Corporate profit margins may be narrowing down with the S&P 500 index declining more than 20%. The stock market being overly dependent on wide profit margins is vulnerable. Statistics and various calculative methods show us that the six-decade average profit margin of corporate America is 6.3%. If corporate profitability reverted back to its average, it is likely that S&P 500 would be on its way down.  The stock market would have single digit growth. Way out could be P/E expansion and widening of corporate profit-margins. Opinions differ; many proponents believe the stock market will be affected no matter what the level of corporate profit margins. To know more, follow the link: http://www.marketwatch.com/story/investors-need-to-face-the-possibility-of-a-great-reset-2015-05-20

“Debt is the vital air of modern commerce.”

 - Daniel Webster

These words were spoken in 19^th century when the U.S. bond market was still in its initial stage. But, today, in 21^st century, the situation has changed. The volume of debt is growing in multifold.  This is justified by the following fact:

The borrowings of global households, governments, companies and financial firms have risen from 246% of GDP in 2000 to 286% today.

But the question is that why is the world growing so much addicted to debt? The answer to this question lies in following two causes:

1. Interest on debt is a tax deductible expense.
2. People over-estimate the safety of the fixed payments that debt offers

3 global trends have magnified the effects of these causes. They are:

• Big exporters such as China have built up reserves that must be invested abroad
• The increasing inequality between the rich and poor
• The growth of finance industry where the impulse is to manufacture debts owed by others in order to generate fees

The need of the hour is to bring reforms in order to reduce these mountains of debt.

To know more, please read the following article at the Economist:

http://www.economist.com/blogs/economist-explains/2015/05/economist-explains-20?fsrc=scn/tw_ec/why_the_world_is_addicted_to_debt

“#”

Most of you must be familiar with this symbol – Hashtag. It is usually used to classify tweets. This classification is being used by banks to provide services these days in the form of Hashtag Banking.

“Hashtag banking or twitter banking is a method of providing banking services such as fund transfer, balance enquiry etc. as well as giving banking information using hashtag (#)”

The following article by Vivina Vishwanathan at livemint.com explains the concept of hashtag banking. In this article, she explains with an example that how # banking works. Since this is still in its initial stage, there are a lot of doubts regarding it like its safety, technical glitches etc.

Whatever its future, it will be decided on the basis of how banks develop this service and earn people’s trust regarding it.

To know more, please visit the following link:

http://www.livemint.com/Money/PaklJWALLp7ttemZp9oleL/One-minute-guide-hashtag-banking.html

•  Adoption of digital technologies has led to a customer-centric set of services. These technologies are nowadays demanded by banks, financial services firms and insurance companies.   With the world becoming competitive, sectors such as banking, finance services and insurance industries and product development, delivery and customer engagement are now being driven by a more mobile, social and data driven experience. But, the financial industry is still way behind firms in the consumer and retail markets. Firms in financial industry must ensure that they build a foundation for digital change. Read more at:   http://blogs.sap.com/banking/2015/05/19/digital-innovation-in-banking/

US companies make huge profits by paying employees minimum wage. US taxpayers pay $153 billion public assistance to working families. Now public opinions are divided. They want these corporations to pay workers enough to live decently. A proposed bill in Connecticut states that companies paying below $15 per hour will be imposed a fine of $1 per hour, per worker and this money will be spent on social welfare. Each Walmart in Connecticut costs taxpayers $1 million in social programs; also state pays $486 million in medication and cash assistance.  The bill could be a creator of many positions, and also help to shift the social assistance burden from taxpayers back to employers. The bill though in its initial stages has gained politicians' attention. Read more at:

http://www.fastcoexist.com/3046341/is-it-time-for-companies-to-pay-for-not-paying-enough-the-walmart-tax-gains-momentum

