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August 24, 2019Today's Top Risk News + Analysis From the Editors at RANE
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01
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BUSINESS INTELLIGENCE
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EU Weighing Plans for Fund to Finance European Tech Firms

The European Union is said to be weighing plans for a roughly $111 billion fund to finance promising European technology companies and invest in sectors that have fallen behind global rivals, Sky News reports. Money for the sovereign wealth fund could come from EU government budgets with an eye toward rivaling Apple, Alibaba and other non-EU competitors with unprecedented financial means. Germany and France have called for stronger opposition to the encroachment of much larger international competitors, particularly state-subsidized Chinese firms. The proposal is part of a group of suggestions that are being presented to the European Commission's next president, Ursula von der Leyen, who will be in office beginning on November 1. The fund will be prioritizing buying long-term equity stakes in corporates that are EU-based and are in key sectors. "The emergence and leadership of private non-EU competitors, with unprecedented financial means, has the potential to obliterate the existing innovation dynamics and industrial position of EU industry in certain sectors," according to the plans for the fund. Currently, Europe does not have firms such as Microsoft, Google, Alibaba, Apple, Facebook and Tencent, officials have stated,

READSky News 
02
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LEGAL, REGULATORY + COMPLIANCE
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Regulatory Scrutiny Deepens Rift Between Facebook and Libra Founding Partners

Some of Facebook’s Libra project’s early backers have been spooked by intense regulatory scrutiny that the proposed cybercurrency has attracted, the Financial Times reports. The 28 members of the Libra Association, which includes Visa, Mastercard, Uber, Spotify and Facebook subsidiary Calibra, pledged to invest at least $10 million in the project, which aims to shake up the global payments market. Global watchdogs and politicians promptly reacted by calling for investigations into privacy concerns, fears of money-laundering risks, potential for tax evasion and the possibility the currency could disrupt global financial stability. Facebook has reportedly become exasperated by the members and is tired of being the “only people putting their neck out,” one of the Libra backers said. News this week is that Libra is being probed by the European Union’s antitrust regulator. Additionally, this month data protection officials from the U.S., EU, UK, Australia and Canada made a strongly-worded statement on privacy concerns. Last month, David Marcus, head of Calibra, Facebook’s financial services subsidiary, also attended two days of intense congressional hearings in Washington.

READFinancial Times 
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03
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CYBER + INFORMATION
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EU Looks to Strictly Limit Facial Recognition, as Tech Allows Palestinians Faster Passage Into Israel

In an effort to eliminate public surveillance of European citizens, the European Commission is planning regulation to give EU citizens explicit rights over use of their facial recognition data, CNET reports. The Financial Times also reports that the planned regulation is part of an overhaul of the way Europe regulates artificial intelligence and would limit the indiscriminate use of facial recognition tech by companies and public authorities. The initiative comes amid revelations of the use of facial recognition to monitor crowds in public areas, which prompted the UK’s data protection watchdog to launch an investigation. Collection of sensitive biometric data that can be used to uniquely identify individuals is already prohibited under the general data protection regulation (GDPR) and the move to explicitly legislate facial recognition technology would bolster those protections. On Wednesday, Sweden’s national data protection authority imposed a $21,000 fine on a school that tried out the technology to monitor its students’ daily attendance, the first fine under GDPR for misuse of the technology. As Israel upgrades its West Bank checkpoints with facial recognition technology, Palestinians are able to pass more quickly into Israel, but the technology has drawn criticism about its controversial role in Israel’s military control over Palestinians, NPR reports.

READCNET , Financial Times , NPR 
04
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SAFETY + SECURITY
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Arctic Region in Demand as Climate Change Reveals Strategic and Economic Resource

Though President Trump’s idea of buying Greenland from Denmark — which does not own it — was promptly derided as awkward, “ham-fisted” and insulting to an ally, the region itself is quickly becoming a sought-after geopolitical and economic asset. As climate change reduces Greenland’s ice sheet, the U.S., Russia, China and others are licking their chops over the incredible riches of oil, natural gas and rare earth minerals waiting to be tapped. The Associated Press reports that Russian President Vladimir Putin proposed an ambitious program this spring to reaffirm his country’s presence in the Arctic as Russia seeks to stake its claim in the region that is believed to encompass up to a quarter of the planet’s undiscovered oil and gas. China has its eye on Greenland for its rare earth and other minerals and as a possible port for a shipping lane through the Arctic to the eastern U.S. Though global warming is pushing the cold and ice farther north every year, the race for the Arctic’s riches is not a slam dunk. The melting of Greenland’s vast ice sheet creates great unknowns and danger for offshore oil and gas developers as massive icebergs break loose and challenge navigation.

