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Insights and News /

23 January 2020 6 min read

The financial services sector must get ‘fit for the future’ now or risk becoming extinct

Lucine Tatulian

Lucine Tatulian
Partner | Financial services | London

Simon Gray

Simon Gray
Director | Financial services | London

Financial Services institutions continue to face challenging macro socio-economic conditions, cost and profitability challenges and regulatory pressure. Organisations also need to make choices given the risks and opportunities from cross-sector disruption, whether through exponential technologies, potential new entrants or industry changes. To survive and prosper, firms must consider how they will respond, transform how they think and operate – in other words, they must get fit for the future.

Breaking this down into the 2 key words:

Fit - firms should consider suitability, sustainability and success. These are about assessing how to remain relevant and meet the desired outcomes from growth revenue and market share in chosen ‘core’ products and services.

Future - look at the 5 year horizon to commit to a strategic view and understand the steps to take to move towards that objective.

So where do organisations start? Organisations need to re-think their strategy along the value chain, focusing on their strengths, and be ready to transform and partner, in order to deliver the value proposition.

By taking an aggressive view and identifying non-differentiating activities, organisations can begin to deliver these more efficiently, by focusing on 4 main levers:

1. Client Centric Simplification

By putting customer and business outcomes first, organisations need to move from fragmented and complex to simplified and flexible operating models with product innovation embedded in the organisation. Focus on profitable business activity, elevating the client experience, increasing automation and intelligent decision making

2. Data and Insight

As execution is increasingly digitized, organisations must be able to capture and store data arising from market activity in a usable manner, integrate it with external data, apply evolving data science techniques to generate actionable insights and deliver increase in margins.

3. Platforms and Partnerships

Firms must embrace the changing market dynamics where outside providers offer services. This requires firms, in some cases, to move away from in-house service delivery to one that draws on the capability of ecosystem partners to create cost efficiencies and risk mutualisation. Moving towards more open and API based architecture to help deliver efficiencies.

4. Modern Workforce

Digital disruption will create the need for new roles and skills. Firms must identify ways to acquire and develop talent which are responsive to the fast-evolving needs of a digital business, operating in a culture of innovation, diversity and enhanced analytics, both in terms of “run” and “change” the bank activities

Over the coming weeks and months, Baringa will publish a series of blogs across these 4 themes and across the FS sub-sectors, including global markets, banking and insurance. For further information, or to get more insight along these themes, please contact lucine.tatulian@baringa.com