Counter party credit risk is becoming important nowadays; advanced risk management methods are being implemented in power and financial-services sectors. Transportation infrastructure industry lag behind but the need is immediate. Technicality in rail infrastructure is complex, thus the need for assessing risk. Failures are growing due to lower rated original equipment manufacturers (OEM). It is necessary to integrate systematic assessment of credit risk into the supplier selection process. Minimum rating requirement could be a way out allowing customers to control and lower the risk of supplier default.  This increases transparency, improves efficiency of risk assessment and facilitates monitoring of counterparties.  Customers of railway projects should learn from the available risk assessment methods and use them to their benefit. Read more at:

http://www.mckinsey.com/insights/risk_management/managing_supplier_risk_in_the_transportation_and_infrastructure_industry

It's high time to move away from the old adage "Sell in May", because the market is on its way to double its year- to-date returns. Marketing axioms, rules of thumb may be comforting than investing logic but do not show the best path for investment. This concept though statistically proven to be nonsense does not discourage investors. Historical stock market data shows return from May through October might be more than the others on an average. Transaction costs, taxes on profits cannot be avoided by investors as trading volumes in summer months being consistently on the lower side. This leads to fewer trends and influence traders to get out as it is not worth to stay in the market. People believe that market loses from May to November with the worst in October, which is not the truth as research shows. Read more at: http://www.marketwatch.com/story/when-it-gets-to-may-you-might-as-well-stay-2015-05-16?page=1

Over the past few years, the impact of globalization, amongst other things, has also been seen on Supply Chain. It’s not restricted to one place or country, rather, Supply Chain function has also spread its wings across countries. This change has affected the entire working of businesses. The change in supply chain has also affected the finance department of the firms. It has to adopt its practices to comply with these changes.

Now, a new era of supply chain is on its rise i.e. Digital Supply Networks. Be it the use of robots or 3-D printing, ‘digital’ is the key word.  Once again, its impact on the finance team is huge. This impact has been discussed by David Axson and Gary Hanifan in their article on IndustryWeek. They state the following 3 major effects:

• Release of working capital
• Improved forecasting
• New control philosophy

But the big question is- Are the CFOs and their finance teams ready for this?

To know more, please visit the following link:

http://www.industryweek.com/finance/finance-ready-demands-digital-supply-chains

In an environment where low interest rates are prevailing in US, investors are again facing the famous question of all times – Where to invest?

Here, an interesting option has now come to the rescue of investors that provides a part of the answer to the above question i.e. Mezzanine Debt in the Commercial Real Estate segment.

“Mezzanine debt is a fixed-income product that produces a consistent dividend yield and is secured by the borrower’s interest in the underlying property.”

As any other investment, mezzanine debt also has virtues as well as risks. Its virtues that have made it a favorable choice include:

• High single-digit to low double-digit coupons
• Backed by hard assets
• Occupies commercial real estate segment where individual investor is under-allocated
• Helps in diversification of portfolios
• There is transparency involved
• Demand for such high-yield subordinate loans is expected to increase
• Reduced lending by banks on commercial property

The risks that need to be considered before investing in this option include:

• Interest rate risk
• Downturn in real estate performance

Thus, mezzanine debt offers a great opportunity for investors as its demand is showing an increasing trend, but its pros and cons have to be kept in mind while making the investment decision.

To know more, please read this highly informative article by Bruce Batkin, CEO and co-founder of Terra Capital Partners, at fa-mag.com:

http://www.fa-mag.com/news/the-case-for-mezzanine-debt-21503.html?section=3

Mergers and Acquisitions (M&A’s) are an important part of the financial scenario. Every day, new deals are made across the globe and companies are brought together. But, the fact remains that only few such deals succeed. So, why do M&A’s happen? What are those special elements that differentiate the successful deals from the failed projects?

The answer to these questions is given in the following article at Investopedia.com, where Elvis Picardo, Vice President-Research and Portfolio Manager at Global Securities Corporation, Vancouver, explains why companies undertake M&A transactions; gives the reasons for their failures that are Integration risk, Overpayment and Culture Clash; states the impact of M&A on capital structure, financial position, market reaction and future growth; and finally, presents some examples of well-known M&A transactions.

