As we fight this global crisis on multiple fronts throughout the world, no aspect of everyday life has remained untouched. The economic impacts of this pandemic are enormous, and we still have a long way to go in understanding the full set of risks we face, not least the epidemiological catastrophe that continues to shut down countries throughout the globe.
For Financial Services firms, we’ve seen huge amounts of volatility in the markets, a desperate need for short term liquidity, and investor and shareholder confidence being shaken to its core. With a global recession looming, it’s a worrying time for the industry, but there are steps that can be be taken to mitigate the impact and prepare firms to emerge from this crisis on a stronger footing.
Businesses across all industry sectors will face three stages over the coming months: Recover, Renew and Regroup.
Recovery and short-term survival
In the most part, the immediate focus must revolve around managing the crisis and ensuring that continuity plans are updated and applied. For specific verticals, emphasis must also be placed on the following:
- Retail Banks – The immediate focus must be on servicing the needs of their customers, and a clear and decisive communication strategy to its customer base should be made a key priority. With unemployment numbers soaring and businesses large and small struggling to make ends meet, retail banks will be under political and societal pressure to fulfil their social obligations and provide the necessary liquidity to keep the economy afloat.
- Lenders – Supporting current debtors is the priority, and by utilising short term amendments to loans, like repayment holidays or relaxed default criteria, lenders and consumers can better weather the storm. Efficiency is paramount to this; an enormous volume of requests must be prioritised, and help provided where it is needed most. If it isn’t essential right now, then it needs to stop.
- Capital Markets – With volatility at such high levels, it’s vital that firms continually analyse and strategise their position in the market. Repeated and iterated modelling of stress test scenarios will go some way to understanding the full impact. While deploying collaborative, cross-functional teams to action directives from the top will allow institutions to be fleet-footed in their approach as the situation evolves.
- Insurers – In a similar vein to Retail Banks, communication is the priority for insurers, particularly those in the Life and Health insurance markets. Customers need to be able to distinguish this vital information amongst the myriad of other information that is currently flooding their inboxes. For insurers at large, understanding what contracts are impacted and the financial implications of this will ensure that solvency requirements are still met.
- FinTechs – The most pressing issue that fledgeling firms are going to face is cashflow – especially if we see a consumer shift towards established and more familiar brands. However, there is a tremendous opportunity for FinTechs to deliver to and capture new customers. Branchless banks, digital mortgage applications and streamlined mobile offerings are set to boom in lockdown conditions. Firms who recognise these opportunities could see huge long-term benefits especially if the crisis acts as a catalyst for digital transformation going into a post-COVID world.
Regroup – Moving Out of Crisis
In spite of chaos and panic, Financial Services firms have always been remarkably efficienct in redeploying employees and resources so they can continue to function. Even traditional brick and mortar branches can operate in the virtual space. Organisations will need to understand whether this resource redeployment requires a more long-term solution. Papering over the cracks will not aid recovery.
New technology is already being deployed, and new ways of working being trialled in rapid and complex situations. This will advance the industry by 12-18 months ahead of the curve, with businesses innovating under pressure to make progress. Existing technology such as AI Chatbots and Cloud functionality will also be stretched and stressed to new levels, due to the shift to remote working and the extensive international lockdown, which may well accelerate their use and development across the industry.
Learning what works internally, as well as understanding how the needs of consumers and clients can be met efficiently, has to be a key target during this period. The institutions that can do this are those who will come out this crisis more resilient and geared to take opportunity forwards.
Renew – Opportunity and Growth
Eventually, normality will return, markets will calm, and employment will rebound. Firms need to ensure they hit this new normal in stride and capitalise on the opportunities identified and renewed customer engagement they are going to see. Proactivity will be the key here. By the time normality returns, firms need to have a strategic approach in-place, ready to meet market demands and with the infrastructure established to support this.
It is worth keeping in mind that in the wake of the last financial crisis we saw a huge boom in new, innovative and now enormously successful companies, including Uber, Slack and Square to name but a few. Even in dark and turbulent times, there are success stories and opportunities to be found. There is no reason to think this time will be different.