial rewards later." The report adds that "[t]hese lessons," which are outlined below, "have emerged from those who have experienced major breaches."
  1. Focus on "zero trust." "Zero trust security is not a single technology, but a holistic approach to security, incorporating different cyber principles across people, process and technology. The basis of the concept is the assumption that there are threat actors within and outside of organizations, so no users or machines should be trusted. All users and devices (both inside and outside of the organization) are authenticated, authorized and continuously validated for security configurations and context before accessing applications and data."
  2. Educate and involve your board now. "Not surprisingly, boards of directors are increasingly interested in preventing data breaches and determining how to prioritize cybersecurity needs. Executives that have experienced a data breach say the experience has taught them to involve many more stakeholders in cybersecurity decisions, including boards. Companies should proactively create a board-level executive dashboard, while simultaneously briefing the board about cybersecurity issues at least once per year."
  3. Reinforce the role of the CISO as a strategic partner to the business. "During the pandemic, every organization had to adapt to a new way of working. However, the speed of change came with a price. Seventy-five percent of companies saw increases in the number of disruptive attacks during the pandemic. In this sense, many companies were forced to adapt to a different cyber risk profile just like an organization has to do after experiencing a breach. CISOs had and still have an opportunity to reinforce their value proposition with the business. With the onset of the pandemic, 55% of cybersecurity leaders believed this gave them an opportunity to position themselves as strategic partners to the business. Dave Burg, EY Americas Cybersecurity Leader, noted that 'I know of many security officers who were viewed as superstars, and we want those superstars to be brought to the front of innovation.'"
  4. Assess usage of managed security service providers. Keeping up with the latest security technologies and evaluating threats are the most challenging pain points for today's CISOs. Companies that have recently experienced a breach are more likely to outsource cybersecurity responsibilities after the breach. By starting the time-consuming process of reviewing outsourcing options and vendor capabilities prior to a breach, companies can develop the best security architecture and posture."
  5. Spend now, save later. "According to the survey, companies that have recently experienced a breach expect to spend more across all security domains, with vulnerability assessments and access controls expected to see the largest budget increases. To protect themselves from today's sophisticated attacks, companies must bolster their cybersecurity capabilities or outsource them to external vendors. Many executives make decisions to bolster capabilities to not only prevent attacks, but also to mitigate the damage and shorten the recovery time."

The report importantly notes that "In today's environment, corporate boards are increasingly held accountable for cybersecurity and resiliency. Boards may want to focus on the governance of their enterprise-wide cyber programs, while the highly technical CISO focuses on the risk management aspects." Moreover, "To help facilitate productive discussions, EY US has developed the following key questions about effective cybersecurity oversight that boards can refer to during an intrusion."

1. Was the organization affected by this intrusion?
  • If yes, how is the organization mitigating and responding to the vulnerabilities identified?
  • If not, what proactive measures were deployed to prevent a similar intrusion?
2. What is the potential impact of the intrusion?
  • Which areas of the network, including data assets, were compromised?
  • What is the total risk exposure, including financial, regulatory, reputational and operational impacts?
  • Has an independent third party assessed the network to analyze the extent of the impact?
3. How effective was the response plan?
  • What gaps were identified in the investigation, containment, eradication and recovery processes?
  • Does the company have appropriate insurance coverage? Has the insurance provider been engaged?
  • What lessons were learned?
4. Are third-party and supplier ecosystems secure?
  • Have any of the company’s third parties and fourth parties been compromised?
  • Do any of those parties have access to the network?
5. Is the company focused on preventing and responding to future compromises?
  • What is the efficacy of the company’s current cyber risk management efforts? Should the company’s risk appetite be re-evaluated?
  • How does the company become more resilient to future incidents?
  • Where should the next cybersecurity dollars be invested based on the evolving threat landscape?
  • Has the company built cyber diligence into its acquisition and integration plans?

Based on regular discussions I have with cybersecurity professionals about how their role of keeping their organization's IT systems secure is an arduous battle that goes on each and every day throughout the year, I appreciate the report's conclusion:
Unlike many corporate functions, cybersecurity departments don't have an off season or a period of reduced activity and demand. For cybersecurity professionals, every day is a race against time and resources, and a balance of competing priorities. Corporate cybersecurity executives are faced with a choice — take simple steps now to lessen the impact of future breaches or continue operating in a reactive mode and responding to daily demands and possibly facing the fallout from inevitable breaches.
As an article by The Economist points out that: "Corporate boards need to have a stronger grasp of the threat levels. As one former cyber-spook says, they need not just gender and racial diversity but technological diversity, too, in order to grill the company's techies on cyber-defenses. Furthermore, they need to recognize cyber-war as one of the growing number of geopolitical risks that firms face."

Do you agree with the findings of EY's survey? What questions should boards ask to guide cybersecurity preparedness?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

February 7, 2022

Report Presents Relevant and Timely Questions Directors Should Ask in This New Era

The coronavirus pandemic has presented a company's board of directors with unforeseen challenges that tests long-held principals in governance and leadership. The balance of mitigating risks while keeping an eye of corporate growth will be a challenge for directors in this new era. Taking a philosophical approach to business strategy throughout my professional career, I support the following notion made by EY, a multinational professional services firm: "We believe that better questions lead to better answers and a better working world. Likewise, we believe that a board's most effective tool is asking compelling questions. These questions can lead to better governance and organizations that drive value for all stakeholders."

