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Hedging Corporate Currency Risk gets a Boost with 21Strategies

Yvonne Hofstetter, CEO & MD, 21strategies GmbH

Hedging Corporate Currency Risk gets a Boost with 21Strategies

An effective team player, with varied experience in distributed intelligent systems, international corporate law, compliance/tax law and accounting, Yvonne Hofstetter has been a trend setter in the field of Artificial Intelligence (AI). An ardent reader, Yvonne is also a published author. Her best-selling non-fiction books on the political impact of AI, including the End of Democracy, the Invisible War, and They know everything earned her some rave reviews.

Her in-depth operational skills with operating autonomous algorithmic trading systems for international currency markets, coupled with expertise in currency exposure management, has given her an edge in the industry.

As an industry expert, Yvonne believes that Next-gen AI is a cognitive machine which is able to autonomously make optimal decisions in complex situations.  As the CEO & Co-Founder, MD, 21strategies GmbH, a B2B deep tech company, she is at the helm of affairs. She speaks on an array of topics – from the growth for enterprises across industries to AI’s impact on hedging corporate currency risk, from the conception of 21strategies to the pandemic effect on the industry. Excerpts from the interview:

Conception of 21strategies GmbH

21strategies is a B2B deep tech company that aims at transforming how organizations make tactical and strategic decisions. Noting that the company also focuses on the defense domain, Yvonne observes that the founding of the company can be traced back to when the governmental defense budgets were reduced after the fall of the Berlin wall. “This led to Wall Street absorbing mathematicians and physicists who worked for defense earlier. “As ‘quants’, they reigned Wall Street. My team was part of this movement – we provided AI for the back then largest pure US currency hedge fund.”

When Big Tech started to acquire AI companies in 2013/14, the civil sector understood that AI formerly built for the defense sector would proliferate to the benefit of businesses, too. “It was Google’s AI strategy which finally spurred the broader acceptance of AI. Before that, a typical European corporate was hostile to AI.” She also points out that the financial crisis of 2008/9 was a decisive point. “My team researched how a cognitive machine would serve the treasury departments and in-house banks of large corporates rather than the financial services industry with their cluster risk. After piloting HEDGE21, the company’s flagship SaaS product, in a field test, with a German commercial bank, 21strategies formally took shape and funded during the first COVID-19 lockdown in March 2020. One year later, we are revenue-effective and seek to grow.”

The Flagship Solution – HEDGE21

The company’s flagship AI ‘HEDGE21’, is a cognitive machine, that fuses external data and information from the markets with company-internal processes and constraints to compute the optimal hedging strategy under uncertainty. It acts as a tool for better decisions to hedge currency exposure. “To the corporate treasurer, HEDGE21 looks like a virtual assistant. It’s interesting to observe that some human treasurers want to compete with the machine – and recognize that they cannot beat the ‘chess computer’ or the ‘Google AlphaGo’ built for the real world.”

HEDGE21 has two components: An algorithmic prognosis predicting how the market for a certain currency or commodity will evolve. “This multi-sensor data fusion resembles a weather forecast model and is forward-looking between 5 days and 6 months. It connects with reliable data providers such as Refinitiv/Reuters and Bloomberg for quantitative data, but also fuses behavioral finance or other qualitative data to gain situational awareness.” The second component is the decisioning algorithm – this is 21strategies’ completely proprietary tech stack, adds Yvonne.

HEDGE21 can be operated as stand-alone system completing the treasurer’s IT ecosystem of ERP systems and electronic trading venues. Once fully connected at both ends, the hedging process becomes fully automated with man-on/out of-loop. In contrast to solutions provided today, HEDGE21’s automation is a smart and adaptive closed-loop control cycle rather than an old-style rule-based process automation.