To know more, please visit the following link:

http://www.investopedia.com/articles/investing/102914/how-mergers-and-acquisitions-can-affect-company.asp

A Financial model is a model that represents the financial operations or financial statements of a company in terms of its business parameters and forecasts future financial performance.

-NASDAQ

Financial modeling is one of the most used tools to supplement financial decisions. Be it, valuation of something as small as assets and liabilities of a business or something as large as the whole business itself or an altogether new business, financial modeling is an essential part.

Read the following article by Sui Chuan at ValueEdge to know more about the pros and cons of this holy grail of finance:

http://www.value-edge.com/the-pros-and-cons-of-financial-modelling/

The FICC (fixed income, currencies & commodities) trading business has seen its ups and down. It’s no longer as attractive as it used to be prior to the Global Recession of 2008. But, this does not mean that it has lost its charm. In first quarter of 2015, U.S. investment banks have seen a notable increase in the FICC trading revenues. These have shown a more than double increase than Q4, 2014 revenues. This increase can be attributed to the increase in debt and the removal of cap from Swiss Franc.

The following article at Forbes.com byTrefis Team reports the total as well as FICC revenues of five largest investment banks – Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America-Merrill Lynch and Citigroup. These figures show JPMorgan’s dominance in the FICC trading as it has highest revenues and lowest volatility. Apart from that Citigroup and Goldman Sachs are the only two other banks that rely more heavily on FICC trading revenues to drive their top line. But in terms of volatility of revenues, their coefficient of variation for FICC is almost twice as volatile as their equity trading revenues.

To know more, please visit the following link:

http://www.forbes.com/sites/greatspeculations/2015/05/14/q1-2015-u-s-investment-banking-round-up-ficc-trading/

Building customer loyalty in the insurance sector has always been a difficult task. But, now there’s some good news in this regard. According to Insurance India, an IMRB International study, ‘Customer loyalty in insurance market with respect to product and services has improved’. This change has been observed due to improvement in products and services like timeliness of the alerts/ reminders for premium due dates, timeliness of receiving the premium receipts for payments made etc. as well as due to customer driven reforms and guidelines set by IRDA.

Another important observation made in the study was the need for improvement in services of the agents, because as compared to bancassurance and other mediums, customers were found to have weaker perceptions and experiences about the companies where agents were involved.

Apart from this, the study also reported that there are 60% Truly Loyal customers and new customer loyalty was highest when insurance was purchased online.

To know more, please read the following article at business-standard.com which summarizes the study:

http://www.business-standard.com/article/finance/customer-loyalty-has-improved-in-insurance-imrb-international-study-115051300967_1.html

Insurance Fraud has become a matter of grave concern in Europe. According to Insurance Europe, the European (re)insurance federation, the total from all cases of fraud – both detected and undetected – amounts to 10 percent of overall claims expenditure in Europe.

According to McKinsey, common pitfalls in Fraud Management are:

• Not in the focus of top management
• Limited importance of fraud in operational claims processing
• Insufficient specialization
• Hardly any modern investigation methods
• IT systems that are obsolete or have not been maintained

Insurance companies need to act fast to realize this untapped potential from optimized fraud management as well as to reduce a potential competitive disadvantage compared to other insurers. This can be done in two stages:

1. Putting fraud management on a more professional footing
2. Rallying forces to fight organized fraud

The insurance industry, as a whole, needs to tackle these fraudsters for the interest of all market participants. To know more, read the following article by Thomas Kuhnt, Johannes-Tobias Lorenz, and Michael Müssig at mckinsey.com:

http://www.mckinsey.com/insights/financial_services/claims_management_taking_a_determined_stand_against_insurance_fraud

In the period of 1997-2000, Internet companies had become the favorites of investors. Despite incurring losses, they were highly valued because of their wide scope. This was the dot-com bubble and it burst on 6 April, 2000 with NASDAQ suffering an over $1 trillion loss in market value.

Now, 15 years later, a similar scenario is forming again. This time, it is not just in US, but also in Asia’s third largest economy, India. Tech investors, all over the world are queuing up to invest in Indian e-commerce firms. At the same time, NASDAQ also climbed above 5000 points for the first time since the Dot-Com boom. Rising valuations, massive losses and ambitious promises of future growth are some of the other similarities that can be drawn.