Produced annually by the EY Center for Board Matters, the 2022 report presents a list of relevant and timely questions, segmented by four themes, for a company's board of directors to consider:

Theme 1: Strategy and innovation - Strategy that positions companies to innovate and differentiate for a sustainable future
  1. How is the company rethinking its definition of "long term" to maximize value while also focusing on near-term risks and opportunities? Is the strategy appropriately focused not only on where the company is going, but where it can go?
  2. Are material environmental, social and governance (ESG) issues considered in the company's long-term strategic planning? How do the company's business model, practices, products, and services address urgent environmental and social challenges as we move toward a more inclusive and sustainable future?
  3. What data and metrics are being used to assess the health and vibrancy of the organization's culture and its alignment with strategy? Is the culture appropriate to inspire and enable innovation?
  4. Is the company's capital allocation aligned with the necessities of its long-term strategy? How is the company addressing barriers toward optimal allocation?
  5. Does the board have the appropriate governance process to oversee strategic investments that seed innovation to change the game? How is it supporting the acceleration of idea generation, trialing and assessment while also encouraging appropriate risk-taking?
  6. Has management appropriately considered partnerships, joint ventures and alliances, along with M&A, to accelerate the strategy, particularly with longer-term adjacent and transformational opportunities?
  7. Are newer and innovative technologies, including digital platforms and cryptocurrency solutions, appropriately leveraged to accelerate goals and objectives? How can these technologies accelerate the speed to market and enhance virtual collaboration and customer engagement?
  8. What is the company's transition plan for thriving in a net-zero future? Is that plan integrated with the company strategy? Does it include specific short-, medium-and long-term greenhouse gas reduction targets and related decarbonization initiatives? How is the company preparing for additional climate-related disclosure requirements?
  9. How is the company investing in protecting and restoring the natural ecosystems and biodiversity on which its business relies?
  10. Does the board understand the company's supply chain constraints? Is the board confident that the supply network is flexible and agile amid continued global supply chain challenges? How is it addressing increased calls from stakeholders for sustainability and less waste?

Theme 2: Talent oversight - Broader oversight of culture and talent that is prepared for the transforming labor market
  1. Do scenario analyses consider an appropriate range of extreme and even improbable scenarios, including existential threats? Do they incorporate the potential compounding effects of various risks, such as supply chain disruption, talent acquisition and retention, inflation, future interest rates and an evolving tax landscape?
  2. Are contingency and response plans related to material and high-impact risks, such as cybersecurity breaches and natural disasters, periodically simulated and reviewed with the board?
  3. How is the company revisiting and adapting its risk management strategy and management's approach to the three lines model in response to potential changes in the external and internal environment, changes in the strategy and risk landscape, and the company's operating model?
  4. Has the board considered how the organization's risk assessment capabilities are evolving, including how analytics, artificial intelligence and other emerging technologies can be used to review and validate data and information to unearth insights into enterprise risks and opportunities?
  5. How has the company's cybersecurity risk management program evolved to address the current environment in which attackers are targeting a larger surface area and using increasingly unpredictable tactics? How are cybersecurity and data privacy considerations proactively integrated into all major strategy or tactical decisions, such as transactions, alliances, new products or services, and technology upgrades?
  6. What types of data is the organization collecting from its customers and other stakeholders to better assess the trust, risks and opportunities related to changing preferences and needs? How is the collection occurring?
  7. How is the company scanning and assessing geopolitical developments, including a rapidly changing trade and regulatory landscape and governments moving to a more interventionist policy position?
  8. What is the company doing to address material social risks across its value chain, including the treatment of employees and suppliers' human rights practices and impacts on customers and the communities in which it operates?
  9. How is the company assessing the impact of physical and transition climate risks on products and services, supply chains and operations that can materially affect operating costs and revenues across the enterprise?
  10. Has the organization's tax planning strategy been reevaluated to address potential tax policy changes, as well as impacts arising from potential shifts in the supply chain and capitalization? Has the organization considered growing stakeholder interest in tax transparency and potential related reputational impacts?
  11. Does the board understand and approve the company's data privacy and data usage policy? How is customer and employee data use managed? Are social surveillance algorithms reviewed for bias? Is data protection considered beyond cybersecurity protection?

