Other parts of this series:
In my last post, I talked about the significant impact of COVID-19 on the banking and capital markets (B&CM) value chain and how leaders are in a unique position to respond, reset and renew the finance function to lead confidently in the post-pandemic era.
Today, let’s take a closer look at these three steps for a path forward in the post-COVID world.
Responding to the tactical issues
Historically, B&CM firms have been uniquely positioned to handle a crisis: they have complex business continuity management structures in place and the ability to provide daily snapshots of their balance sheets, liquidity and capital movements. However, most of the existing processes and controls are not agile enough to manage the volatility and variability of the COVID-19 situation.
As finance teams have worked hard to gain insights into new risk profiles and explain their impact to key leaders, they have also needed to stand-up a completely virtual work environment. Finance leaders must be sensitive to the needs and emotions of employees, who may not have access to all the tools they need to do their jobs and may be personally impacted by the pandemic. As some finance teams start to return to their offices, leaders also need to address safety issues and employees’ concerns.
During this time of disruption, it is crucial for B&CM CFOs to proactively capture key lessons from the new work completed during the tactical response phase. This will ensure that new capabilities created during this time of stress are not lost, and will kick-start the realization of a reimagined finance function.
Resetting transformational capabilities
B&CM firms that stay focused on key metrics (such as efficiency ratios, product profitability and mix analytics, and business unit (BU) returns on assets) will be able to quickly assess which products and services their clients need, when they need them, and how much investment is necessary to optimize returns. As these leaders look to reset, they should focus on:
- Finance and risk data: Find ways to rapidly integrate and drive consistency between financial and risk-related data flows, enabling timely and flexible financial, regulatory and operational analysis.
- Agile delivery: Deploy a software-as-a-service delivery model, which enables more effective end-to-end process and experience management.
- Resource planning: Enable optimal use of limited organization resources by more closely integrating forecasting with BU operational plans and demand management.
- Intelligent automation: Use pilots to jumpstart process enhancement initiatives that drive near-term cost takeout, increase productivity and efficiency, and expand margins.
- Core platform elevation: Invest in targeted enhancements to financial platforms which remove batch processing latency and reduce maintenance costs in the short term.
- Spend analytics: Build capabilities to provide business stakeholders with insights into headcount-related and third-party spend using benchmark data and analytics.
Renewing the finance function
In the post-pandemic era, B&CM firms will benefit significantly from focusing more intently on digital client interactions, enabling near-real-time decision-making (around credit worthiness, risk and compliance) and creating nimble and scalable product portfolios.
In order to ensure financial control and healthy margins, CFOs will need to invest in optimization of financial and operational risk monitoring, intelligent automation, scenario planning and forecasting, and analytical capabilities. As they look to renew their functions, they should focus investments in five areas:
- Intelligent finance: Fully redesign the finance operating model, leveraging concepts that are human-centric (the right skills), liquid (porous structures), living (nimble) and modular (plug and play).
- Enhanced finance: Employ digital assets to drive straight-through processes across transact, account, control, comply and report, to improve insight generation.
- Data-informed monitoring: Replace point-of-incident controls and checks with analytics-driven continuous monitoring of key financial and operational performance metrics.
- Financial planning and analysis reimagined: Create radically enhanced planning, forecasting and reporting capabilities that are more agile, deliver personalized predictive analytics and provide new insights (e.g. profitability).
- Value architecture: Generate the data necessary for the business to understand and increase value delivered, accelerate value realization, and track the impact of key decisions on enterprise value.
In previous disruptions, many B&CM firms tended to pivot toward tactical and fragmented short-term priorities. It is important for B&CM finance functions to avoid this trap with the COVID-19 crisis. They need to balance a calculated response to new risks and requirements, with a longer-term focus on a complete renewal of the finance function. By resetting their transformational capabilities they will position themselves strongly to survive and thrive in these unprecedented times.
To learn more about these topics visit:
COVID-19: How banks can manage the business impact
COVID-19: A capital markets industry perspective