Pandemic’s Effect on Hedging Corporate Risk

The COVID-19 pandemic is also owed to the dynamics of a highly connected global world, according to Yvonne. “As we proceed with digitalization and the hype-connectedness of the ‘Internet of Everything’, we even further increase the dynamics and complexity of our lives. In such complex dynamic environments occur decision-making situations in which a future state cannot be predicted with certainty. This imposes new risk on businesses”, observes the entrepreneur. Corporates have multiple options moving forward into the future, depending on varied factors like volatility, uncertainty, and ambiguity of the markets. “An example is the hedging of currency exposure – when, at which price, and how much of a foreign currency risk shall an international corporate hedge to protect their operational margin from adversarial price moves of currencies. Next-gen AI is a cognitive machine which is able to make optimal decisions under uncertainty – can be of great help here.”

Case Studies:

Case study 1: HEDGE21 extends its supports to steel traders in two aspects. First, it makes decisions as of when and how to hedge physical steel transactions profitably with steel derivatives at metal exchanges. Thus, it supports the steel trader managing flat price risk in financial markets. Secondly, steel traders use it to understand the market dynamics of the steel price evolution to find the best timing and sizing of a physical steel transaction, reducing their flat price risk. HEDGE21 protects the margin of physical steel trading against spread risk, thus helping it make better steel procurement decisions.

Case Study 2: To smoothen EBIT oscillation from currency swings, a stock-listed chemical company manages their USD receivables using HEDGE21 – a rolling portfolio of $60 MN. USD exposure is handed over to HEDGE21 at the first day of a quarter and then managed profitably by the machine until the hedging period ends on the last day of the quarter. “While HEDGE21 observes the company’s process constraints such as passive investing vs. active investing, hedge policies, maturity dates, benchmark, time to go or P&L made, as well as the actual market situation, once every day during the hedging period it computes the best hedge ratio for the exposure, eventually corrects an earlier decision to amend the hedge to the market situation and alerts the trading desk, which decides whether to follow the machine’s advice or not.”

Leadership Traits

“Being leader means serving my company and its stakeholders for me. I consider myself being a conductor of my team, and I lead co-operatively. As a CEO, I need to delegate and share power. This requires that I put trust in good staffers and turn them loose to contribute to 21strategies’ corporate goals.”

Awarded a renowned German political award for outstanding democratic behavior, Yvonne feels she is a responsible employer and a lawyer. She upholds her ethical concepts and norms, and as honorary professor for digitization and society, she also trains her students accordingly. “I am pretty fearless –risk-taking and testing limits. That was already the case when I was a child. It is character more than education. And I am a hard worker.”

A Word of Advice

“Time is a big issue for startups. Usually, things take much longer than expected. B2B startups need time to fulfill procurement requirements. Their clients need time being convinced of a new offering. Revenue is being realized later than planned. Fundraising takes time, while liquidity melts down. Liquidity becomes an issue when the time risk homes in.”

Rather plan for a startup marathon than a sprint, and act, accordingly, advises Yvonne. If a startup relies on an equity investor, the investor should be of good fit, as the parties will be coupled for some years. A startup should do a proper due diligence of a potential investor. It is of importance that the investor’s fund maturity is not looming in the short-term; this will put time pressure on the startup to make an early exit.

The Success Mantra

“Once an entrepreneur – always an entrepreneur. This is decision-making under uncertainty at its best: You choose the entrepreneurial path, which is almost a decision for life.” Being leader means to me: serving my company and its stakeholders. What it is not to me: a status symbol. I consider myself being a conductor of my team, and I lead cooperatively. As a CEO, I need to delegate and share power. This requires that I put trust in good staffers and turn them loose to contribute to 21strategies’ corporate goals. Specific female properties which deem women being “better” or “different” CEOs I do not see. Personally, I am not more emotional or understanding or cooperative than my male colleagues. However, I love complementing my male colleagues. They have their capabilities, I have others. Together, we are a winning team.”

If leaders developed an attitude that there is greater meaning of life than mere economic success or failure, this has a two-fold effect. First, it makes leaders more risk-taking – which is generally good for today’s societies which must develop a different stance to risk and, consequently, to innovation and startups. European societies are too much pampered by Big Government, and too many people rely on the state being their problem-solver. That’s an unhealthy development. Second, it comforts leaders after a failure. Life does not come to an end only because we failed. Failure will open new perspectives and options. Life goes on despite a failure, and it has many beautiful offerings: the family, the nature, the human intellect, or even religion. You name it. Find one, exercise one, trust it – then stand up and move on.

