Blockchain explained... in under 100 words! AND A Perspective on the Deloitte CFO Survey!

}Blockchain explained... in under 100 words!

I recently attended an industry seminar where the concept of the Blockchain was explained. At the end of the session, walking out of the lecture room I heard one of the attendees say to a colleague "I'm still not sure what exactly Blockchain is...".
Many of us know that Blockchain is a topic that is hot at the moment. It's a topic that is disruptive. It's a topic that is accelerating.
And that may be your elevator pitch...
But now imagine your elevator stops between floors and you are asked "Great overview - but can you explain to me how it really works?".
Here is my attempt to explain the original intent of the Blockchain in fewer than 100 words.
You (a "node") have a file of transactions on your computer (a "ledger"). Two government accountants (let's call them "miners") have the same file on theirs (so it’s "distributed"). As you make a transaction, your computer sends an e-mail to each accountant to inform them.
Each accountant rushes to be the first to check whether you can afford it (and be paid their salary "Bitcoins"). The first to check and validate hits “REPLY ALL”, attaching their logic for verifying the transaction ("Proof of Work"). If the other accountant agrees, everyone updates their file…
This concept is enabled by "Blockchain" technology.
Surely it's more complicated?
Yes - but as a concept, not much more. Complexities come in the implementation and the journey to realize value from such implementations. The above example will, of course, be overly simplistic for some – but may be a starting point for others.
In a traditional environment, trusted third parties act as intermediaries for financial transactions. If you have ever sent money overseas, it will pass through an intermediary (usually a bank). It will usually not be instantaneous (taking up to 3 days) and the intermediary will take a commission for doing this either in the form of exchange rate conversion or other charges.

The original Blockchain is open-source technology which offers an alternative to the traditional intermediary for transfers of the crypto-currency Bitcoin. The intermediary is replaced by the collective verification of the ecosystem offering a huge degree of traceability, security and speed.

In the example above (a "public Blockchain"), there are multiple versions of you as “nodes” on a network acting as executors of transactions and miners simultaneously. Transactions are collected into blocks before being added to the Blockchain. Miners receive a Bitcoin reward based upon the computational time it takes to work out a) whether the transaction is valid and b) what is the correct mathematical key to link to the block of transactions into the correct place in the open ledger. As more transactions are executed, more Bitcoins flow into the virtual money supply. The "reward" miners get will reduces every 4 years until Bitcoin production will eventually cease (although estimates say this won't be until 2140!). Of course, although the original Blockchain was intended to manage Bitcoin, other virtual currencies, such as Ether, can be used.
Why do I need to know about Blockchain?

There are three reasons why you need to know about Blockchain:
Blockchain technology doesn't have to exist publicly. It can also exist privately - where nodes are simply points in a private network and the Blockchain acts similarly to a distributed ledger. Financial institutions specifically are under tremendous pressure to demonstrate regulatory compliance and many are now moving ahead with Blockchain implementations. Secure solutions like Blockchain can be a crucial building block to reduce compliance costs.
Block-chain technology is broader than finance. It can be applied to any multi-step transaction where traceability and visibility is required. Supply chain is a notable use case where Blockchain can be leveraged to manage and sign contracts and audit product provenance. It could also be leveraged for votation platforms, titles and deed management - amongst myriad other uses. As the digital and physical worlds converge, the practical applications of Blockchain will only grow.
The exponential and disruptive growth of Blockchain will come from the convergence of public and private Blockchains to an ecosystem where firms, customers and suppliers can collaborate in a secure, auditable and virtual way.

}A Perspective on the Deloitte CFO Survey{

The winter and spring Deloitte CFO Surveys reveal some familiar concerns and intriguing insights into how CFOs are managing them. Geopolitical risk continues to be a top of mind issue for Swiss CFOs, and the proportion seeing the level of uncertainty in the economic and financial environment as high ticked-up one point in the spring survey, to 59%. These concerns are natural - with the 100 day milestone for the Trump presidency only just passed, in the midst of Europe’s election super year, and with Brexit negotiations only just beginning, electoral and policy outcomes in major global markets remain unclear.
As an export-led economy Switzerland can benefit strongly from growth in world trade, equally it is vulnerable when uncertainty or protectionism foreshadow a downturn. The likely impacts of “America First” or Brexit remain far from clear and CFOs see significant uncertainty too in some of Switzerland’s other major trading partners, including France and Italy.
The notable concern over the international arena is balanced by more confidence about the performance of the Swiss economy. Domestically the darkest fears about recession following the 2015 exchange rate shock have receded - nine out of ten Swiss CFOs now do not expect a recession at home in the next two years.
The Spring Survey indicates that the unpredictable international business environment may now be casting a shadow over the outlook for cashflow. Though sentiment amongst CFOs is mixed, and the consensus around revenues remains strongly positive, there is also recognition that revenue growth in 2017 may have to be earned through margin erosion. Pressure on margins and prices has risen four places to number three in the list of greatest risks CFOs see to their companies over the twelve month horizon. Confidence about investment has also taken a knock. Despite record low interest rates producing an attractive external financing environment, fewer CFOs now expect replacement and new investment levels to grow in the coming year than was the case in the winter survey.
With global uncertainty dampening the prospects for international growth and expectations for only modest growth at home, it is more important than ever for CFOs to help their businesses deliver maximum value from existing operations. Generally, CFOs appear to feel they have the means in their financial toolkit to work through the uncertainty and remain positive about their ability to enhance operating cashflow over the next twelve months. Doubling-down on costs is re-emphasized by a growing proportion of CFOs who share an expectation that discretionary spend will reduce in the near term.
Working capital management is an area which is debated less often but can be a powerful aid to improving operating cashflow. The day-to-day governance and operating effectiveness of days sales outstanding (DSO) and days purchases outstanding (DPO) policies can be complex and time-consuming. Supervision is more complex when more stakeholders are able to negotiate bespoke payment terms for their individual clients or contracts. With a proliferation of different terms in place upholding compliance can be more expensive, breaches are harder to detect and it becomes more difficult to provide transparency on where collection dates are missed, or where more generous payment opportunities on the purchase side aren’t fully leveraged.
Cash collection targets, a key lever in attempts to boost operating cashflow, are difficult to achieve without effective control over DSO policy and even when the primary DSO KPI is achieved, cash leakage can occur when customers are granted settlement discounts even though they pay outside their agreed early settlement window.
A review of payment terms, on both the sales and purchases sides, can quickly highlight areas which need to be shored up to protect value, spotlight the areas presenting the greatest risk and reveal opportunities for simplification and risk mitigation through payment terms harmonization.
Procure-to-pay and order-to-cash processes are fertile ground for further automation through process robotics. Companies who have successfully introduced robotics, driven by common motives of higher accuracy and lower cost, report some remarkable results including the elimination from their processes of some of their most important quality fails.
In their role as value protector, when margins and cashflows are under pressure, CFOs can find that effective governance and automation of working capital management can be a potent ally for an organization needing to safeguard its liquidity.
We hope that you find these perspectives thought provoking and useful and welcome your contributions to the discussion of the points raised in the CFO survey.

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