Blockchain: What Board Directors Need to Know Presented to: Cal CPA & National Association of Corporate Directors Membership Presented by: Manoj K. Kashyap, PwC Partner Christa Steele, Board Member and Former Public Co CEO May 2, 2019

Christa Steele Board Director of OFG Bancorp (NASDAQ: OFG), Puerto Rico; Recology, CA.; Sasser Family Holdings, IL; the NACD Northern California Chapter; and Pacific Coast Banking School, WA

Manoj Kashyap Assurance Partner in the Banking and Capital Markets group of PwC's U.S. Financial Services practice, Leader of PwC's U.S. Assurance FinTech practice

Agenda What is blockchain? How is blockchain used in companies? What is the future of blockchain in the new digital world? Challenges and risks that board directors should know

A distributed, tamper proof digital ledger. What is blockchain? A distributed, tamper proof digital ledger. Transactions are verified through consensus — participants confirm changes with one another — and cryptography ensures data integrity and security. This eliminates the need for a central certifying authority.

Blockchain enables these business benefits in a shared ecosystem…

…and the key technical concepts that come together to make it work and different from existing solutions Cryptography Integrity and security of the information on the blockchain are ensured with cryptographic functions Distributed ledger Every participant in the network has simultaneous access to a view of the information Consensus Verification is achieved by participants confirming changes with one another, replacing the need for a third party to authorize transactions Smart contracts The ability to run additional business logic means that agreement on expected transaction behaviors can be embedded in the blockchain

How blockchain works:

How is blockchain used in companies?

Characteristics where blockchain makes sense:

Use cases & proof of concepts

Capital Infrastructure Projects Developing themes Capital Infrastructure Projects Humanitarian Aid We’ve seen several themes emerge across industry sectors over the last 3+ years

Companies implementing blockchain

What is the future of blockchain in the new digital world?

The digital innovation melting pot Frightening, exciting, or a little bit of both? Where your business, social media, AI, wearables, blockchain, IoT, open API’s, big data and predictive analytics converge.

Incumbent company dilemma Denial Knowledge Resources

Platform, software provider or both? The race to space Who will be the leading platform provider? Platform, software provider or both?

Platform vs. software providers

Challenges and risks that board directors should know

Blockchain barriers to entry Legal Tax Accounting Audit Cost benefit Consensus Adoption Scalability Governance Simplicity Regulation Security Timing “Tamper Proof”

What boards need to know Key takeaways

Q&A Thank you!

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