OPINION: How the financial services industry will need to adapt during Covid-19
DURBAN - The ongoing Covid-19 pandemic has placed immense pressure on South Africa’s economy, which was already struggling to correct its underperformance for some years.
Financial services institutions such as banks and insurers are particularly hard hit, meaning that containing operational costs will be crucial for this sector to remain competitive, and even thrive, in a post-Covid-19 economy.
Maintaining a healthy balance sheet, while delivering on revenue and cost targets, is going to be an even greater challenge for financial services businesses over the coming months. In addition, banks and insurers are now expected to deliver on Covid-19 support programmes to retail and business clients, as well as show that they can effectively service, retain and grow their customer base in a socially distanced world.
Mazars’ own research shows that especially in the banking and insurance sectors, the response to these challenges have mostly followed the same format. The most common responses that we have observed include addressing the immediate liquidity concerns, quick responses to reconfigure operations to serve clients given socially distanced and lockdown requirements, several cycles of reprioritisation of strategic objectives and strategic initiatives in the short term, and formulating and executing on short term tactical cost containment imperatives.
In our interactions with financial services executives during the lockdown period, we have noted a number of trends among these businesses. In general, business units have been challenged to attain a further tactical cost containment target of around ten percent. Also, strategic initiatives that have not yet commenced, and that do not address the Covid-19 challenges in the near term, will be delayed.
Other trends include, digital sales and service initiatives being prioritised and accelerated, with funding being reprioritised accordingly; more focus being placed on collections capability buildout; and protecting staff health and jobs in the near term becoming a priority.
Eksteen notes that the result of this increased focus on cost containment often means that their project teams within these organisations are increasingly being kept relatively small. The problem with this is that these teams routinely lack specialised skills and capabilities that are so crucial for accelerated delivery. While attracting and developing these professionals in-house invariably comes with a high price tag, Eksteen says that partnering with a specialised organisation that specialise in providing these skills at an extremely cost effective rate could be a viable solution.
With this in mind, he says that it has become vital for companies in the financial services sector to partner with service providers that can assist project delivery teams with solutions to deliver and accelerate their priorities during this time. A service provider that is uniquely positioned to find and attract cutting-edge skills and make them available to clients on a project-by-project basis, therefore makes sense. Mazars Financial Services Africa is one such service provider. Our CFO Services and Financial Services Engineering offerings allow companies to eliminate a lot of hiring risk and build much leaner finance and financial services engineering teams.
Ellis relates an example where one of the large insurers have partnered with MFSA to drive digitalisation of their sales and services environments through the implementation of Salesforce, achieving rapid and cost effective implementation of these processes. Our Financial Services Engineers additionally ensure that these processes are efficient by design, while also giving the relevant focus on compliance, risk and controls.
In addition to making these professionals available to businesses in a cost-effective manner, Eksteen says that on-demand service providers are also a great benefit to the industry in general. This model is very much in line with modern workforce trends. Young professionals value flexibility and variety, so offering non-permanent experience at various clients allows them to gain experience across different sectors and develop skills that are in high demand in the industry. This way, we believe on-demand skills providers can help to grow the skills base to the advantage of the entire financial services sector.
In closing, Eksteen says that on-demand skills providers will increasingly offer financial services clients the personalised service that their businesses need in the rapidly evolving market. The business world has changed immensely in the last few months, and more significant shifts are anticipated in the near future. On-demand skills will help these organisations face these changes and challenges in a cost-effective manner.
Riaan Eksteen is Managing Director at Mazars Financial Services Africa and George Ellis is Director at Mazars Financial Services Africa
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