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Reporting on CIBC Mellon initiatives and developments within the securities industry.

May 2018 edition

Putting Clients at the Centre

At CIBC Mellon, we are committed to our clients and to delivering outstanding service, operational excellence and continuous improvement. An important part of our ongoing efforts includes listening carefully to our clients and seeking input. As such, we maintain an open dialogue with clients to hear what continuous improvement and the overall client experience means to them – especially as industry change and complexity continue to increase – so we can get it right, every day.

We Look Forward to Continuing to Support Your Asset Servicing Needs We want to continue delivering great client service and to find ways for improvement. CIBC Mellon remains committed to putting clients at the centre of all that we do, while Jeffrey Alexander is Vice working hard to provide effective product and data solutions to help clients with their President, Head of Relationship asset servicing needs. Management at CIBC Mellon. Jeff is responsible for leading the company’s relationship management team. Jeff has held View CIBC Mellon’s progressively senior roles for more than 18 years at CIBC Mellon. video entitled, “Putting Clients at the Centre.”

What’s Inside? Cyber Security: Protecting The Data Era: Seizing the Simplifying the Disclosure Friends With Fewer Benefits Your Data Opportunity Process for Pension Plans

By Kevin Kondo, Assistant Vice President, By Bill Graves, Chief Technology and By Darryl Horn, Consultant, Global Risk By Avery Shenfeld, Managing Director and Business Continuity and Information Security Data Officer Solutions Canada, BNY Mellon Chief Economist, CIBC Capital Markets 2 3 5 7

Trade Talk / may 2018 Edition 1 By kevin kondo Assistant Vice President, Business Continuity and Information Security

Cyber Security: Protecting Your Data

According to a recent article by IDG Engage Your Workforce Communications1, cyber security Often deemed the weakest link, your damages are estimated to cost $6 employees need to be equipped and trillion by 2021. Understandably, cyber aware of cyber security and what they security has become a high priority can do to protect the company, as for businesses across the globe as well as themselves at home. Cyber they look to develop plans, implement security requires participation across strategies and stay current on cyber your organization to be effective, and Kevin Kondo is Assistant security news, trends and threats. education is your best safeguard for Vice President of Business protecting your information. The Business Continuity Institute’s (BCI) Continuity and Information 2017 Cyber Resilience Report2, which is Test procedures Security at CIBC Mellon. Kevin is designed to track risks and threats to It’s not enough to have the procedures responsible for overseeing the organizations, outlines the top causes in place; you have to test them, run disaster recovery and business of cyber security disruptions in 2017. scenarios, and search for potential continuity program in addition According to the 734 respondents vulnerabilities. That could be done to managing CIBC Mellon’s from 69 countries, they are: phishing through a combination of your own tactics, information security programs. and social engineering (57%), malware as well as the hiring of external resources. Kevin has more than 15 years (41%), spear phishing (30%), denial of of experience in the Canadian service (20%), and ransomware (19%). Focus on Storage financial services industry. How is your information being stored? To help protect your business and its Although businesses often look at how data, it is imperative that you, your information is received and how it is Five Important Cyber Security technology and your vendors are in shared, the storage component can Program Questions: alignment to understand your cyber often be overlooked. It’s important to security programs and know how you consider how the data is stored, where 1. Do you have a cyber security are evaluating threats and addressing it is stored, and the encryption and program? any potential vulnerable systems. controls used to protect the safekeeping 2. How do you store, manage of your business’s information. and protect data? Cyber Security Best Practices In addition to engaging with your Plan Ahead 3. How do you manage your technology and vendor teams, the If a situation does arise, what do vendors? following cyber security best practices you do? It is imperative that your 4. Do you test your systems can help you develop your program or organization is ready to react at a and business continuity further enhance your efforts. moment’s notice. A well-developed plans against cyber threats? cyber security program that includes If so, how? Set a Schedule defined strategies, procedures and This is not a singular schedule, but 5. What type of training and policies will help to protect you and rather a combination of a variety of awareness program do you your organization while providing a schedules for testing, maintenance, provide employees? guide or standard for responding to any implementation and evaluation. potential issues.

Notes BACK TO COVER 1 “Top 5 cybersecurity facts, figures and statistics for 2018”

2 “Cyber Resilience Report 2017”

Trade Talk / may 2018 Edition 2 By Bill Graves Chief Technology and Data Officer

The Data Era: Seizing the Opportunity

In December 2017, you heard from CIBC Mellon President and CEO, Steve Wolff about our plans to take both our clients and our business into the data era. With the data environment rapidly expanding, we understand that our clients are looking to us to help them better capture, refine and leverage data for evidence-based decision-making.