Journey with AI

“People are skeptical of the superiority of cognitive machines in certain domains. Some even doubt that such a class of machines exists; but then they never studied the development programs of the military-industrial complex all around the world.” Everywhere this class of machines is being developed – or learned or trained – today. Doubtful customers – the mainstream or laggards – are still not the clientele for cognitive machines today, observes Yvonne.

She adds that corporates are very open to the deployment of cognitive machines when they have strategic pressure. They rely on a machine that secures their margins or gives them a competitive edge that is directly reflected in the corporate’s finances. “But even innovators and early movers need to trust such a class of machines first. You only gain trust over time. Time plays a big role here. You have to plan for sufficient test time for man-machine teaming.”

Company: 21Strategies

Website: www.21strategies.com

Management:  Yvonne Hofstetter, CEO & MD

Founded Year: 2020

Headquarters: Hallbergmoos, Bavaria

Description: 21strategies is a B2B deep tech company aiming at transforming how organizations make decisions under uncertainty by providing them with Enterprise AI which navigates their complex and volatile real life risks.

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MemryX: a new Edge AI startup that has developed a highly efficient and scalable AI accelerator.

Keith Kressin, President & CEO, MemryX

MemryX: a new Edge AI startup that has developed a highly efficient and scalable AI accelerator.

As the CEO of MemryX, Inc., an innovative Edge AI startup founded by professors at the University of Michigan in Ann Arbor, Keith Kressin has been a passionate entrepreneur. Prior to joining MemryX, Keith was a SVP at Qualcomm, leading a spate of activities including the Snapdragon roadmap, technologies for application processing, company strategy, competitive analysis, and more. In an interview, he speaks on an array of topics. Excerpts:

Conception of MemryX

“Our team wanted to develop an AI accelerator that was customer friendly in terms of ease-of-use and scalability, while providing excellent technical metrics.” Adds Keith that the team wanted to develop a hardware accelerator that could be adapted to any trained AI software model, rather than needing to train and then modify the model to run well on target hardware. “So our focus from the start was on developing technology to meet a key customer need and hence MemryX was born.”

Challenges galore – AI technology

AI continues to grow in a variety of different applications and industries as it is used to make cities, companies, and hospitals smarter, help increasing manufacturing efficiencies, better support education inside and outside the classroom, and more.  “AI can add a layer of intelligence into any device that computes. Of course, every new technology is just a tool and those tools need to be used to increase to increase productivity and quality of life, rather than the limit freedoms or increase natural biases.” MemryX envisions accelerating Edge AI by providing a highly efficient and scalable solution that is simple to deploy and support.”

The key is the company’s innovative MemryX architecture.  “Our architecture was designed to natively support pre-trained AI models with high efficiency and utilization.  If one doesn’t consider model structures and framework, and only focuses on HW efficiency the result is theoretically strong, but practically weak.  MemryX architecture was designed not for white papers or theoretical achievements, but for broad customer scale and deployment.” The combination of at-memory computing, pure dataflow, and our unique memory-based fabric interconnect all support our ability to scale verified models into high volume with a very simple to use software SDK.

One trap for AI is focusing on the core technology itself, rather than the practical application of that technology throughout the entire value chain.  As in most industries, solving customer needs be in the forefront. AI is extremely complex with many facets.  It is also very exciting and dynamic field that attracts individuals with a wide variety of background and skills. The key is to stay focused on the larger picture while being extremely adaptable to market and technology changes.

Leadership traits

“It all starts with clear and transparent organization & communications.  People need to understand objectives, timelines, and be given the tools/resources to achieve well defined goals.  Teams need to be encouraged to be open and honest.”  Realistic, approachable, in-tune with all functions of the entire organization, humble, goal-centric, empowering, and one who honestly cares about the company, the team, and the individual. Keith’s leadership style is approachable with realistic expectations and stays in-tune with all functions of the entire organization. He honestly cares about the company, the team, and the individual.

