Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

For the integrated oil and gas company of yore, downstream operations were something of a hedge. When oil supply gushed and prices fell, relatively stable refining and marketing divisions provided a countercyclical — and cash-generative — cushion. But the current refining slump, highlighted by TotalEnergies on Tuesday, alongside BP and Shell last week, comes at a time of softer oil prices, a double whammy for beleaguered oil majors. 

In part, lower refining margins reflect normalising conditions in the market after Russia’s full-scale invasion of Ukraine caused them to rise. Indeed, while refining margins have fallen about 50 per cent over the past year according to LSEG, they are back within historical ranges.

But this also highlights the fact that there is more than one sort of oil price slump. Refining margins are largely uncorrelated to oil prices when these fall because of excess crude supply. When the problem is wilting demand, that reduces the utilisation of refining capacity and hits downstream margins too.

That is a reasonable description of where we stand today. Oil demand growth has been underwhelming, likely to average less than 2mn barrels a day over 2024 and 2025. Meanwhile, new refineries are being built, mainly in the Middle East and Asia. These will add 3.9mn b/d of refining capacity by the end of 2025, according to Christopher Kuplent at Bank of America.

The net result is that about 2mn b/d of capacity globally will probably come under pressure to halt production. It is a fair bet that these facilities will be concentrated in Europe, which has the oldest plants and the highest energy costs. The process has already started, with BP and Shell planning capacity closures in Germany. Grangemouth, in Scotland, is also slated for the chop.

Should refining spew out more bad news, European majors will not be equally affected. Many have reduced their footprints over time. Indeed, refining was only just over 10 per cent of group ebitda last year for BP, Total and Shell. Others remain more exposed. At Repsol, for instance, refining contributed more than 30 per cent of ebitda, according to BofA’s calculations. That points to a potential pain point.

The downturn in European downstream is a long-term trend, which will not be helped by the green transition. The continent’s oil and gas companies may be hoping that an — as yet unseen — pick-up in demand delays the day of reckoning. Should that come courtesy of ever-lower oil prices, however, the impact on group revenues would be greater still. They should be careful what they wish for.

camilla.palladino@ft.com

Facing a lawsuit can present significant challenges for any business, potentially leading to financial ruin and reputational damage. Implementing preventative measures is the key to shielding your company from legal action. This requires an understanding of areas of vulnerability and acting proactively.

Legal documentation stands at the forefront of business protection. Well-drafted contracts ensure that all parties understand their obligations and rights, thus reducing the risk of disputes. Furthermore, regular consultations with a legal expert can keep your company policies updated and compliant with current laws.

Employees also play an essential role in maintaining a lawsuit-free environment. Adequate training and a clear understanding of company policies foster a workplace culture that respects the law and emphasizes ethical behaviour. By addressing these critical areas, businesses can significantly decrease the likelihood of facing unwanted legal challenges.

Understanding Legal Risks in Business

Businesses encounter various legal challenges that require careful navigation. Identifying potential threats and knowing common missteps can help companies mitigate risks effectively.

Types of Lawsuits Businesses Face

Businesses can face several types of lawsuits. Breach of contract occurs when one party fails to fulfil contractual obligations, leading to legal disputes. Companies may also face employment-related lawsuits, such as wrongful termination or discrimination claims. Intellectual property infringement is another risk businesses encounter, involving the unauthorized use of trademarks or copyrights.

Negligence claims can arise if a company fails to provide a safe environment for customers or employees. Consumer protection lawsuits may occur if products are deemed defective or misleading. Each of these lawsuits can lead to significant financial and reputational damage. Consulting with a business attorney can help in preemptively addressing these legal threats.

Common Legal Mistakes Companies Make

Businesses often make legal mistakes that can result in lawsuits. Failing to document agreements properly is a frequent error that can lead to misunderstandings and disputes. Companies might neglect compliance with employment laws, including wage regulations and workplace safety standards, risking regulatory actions.

Mismanagement of intellectual property is another common mistake. Businesses sometimes use trademarks without proper authorization, inviting legal issues. Ignoring cybersecurity, with inadequate protection for customer data, can result in privacy violations. Inappropriate responses to legal actions, such as delayed engagement with legal counsel, may exacerbate the situation. Being proactive and engaging a competent business attorney can prevent many of these issues.

Preventive Legal Strategies

Navigating legal complexities is crucial for business longevity. Identifying and mitigating potential legal risks can save time and resources. Businesses can focus on strong contracts, regulatory compliance, and intellectual property protection to avoid lawsuits.