In addition to our efforts to on-board new, flexible solutions to provide the enhanced data institutional investors are seeking, we’re committed to providing educational and support resources that will help faciliate the effective use of the data these solutions offer. Bill Graves is Chief Technology and Data Officer at CIBC Mellon. What is Data versus Information? Bill is responsible for leading Although many refer to data and Insights CIBC Mellon’s technology information interchangeably, we’re using mandate, which includes the terms to mean different but tightly overseeing our data strategy related ideas. Data is the facts or figures, and client technologies as for example, the number of trades, the information well as aligning CIBC Mellon’s cost, the time it took place. Information technology solutions with CIBC provides context for the data, for and BNY Mellon. Bill has 20 years example, the trade occurred at X time DATA of experience in the financial which resulted in X return. services industry. While stopping there is a great first step as you begin your data journey, further work with your data is required to glean actionable insights. Does knowing the number of trades and the time help you to understand that trade and take it a step further? Do you now have insight that allows you to take immediate action that will improve your business and inform future business decisions? For example, does that information allow you to identify optimal times to perform trades for maximum profitability for both your business and your clients?

Data Opportunities The International Data Corporation (IDC) has predicted that the world will be creating 163 zettabytes of data a year by 2025 . Further, the white paper predicts that enterprises will create 60 per cent of that data by 2025. Predictions like these highlight the importance for businesses to find opportunities and methods for ingesting, transforming, analyzing and consuming valuable data.

Here are some common data opportunities to consider: • Understand the value of data: Above and beyond the opportunity to better understand your business, the effective use of data can offer value from a variety of perspectives: -- Decision-making: For example, evaluating trends in the market, time of day, day of the week, cost and return, can potentially help identify the optimal times for executing trades or investing in assets. -- Affirm decisions: Data can enhance post-trade reflection, providing better BACK TO COVER demonstration to stakeholders that resources and investments were wisely allocated. The Data Era: Seizing the Opportunity

-- Gaining insights: Through analytics, data can be • Benchmarking: Another important opportunity data transformed to insights, which enable you to re-think provides is benchmarking; comparing your data to that of what you know and potentially re-direct your thinking your peers, competition, industry or similar businesses to or focus to a portion of your business you may not have better understand how you stack up and further identify identified otherwise. opportunities for improvement. • Opportunities for integrating data: Integrating data from the The Canadian Master Trust Universe3, a BNY Mellon Global Risk systems used across your organization can support a holistic Solutions (GRS) fund-level tracking service, is an example of a view of your business and identify new insights. For example, solution that is designed to help you make peer comparisons using your investor data in tandem with data assets from of performance by plan type and size. Encompassing 85 your CRM, market data, internal processing platform, call Canadian corporate, public and university pension plans with an centre and other systems can contribute to achieving goals average plan size of $2.8 billion, it can provide insight to better such as increased client retention and improved profitability. understand asset allocation trends and performance metrics. Complemented by its integrated performance solutions, • Establishing a data culture: With increasing access and BNY Mellon’s Asset Strategy View and Asset Allocation Trust availability to data, the need for people to gather and analyze Universe, GRS helps you compare, evaluate and understand the that data continues to increase. For some, this may mean a impact of your investment decisions. dedicated team of data scientists, while for others, it may mean bringing together employees from a range of disciplines In today’s environment, and the anticipated environment of the with particular interest and facility with data; or perhaps a future, using data to glean insights is what will separate the single employee with a flair for data, who plugs their analyses good companies from the great companies. Begin gathering into your organization as a whole. It’s important that there is the data, and find vendors and suppliers who can help you a focus on delivering the data broadly in a way that everyone effectively manage and use that data. Here are some of our tips in the organization can understand and use. Collectively, starting with the three questions below to develop your data you have a better opportunity to improve internal processes, strategy and take your business into the data era. develop new products and more.

Three Questions to Ask When Building Your Data Culture:

What are our goals/KPIs? – These must be specific, measureable, and achievable through the use of data. Think about how you are prioritizing your data initiatives – are you focused on improving operations, gaining oversight, 1 decreasing risk or optimizing investment performance? This extends to evaluating whether you have access to the data you need to achieve those goals.

How are you storing or how will you store your data? – This could be a variety or a combination of cloud-hosted storage, vendor-hosted, “Platform as a Service” or “Software as a Service” solutions, internal filing or storage 2 solution and many more. When choosing, think about whether the solution provides the access to data you need in a way that can be shared throughout the organization.