“Fear in failing is usually rooted in the reaction to the failure in terms of embarrassment or punishment. However, if leaders encourage an intelligent risk-taking culture where we learn from our failures, then we grow to become a stronger organization. Further, failures from risk-taking can be minimized through proper hiring, organization, funding, and goal setting.”

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RAIN Defense + AI: Creating synergies between AI and defense sectors

Norine MacDonald KC, President & Founder, RAIN DEFENSE + AI

RAIN Defense + AI: Creating synergies between AI and defense sectors

Norine MacDonald is the President and Founder of RAIN Defense + AI, an exciting new global platform on AI and Defense. She was formerly President and Founder of The International Council on Security and Development (ICOS), an international security and development think tank founded in 2002. Ms MacDonald is a former Distinguished Research Fellow for National Defense University in Washington and a graduate from Massachusetts Institute of Technology Sloan School of Management program in Artificial Intelligence (AI). In an interview, she speaks on an array of topics. Excerpts:

Conception of RAIN Defense + AI

For Ms Norine MacDonald it is clear that the business of war is being overtaken by the advent of AI, and a competitive and fast-moving global environment. Western governments need to be competitive with other countries, primarily China, that have been investing heavily in the sector.

The AI + Defense sector offers significant investment opportunities, particularly for non-traditional business players. The global AI + Defense market is projected to grow to $61 billion by 2027.

“There is no specialized single company or platform for the AI + Defense sector to source comprehensive, intelligible and relevant knowledge/data and connect to all the players globally” said Ms Norine MacDonald.

RAIN Defense + AI is an exciting new venture working at the critical intersection of AI and Defense:

  • RAIN INDUSTRY provides access to expert knowledge and data analytics on current and emerging AI technologies on defense platforms for all market participants across sectors and geographies.
  • RAINCLOUD creates a global community content platform with a validated network of multidisciplinary professionals, with curated data and news and product info in AI and defense.

RAIN, the AI and defense solution: the RAINCLOUD global platform

To understand and unpack the complex world of AI and defense, RAIN  produces commercial INDUSTRY Reports which provide:

  • benchmarking  various defense sector platforms and AI, along with trends and forecasting.
  • complete information “Who’s Who” data on individuals working in the field of AI and defence.
  • a data and directory on Venture Capital players active in AI and defense. Norine says: “We have mapped the 500 most influential individuals in the US in our RAIN 500 and we have done an extensive report on the 40 main venture capital firms in the US and the 150 defense and dual-use startups they invest in.”

As a gateway to RAIN Research data and content platform RAINCLOUD will be launched in 2023.

“For RAIN, our access to government clients has been made much easier through our business connection as a data provider with Grist Mill Exchange, which functions as a data marketplace for government and national security enterprises. Through Grist Mill Exchange we will be able to provide our INDUSTRY reports to  government stakeholders and to onboard them to the RAINCLOUD global platform where they can connect with  AI startups, venture capitalists, defense companies and scientists working in the broad field of AI and defense.”

AI and Defence: a new Ethical Challenge

“AI solutions in defense are now more than ever driven by the commercial sector and dual-use technology. While onboarding such technology in the military world is revolutionary in terms of competitiveness, we cannot ignore the important ethical questions inherent in their adoption.”

AI enables unprecedented opportunities for more autonomy, and this changes the human-machine interaction. Therefore, we decided from the beginning that RAIN would also have an Ethics Division, which helps unpack the ethical and legal arguments involved and supports discussion and debate on these issues, she observed.

Leadership Traits

“The RAIN team has been working together for more than 20 years on international security and policy issues in Afghanistan, Latin America and the Middle East. To launch a new company requires both creativity and stamina. We are lucky to have a close-knit team that works well both independently and together.” Norine believes in having a hands-on approach to the work in the sense that she involves herself in the conception, research and implementation of projects, from field work in conflict zones contexts to testifying at the highest levels of government. “If you have a good business idea stick to it –  but at the same time be flexible and adapt as you go along. Hard work, high standards and discipline will never fail.”

