It’s no secret that the financial services industry is highly regulated, and it’s just one challenge the industry faces. In addition to the ubiquitous burdens the COVID-19 pandemic brought to just about every industry, financial services firms are also trying to navigate de-globalization as well as digital disruption.
In order to succeed, financial services institutions need to remain proactive and continue to help drive innovation. As they align their budgets and resources on future goals where their businesses and operations are concerned, it’s vital to reprioritize digital strategies to emerge as winners despite continual volatility and shifts in the market.
And in order to do that, it’s imperative that chief financial officers (CFOs) are in lockstep with chief information officers (CIOs) and other technology leaders to keep innovation moving forward.
The pandemic-induced reality
While the financial services industry has its list of challenges, there’s no getting around the fact that the global pandemic has created some harsh implications. A recent PwC assessment of the industry laid out a series of macro trends that financial services leaders need to grasp as they develop their plans for the future. Among them: the COVID-19 recession will reduce the risk-bearing capacity for regulated industries — including financial services — to support the “real” economy as it enters a recovery stage over the next year.
In addition, the firm says that low interest rates will continue to add a layer of volatility to business models and margins, while de-globalization will further coordinate the size of financial institutions with the GDP of the countries in which they’re based. That, PwC argues, will lead to continued offshoring and increase operational risk across the industry. Finally, the firm says that the pandemic won’t delay — and may actually accelerate — the development and implementation of regulatory measures across many countries and regions.
Prioritizing digital innovation
Digital transformation is a priority in just about every industry, but it appears that it’s slightly less important to executives in the financial services industry. A recent Dimensional Research survey of CFOs and senior finance leaders found that 65% of respondents from financial services and insurance organizations view digital transformation investments as key to their business’ success. That’s lower than any other industry examined in the survey; as an example, 81% of manufacturing respondents said digital transformation investments are vital to their success, as did 79% in the tech industry, 75% in retail and 73% in construction. When asked, financial services respondents identified optimizing existing tech investments as the top IT initiative they’d like to see more of from CIOs.
This is where CIOs can help their CFO counterparts. Creating strong relationships with their CIO not only helps CFOs drive more innovation where transformation is concerned but also helps meet other wider business goals. The CIO is uniquely positioned to convey which digital initiatives can provide the most near-term value and ROI, as well as which projects are worth shelving for the time being. Armed with this knowledge, the CFO can then turn to other decision-making executives and explain why driving digital innovation forward is important to the health of the business.
In most cases — particularly in this environment — the safer bet is to focus on smaller initiatives that drive the digital strategy forward incrementally over time, as opposed to a lengthy and costly infrastructure overhaul that may not yield tangible results for three to five years (or more). Quick wins every few months demonstrate added value across the organization and showcase the why behind digital transformation efforts.
Leaders must invest in their most valuable asset: Their employees
As financial services companies — like just about every other industry — reassess their strategies in the post-pandemic landscape, it’s becoming clear that the winners are investing in employees. Just about every organization in the industry expects to allow employees to continue to work remotely in some fashion in the coming year, which means CFOs and their CIO counterparts have an opportunity to help their businesses provide employees with the resources they need to remain productive while working remotely.
A recent Gartner study on the digital future of finance noted that the pandemic proved that efficiency comes at the cost of flexibility, and that businesses need to fund the right investments to increase employee performance in what will likely be a hybrid workforce for the foreseeable future. This means providing employees with the hardware necessary to remain productive, but also to make smart and efficient investments when it comes to organization-wide systems that the business runs on.
According to the report, finance professionals and organizations have an opportunity to reduce waste and redundancy in this environment. I would argue that one way to do this is to not succumb to the vendors of ERPs and other types of business software by over spending on the so-called “latest and greatest” updates. The truth these vendors probably don’t want you to hear is that most businesses can remain just as effective, productive and secure — a major must for this industry — by maintaining the systems they already have in place rather than investing in the latest versions of everything just because the vendor says it’s time to do so.
Digital transformation isn’t an all-or-nothing proposition. Taking a more measured approach and investing incrementally where it makes sense frees up funds for organizations to invest in other ways to help foster employee growth, development and ultimately, productivity.
In the end, this is a key area where CFOs and CIOs can partner to help keep employees productive so they can move their organizations forward. As CIOs identify strategic areas where bolstering technology supports the business’s digital transformation aspirations, CFOs can illustrate to other leaders why these initiatives make good business sense.
Renee Wells serves as vice president of product strategy at Rimini Street. A 27-year veteran of IT and enterprise software with extensive experience in network engineering, management consulting, product marketing and product management, she held several leadership roles at AT&T prior to her current role.