Who understands your data? – Again, whether this is a team or an individual, it’s important to have the appropriate structure in place – data governance – so everyone knows who is responsible for data, who can grant or provide access to data and who is leading the data strategy for your business. This person or team should also critically 3 assess the quality of the data you are receiving and understand how the individual teams and touchpoints are using data in their daily operations.

Notes:

1 “Actionable Insights: The Missing Link Between Data And Business Value”

2 “Data Age 2025: The Evolution of Data to Life-Critical”

3 “First Quarter 2018 Median Canadian Plan Sponsor Returns Remain Positive Despite Negative Canadian Equity Returns, According to BNY Mellon Canadian Master Trust Universe ” [Press Release]

Trade Talk / may 2018 Edition 4 By Darryl Horn Consultant, Global Risk Solutions Canada, BNY Mellon

A Note on Financial Statements: Simplifying the Disclosure Process for Pension Plans

With an abundance of data flowing through the investment landscape, the way it is received, used and reported is continually evolving as new investment opportunities, changes to regulations and demands for greater transparency can dictate how a data strategy is formed. These challenges are especially evident to pension plans around financial statement time.

The financial statement preparation process for many organizations is manual, and can often be very time-consuming. For pension plans that lack appropriate resources, producing statements entirely in-house can put pressure on the rest of Darryl Horn is a Consultant the business. Pension plans must also understand the regulations relating to the with BNY Mellon’s Global Risk notes and disclosures that must be presented within their financial statements, Solutions team in Canada. He such as investment classifications, expenses and various portfolio risks1. There is responsible for client use is definitely much to consider, and charting an appropriate action plan can be as and understanding of Global challenging as executing it. Risk Solutions products and Some plans have struggled through collecting and depositing information into reporting. Darryl has over 20 multiple spreadsheets, and then using those spreadsheets to develop notes and years of financial services disclosures manually. This process presents a few risks, including the potential for experience. errors and omissions, a strain on resources, and a lack of continuity year after year. Procedures used to produce notes and disclosures tend to change each year simply due to the lack of a documented, consistent approach, which perpetuates these challenges as organizations essentially start from scratch every time.

As a provider of accounting and reporting services to pension plans in Canada, CIBC Mellon has seen clients struggle through this process. CIBC Mellon can help. BNY Mellon Global Risk Solutions’ suite of services, developed by CIBC Mellon’s parent company, BNY Mellon, aims to transform complex investment data into meaningful information. Leveraging Global Risk Solutions provides pension plans with access to a variety of useful reporting options, including assistance with preparing financial statements with relevant and informative notes.

CIBC Mellon and the BNY Mellon Global Risk Solutions consulting team work collaboratively with clients to review past statements, discuss needs, and then use BNY Mellon’s interactive reporting to tailor data and information to address specific requirements. The solution also includes documentation that describes which notes and disclosures were included and excluded from the financial statements, and how they were produced, making it easier for clients to understand the process. Statement production is automated as much as possible, which provides clients with a consistent, repeatable method designed to reduce the risk of potential of errors, time constraints and continuity issues. The solution not only helps clients display information in a simple, easy-to-read manner, but also allows for more efficient production for future financial statements.

The tables on the next page offer a visual example of how notes and disclosure data can be dissected, computed and presented in a typical financial statement format. BACK TO COVER

Trade Talk / may 2018 Edition 5 A Note on Financial Statements: Simplifying the Disclosure Process for Pension Plans

Note 4b) Fair Value Positions

Note 6 C) Credit Risk

With investment data becoming more essential to the asset management process, and with unique challenges emerging as the investment landscape in Canada becomes increasingly complex, asset owners and asset managers are continually looking for the right reporting solutions. This is a trend that is likely to continue, but those who view it as an opportunity rather than a speedbump are better positioned to succeed.

Note:

1 “Disclosure Requirements for Defined Benefit Pension Plans,” Office of the Superintendent of Financial Institutions, October 2016

Trade Talk / may 2018 Edition 6 By Avery Shenfeld Managing Director and Chief Economist, CIBC Capital Markets

Friends With Fewer Benefits

Rising oil prices are a friend of the Canadian economy, with lots of side benefits even for those not working on a drilling platform. But today’s run to the $70/bbl range looks to be a friend with less generous benefits than usual.