READThe Associated Press 
05
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CYBER + INFORMATION
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Genealogy Quest or FBI Dragnet? When Consumers Hand Over DNA, They Don’t Always Know

Millions of consumers have purchased home DNA test kits to find out about their families’ roots or to gather data about health risks. The boom in DNA testing has helped people find the identities of biological parents and sometimes has revealed unexpected family secrets. The Wall Street Journal reports that the DNA databases have also attracted attention from drug companies eager to mine them for health information, researchers tracking population migration and law enforcement entities looking for leads. Decisions on what use a company’s DNA database will be put to remain largely with its controllers, sometimes a single individual at a company. When the FBI approached Bennett Greenspan, president of FamilyTreeDNA, with a request for DNA data to help solve two heinous crimes, Greenspan said yes. The agency later pressed Greenspan to cooperate on a regular basis, the genealogist was uncomfortable doing so, but he ultimately agreed. Other firms including 23andMe and Ancestry say they won’t share genetic data with law enforcement unless presented with a warrant or subpoena, while privacy advocates argue that consumers do not expect that the data could be used by law enforcement without a warrant.

READThe Wall Street Journal 
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06
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SAFETY + SECURITY
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FAA to Test 737 Max Software on Pilots With One Year’s Experience

The Federal Aviation Administration (FAA) plans to test how pilots with around one year of experience fare with new software on Boeing’s 737 MAX model aircraft, Reuters reports. The 737 MAX has been grounded worldwide since March following two fatal crashes within five months in Indonesia and Ethiopia that killed 346 people. The tests are part of the company’s re-approval process for certifying the narrow-body plane for commercial flight after airlines worldwide had to cancel thousands of flights in the crashes’ aftermath on concerns that the stall-prevention system software was not functioning as it should. The manufacturer has had senior pilots testing the software fix and using simulators to run scenarios similar to those that led to the two crashes. Sources who are familiar with the process said the FAA wants to observe relatively inexperienced 737 pilots put the software through its paces. Boeing reduced the number of 737s it produces monthly when MAX deliveries were frozen in April but plans to resume production in February, sources told Reuters.

READReuters 
07
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GOVERNANCE
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Overstock CEO Patrick Byrne Resigns After Disclosing Affair With Russian Agent

Never one to dodge controversy, Patrick Byrne, chief executive of online retailer Overstock.com, disclosed last week that he had been in a romantic relationship with accused Russian spy Maria Butina who authorities believed was trying to infiltrate circles of political power ahead of the 2016 presidential election. The New York Times reports that Byrne said he made the disclosure on the advice of Berkshire Hathaway chief executive Warren Buffet. The statement, peppered with references to the “Deep State,” “Men in Black” and political espionage, baffled investors and sent Overstock’s shares sharply down. On Thursday, Byrne announced that he was resigning as Overstock’s chief executive and chairman because his continued presence was complicating the company’s business relationships, including those necessary to fulfill his plan to sell the company. In a statement last week, Byrne said he had helped the FBI with the “Clinton Investigation” and the “Russian Investigation.” He said his presence would lead to problems as the company sought to renew indemnification insurance for its directors and officers because, though he has always been controversial, his recent situation is “salt in the wound.”

READThe New York Times 
08
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CYBER + INFORMATION
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Local Governments on Guard After Recent Cyberattacks Cripple Texas Cities

Cyberattacks that recently crippled nearly two dozen Texas cities have underscored the evidence these attacks are very concerning given how easy they were for criminals to execute as well as how vulnerable small towns in the U.S. may be, CNBC reports. The Associated Press also reports that attacks on cities have been happening for years and can set governments back decades as libraries are blocked from their electronic checkout systems, police can’t access electronic records and utility companies must be paid with paper checks. Government agencies that don’t keep reliable backups of their data can be forced to choose between paying ransoms or spending more to rebuild lost systems, and government officials increasingly seek out cybersecurity insurance to deal with the growing threat. Protection is expensive and many employees may not be trained on the latest ransomware that often is delivered via innocent-seeming emails containing malicious links, or by luring users to a compromised website that encrypts files until a payment is made. The FBI and Department of Homeland Security are working with the government entities in the latest crisis, but did not release details about their names or how the hackers gained access.