Implementing Strong Contracts and Agreements

A robust contract serves as the backbone of any business relationship, outlining the rights and responsibilities of each party. Effective contracts should be clear, comprehensive, and drafted with the assistance of a competent business lawyer in Pittsburgh, or wherever the business operates.

Businesses must ensure contracts are tailored to specific needs, avoiding generic templates that may miss critical clauses. These documents should cover key elements such as payment terms, delivery timelines, dispute resolutions, and confidentiality agreements.

Engaging in regular reviews and revisions of contracts can prevent misunderstandings and legal vulnerabilities. A legal expert can help spot potential issues and make necessary adjustments, ensuring that the contracts remain compliant with current laws and regulations.

Maintaining Regulatory Compliance

Staying compliant with industry regulations is essential to avoid costly lawsuits and penalties. It involves understanding and adhering to legal requirements relevant to the business sector, which may include environmental laws, labour laws, or data protection regulations.

Businesses should develop a compliance program that includes regular audits and training sessions. This keeps staff informed about legal obligations and ensures that processes align with regulatory standards.

Business lawyers can offer guidance on regulatory changes, helping businesses adjust policies and operations accordingly. They can also assist in drafting internal compliance manuals that detail every requirement, providing employees with easy access to necessary information.

Protecting Intellectual Property

Safeguarding intellectual property (IP) is vital for maintaining a competitive edge and preventing misuse. Various forms of IP, such as trademarks, patents, and copyrights, require different protections and registrations.

Businesses should conduct regular IP audits to identify and document all intellectual properties. Registering IP with the appropriate authorities ensures legal protection, making it easier to enforce rights if needed.

A knowledgeable lawyer can assist in conducting these audits and filing registrations, protecting brand identity and innovation. Businesses also need strategies for monitoring any unauthorized use of their IP, which may involve setting up alerts or subscribing to monitoring services.

Handling Lawsuits Effectively

Managing legal challenges is crucial for any business. Partnering with a skilled attorney and making informed choices about settlements are among the strategies to handle lawsuits effectively.

The Role of a Business Attorney During Litigation

A business attorney is vital in navigating the complexities of litigation. They provide expert guidance in assessing the merits of a claim and outlining potential defences.

Their expertise helps in gathering and preserving evidence, preparing legal documents, and ensuring compliance with court procedures. They also communicate with the opposing party to explore potential resolutions. By maintaining a strong understanding of applicable laws, a business attorney can offer strategic advice that minimizes risks and potential liabilities for the business. Engaging an attorney early in the process can be instrumental in achieving a favourable outcome.

Settlement Considerations and When to Fight a Claim

Determining whether to settle or litigate depends on several factors. Settlement may be beneficial when it offers a quicker resolution and lower costs compared to prolonged litigation.

Factors such as the strength of the evidence, potential damages, and reputational impacts should be assessed. Engaging in negotiation with the other party can sometimes lead to mutually beneficial solutions. When the claim lacks merit or if a win could deter future lawsuits, opting to contest the claim may present advantages. Each case requires a tailored approach, weighing costs against benefits effectively, often with the guidance of a skilled attorney.

Financial Management and Insurance

Effective financial management and comprehensive insurance coverage are critical in safeguarding a business against lawsuits. Identifying suitable insurance policies and managing financial risks can greatly reduce potential liabilities.

Securing Adequate Insurance Coverage

Insurance is a crucial shield against business liabilities. Businesses should invest in General Liability Insurance to cover legal fees, settlements, and medical expenses related to third-party injuries or property damage. Additionally, Professional Liability Insurance addresses errors, omissions, or malpractice claims. Business Interruption Insurance protects against revenue loss in crises.

Evaluating the specific needs of the business is essential. Depending on the industry, other policies like Product Liability Insurance or Employment Practices Liability Insurance may be worthwhile. Consulting an insurance expert ensures that coverage is comprehensive, aligning with the business’s risk profile.

Managing Litigation Costs and Financial Risks

Managing litigation costs requires a strategic approach. Establishing an emergency fund ensures immediate access to funds if legal issues arise. Analyzing financial statements helps identify trends and potential vulnerabilities.

Implementing risk management strategies reduces exposure to legal threats. Companies should regularly review contracts and compliance with relevant laws. Investing in legal counsel or risk management software aids in identifying and mitigating financial risks efficiently.

Regular audit processes can uncover and address financial weaknesses promptly. Diversifying assets and implementing strict financial controls further bolster financial resilience. By proactively managing litigation expenses and financial obligations, companies can maintain stability amidst legal challenges.

