Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.
European Edition
27th September 2021
 
THE HOT STORY
The race to fight off multiple ‘Black Swan’ events
Britain's fuel and food shortage crises, alongside flooding in Germany and wildfires in places such as the US, have compelled officials to reassess risk preparation strategies, reports the Telegraph. These Black Swan events, or what disaster planners call “long-tail” risks, are not supposed to come all at once, and Professor Bent Flyvbjerg, a fellow of St Anne’s College, Oxford says we are all prone to “Black Swan blindness . . . Our brains are not well suited for detecting extreme risks.” Prof Flyvbjerg and other experts say Black Swans are becoming more frequent as the world becomes more complex: “the walls are coming down between natural and human systems, with humans impacting nature at a global scale for the first time in history.” Planners are fooling themselves that they have everything covered in their risk registers, and also commonly make the mistake of “letting down one’s guard because a risk has not materialised for a while,” observes Prof Flyvbjerg.
OPERATIONAL
Independent petrol stations running out of fuel
The Petrol Retailers Association (PRA), which represents almost 5,500 independent petrol stations, has revealed that up to 90% of its members have run out of fuel after panic buying swept across the nation for the third day. Brian Madderson, chairman of the PRA, said that panic buying was causing "really serious problems" and that the 5,000 HGV foreign driver visas, announced by the Government on Saturday, was unlikely to alleviate pressures in the immediate short term. Tesco claimed it had "good availability" yesterday afternoon but some of their sites were among those closed, while some retailers including Asda have put a temporary transaction limit of £30 in place to ensure "as many customers as possible" could refuel. It comes as the Government is likely to put soldiers on notice to drive petrol tankers to forecourts within days.
Essar Oil on brink of collapse
Stanlow oil refinery in Ellesmere Port is on the brink of collapse having suffered from the dramatic fall in demand during the pandemic. The company, which  is owned by the billionaire Ruia brothers Shashi and Ravi through their company Essar Oil UK, owes £233m to HMRC after making use of the Government’s pandemic VAT deferral scheme. Repayment is due by January and the company said this month that t it was in talks with HMRC to “modify that schedule”. The Sunday Times reports that the Government has ruled out a bailout and EY is advising Essar Oil UK on its options. The paper also notes that concerns about corporate governance, particularly that hundreds of millions of pounds were being taken out of the company by the Ruias, saw Deloitte quit as auditor and PwC cease its advisory work for the company.
WORKFORCE
Over 10,000 temporary visas offered to hauliers and poultry workers
The Government has confirmed that 10,500 temporary UK visas will be offered to foreign workers in an attempt to alleviate Britain’s lorry driver shortage. Transport Secretary Grant Shapps said 5,000 fuel tanker and food lorry drivers will be eligible to work in the UK for three months, until Christmas Eve, with the scheme also extended to 5,500 poultry workers. Additionally, ministers are to write to almost a million drivers who hold an HGV licence, encouraging them back into the industry. The letter will set out the steps the haulage sector is taking to improve industry conditions, including increased wages, flexible working and fixed hours, according to the Department for Transport. Mr Shapps said: "We are acting now, but the industries must also play their part with working conditions continuing to improve and the deserved salary increases continuing to be maintained in order for companies to retain new drivers.”
CBI chief calls for practical approach to worker shortages
Tony Danker, the director general of the Confederation of British Industry (CBI), has urged ministers to take a “practical” approach to addressing labour shortages and plugging gaps in the workforce. He told BBC Breakfast: “Everybody accepts that what we need to do is change our skill system and think about the structure of the workforce . . . and start to build a pipeline of workers at good wages over time,” but warned “you can’t turn round when there are shortages, fold your arms as some Government ministers have done, and say: ‘Well, just put up wages and it will sort it’,” adding: “It won’t sort it, you can’t turn baggage handlers into butchers overnight or shopkeepers into chefs.” Mr Danker also called for a “temporary and managed” system to bring in foreign labour.
LEGAL
Credit Suisse fined for firing staff without a consultation
London-based Credit Suisse employees were made redundant in June 2020 without a proper consultation process, an employment tribunal has found. The bank has been fined £20,000 for "significant" breaches of the law. Under UK employment law, an employer must inform and collectively consult in circumstances where it proposes to dismiss 20 or more employees within a period of three months. Judge Barry Speker said the Swiss lender’s violation was notably egregious because it had breached similar laws during a round of redundancies in 2017. The judge said: “For the same type of failures to occur again within the June 2020 redundancy round shows either or all of a determination not to comply with the law, an inability to do so, or a failure to give the matter any serious consideration,” adding that the failures were “significant” considering Credit Suisse has a “substantial and well-resourced” HR department. The cuts came as departments overseen by the bank’s chief risk officer struggled with “budget challenges” during the pandemic, notes the Telegraph.
Capita breaks the law over minimum wage
Outsourcing firm Capita has breached the law by failing to pay the minimum wage to thousands of low paid workers across the UK, analysis of data from between 2015 and 2021 has found. Those who fell short of being paid the minimum wage have started to be reimbursed after Capita carried out a national minimum wage audit following complaints. Letters sent to past and current staff by Capita's chief people officer Will Serle say salaries dropped to below the National Minimum Wage “due to a small number of technical issues.” He said these issues have been addressed, and the firm has “strengthened our policies and practices to prevent this from happening again." Capita has not revealed the number of staff affected but said the "vast majority" of the underpayments were historical.
Petrofac to plead guilty to seven bribery offences