READCNBC , The Associated Press 
09
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GOVERNANCE
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Amazon Will Stop Using Drivers’ Tips to Pay Their Promised Wages

In February, the Los Angeles Times revealed that Amazon would sometimes dip into the tips of its Flex drivers, who deliver for the company’s Prime Now, Fresh and Whole Foods services, to pay their guaranteed wages. The practice reduced the amount Amazon needed to pay as well as the net amount drivers were receiving. Now, the LA Times reports, the company has announced that it is stopping that practice and will start giving a full breakdown of how much Flex drivers are being paid for each shift, including how much of their total payment comes from the tip. The company also promised to pay drivers their promised minimum out of its own coffers. Amazon says it will always contribute at least $15 per scheduled hour to driver pay and sometimes more, depending on location and demand. Amazon spokesperson Rena Lunak said that for deliveries with tipping opportunities, drivers will receive 100 percent of the tips. Some drivers expressed in Facebook groups that, given the company’s previous lack of transparency, they are still unclear whether this new approach will actually result in a pay increase. Several other delivery companies have come under fire for their tip-paying practices, including Instacart and Doordash

READLos Angeles Times 
10
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GOVERNANCE
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12 U.S. Cell Carriers Pledge to Combat Robocalls, but Set No Deadlines

Robocalls are an illegal, billion-dollar industry which, TechCrunch reports, 12 cell carriers including the top four in the U.S.— AT&T, Sprint, T-Mobile and Verizon — have pledged to disrupt. The pledge announced Thursday follows a deal 51 U.S. attorneys general brokered that would have the telecom giants roll out anti-robocalling technologies, including a way the number being called could wipe out the spoofing phone number. The system, known as STIR/SHAKEN, relies on each customer phone number having a unique digital signature which would be used to verify that a caller is real. To date, AT&T and Comcast have tested the new system and AT&T and T-Mobile have worked together to use it to fight robocalls. However, the system works best when every carrier uses it and the attorneys general hope the 12 companies’ cooperation will vastly reduce the number of the calls each year. But, no deadline has been set, which means the carriers can take as long as they wish to roll out the technology.

READTechCrunch 
11
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BUSINESS INTELLIGENCE
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Companies' Post-Divestiture Share Prices Plummet in 2019

With an average underperformance of 7 percent, almost two thirds of companies have seen their stock prices fall short of industry benchmarks after divesting significant assets, CFO reports. According to a Willis Towers Watson and Cass Business School study of 251 divestitures with a value of at least $50 million that closed in the first half of 2019, 63 percent of divesting companies underperformed MSCI World Index industry benchmarks. Excluding deals with private equity sellers, the study measures the percentage of change in sellers’ share prices six months before deal announcements through the end of the half-year period in which the deals are completed. Often it is investors who push for deals, though they take a subsequent hit after divestiture. A rise in activist investors has some pushing companies to unlock value by divesting some assets they see as non-core and companies may feel forced to move more quickly than they would need to adequately prepare, according to Duncan Smithson, senior director, mergers and acquisitions, for Willis Towers Watson. Divestitures that took the form of spinoffs, on the other hand, actually outperformed the MSCI World Index by an average of one percent.

READCFO 
12
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MEDICAL + PSYCHOLOGICAL
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Biologists Are Trying to Edit Human Genes in Sperm

Scientists are trying to develop a way to modify human DNA found in sperm, in an attempt to find ways to prevent disorders passed down from men through genetic mutation, NPR reports. The research team is starting with a gene that can increase the risk for breast, ovarian, prostate and other cancers; another goal is to try to understand and possibly interrupt male infertility caused by genetic mutation. Though in their early stages, the experiments have yet to be successful. The research raises some of the same hopes and fears as editing the DNA of human embryos as advocates argue that finding a cure for diseases that plague families would justify the means and critics question whether the process opens the floodgates for creating “designer babies” in the future. The fundamental question is whether scientists should tinker with the human gene pool in ways that could affect generations to come. Critics also say this kind of research is not really needed since there are other means to stop most genetic diseases. There is also the aspect that editing sperm, eggs or embryos also raises philosophical, moral and ethical questions that have to be addressed first.

READNPR 
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