Proxima Blog

All change in Financial Services

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New regulations, greater scrutiny, a more unpredictable operating environment, more severe exogenous risks... The financial services industry clearly needs to be fast on its feet right now.

That nimbleness has to be embedded in the culture, too. If a business is trying to project to clients and regulators that it has a firm grip on risk and has become agile to cope with a less certain world, it needs to live those principles in every area – including how it manages every cost and every external relationship.

Taking a more considered and expert approach to managing the cost base is an obvious way for organisations to become more flexible. A holistic view of how, and what, products and services are being bought in – and how that aligns to the strategy of the organisation – is an opportunity to reshape operational capabilities.

Why is that so important?

At the strategic level, it can help create room for manoeuvre. For example, financial advice in the UK is now governed by the regulations set out in the Retail Distribution Review (RDR). It’s still not clear what this will mean to customers – how they’ll react to paying fees for advice instead of allowing advisers to collect commissions, for example – and how product providers and intermediaries will get themselves into the market.

So static supply chains – whether that’s around IT services, marketing or even wholesale banking relationships – could leave businesses exposed if the market shifts.

Then there’s compliance. The FSA’s nine-figure fines for LIBOR fixing might have hit the headlines. But there were dozens of smaller penalties for mis-selling, poor reporting and governance failures. Obviously many of these are unrelated to supply chain issues. But solutions to the underlying problems that caused them will mean looking at new IT systems, new structures, new advisers and new market approaches.

Making sure all those endeavours are properly aligned to overall strategy and that the “total supply chain” – from employees and sources of capital to outsourcing partners and customer relationships – is being managed intelligently (and transparently, to management) is a massive opportunity to restore trust in the financial services sector.

But how far away is the FS sector from realising a total supply chain nirvana?