For one, only some of this year’s run is tied to healthy global growth and its attendant support for Canadian non-energy exports. Signals on both the U.S. and Europe have been in line with our below-consensus global growth call. The upward revision to our Economic team’s average WTI price to roughly $65/bbl this year is rooted in a supply collapse in Venezuela. We’re assuming that sanctions are not reimposed on Iran, Avery Shenfeld is Managing and are skeptical that OPEC will continue to squeeze its output and drive prices still Director and Chief Economist at higher, since we’re now at levels where it opted not to do so back in 2014. CIBC Capital Markets. He has been Higher oil prices come at a time at which the central bank of Canada’s largest trading with CIBC since 1993 and is widely partner is judging just how much growth to sacrifice on the altar of higher interest recognized as one of Canada’s rates to keep inflation at bay. The Fed can look past energy-triggered inflation when leading economists for his the economy is soft, but has more reason to fear that wages will chase higher fuel perceptive analysis and insight on prices when labour markets are tight. economic developments and their implications for financial markets. The lessons of doing otherwise were seen in the last major run-up in inflation in the late 1970s. But leaning against the wind has its growth risks, which will impact Canada’s non-oil exports. The Fed’s tightening response to what was partially oil- induced inflation in the last business cycle was a factor in triggering the housing and financial downturn, although we don’t see that sort of overkill for now.

Some of the domestic economic benefits to Canada from firming energy prices also This article originally appeared in won’t be as apparent as they were in that prior cycle. For an oil exporter like Canada, Economic Insights, published by the hit to consumer spending power from higher pump prices is typically more than CIBC Capital Markets on April 30, 2018 countered by the spending by oil and gas companies on exploration and development.

But we’re much less likely to see those offsetting benefits, at least not as soon. Nat-gas prices remain weak. Crude producers are leery of expanding in Canada given pipeline uncertainties here, and a now-lighter tax and regulatory hand in competing U.S. jurisdictions. For the oil sands segment, high up-front costs for greenfield projects imply the need for more certainty on just how long today’s prices will persist.

While Statistics Canada’s survey would not have picked up the latest price upswing, it reported weak intentions for energy capital spending in 2018. Canada’s energy players will need more convincing that U.S. shale is hitting lasting roadblocks to growth, or that current prices aren’t reversed if the Iranian or Venezuelan uncertainties clear up favourably. A shiny new pipeline wouldn’t hurt either.

Sure, we welcome a return to near-$70 WTI, and it feels better than $40. But this isn’t the big win for the Canadian economy or our equities that it could be in other circumstances.

BACK TO COVER

Trade Talk / may 2018 Edition 7 “At CIBC Mellon, we are committed to our clients and to delivering outstanding service, operational excellence and continuous improvement. An important part of our ongoing efforts includes listening carefully to our clients and seeking input. As such, we maintain an open dialogue with clients to hear what continuous improvement and the overall client experience means to them.”

- Jeffrey Alexander, Vice President, Head of Relationship Management, CIBC Mellon

About CIBC Mellon

CIBC Mellon is a Canadian company exclusively focused on the investment servicing needs of Canadian institutional investors and international institutional investors into Canada. Founded in 1996, CIBC Mellon is 50-50 jointly owned by The Bank of New York Mellon (BNY Mellon) and Canadian Imperial Bank of Commerce (CIBC). CIBC Mellon’s investment servicing solutions for institutions and corporations are provided in close collaboration with our parent companies, and include custody, multicurrency accounting, fund administration, recordkeeping, pension services, exchange-traded fund services, securities lending services, foreign exchange processing and settlement, and treasury services. As at December 31, 2017, CIBC Mellon had more than C$1.9 trillion of assets under administration on behalf of banks, pension funds, investment funds, corporations, governments, insurance companies, foreign insurance trusts, foundations and global financial institutions whose clients invest in Canada. CIBC Mellon is part of the BNY Mellon network, which as at March 31, 2018 had US$33.5 trillion in assets under custody and/or administration.

©2018 CIBC Mellon. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Trust Company and CIBC Mellon Global Securities Services Company and may be used as a generic term to reference either or both companies. Products and services may be provided under various brand names and in various countries by subsidiaries, affiliates, and joint ventures of The Bank of New York Mellon Corporation where authorized and regulated as required within each jurisdiction.

The material contained in this document, which may be considered advertising, is for general information and reference purposes only and is not intended to provide legal, tax, accounting, investment, financial or other professional advice on any matter, nor to represent any contractual commitment, nor is it an offer or solicitation to buy or sell any products (including financial products) or services, and is not to be used as, or construed as, such. All products or services provided by any of CIBC Mellon, CIBC or BNY Mellon or parties related to them are governed solely by the terms of the written agreements they enter into in such respect, which do not include the material contained in this document.

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