AI, the Defense sector and start-ups

In the AI and defense sector, there are exciting new companies developing defense and dual-use technology. These start-ups benefit from new ways to work directly with the government to develop and test their prototypes. At the same time, there are new venture capital firms that focus especially on defense and national security-oriented startups.

“We want to bring all these actors together on our RAINCLOUD platform for mutual benefit. Companies will be able to showcase their latest products and services in our virtual trade show”, MacDonald said.

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Optimizing Industrial Business Processes with AI

Rudolf Felix, CEO, PSI FLS Fuzzy Logik & Neuro Systeme GmbH

PSI FLS Fuzzy Logik & Neuro Systeme GmbH: Optimizing Industrial Business Processes with AI

Rudolf Felix is the CEO of PSI FLS Fuzzy Logik & Neuro Systeme GmbH, a German company that specializes in developing and providing software solutions for complex technical systems. Rudolf Felix has been with FLS in the PSI Group since 2008 and has been the CEO since already 1992. Under his leadership, the company has grown to become a leading provider of software solutions for technical systems, particularly in the fields of energy, industry, and transportation. Rudolf Felix has also been involved in various research and development projects related to fuzzy logic and artificial intelligence and has published numerous papers in these fields. In an interview, he speaks on an array of subjects. Excerpts:

Conception of PSI FLS Fuzzy Logik & Neuro Systeme

Says Rudolf that making decisions is crucial for successful and efficient operation in every industrial business process. Decision-making processes that are based on business goals must reflect both long-term strategies and the current operational situation. If the decisions are based on data and the pros and cons between the business process goals are machine evaluated, machine learned and optimized, business process owners and operators get the best possible benefit. “An optimized and explainable decision support is particularly helpful here. And this is exactly what PSI FLS and the specially developed Qualicision AI technology is all about. It combines both technical and economical business goals. An efficient, easy-to-use, and explainable software that is used for business process optimization is what we deliver. It is data-based, and balances out conflicting business process goals ahead of classic algorithms and provides for the performance that our customers across many industrial sectors appreciate.”

AI- Challenges galore

According to Rudolf, many of the industry’s industrial AI use cases have long been developed and in use. Perhaps in the pandemic time, the constant work with computers at home is an additional momentum. “But in my view, business processes in industry have evolved in their objectives rather because of the growing importance of topics such as digitalization, exploitation of data, sustainability and green energy or new possibilities to integrate automatized decision-making in context with many new important aspects in business processes. Therefore, the complexity of the processes has rather increased.”

PSI FLS Fuzzy Logik & Neuro Systeme AI solution

Qualicision AI stands for qualified support with decision-making when optimizing business processes. Qualicision technology was originally based on fuzzy logic which has been extended by a full stack of AI methods that combines the advantages of all of them. In this combination Qualicision AI helps to integrate decision-making expertise of people with business process know-how and connects it with data-driven AI. In addition, the Qualicision AI software has been extended by highly automated deployment. Machine-learned explainability mechanisms are part of it, too. In business processes there are a lot of pros and cons when decisions must be made. Therefore, uncertainty is intrinsic even if all data is clearly measured and in good shape. Automated recognition of these kinds of uncertainty, in particular stemming from the variety of the data and interaction between decision options, is extremely important. “Our Qualicision AI based tools help to identify and to exploit tolerances in the business processes and to optimize out uncertainty. Many use cases show that once Qualicision AI is introduced the business process efficiency increases by 10 to even 25 percent compared to the previous unoptimized status quo.”

Leadership traits

Trying to get inspired from people for whom and with whom you work and trying to inspire them, too. Everything else is the right technology you must have and the passion to work with it.  “When you work on something with passion, the thought of possible difficulties is more of a drive. This is especially true when you are working on the implementation of something you have been involved in from the beginning on.”

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