Theme 3: Risk and resiliency - Risk management that enables resiliency amid new and evolving challenges
  1. As the nature of work and employment further transforms, how will the organization adapt its talent functions to realize its strategy? Does the board spend the same amount of time with the chief human resources officer (CHRO) discussing data and metrics to assess the health and welfare of the workforce as it does with the CFO reviewing and assessing the overall financial health and stability?
  2. To attract and retain talent in a hypercompetitive labor market, how is the organization implementing plans to address calls for better pay and benefits, including flexibility, the opportunity to work from anywhere, programs to enhance well-being, and funding for training and educational advancement?
  3. How have the desired skills and behaviors for the organization's leaders evolved in response to the events of the last two years, and how has the board's succession planning and oversight of talent development changed in response?
  4. Given that more than half of employees say they would leave their job if flexibility in their schedule and work location is not extended after the pandemic, has the organization considered how to make flexibility integral to the company's human capital strategy?
  5. How is the company seizing strategic opportunities to tap into larger talent pools, diversify across numerous dimensions and expand working hours across time zones, while being mindful of work location, regulatory and legislative challenges?
  6. Is the board comfortable with how the organization is nurturing its existing and future talent pools (e.g., reskilling and upskilling, educational alliances) to position the company to meet current requirements, address enterprise risks and prepare for continued strategic pivots?
  7. How is company leadership enabling cross-functional collaboration and seeking input from a broader set of internal constituencies to support an inclusive culture, enhance engagement and spur innovation? How are these efforts measured?
  8. Are there any efforts to identify and address disconnects between how management views the employee experience and the employee's actual experience? Are employee engagement scores, periodic pulse checks, summaries of exit and onboarding interviews, and social media data routinely reviewed?
  9. With continued virtual work, how is the company addressing any impacts on employee engagement, inclusion and career development?
  10. How is the company embedding diversity and inclusion into its workplace policies and human capital management programs throughout all steps in the employee life cycle to enable equitable opportunities, advancement and compensation?

Theme 4: Dynamic governance - Dynamic governance that addresses expanded and changing oversight requirements
  1. How is the board adopting a continual learning mindset and strengthening its education program? Is the program sufficiently tailored to the company's and individual board member's needs, seeking diverse views from inside and outside the company that allow for challenges to status quo thinking?
  2. How can the board's structure be refreshed to be more agile, future-focused and aligned to the risks and opportunities on the road ahead? Is the board considering the use of ad hoc committees made up of directors, management and third parties to address specific strategic issues?
  3. How is the compensation committee evolving its charter to address oversight of broader human capital issues? How does the board hold senior management accountable for progress against related goals via incentive plans and other reward mechanisms? How is the company preparing for ongoing human capital disclosure requirements?
  4. How is the company refreshing its investor engagement strategy to be more efficient and productive? Is it considering new engagement approaches (e.g., more collaborative engagement via working groups or investor days)? Is it leveraging the proxy statement and other disclosures as communication tools?
  5. How is the board thinking like an activist in considering and proactively addressing the company's operating vulnerabilities? How is the board obtaining an unfiltered view of shareholder feedback on the company's strategy and pace of performance? Do select individual board members have direct dialogue with shareholders to understand their priorities?
  6. Are information flows to the board being appropriately challenged to include more forward-looking and predictive insights, coverage of emerging risks, external perspectives, and corroborating data from third parties to keep pace with the evolving market, economic and geopolitical developments? Is a consent agenda used to maximize board discussion of strategic initiatives?
  7. How is the board expanding its director search to maximize diversity and broaden board competencies in critical areas such as technology, human capital management, cybersecurity, and sustainability, and how are those individuals onboarded to set them up for success?
  8. With increased board diversity, what changes to its protocols are being made to leverage diversity of thought, improve decision-making and create an inclusive boardroom?
  9. Is the board prepared for increased accountability as ESG matters become a multi-stakeholder priority and investors increasingly embrace proxy votes against directors as their most effective tool to accelerate progress on ESG matters?
  10. With growing scrutiny of sustainability reporting and stakeholder concerns around greenwashing, how is the board — particularly the audit committee — overseeing nonfinancial disclosures made in regulatory filings, sustainability reports, analyst calls and other mediums? Are internal or external assurance procedures applied to material assertions and data?
  11. Is the company progressively reporting on human, customer and societal value to attract capital and meet the increasing demand of stakeholders for consistent and comparable ESG and other nonfinancial‑related data that aligns with evolving external frameworks?
  12. What is the board's policy for timely review of corporate political and lobbying expenditures and any public political positions taken by senior executives? How is the board assessing the alignment of those expenditures and positions with the company's values, commitments and strategy?
  13. Could the board create more effective meeting agendas and protocols (e.g., consent agendas) to increase director engagement on priority matters? Can virtual sessions augment and enhance traditional in-person meetings?

The report insightfully notes that companies will "continue to refresh their strategy to strengthen agility, resiliency and sustainability and leverage innovative opportunities that can accelerate their performance over the long term." Importantly, "Trajectories of companies that are thriving and leaning into this strategic reset are diverging rapidly from those that are merely surviving."

Moreover, "Boards have both the opportunity and the responsibility to help guide companies in this new era. They can support their companies in incorporating human and natural capital as part of business decisions and strategy, and harness risks as opportunities for innovation and a competitive advantage." I concur that this cannot "be achieved through a historical governance model. Boards should continue their own transformation to a new agile and dynamic form of governance and continuously challenge their composition, committee structure, agendas, and ways of working to position their organizations to thrive in the long term."

I appreciate how EY's report provides directors with insights and questions to consider as they engage with management on a variety of complex boardroom issues. What questions do you think directors should be asking to help companies in this new era?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.