The following article by Shrutika Verma and Mihir Dalar at livemint.com, talks about the e-commerce frenzy in India today and draws its parallels with the Dot-Com Bubble. This article also cautions that this e-commerce boom should not meet the same fate.

Read more at:

http://www.livemint.com/Companies/PKYPXSiOwle8hOkgUi8mpL/Indias-ecommerce-frenzy.html

According to McNett (CMRP, Life Cycle Engineering), KPI (key performance indicators) should contain objectives, source, performance criteria and action plan to be effective. KPI helps managers to evaluate a company's performance and spot weak points which need manager's attention. According to Michael Porter (strategy professor at the Harvard Business School), KPI should be related to organizational goals and strategy, so that an organization can have a sustainable growth. Strategic asset management plans help to convert organizational goals into asset management objectives. Asset management functions support the company's goals and objectives. So, KPI helps to achieve organizational asset management objectives. Performance and evaluation of assets not only include technical performance, but also the performance of the physical asset portfolio. Read more at: http://www.industryweek.com/maintenance/monitoring-asset-management-strategy-execution-kpis

According to the Identity Theft Resource Center, to date there have been more than 778 million records exposed in thousands of data breaches. 

One of the foremost technology solutions for addressing the financial security concerns is Biometrics. Its application in the Banking and Financial Services industry is projected to increase to $8 billion by year 2020. This is largely due to less reliability of traditional authentication systems. Investing in biometrics is also seen as a lucrative opportunity today as banks and financial institutions all over the world want to implement it in their security systems as soon as possible.

To sum up, Biometrics in banking industry is now quickly evolving into a global standard. Read the following Investopedia article to increase your knowledge about this opportunity:

http://www.investopedia.com/articles/investing/042015/biometric-banking-huge-prospects-tech-profits.asp

According to the World Economic Outlook Database (WEO), released on April 14, 2015, the International Monetary Fund (IMF) has predicted a not so good global growth scenario till 2020. Following are few of the highlights of the report:

• US growth has been revised lower- below 3%
• India’s GDP growth will not cross 8% till 2020
• The new normal in world growth - below 4%
• Commodity prices will remain low
• World trade growth will be muted

To know more, read the following article by Manas Chakravarty at livemint.com:

http://www.livemint.com/Opinion/Z3InMgIqNxSUOkB3Nch9AI/Five-trends-that-define-the-world-economy.html?ref=newsletter

The Indian Railway Catering and Tourism Corporation (IRCTC) has now taken the first step in its ambitious initiative to provide travel insurance to its users. The railways, in partnership with insurance major, New India Assurance, will now provide insurance which will depend on the length, class, etc, of the journey. In the first phase of this project, insurance will only be provided via IRCTC website. Further, the aim is to reach at least one million customers.

According to a senior railway official, "For the railways, it may be a win-win situation. It anyway ends up paying out of its own pocket a considerable amount as compensation to train accident victims. The travel insurance will only mean that the railways will have a corpus, that too as commuter contribution, to pay insurance for such incidents."

To know more about this project, visit the following link:

http://www.dnaindia.com/mumbai/report-how-about-railway-insurance-of-rs-10-lakh-for-a-premium-of-rs-25-2077535

According to the World Bank report, there is a fall in the growth rate of developing countries like East Asia and China. According to the Washington-based lender, growth in China is going to be 6.7% in 2015 and 2016 from 6.9% growth in 2014.  And according to the World Bank, developing East Asia countries excluding China is expected to grow at 5.1% in 2015 and 5.4% in 2016 from 4.6% in 2014. Reason for China, is slow down in its policies that aimed at putting its economy in a more sustainable way.  And higher US interest rates and an appreciating US dollar may raise borrowing costs. Read more at:

 http://www.moneycontrol.com/news/world-news/world-bank-cuts-east-asia-growth-forecast-warnsrisks-to-outlook_1355974.html?utm_source=ref_article