Good morning from Edinburgh, where people are still digesting the shock news of former first minister Alex Salmond’s death from a heart attack, aged 69.

Difficult times ahead

A domineering presence, who brought Scotland to the cusp of independence in 2014, he divided opinion as much as he formed it over decades. The tumultuous falling out with his protégé and successor as first minister, Nicola Sturgeon, gave us Scotland’s highest modern-day political drama.

Sparked by 13 counts of sexual misconduct, from which Salmond was acquitted, his subsequent legal action against Sturgeon’s handling of the case won him damages for “apparent bias”. His family could pursue the further legal action that he had said would deliver “a day of reckoning”.

That would heap yet more pressure on to the Scottish National party, which he led for 20 years over two stints, and was routed by Labour in this year’s general election.

The spotlight on his legacy of dragging nationalism from the fringe to the mainstream comes as many observers believe the cause has been set back for a generation, if not longer. While almost half of the country still supports exiting the UK, independence is low on voters’ list of priorities, trailing behind delivery of public services and economic growth — the priorities now pledged by John Swinney, SNP leader and first minister of five months’ standing.

“What we are seeing is the SNP recognising that independence is off the agenda and the great pretence that another referendum was just round the corner was pure fantasy,” said James Mitchell, professor of public policy at Edinburgh University. “Salmond’s legacy may be — emphasise may be — to show what might be achieved, to give the SNP hope even in the difficult times ahead.”

The scandal-strewn party is battling multiple fronts on competence and probity: budget cuts are piling further pressure on to underperforming public services, with tough choices limiting room for manoeuvre that could narrow after the UK Budget later this month. Each week brings more data that opposition parties utilise to paint the SNP government as incompetent. Earlier this year, Sturgeon’s husband, Peter Murrell, was charged in connection with the alleged embezzlement of funds from the Scottish party. The investigation still overshadows the party’s reputation.

Indeed, Peter Mandelson, after delivering think-tank Reform Scotland’s inaugural lecture last week, said of the SNP: “Forget them, they’re gone.”

The former Labour cabinet member went on:

In my view there has been a profound structural shift in Scotland — people have reached a settled view about the SNP and are now interested in looking at alternatives, and that is where Labour has to step up.

Yet Swinney remains “very optimistic” he can win the 2026 Holyrood elections and secure a fifth term in office for the SNP, the first two of which were delivered by Salmond.

Salmond’s death means Scotland will not see his promised return to the campaign to revive the flagging fortunes of his splinter pro-independence party, Alba, which he formed after his split from Sturgeon. While questions lingered over his electoral appeal, his contribution to the national debate over the energy transition to independence strategy, is no doubt a loss.

But it is Labour’s travails south of the border, from the winter fuel payment to freebie scandals, buoying Swinney’s spirits. With a wry smile, he last week described Starmer’s first 100 days in office as far from “plain sailing”.

In the aftermath of the July landslide, Labour figures north of the border were salivating at the prospect of ousting an unpopular SNP government that would by then be seeking a third decade in power. “We were pretty excited back then, but it’s looking a lot tougher now,” said one Labour strategist.

Post-election polling has seen Scotland following a similar path to the rest of the UK in light of Labour’s struggles. Scottish Labour has fallen behind the SNP in vote share and seat projections, said pollster Mark Diffley.

Scotland’s proportionate voting system militates against single-party majorities — the only one in Scottish parliament history was secured by Salmond in 2011 — and this time Holyrood voters will not be focused on removing an unpopular Tory government from Westminster. And it is all happening within 18 months, rather than Starmer’s four-year horizon to regain support.

“The first 100 days of the Starmer government should act as a warning sign for Labour that the path to Bute House is one which is much trickier to negotiate than they might have appreciated,” Diffley said.

Know someone who would enjoy our newsletter but are not yet subscribed to the FT? They can get a separate Inside Politics subscription. First 30 days free here.

Now try this

If you want more erudite analysis of Scottish politics, download the Holyrood Sources and Ponsonby and Massie podcasts.

Economics editor Sam Fleming is up next on Inside Politics to discuss the launch of the FT’s new chancellor game. Have a go at masterminding your own UK Budget here.

Top stories today

• Summit borrowed, summit blues | Attendees of the UK investment summit yesterday expressed both praise and doubt as Starmer pledged his government would return the UK to its former status as “an open, outward-looking” nation and “rip up” bureaucracy. Last year, then prime minister Rishi Sunak held his own investment conference. “We only gathered 10 months ago for the same event, and the agenda is almost identical,” one businessperson said.

