Why Operational Resilience is Vital for Financial Services

In light of increasingly sophisticated cyber attacks, technology advancements, more complex ecosystems and impending regulations, firms should be prepared for unexpected disruptions and strive to protect their stakeholders and their businesses. They can do so by developing operational resilience.

Operational resilience means being able to protect systems that support business services and quickly rebound in the face of threats and disruptions. Financial services firms that want to build financial resilience should improve their operational resilience as well. In fact, their financial resilience depends on it.

“Operational resilience refers to the ability of firms, FMIs and the sector as a whole to prevent, respond to, recover and learn from operational disruptions.”—

Why is operational resilience important for financial services firms?

First and foremost, there are strong signs of impending regulations that would require firms to become operationally resilient across the enterprise as a whole. Under existing legislation, firms are already responsible to their customers, shareholders and the overall economy in terms of cybersecurity, risk management and outsourcing.

The Bank of England and the European Banking Authority have both issued discussion papers on the topic and working towards introducing legislation that aims to improve resilience across the industry in a holistic way. Across the globe other regulators are expected to follow suit. Regulators are reviewing three key areas:

  • The growing interconnectedness between financial services institutions and third-party providers.
  • The increasing sophistication in cyber attacks on individual financial services institutions and entire markets.
  • The dependence on an increasingly concentrated group of providers.

Additional regulations should also require evidence of firms’ resilience. Firms that fail to comply may have to absorb significant financial losses caused by large disruption events, such as a major security breach.

A second factor contributing to a strengthening of operational resilience is the current industry environment. The pace of change and pressure to more quickly meet shifting customer expectations combined with increasingly complex ecosystems increases firms’ risk of service outages and security breaches. The quality data that is so key to enterprise competitiveness is now vulnerable to increasing cyber attacks and breaches and thus more likely to be compromised, putting customers and the firms that serve them at great risk. Disaster recovery becomes paramount.

Finally, financial services institutions are increasingly vulnerable to an escalating number of security attacks. A 2018 State of Cyber Resilience study across 19 industries and 15 countries found that the number of cyber attacks on surveyed firms doubled in 2018. One in seven attacks on banking and capital markets firms were successful.1 One in five attacks on insurers were successful.2 These attacks are often difficult to identify, so considerable damage can be done in a short amount of time. Due to social media, word about a breach can spread quickly, affecting a firm’s reputation and, potentially, its bottom line.

A two-fold approach to current challenges

Implementing operational resilience requires firms to plan for and mitigate these threats while at the same time complying with new regulations and protecting their financial foundation. In my next blog post, I’ll share a framework for implementing resilience, not only operationally but across the entire enterprise, and highlight some common roadblocks leaders should be aware of.

 

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Workforce 2025: Financial Services skills and roles

 

FEBRUARY 16, 2019 RESEARCH REPORT

In brief

  • Seven to 10 percent of tasks in the financial services workforce could be automated by 2025, while 43-48 percent could be augmented with technology.
  • Resulting cost savings and productivity gains could deliver up to $140 billion of cumulative value for the North American industry.
  • Organizations must take a strategic approach to augmentation and automation to emerge as the winners from this time of change and innovation.

The adaptive financial services workforce of tomorrow

The worlds of work and of financial services are changing at high speed. Consumer expectations are rising as financial services companies face growing competition from digital startups and technology companies that are setting new benchmarks for customer and workforce experiences. At the same time, a new generation is entering the workforce, bringing with it new demands of the workplace and new ways of thinking and collaborating.

From big data to the Internet of Things to intelligent automation, the pace of technology change, too, is accelerating. Disruptive technologies that automate mundane tasks and processes, or that augment human expertise, creativity and skill with real-time information and new capabilities will completely change the shape of the financial services workforce over the next five to 10 years.

Accenture economic value modelling estimates that Seven to 10 percent of tasks in the financial services workforce could be automated by 2025, while 43-48 percent could be augmented with technology. The resulting cost savings and productivity gains could deliver between $87 billion and $140 billion of cumulative value for the North American financial services industry between 2018 and 2025.

Despite the size of this opportunity, automation projects at many banks, insurance carriers and capital market firms are small-scale, tactical and siloed by nature, practices that dilute full value capture.The cost-savings financial services companies could reap from higher levels of automation are not insignificant. However, they can unleash the most value by focusing on the things that AI and humans do best together, to drive large productivity gains.

Unlocking the new financial services workforce

If financial services organizations are to unlock the value proposition of the new workforce and the next wave of digital technologies, they need to take a top-down, cross-functional view of the roles and functions in the enterprise to understand where they can drive the most value. Then they need to focus strategically on the roles that are best suited to being reinvented through the application of automation, and that offer the most potential for rapid and sustainable return on investment.

Finally, they should have a point of view on what to do with the capacity released through automation, consistent with the values of the organization. How financial services business leaders respond to the challenges and opportunities of a changing social, economic and technology landscape today will determine their readiness to compete in a different world tomorrow.

Unlocking up to $140 billion of industry value

Productivity gains from augmentation could deliver $72-117 billion in value to the North American financial services industry between 2018 and 2025, while cost-savings from automation could total $15-23 billion.

Projecting cost-savings and productivity gains through automation and augmentation for the North American financial services sector, 2018-2025

 

*We are here to help you navigate so schedule a call to discuss your specific business goals