Financial Institutions are Set for Change
COVID-19 has forced everyone into accelerated digitisation and real productivity gains are required to survive restructuring waves. Low interest rates redefine product and portfolio combinations. Capital constraints in regulated institutions drive financing to non-bank lenders. The post-recovery government initiatives drive environmental, social and governance principles to the mainstream.
The primary role of a traditional bank providing financing and capital is set to be challenged further in a post COVID-19 world. We will see a greater focus on non-banks and alternative providers of capital set to become a more important part of the global financial system. National lockdowns and other measures taken by governments around the globe to flatten the infection curves have caused significant damage to many industries, all of which are served by financial institutions. Compared to all previous crises, including the global financial crisis, the oil-price shocks of the 1970s or even the great depression of the 1930s, COVID-19 has had the most substantial impact on the global economy. However, Covid-19, has become the catalyst for change, a rapid change and new opportunities for innovation. Leaders need to look forward, embrace the challenges and respond boldly to them. We will look at some worldwide trends that financial services firms need to consider to properly plan for the future
TRENDS THAT MATTER AND THEIR IMPACT IN A Changing world
Low interest rates will continue wreaking havoc on margins and business models. The COVID-19 recession and asset impairments will reduce risk-bearing capacity for regulated industries to support the real economy as it enters the recovery stage over the next year. Alternative providers of capital are set to become an even more important part of the global financial system. COVID-19 will not delay and may accelerate, the implementation of current and planned regulatory measures in many countries and regions. Continued de-globalisation will further align the size of financial institutions to the GDP of their home countries while continued offshoring will increase operational risk across the industry. Firms face unrelenting pressure to boost productivity through the digitisation of the business and the workforce. The client-driven shift to a platform- and ecosystem-based financial services industry will create a new wave of disruption and disintermediation.
A New Way to Think About the Future of your Business
Whilst Covid-19 brings many challenges, it also brings many opportunities for financial institutions. It provides banks, insurers and asset managers with opportunities to support clients in navigating these challenges, adjusting portfolios and developing new investment opportunities.
Four Key Areas for Recovery in Financial Services
Repair the damage: The damage from COVID-19 to the real economy and, by extension, the financial system is only now beginning to manifest itself in various ways. This damage will require deliberate actions to repair financial institution balance sheets and reputations.
Rethink the organisation: Many of the questions about organisational structures and talent that existed before COVID-19, the efficacy of remote working and the productivity of agile teams have been answered. These and related tools and approaches are now being deployed, and succeeding, on a massive global scale.
Reconfigure the business and operating platform: Along with the repair and rethink activities, many financial services institutions will need to reconfigure the business and operating platform, in some cases making profound changes to succeed in the future. To be sure, the post-global financial crisis changes were also profound, as the industry grappled with increased regulatory costs by selling businesses, reducing workforces, increasing offshoring, and taking many other important actions.
Report the results: As various stakeholders demand more transparency and accountability from financial institutions, the focus will increasingly turn to complete and accurate reporting in a range of areas, including financial performance, environmental, social and corporate Governance, regulatory compliance and the like.
It will be critical not to miss the most important attribute of any successful financial institution in the future: being able to articulate its unique culture, story, and value to society. At endorphin we will strategize your financial future today ensuring that you have extraordinary reach and extraordinary results.