Brexit, regulation and cybersecurity – three words you would not have expected to be headlining a list of major concerns facing financial services companies a decade ago.
Yet, according to our latest research, The Future of Financial Services: Planning for Every Eventuality, these are now expected to be the biggest challenges facing business decision makers in financial services over the next five years.
Regulation and compliance issues continue to be a major disruptor, with the recent implementation of GDPR leading to an increasing number of companies that are struggling to meet requirements. And, with a decision over Brexit looming, the political implications only add to the uncertainty faced by financial services companies. This is supported by our research, which revealed that over half of UK decision makers highlighted the impact of political changes as the biggest challenge that their businesses will face over the next five years. Much of this anxiety is likely to be due to the chaos surrounding Brexit.
When you factor in other challenges highlighted by those UK respondents: namely data management and privacy (30%); planning and uncertainty in the market (18%); as well as disruption from technology (16%), companies are facing a perfect storm of threats to mitigate, external factors to manage and new developments to facilitate. This all adds up to a testing ecosystem – full of economic and political uncertainty – but one that is also brimming with opportunity for those businesses that navigate the period well and understand the environment that surrounds them. Now more than ever, businesses need to face the music with a fluid plan that covers all eventualities and possibilities, so they can manage uncertainty, adapt to change and transform business processes quickly.
Remaining calm in rising uncertainty
The industry is as unsettled as it has been in a decade, with the true implications of our divorce from Europe remaining unclear. As a result, it’s no surprise that UK decision makers see political change as a major challenge, with uncertainty clouding their every move. This hesitation brings its influence to bear right across the sector, from small players to market leaders – potentially impacting every area of business. And while many firms will decide to remain in London post-Brexit, over a third of the UK’s largest financial services firms have announced they will be moving to other European cities, with Paris set to become Europe’s post-Brexit trading hub. Dublin is another popular choice with Barclays recently announcing it’s moving £166bn of assets due to Brexit fears.
It can be hard not to panic against this backdrop. But however disconcerting, it’s crucial to remain calm as customers, employees and trading partners are relying on companies to make the right decisions – preserving as close to ‘business-as-normal’ as possible. That doesn’t mean sitting around and pretending everything is fine, like a 2019 Canute; it means putting in place plans that cover all the possibilities and eventualities. In other words, knowing the ‘what ifs’ and having a measured, effective response for any scenario. Do that, and businesses can steal a march on less organised competitors.
Greater transparency needed for compliance
Regulation and compliance has also taken its toll on the financial services industry and continues to be a struggle for many, despite the risk of heavy penalties. Recently, we saw Google fined £44m by the French data regulator for a breach of the EU’s data protection rules. Our research further demonstrated this struggle with 45% of UK respondents seeing this as the largest potential disruptor to their business over the next five years.
Focusing on greater transparency and data protection, this is exactly where technology and data has the power to transform – helping to tackle much of the complexity involved in achieving compliance whilst delivering instant access to the precise information needed to plan effectively. With the right systems in place, organizations can quickly connect and verify different data sources, whilst breaking down the silos to gain a much clearer view of what lies ahead.
But as emerging technologies such as artificial intelligence, machine learning, big data and digital payments disrupt traditional processes, there’s also a heightened threat from cybercrime to contend with. In fact, our research shows that UK business leaders feel this threat to be their second greatest challenge (44%) and potential disruptor (44%) over the next few years (behind ‘political changes’ and ‘regulation & compliance’ respectively). Business identity theft, for example, was up 46% year on year in 2017, and mobile cyber-attacks grew by 40% in that year alone.
Planning for every eventuality
But it’s not just cybersecurity and regulatory or political uncertainty causing sleepless nights for financial services as lower barriers to entry have given the green light to a host of new upstarts across the industry. From fintech companies providing loans and payments, to completely new high street banks – Atom and Metro are just two examples in the banking sector, plus the tech-behemoths of Amazon and Apple. Everyone fighting for market-share and challenging the long-held stronghold of traditional Industry players.
Confronted by these dynamics, it’s surprising that concern over competition isn’t more acute – with our research finding just 11% of UK business decision makers feel worried about the challenge from start-ups over the next five years. Organizations must ensure they don’t get complacent and take their eyes off the ball. Disruption can come from anywhere and the speed at which new start-ups can grab market share can be disconcerting. Companies need to ensure they are planning for every scenario, with all angles covered. Only then will they be ready to jump on new opportunities and steal a march on rivals.
Organizations should continuously be asking themselves if they’re truly getting the most out of their data. With effective planning and solid forecasting, businesses can unlock opportunities, get closer to customers and inform better decision making – from new appointments to investments. Having a connected approach to planning and forecasting, right across the business, will provide the insight to face the challenges and disruptions that shape the financial services industry.
It’s all about being able to move fast, and having access to critical data will reduce the impact of uncertainty and build realistic, actionable responses to all the ‘what ifs’.