The UK Serious Fraud Office has charged oilfield services company Petrofac with seven separate offences of failing to prevent bribery between 2011 and 2017. The company indicated it would plead guilty. In a statement, chair René Médori said the charges concerned a “deeply regrettable period of Petrofac’s history,” adding: “Petrofac has been living under the shadow of the past, but today it is a profoundly different business.” Analysts at Jefferies estimated the fine would be in the region of $300m.
REGULATION
Regulator under pressure over open banking inquiry
Simon Foy reports in the Sunday Telegraph on the Competition and Markets Authority’s (CMA) probe into conflicts of interest at the Open Banking Implementation Entity (OBIE). The unit was set up to promote open banking reforms in the UK and an independent investigation by Mishcon de Reya into bullying at the OBIE has now expanded into a wider investigation about poor governance and cronyism after nearly 50 witnesses came forward to detail allegations of wrongdoing. But the CMA has been sitting on the final report since early August, Foy says, something one former OBIE insider says is making things worse. “It's ultimately bad for the reputation of open banking," they add. Another former senior insider at OBIE argues: "A lot of the fault lies with how the CMA set up OBIE and the lack of oversight the regulator provided. It did nothing to rein it in. And by sitting on the independent report, it shows they're not taking it seriously." A spokesman for the CMA said the regulator “is finalising the appropriate next steps as a priority."
Regulator to investigate Rio Tinto
The Financial Conduct Authority (FCA) is investigating mining group Rio Tinto over claims it misled the market about its £5bn copper mine in Mongolia. The Mail reports that the regulator is questioning those previously linked to the project and could launch an official probe. Sources say other authorities, including the US Securities and Exchange Commission, are also looking into the allegations. It is claimed that Rio Tinto was aware that the project was running late and over-budget months before it informed investors. In market announcements in 2019, the firm said it would need additional funds of up to £1.3bn to complete the project due to “geotechnical issues,” but investors and whistleblowers say the majority of issues and overrunning costs were down to poor project management. The Mail’s Francesca Washtell says the allegations and investigations will be the first test for new chief executive Jakob Stausholm's commitment to “impeccable" ESG standards.
TAX
Afiniti restates accounts over errors
The British division of technology group Afiniti has restated its accounts over errors linked to its use of a financial mechanism that aids tax avoidance. Afiniti Europe Technologies recorded a £34.5m adjustment in its gross profit and a £27.7m revision to its pre-tax profit for the year to June 2019 after a series of accounting errors related to its intercompany dealings. The Times reports that the company’s revenues come from transfer pricing, a common and legal tax avoidance strategy that has often been deployed by multinational technology companies.  George Turner, director of think-tank Tax Watch UK, says: “Fixing the prices that group companies use to trade with each other is a very common way for multinationals to move their profit to tax havens.” The Times’ James Hurley notes that there is no suggestion of wrongdoing by Afiniti or former Prime Minister David Cameron, who advises the firm.
STRATEGY
Credit Suisse dumped Evergrande exposure on risk fears
Reports continue to swirl about the exposure of various banks to Evergrande debt. The FT reports that Credit Suisse, once the top international underwriter of Evergrande bonds, sold down its entire exposure late last year because “it didn’t like what it was seeing.” The paper notes that $4.2bn of the bonds Credit Suisse arranged are still outstanding. They were sold to counterparties such as asset managers, hedge funds and the lender’s ultra-wealthy private clients, who could now be wiped out. Meanwhile, Chinese lenders are holding back on providing new credit for other property developers, and analysts at JPMorgan warn that, despite HSBC and Standard Chartered saying they have limited their direct exposure to Evergrande, they are likely to face the most immediate second-order impacts as they have the most direct lending exposure among foreign banks to China's property sector.
US consultancy Ankura expands into UK restructuring
The private equity-backed US consulting business Ankura has hired a string of heavyweight practitioners to make a push into the UK restructuring market. BDO’s former UK chief executive Simon Michaels, who joined the firm in 2019, is leading the UK drive and is now joined by Donald Featherstone and Mark Hawken from Boston Consulting Group and Scott Millar and Mark Christiansen from AlixPartners. This marks the latest shake-up in the UK’s restructuring market which earlier this year saw the restructuring arms of KPMG and Deloitte both spun off in private equity-backed buyouts.
SUSTAINABILITY
PwC advised firm on sustainability while probing greenwashing claims
It has been revealed that PwC was advising DWS on sustainability while at the same time investigating whistleblower allegations related to greenwashing at the asset management business, raising concerns over the independence of the probe. DWS’s former head of sustainability, Desiree Fixler, accused the firm of using inaccurate ESG metrics. The business gave a PwC employee the remit of investigating the claims, while, at the same time, a separate PwC team was advising DWS on how it can achieve its goal of reaching net zero by 2050. DWS said it “stands by its disclosures in its annual reports” and “firmly rejects the unfounded allegations being made by a former employee.”
OTHER
Ukraine passes law to curb political influence of oligarchs
Ukraine’s parliament has passed a law defining the term “oligarch” and establishing a register of individuals who meet the description and who would be forced to disclose their assets. Individuals who are subject to the law will also be barred from financing political parties, holding government posts and taking part in privatizations. The bill is part of a crackdown on the corruption that has dogged Ukraine since communism collapsed 30 years ago.

Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.

Content is selected to an exacting brief from hundreds of influential media sources and summarised by experienced journalists into an easy-to-read digest email.

Risk Channel enhances the performance and decision-making capabilities of individuals and teams by delivering the most useful news and knowledge in a cost-effective way, while promoting a sponsor's brand to the risk and leadership communities.

If you would like to sponsor a Risk Channel special report, reaching thousands of influential professionals, companies, business leaders and decision makers through our US and/or UK & Europe editions, please get in touch with us via email sales team

This e-mail has been sent to [[EMAIL_TO]]

Click here to unsubscribe