• Chancellor cuts NWF | Rachel Reeves has cut the new money she is investing into the UK’s National Wealth Fund by a fifth, despite the government emphasising the importance of extra investment in the green economy. 

• Wage growth slows | UK wage growth fell to 4.9 per cent in the three months to August, while growth in payroll employment flattened, official data showed today.

• Bringin’ it back | The attorney-general for England and Wales has pledged to reestablish the UK as a global leader on the rule of law, criticising the last government for “undermining” Britain’s reputation both at home and abroad.

• Labour donor in Tortoise talks | Tortoise Media is in advanced talks to raise funds from Gary Lubner, the South African businessman and major donor to the UK Labour party, ahead of the online start-up’s proposed takeover of the Observer.

Apple’s iOS 18 has just dropped and, with it, a major upgrade that could make Siri smarter than your average human — or at least better at answering questions.

Dubbed Apple Intelligence, this new suite of artificial-intelligence (AI) tools promises to turbocharge the iPhone with features powered by ChatGPT.

The iOS 18.1 update introduces advanced features, such as improved writing tools, suggested replies in Messages, email summarisation and phone-call transcription.

Apple has hinted at even more exciting updates down the road. Think custom emojis and even deeper Siri integration with your calendar, photos and messages.

Fintech isn’t magic. Establish a ‘chief AI officer’ role in your business

Imagine asking Siri when your mum’s flight is landing and it knows right away. No more hunting through emails.

So, what can our industry learn from this new wave of smartphone generative AI?

1. Forget tech stacks; build an ecosystem

Apple Intelligence will offer more extensive and seamless integrations, data intelligence and analytics than before, with users able to access this across all the apps they employ.

Where financial services are concerned, it’s time to stand tall against legacy tech that does not deliver streamlined integration. We need integrations that facilitate accurate and high-quality data reporting across all stakeholders.

Remember that new technology comes with its fair share of quirks

With a data-led Financial Conduct Authority armed with the Consumer Duty, tech firms are front and centre in the distribution chain and cannot be seen to be a barrier to advice firms’ assessment and reporting on client outcomes.

Synthetic data lakes must be made available by tech providers so firms can gain access to pooled client data. Without this, we are stuck with Band-Aid solutions not fit for purpose and are in for a rude awakening with blockchain, tokenisation, smart contracts and Web3 expansion just around the corner.

2. Privacy matters

Apple has been banging the privacy drum for years and, with Apple Intelligence, it’s sticking to its guns.

The good news? Most of the AI processing will happen directly on the device, keeping data safe — or so Apple says. If Siri can’t answer a question, it may reach out to Apple’s servers or ChatGPT, but not before anonymising and encrypting data.

It’s time to stand tall against legacy tech that does not deliver streamlined integration

It’s not all sunshine and rainbows, though. Some features, such as enhanced Siri capabilities, require more data access. Apple could be reading your messages, tracking your calendar and even recording your calls (with permission, of course).

On this, advice firms need to ensure they have a robust due-diligence, governance and oversight process. Enforce a strong AI code of conduct and make sure AI ethics is front and centre of all implementation and ongoing services.

3. Roll with the glitches

Remember that new technology comes with its fair share of quirks. Apple chief executive Tim Cook even admitted that Apple Intelligence might have a few hiccups — or “hallucinations”.

We all know that fintech isn’t magic, so we need to ensure we have the right people, in the right roles, with the right skillsets. Establish a ‘chief AI officer’ role in your business — even if that’s outsourced — as well as an AI champion and/or data scientist who knows how to deploy and monitor AI.

4. The showdown

One of the most exciting aspects of Apple Intelligence is its ChatGPT integration. Siri will be your first stop for questions but ChatGPT will swoop in to save the day if it’s out of its depth.

Enforce a strong AI code of conduct and make sure AI ethics is front and centre of all implementation and ongoing services

The approach at many fintech firms works in reverse. We engage generative AI first to automate a response for our compliance chatbot, client file review or client document audit. But, given the potential for “hallucinations”, rules are built in by our compliance team to ensure they are caught, eliminated and replaced by accurate regulatory information.

Final thoughts

Apple Intelligence will revolutionise the way we use our iPhones, making them more helpful and intuitive.

We need to ensure we have the right people, in the right roles, with the right skillsets

For the planning profession, AI should be considered a great leveller, increasing efficiency across key activities such as client engagement, servicing, reporting and compliance, as well as providing significant cost and time savings.

Chris Davies is founder and chief executive of Model Office

This article featured in the October 2024 edition of Money Marketing. 

If you would like to subscribe to the monthly magazine, please click here.